The European Commission has sent a letter to the German government warning it not to grant Deutsche Telekom AG an exemption from Union-wide rules designed to improve competition in the telecoms sector, spokesman Martin Selmayr said Thursday.
A proposed German law would allow Deutsche Telekom to deny rivals full access to its infrastructure while it recoups the estimated €3 billion (US$3.8 billion) it is investing in a new high-speed broadband network.
The Commission has “serious concerns about the proposal,” Selmayr told journalists Thursday at the Commission’s daily press briefing.
If the law is passed the Commission will “have no choice but to open infringement proceedings,” he said. These proceedings ultimately lead to legal action at the European Court of Justice in Luxembourg, which could result in hefty daily fines for the German government.
Germany’s national telecoms regulator, the Bundesnetzagentur based in Bonn, proposed forcing Deutsche Telekom to open up its network to other phone companies. The German government responded by promising to pass an exemption law that would allow Deutsche Telekom to continue its restrictive practices.
Deutsche Telekom has warned it will stop the planned expansion of its VDSL (very high bit-rate Digital Subscriber Line) network to 40 German cities if it is forced to comply with the E.U. competition law. The company argues that VDSL is not merely an upgrade of existing technology, but a costly leap that will ultimately benefit Germany. Deutsche Telekom says VDSL will create a new online market for services such as HDTV (high-definition television), 3D television and telemedicine.
By making the investment in VDSL, Deutsche Telekom argues that it deserves some protection from competition.
But the European Commission insists that Deutsche Telekom must give rivals affordable access to its broadband network infrastructure, regardless of the underlying DSL technology.
Affordable access for rivals would spur broadband competition in Germany, Europe’s largest telecommunications market, where Deutsche Telekom already holds a 60 percent market share of the DSL market.
The proposed new law would protect Deutsche Telekom’s VDSL network from regulation for up to five years. If the German government doesn’t bow to pressure from Brussels and from its own telecom regulator, the bill is expected to pass parliament either this year or early next year.
Viviane Reding, the European Commissioner for telecoms issues warned in June that such protection amounted to a “regulatory holiday” and would be opposed vigorously by the Commission.
“The Commission is concerned about all obstacles to competition whether today, tomorrow or in the long-term,” Reding said. “We therefore do not accept monopolistic situations even if we are promised that they would only last for four or five years,” she added.
The Commission, the European Union’s executive body, also objects to the way Deutsche Telekom denies rivals IP (Internet Protocol) bitstream, or DSL, access to its huge broadband network.
