Deutsche Telekom project may flounder under regulations

One of Europe’s most ambitious projects to deliver high-speed Internet access to residential homes could collapse over ambiguous legal requirements.

“We need clear legal commitments regarding the long-term regulatory situation if we are to roll out this project,” said Kai-Uwe Ricke, CEO at Germany’s Deutsche Telekom, at a news conference in Berlin on Thursday.

Europe’s largest telecommunications service provider plans to invest €3 billion ($3.6 billion) in the construction of a network that will string fiber optic cable to the curb of homes in 50 German cities. To bridge the remaining distance to homes, the company plans to install Very High Speed DSL (VDSL) technology, offering speeds up to 50Mbps.

With the new infrastructure, Deutsche Telekom aims to offer customers a range of Internet-based services, such as HDTV and 3-D television or video conferencing, which slower-speed Asymmetric DSL (ADSL) technology can’t support, according to Ricke.

To safeguard its planned investment, Deutsche Telekom is demanding that if the operator must share the new network with rivals, it should be allowed to set the conditions — and not the national regulator, which has determined the prices for rivals to use the former monopolist’s copper-based local loop infrastructure.

“Without a change in regulatory thinking here in Germany, I’m sorry to say we’re going to miss the boat,” Ricke warned. “Other countries with far less intensive regulation have overtaken us in the roll-out of these key technologies.”

Earlier this week, Germany’s Federal Ministry of Economics released the first draft of the country’s new Telecommunications Act. But Ricke pointed to what he views as ambiguous wording in the draft, such as the lack of a precise definition of the concept “new market,” which, he said, VDSL represents, and no clear declaration that this new market won’t be regulated.

With an eye to the European Commission, which has warned the German regulator about deregulation of the planned network, Ricke said Deutsche Telekom “will have to start convincing people in Brussels, in particular.”

The current plan is to connect homes in 10 cities by the middle of the year, according to Ricke. The up-front investment, he said, will be based on “trust.”

The carrier plans to connect the remaining 40 cities by 2007, but only if its conditions are met, he said.

In rural areas, where the cost of deploying fiber optic cable is prohibitive, Deutsche Telekom will use wireless WiMAX technology, which offers high speeds over relatively large geographical areas, according to Ricke.