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10/12/2016

Oettinger faces major test on German telecoms rules

Digital

Oettinger faces major test on German telecoms rules

Günther Oettinger

[European Commission]

Günther Oettinger is embroiled in a heated political fight that could result in a showdown with politicians in his home country next week over a major telecoms regulation.

Tensions are high in Brussels and Berlin.

Oettinger’s office has until 10 May to decide whether it will green light a new regulation from Germany’s Bundesnetzagentur that will give giant operator Deutsche Telekom exclusive access to service millions of homes in the country. Competing firms have blasted the regulation as an unfair move that will choke off their business.

By all accounts, it’s one of the most significant and trickiest telecoms decisions the German Commissioner has taken on in the eighteen months since he took office as the EU’s digital chief.

The European Commission can either approve the 318-page German regulation or open up a three-month inquiry into the rules—if the executive expresses serious doubts about whether they comply with EU law.

That’s where Oettinger could run into trouble with Merkel’s cabinet. The current government of Oettinger’s Christian Democrats (CDU) and the center-left SPD is under pressure to make good on its promise to bring internet connections all over the country up to a minimum speed of 50 megabits per second by 2018.

If the firm gets the go ahead from regulators, Deutsche Telekom promised to bring speeds up to an average of 50 to 100 megabits per second. Competing operators have argued those figures are unrealistic.

Currently, Germany’s average internet speed hovers at around 12 megabits per second.

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Deutsche Telekom up in arms

If the European Commission tacks on a three-month probe of the German rules, Deutsche Telekom would have to put its plans on ice to exclusively use the so-called vectoring technology to speed up connections.

“We already lost a lot of time in a stupid battle on the right or wrong technology and that is hindering the broadband rollout. We don’t have time to waste,” Deutsche Telekom spokesman Philipp Blank told EurActiv.com.

Blank said the delay would be “critical” for the company and could endanger’s the government’s 2018 target.

“It’s still possible even with the three-month delay to achieve this goal, but it’s not helpful,” he said of the government’s deadline to speed up connections.

Deutsche Telekom is approximately 30% owned by the German government, directly and through the government-owned development bank KfW.

Under the rules now hinging on Oettinger’s approval, Deutsche Telekom signed up to boost internet speeds by investing an additional €1 billion into vectoring. The technology will update and speed up the firm’s copper networks. It’s a cheap fix to make internet connections faster, but also a temporary one as demand for more data volume and even faster networks skyrockets.

Competitors, including Vodafone, say the pending regulation will prevent them from accessing the most lucrative parts of Deutsche Telekom’s copper cables. The competitors also argue that the rules will delay Germany’s transition to faster glass fibre because Deutsche Telekom will continue to use its copper networks for the next few years.

Deutsche Telekom said vectoring is the only affordable way to provide high-speed internet: it can’t afford to pitch in the €70-100 billion needed to build glass fibre networks around the country.

Oettinger has been taking heat from all sides since the Bundesnetzagentur sent its draft regulation to Brussels on 7 April.

One day after the Commission was notified by the Bundesnetzagentur, thirteen MEPs sent Oettinger an angry letter asking him not to approve the rules. Other letters followed, including one from the minister for consumer affairs in Baden-Württemberg, the state Oettinger governed as minister-president until 2010.

The Commission will announce its official opinion next Tuesday, but Oettinger already indicated that he might choose to add on a three-month inquiry of the German regulation.

“Without committing myself, I now tend now to prefer the extended inquiry and not wave it through,” Oettinger told MEPs in the Internal Market and Consumer Protection (IMCO) Committee on 15 April.

Oettinger warned the MEPs that the rules shouldn’t “clear a way for remonopolisation”.

“I’m looking forward to the reactions from the governing parties in Berlin, both of ours,” he said, responding with a grin to German S&D MEP Evelyne Gebhardt (SPD).

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Political pressure

Berlin’s response to the Bundesnetzagentur’s draft regulation has been mixed.

Marta Kujawa, a spokeswoman for Germany’s SPD-led ministry for economic affairs, told EurActiv.com that the Bundesnetzagentur’s regulation “responded in detail to the arguments of the market operators and made constructive recommendations”.

Asked about the government’s plan to dramatically boost internet speeds, Kujawa said, “how exactly that’s implemented is something that’s gradually being worked on”.

In March, Sigmar Gabriel, Vice Chancellor and Minister for Economic Affairs, announced his ministry’s strategy to have a Germany-wide glass fibre network by 2025 to pick up internet speeds. That would clash with the Bundesnetzagentur’s regulation, which would delay a large-scale glass fibre deployment.

Even Oettinger’s own party is divided.

Thomas Jarzombek, the CDU’s spokesman for digital policy and a board member of the Bundesnetzagentur, said the new regulation will deal a blow to Deutsche Telekom’s competitors. But unlike the MEPs who complained to Oettinger, Jarzombek says vectoring isn’t a technically bad solution to speed up internet connections.

“If you force Telekom to build fibre to buildings everywhere we’d have a terrible problem. Because in the next ten years there wouldn’t be any proper access in many parts of Germany,” Jarzombek said in an interview.

“The dissatisfaction absolutely spans political groups,” he said of the Bundesnetzagentur’s regulation.

Sabine Verheyen, a CDU MEP from the EPP group who organised the letter to Oettinger, went a step further and slammed vectoring for not bringing enough technical benefits to internet users.

“The quality of the service that can be delivered with vectoring technology is not that much higher. And it’s not a technology for the future, that’s glass fibre,” Verheyen told EurActiv.

The Junge Union, the CDU’s youth organisation, weighed in on the draft rules yesterday, adding to the heap of pressure on Oettinger. The group called on the German government to sell its shares in Deutsche Telekom and create a broadband fund with the returns to build new glass fibre networks.

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Brussels has one week left to decide

European Commission officials working on a response are aware they’re involved in a case that’s attracted an unprecedented amount of attention. Officials at the Commission’s digital unit DG Connect have gotten involved in the unusually sensitive and political review of the regulation, including director general Roberto Viola and other top directors under him.

“If there is something to criticise about this case it’s probably that there’s too much emphasis on the investment and too little emphasis on competitive aspects,” one Commission source close to the file told EurActiv.

“It’s a very high price you pay for a technical solution which gives you small relative speed gains,” the official said.

Oettinger told MEPs in the ITRE Committee last month that the German regulation could be “a kind of blueprint”.

That’s exactly what the executive is wary of. Officials working on the Commission’s reaction told EurActiv they’re concerned they will set a precedent for other EU countries, especially now that the German case has become so high-profile—as far as telecoms regulations go.

In Brussels, telecoms lobbyists are calling Oettinger’s decision a kind of litmus test ahead of new legislative proposals expected this autumn.

The European Commission is reviewing current EU telecoms rules on competition, investment in infrastructure and whether governments can favour a certain kind of technology—issues at the heart of the battle over the German regulation.

Gijs Phoelich, chairman of ECTA, the umbrella organisation for alternative telecoms operators, called the decision a “crossroads”. ECTA’s members include Deutsche Telekom competitor Vodafone.

Approving the decision could create a “dangerous and harmful precedent with potentially strong reverberations” around the EU, Phoelich said.

ETNO, the EU association that represents major telecoms incumbents including Deutsche Telekom, has defended the rules to allow vectoring as a boost for consumers.

“German citizens will get a speedy roll-out of faster broadband. Also, infrastructure competition will be significantly stronger. This is a good decision,” ETNO director general Lise Fuhr said.

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EXCLUSIVE / Germany’s leaked position paper on the upcoming EU telecoms reform tells the executive to lighten up on regulation and give its national telecoms authority more power.

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Background

The European Commission announced as part of its digital single market plans that it would propose telecoms legislation in 2016, likely after the summer. The Commission's public consultation on regulation of the telecoms sector ended in December 2015.

The upcoming reform is expected to affect investment in telecoms networks, access to networks and competition with internet services like Skype and Whatsapp. Big incumbent telecoms companies argue those services aren't regulated as rigorously--and they demand a 'level playing field'.

In November 2015, the German national telecoms regulator approved a request by Deutsche Telekom to use the controversial vectoring technology to deliver highspeed broadband, which competing companies say will crowd out their access to networks. The executive was notified about the decision on 7 April 2016, and will then issue its own decision about whether the deal breaks EU law.

Timeline

  • 7 April 2016: Bundesnetzagentur notified European Commission about its decision to allow vectoring. The Commission has one month to respond with its own decision.
  • 10 May 2016: European Commission will issue its opinion on the German regulation.

Further Reading