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Last updated: November 14, 2005 8:07 pm

Berlin rapped for Telekom exemption

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The incoming German government was on Monday night at loggerheads with the European Commission before even taking office over its agreement to exempt Deutsche Telekom’s planned fibre-optic broadband network from regulation.

A spokesman for Viviane Reding, the European Union’s telecoms commissioner, said: “We would have a problem if the German coalition agreement meant a general unilateral exemption of fibre-optic networks in Germany from telecoms regulation.”

As part of their coalition talks last week, Germany’s leading political parties agreed to a request from Deutsche Telekom to exempt a €3bn ($3.5bn) investment in ultra-fast digital subscriber lines (VDSL) in 50 cities from scrutiny by Bundesnetzagentur, the regulator, for a number of years.

However, the Commission said the relevant rules – the European telecoms framework – did not allow exemptions on account of novelty, as Germany is now proposing.

Matthias Kurth, Germany’s chief regulator, informed Ms Reding in mid-October that VDSL technology was so new that no market for it yet existed in the country.

The question of regulation could only be tackled in about two years, Mr Kurth argued.

The Commission on Monday said it had written a letter to Germany’s telecoms regulator criticising the proposal. Brussels said it had “serious doubts” about whether such a decision – which would benefit Deutsche Telekom – was justified. The Commission now has two months to come to a final decision on the dispute.

“Thanks to the Commission, the regulator and the new government will have to give regulation another hard look,” said Jürgen Grützner, head of the German Telecoms Services Association, which speaks for DT’s many competitors who rely on regulated network access.

“You can’t abandon your duty to regulate by simply saying there’s nothing to regulate.”

Deutsche Telekom’s rivals in Germany have already complained about the proposals to exempt its network from regulation. Ben Verwaayen, BT’s chief executive, accused the German government of protectionism last week.

The German regulator now has until early next year to persuade Brussels that its definition of the VDSL market is legitimate. Should it fail, Brussels could veto Mr Kurth’s suggestion and force him to come up with a new one – an unprecedented step.

His agency was not available for comment.

German politicians said they were not worried by the cross-fire from Brussels. DT said it was sticking to its request and refused to comment on “a dispute between bureaucracies”.

Additional reporting by Birgit Marschall in Berlin

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