Germany’s telecom and antitrust regulators are investigating a Deutsche Telekom (DT) “net rental agreement” competitors say discriminates against smaller providers, the German press reported Thurs. Among other things, BNetzA and the Federal Cartel Office are probing the effect of a clause that allows DSL resellers that interconnect with DT to obtain DSL lines to reach end-customers -- and which have more than 120 customers in a DT local calling area -- to receive a 50% rebate on DT’s end-user prices, way above the usual 11.5%. Observers believe the provision favors T-Online -- DT’s ISP subsidiary which, with 4.5 million customers, is the country’s largest ISP -- allowing it to undercut smaller resellers’ prices to consumers. Those resellers, together with alternative DSL providers, say DT is charging rates lower than its costs ahead of a T-Online and DT merger. Competitors are seeking an injunction from the Administrative Court in Cologne, claiming the net rental agreement hurts resellers of DT DSL connections because they're not eligible for the same favorable terms and that DT is trying to force them out of the market sector. “The rental rebates are not only discriminatory, they hurt the rollout of rural broadband,” attorney Axel Spies said on behalf of the German Competitive Carriers Assn. (VATM). The rebates favor large providers who focus on high-density population areas with many customers in the DT’s local calling area, causing DSL prices in rural and urban areas to “drift apart.” The fact that regulators will now check DT’s resale tariffs to determine if they're cost-based is “good news,” Spies said. DT now reportedly operates around 72% of all DSL connection in Germany (some 10.4 million lines), and DSL is by far the most popular broadband delivery service in a country where broadband cable connections don’t play a major role.
Dugie Standeford
Dugie Standeford, European Correspondent, Communications Daily and Privacy Daily, is a former lawyer. She joined Warren Communications News in 2000 to report on internet policy and regulation. In 2003 she moved to the U.K. and since then has covered European telecommunications issues. She previously covered the U.S. Occupational Safety and Health Administration and intellectual property law matters. She has a degree in psychology from Duke University and a law degree from the University of Tulsa College of Law.
German regulator BNetzA Thurs. signaled displeasure with govt. plans to give Deutsche Telekom (DT) a regulatory holiday while it installs a new fiber network. Releasing the agency’s annual report, BNetzA Pres. Matthias Kurth said it’s “no miracle but the effect of competition” that DT competitors’ market shares have grown disproportionately. In 2004, DT rivals provided 17% of all DSL connections, a number rising to 38% at the end of 2005. Kurth said the achievement resulted from goal- and competition-oriented regulation. He said he worries about the “shallow” debate on rolling back allegedly heavy-handed regulation to further innovation and foster investment. Apart from the fact that those arguments always come from the same corner -- DT -- the annual report shows they're untrue, he said: Rather, opening the monopoly network has been good for growth. The Ministry of Economics (BMWi) is overhauling Germany’s telecom act and is expected to submit amendments in May, said telecom lawyer Axel Spies. One amendment in play is a new one, Section 9a, that would guard DT from oversight while it builds a fiber VDSL network. The proposal has drawn fire not only from competitive telcos but also from the European Commission. Now, it appears the ministry may be prepared to “revisit” the draft article to “accommodate” Commission concerns to an extent. And complaints pending against Germany at the U.S. Trade Representative (USTR) hit at the notion of a regulatory moratorium (and other issues), and the ministry is talking to the USTR about them, Spies said. But because there’s no text of any revisions to 9a, “we don’t know yet whether these are only cosmetic changes.” DT rivals are “pleased that Mr. Kurth has made it clear that there is a clear connection between investments and regulatory environment that furthers and encourages competition,” Spies said on behalf of the German Competitive Carriers Assn. VATM. Competitors “agree there is no indication” Germany’s telecom sector is over- regulated, he added. Cabinet approval of the telecom act amendments is expected in May, after which the measure moves to the Bundesrat (Upper House of Parliament), which will vote June 16 on a formal position on the bill. It then shifts to the Bundestag (Lower House) for early fall consideration, Spies said.
Despite excitement over WiMAX, its role in the wireless market is “debatable,” the Organization for Economic Cooperation & Development (OECD) said Tues. The technology - - not widely used anywhere -- raises questions regarding spectrum, regulation and security, said Taylor Reynolds of the OECD’s Science, Technology & Industry directorate. It’s also sparking new arguments about net neutrality, said Reynolds, who wrote the report on WiMAX’s implications for competition and regulation.
Despite rosy industry predictions and a strong nudge from the European Commission, widespread mobile TV uptake in Europe is far from certain, an analyst said Fri. The technology is “heavily overhyped by the vendor community,” said Strategy Analytics’ Nitesh Patel. Carriers not convinced of the opportunity are forced by competitive threats inside and outside the industry to think seriously about choosing a strategy to pursue the technology, he told us.
LONDON -- U.S. VoD distributor TVN could have a digital watermarking system in place in a year, its CTO said Wed. at the IPTV World Forum. The system is ready technically for prime time, Dom Stasi told us. It’s in a trial with Thomson to work out kinks. Watermarking and digital copy protection are the emerging technologies that the IPTV sector hopes will let loose the flow of content to draw customers.
LONDON -- As telcos move from traditional telephony to IPTV, a debate has arisen over whether to handle content security with smartcard technology or software solutions, speakers said Tues. at the IPTV World Forum here. Providers of “conditional access (CA)” called smartcards the only way to guard premium content. Software sellers said smartcards are too vulnerable to copying and too pricey.
LONDON -- Despite rising interest in TV over broadband, its future is far from assured, speakers said Mon. at the Internet Protocol (IP) TV World Forum here. Technical, financial and content issues could hurt deployment. No one knows what consumers want and only now is the market is becoming measurable. But the main threat is a possibility Google or another global portal will enter the IPTV market directly, panelists said.
Despite improvement in EU-U.S. trade, roadblocks remain to trans-Atlantic business related to telecom and intellectual property (IP) rights, the European Commission (EC) said Wed. in its latest annual report on U.S. barriers to trade and investment. The U.S. has made “significant commitments” on European service provider market access, but the EU “remains concerned” about steep hurdles European and foreign-owned firms still face, the Commission said. The report emerged as the sides agreed to lift longstanding public procurement sanctions, some involving European telecom.
Europe could have 20 million more broadband subscribers if every country’s market were as competitive as Sweden’s, said U.K. Strategy & Policy Consultants Network. In a paper on EU broadband competition and market growth, the firm’s analysts tied rates of change in broadband use to market concentration. In 21 of 25 EU member nations, there’s a “clear 41% correlation between the level of broadband take-up and competition between access modes, identified as incumbents’ own ISP, resellers of incumbent’s bitstream, LLU, cable and other modes,” the report said. For every 1% drop in market concentration broadband uptake rises 1.66% hike, analysts said. If all EU states studied had the Swedes’ competitive intensity, 20 million subscribers would be added. Analysts urged policy-makers to spur competition by: (1) Removing barriers to market entry by, for instance, mandating wholesale DSL and promoting LLU. (2) Encouraging efficient entry of new infrastructure to cut domination by cable and DSL. (3) Lowering barriers keeping consumers from switching to alternate suppliers. (4) Scrutinizing markets for static market shares that could signal collusion between competitors. The report confirms European Competitive Telecom Assn. (ECTA) findings that broadband adoption rises when markets open up, ECTA said. Procompetitive policies some EU countries enforce are “directly responsible” for higher broadband takeup among consumers and small-to-midsized businesses, ECTA Managing Dir. Steen Clausen said. But another analyst finds fault with the EU strategy for increasing broadband competition. Forrester Research analyst Lars Godell accused Information Society & Media Comr. Viviane Reding of “barking up the wrong tree” by focusing on competition complaints between service providers in already regulated markets to the exclusion of considering how to generate benefits for end-users, Telecoms.com reported. Godell cited recent EC criticism of Telefonica for alleged margin squeezing and antitrust activities in the broadband market -- and of efforts by Deutsche Telekom to secure a regulatory holiday while it builds a new fiber network -- as examples of a mistaken Commission focus on negligible issues. “This appears a classic case of regulators being blinded by looking after producer, not consumer, interests,” Godell is quoted as saying.
German Economics Minister Michael Glos voiced surprise this week over EC criticism of Germany’s proposal not to regulate DT’s next-generation network, MarketWatch reported. On Feb. 17, Information Society & Media Comr. Viviane Reding wrote Glos she’s paying special attention to the proposed revision of Germany’s telecom act -- particularly new section 9a, which provides for nonregulation of new markets. The Commission is concerned about a “regulatory moratorium” because it raises serious questions about the relationship of competition, new markets and investment that should be addressed by the EU, not nations, Reding said. The legislative proposal suggests new markets be regulated only if development of sustained competition would be obstructed long run otherwise. That runs counter to the EU’s package of e-communications directives, Reding wrote: The law shouldn’t allow a monopoly to be revived, even for a limited time. She said also said Art. 9a: (1) Fails to make clear that consultation must take place before the German telecom regulator decides a new market exists. (2) Doesn’t clarify that “new market” and the duration of any regulatory moratorium must be defined by the regulator in close cooperation with the Commission. (3) Uses “sustained competition-oriented market,” an expression unknown in the EU regulatory framework that should be replaced with “effective competition.” Finally, Reding wrote, the Commission has already launched 2 EU Treaty violation procedures against Germany for infringing EU law by restricting the telecom regulator’s discretion. It’s the regulator -- not the legislature -- that must determine if and how regulation should be imposed, she said, and Art. 9a must be drafted to ensure that principle applies to new markets. Germany lags significantly behind other EU countries in broadband partly because it lacks essential regulatory measures such as bitstream access, she added. Glos said Tues. his office is surprised because the revised telecom bill was based on preliminary working-level talks between his department and the Commission, MarketWatch said. But the official said he would look into Reding’s concerns. The Head of the Federal Network Agency, Matthias Kurth, said “more transparency and sincerity” is needed in the debate to counter the impression that his agency favors “one single company and risk[s] the balance between competition and innovation.” The public consultation is aimed at defining “new market” and embracing the discussion started by the EC. The consultation should help clarify the issue for fixed net and broadband providers in Germany and across the EU, said Kurth. The Federal Network Agency will accept statements until April 19 from interested parties on 9 questions, on the agency’s website, about the definition and treatment of “new markets.” -- www.bundesnetzagentur.de/media/archive/5120.pdf.