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Berlin was on Monday formally reprimanded by Brussels for shielding Deutsche Telekom from competition.
A German law barring rival operators from using the company’s €3bn new, ultra-fast internet network violated EU telecoms rules, the European Commission argued.
Monday’s action is one of a number of clashes between Brussels and EU member states over protectionism in sectors including energy, banking and telecoms.
The Brussels regulator sent Germany a letter of formal notice, the first move in a three-stage infringement procedure. The case could reach the European court of justice for binding censure if Berlin fails to change the legislation, which came into effect last week.
Deutsche Telekom, which is 32 per cent state-owned, dominates Germany’s broadband market. The company argues that it needs sole access to the new infrastructure to guarantee a decent return on its investment.
Under EU rules, dominant telecoms operators must open their networks to rivals. Brussels is pushing for greater competition in the European broadband market as part of efforts to establish new jobs and services.
Ecta, a lobby group representing new entrant telecoms operators, backed Brussels’ action. “Of course we should deregulate where competition is fully effective, but deregulating prematurely harms consumers and also affects business communications, which is vital for productivity and economic development.”
However, Michael Glos, German economy minister, last week defended the new legislation. He said the law created a balance between boosting competition and meeting the needs of companies that were willing to invest.
Angela Merkel, German chancellor, pledged on taking office in 2005 to change regulations in return for Deutsche Telekom’s promise to link 50 cities to its VDSL network by the end of next year.
The company offers services such as high-definition television on the new infrastructure.
Berlin has 15 days to respond to the European Commission’s letter.