EU court ‘sets precedent’ in Germany telecoms ruling

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Germany’s laws give preferential treatment to the country’s main telecoms company Deutsche Telekom, according to a ruling by the European Court of Justice (ECJ) yesterday (3 December), dealing a blow to dominant operators across Europe.

In what the European Commission is calling a precedent-setting case, Germany has been told to stop giving its dominant telecoms operator, a former state-run monopoly, so-called regulatory holidays – a relaxation of competition rules. 

The ruling concerns a German law that entered into force in 2006, which, according to the Commission, allowed Deutsche Telekom to bypass EU rules on regulation. 

The Commission’s rules, bolstered last month with the adoption of a new telecoms package, say markets must be subject to “a solid, independent analysis by the national regulatory authority”. 

However, the German law foresaw such an analysis “only in exceptional circumstances,” allowing Deutsche Telekom to prevent competitors from accessing to its new high-speed broadband network. 

Germany ignored repeated warnings 

The European Commission sent Germany a formal caution in February 2007 after repeated warnings not to adopt legislation giving Deutsche Telekom a ‘regulatory holiday’ had been ignored. 

Deutsche Telekom’s fast Internet access network was “effectively exempt from competition,” a Commission statement from 2007 said, pointing out that the German state still part-owned the operator. 

As of June 2008, the German government still held a 15% stake in the company’s stock directly, and another 17% through government bank KfW. 

Decision clarifies law… 

The German Ministry for Economy and Technology welcomed the ECJ’s decision, saying it confirms its own stance on competition. 

Meanwhile, “yesterday’s decision clarifies EU law, that there are no exceptions and that regulators must make a market analysis,” Innocenzo Genna of the European Competitive Telecoms Association (ECTA) told EURACTIV. 

Genna said the ruling will clear the way for a long-awaited Commission proposal on the construction of Next Generation Networks – fibre-based broadband infrastructure expected to increase speed from 2.0 megabits per second to 100 megabits per second. 

The NGN proposal may, however, need to be changed to reflect the ECJ’s zero tolerance of regulatory relaxation because the last draft contained more flexible rules for multi-fibre, joint investments and co-operative agreements between companies, according to Genna. 

…but incumbents still want to share investment risk 

The ECJ ruling will disgruntle so-called legacy networks, former state-run monopolies, which have been calling for a relaxation of regulation to encourage investment in NGNs. 

The ruling still does not resolve the main issue, Thierry Dieu, from the European Telecoms Network Operators (ETNO) said, namely how do we encourage investment. 

Large operators, represented by ETNO in Brussels, say the capital will come when network operators are allowed to share the risk more evenly (EURACTIV 13/11/09). 

“ETNO is not calling for regulatory holidays,” Dieu said but for “a more targeted and proportionate regulatory approach to take investment risk into account.” 

Background

A highly contested set of telecoms rules finally won broad consensus in the European Parliament on 24 November 2009, paving the way for high-speed Internet across Europe. 

EU telecoms law says that any assessment of the state of competition and of the need for regulation must be based on a solid, independent analysis by the national regulatory authority. 

Large and small operators are at odds over how markets should be regulated and who should foot the bill for rolling out Next Generation Networks (NGNs). Fibres are at the core of so-called NGNs. 

Optical fibre backbones are considered the future of telecommunications infrastructure, because they allow faster and wider transmission of data than current, largely copper-based networks. 

Further Reading

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