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IP/07/237

Brussels, 26 February 2007

Commission launches "fast track" infringement proceedings against Germany for "regulatory holidays" for Deutsche Telekom

The Commission decided today to send Germany a letter of formal notice after repeated warnings not to adopt legislation that could grant Deutsche Telekom a 'regulatory holiday' in spite of its dominant position on the German broadband market. The case is being fast-tracked and Germany will only have 15 days to reply to this letter. The Commission intends to refer the case to the European Court of Justice as soon as possible.

“I regret that Germany has chosen to ignore the Commission’s concerns about this new telecom law despite several clear warnings from the Commission,” said EU Telecom Commissioner Viviane Reding. "The granting of regulatory holidays to incumbent operators is an attempt to stifle competition in a crucial sector of the economy, and in violation of the EU telecom rules in place since 2002.”

The new infringement procedure launched today concerns amendments to the German telecom law that just entered into force. These amendments, which were proposed by the German government in spring 2006, would effectively exempt Deutsche Telekom AG’s fast internet access network (VDSL) from competition, as had been requested by the German incumbent operator, which is still partly owned by the German State. Such ‘regulatory holidays’ would be granted without consulting the Commission and regulatory authorities in other Member States, as is mandatory under EU telecom rules to ensure transparency and a better functioning internal market.

Already in October 2006, EU Telecom Commissioner Reding and EU Competition Commissioner Neelie Kroes had sent a letter to German Minister of the Economy Michael Glos in which they expressed their serious concerns about the draft law and announced infringement proceedings if the law was not brought in line with European law – unfortunately without results.

In the Commission's view, the German law, as now adopted, jeopardises the competitive position of Deutsche Telekom's existing competitors and makes it much harder for new competitors to enter German markets. It also attempts to influence the German regulatory authority in charge of electronic communications (the 'Bundesnetzagentur') on whether or not to grant competitors access to the new VDSL-network currently being built by Deutsche Telekom. The new law therefore interferes with the authority's discretion in defining and analysing markets under EU rules. It is a legislative response to Bundesnetzagentur's decision in September 2006 to address Deutsche Telekom’s significant market power in the German wholesale broadband market. The remedy proposed by Bundesnetzagentur on 21 July 2006, and endorsed by the Commission on 21 August 2006, requires Deutsche Telekom to open its broadband networks (including those using VDSL technology) to competitors (see IP/06/1110).

In Germany, Deutsche Telekom controls access of 9,400,000 lines out of 12,900,000 lines. In turn, broadband penetration in Germany (16.36%) is significantly weaker than in leading EU Member States like Denmark and The Netherlands which have a broadband penetration of nearly 30%.

"The German decision to grant Deutsche Telekom a 'regulatory holiday' is bound to lead to numerous legal disputes at EU and national level," said Commissioner Reding. "This is the worst possible signal for investment, as now neither the incumbent nor new market entrants will have legal certainty in Germany. Efficient implementation of EU telecom rules would clearly have been the better way to promote both competition and investment."

The infringement procedure started today is the sixth proceeding pending against Germany under EU telecom rules (see IP/06/1358, IP/06/1110, IP/06/784).


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