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The European Commission on Tuesday turned up the heat in a simmering row with Berlin when it said a German draft law to exempt new telecoms services from regulation might break EU law and needed to be changed.

The German government had earlier presented a draft of a new Telecoms Act, which would allow its regulator to postpone policing new services on planned ultra-fast internet lines if competition was safe “in the long term”.

Berlin pledged the revision to secure a €3bn ($3.7bn) investment from Deutsche Telekom, which has threatened not to build very high data-rate digital subscriber lines (VDSL) if forced to grant rivals access straight away.

A Commission spokesman told FT Deutschland, the FT’s sister-paper, that Vivane Reding, EU telecoms commissioner, was “sceptical whether the German draft complied with EU law” and would seek changes.

The VATM, an association of German telecoms services providers, agreed with this view, while Breko, the lobby group of regional network operators, warned of dire consequences if the regulator misused its new freedom.

Brussels and rival telecoms operators have repeatedly cried foul about Berlin’s pledge, accusing it of favouring the former monopolist and endangering the spread of new internet based services like high-definition TV.

Last year, Ms Reding forced the German regulator to agree to police rivals’ access to DT’s VDSL lines, which it plans to build in 50 cities, if services were the same as those offered on existing DSL-networks.

But Ms Reding said the Bundesnetzagentur, the telecoms watchdog, could postpone regulating services on VDSL if they were not available on slower DSL-lines, a condition DT said it would be able to meet. In its draft, the German government notes an operator seeking exemption had to prove a service was new – something DT has yet to do – and cites two Commission guidelines giving watchdogs leeway to foster investment.

Berlin is worried over-regulation will discourage any investment in VDSL networks after Germany lost ground in the spread of DSL – the UK counts one of these lines per seven inhabitants and Germany one per 10.

Germany is at the vanguard of a movement among EU member states to reduce the power Brussels has over national telecoms regulators.

The row over DT‘s VDSL investment is seen as a test case in Berlin and Brussels that could decide the future of telecoms regulation. Brussels could sue Berlin in the European Court of Justice if Germany keeps the draft.

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