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Author: Pritpal Warner
On 21 August the European Commission (EC) approved with comments the German regulator Bundesnetzagentur's (BNetzA's) proposed regulatory remedy ('draft remedy') to Deutsche Telekom's (DT's) dominant position in the wholesale broadband access market. Specifically, BNetzA's draft remedy requires DT to:
- provide IP-based bitstream access, including 'naked DSL' (NDSL) on non-discriminatory terms
- implement retail and wholesale accounting separation
- publish a reference offer
- comply with ex ante pricing - cost-based or based on a price squeeze test.
Much to DT's dismay, the draft remedy applies to its current and planned fibre-to-the-node (FTTN)/xDSL network. The network was rolled out in ten major cities in time for service trials prior to the FIFA World Cup. Services will be launched commercially in Autumn at the earliest. DT has threatened to stop the planned expansion of the network to an additional 40 cities if it is forced to comply with EU law.
Bnetza, the EC and the national regulatory authorities (NRAs) of the other EU Member States now have one month to discuss and finalise the remedy. Upon finalisation DT will have three months to comply.
Comment: Once a European broadband front-runner, Germany is now a laggard with a broadband penetration below the EU average. Most people would agree that this situation is due to a lack of competition from facilities-based operators and from bitstream access-based operators. The availability of wholesale bitstream access has enabled impressive growth rates in broadband take-up in other EU countries. When overall broadband penetration is considered, all but the EU slow-starters have overtaken Germany.
The immediate availability of wholesale bitstream access on the terms mandated by the BNetzA would see a dramatic increase in broadband uptake in Germany. However there are a number of potential obstacles to it being implemented within the time period specified by the EC.
Obviously it is in DT's best interest to delay the implementation of bitstream access, and with a free rein on developing the reference offer, it may prove again to be a bottleneck. DT will naturally attempt to delay proceedings, frustrating stakeholders. Considering that this process has taken many regulators well over a year the EC's target of three months is a bit optimistic.
The German Government has much to fear from the regulation of wholesale broadband access:
- the effect on DT's share price - it owns 14.6% of DT directly and 30.2% of it in total
- the presence of powerful workers' unions
- the political fall-out of potential job losses.
As such, the Government has promised to protect DT by implementing legislation that will prevent access to its FTTN/xDSL network. However the EC has threatened to impose sanctions on Germany should this happen.
The regulatory environment could itself be an obstacle. The legislation that supports BNetzA - the new Telecommunications Law (Telekommunikationsgesetz - TKG) - was adopted in June 2004 and is largely untested. Unlike the RegTP, its telecoms-specific predecessor, BNetzA is a full-service regulator. As such many stakeholders fear that expertise has been diluted by the moving of experienced telecoms staff to the regulation of gas, trains etc. However, the TKG should speed up the appeals process. The familiarity of the BNetzA with bitstream issues along with the extreme pressure being placed on it by the EC and alternative operators will also help it to progress proceedings.
Wholesale bitstream access, and bitstream access via DT's FTTN/xDSL network in particularly, will have a significant impact on the uptake of advanced broadband services in Germany. However if it is not implemented in a timely manner Germany may slip even further down the broadband rankings.
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