EC rules Deutsche Telekom must open VDSL network immediately

22 Aug 2006

The European Commission (EC) yesterday ruled that Deutsche Telekom must open its new EUR3.3 billion high speed broadband network to rivals with immediate effect. The telco had vehemently argued that the scale of its investment in the VDSL infrastructure meant it should be exempt from competition for a period of three years to allow it to recoup the cost of rollout but following complaints from Telekom’s rivals, the EC said the German operator should be forced to open up the last mile of its network. Viviane Reding, IT and media commissioner, also signalled that she would start legal action against Germany for infringing EU rules if the government chose to exempt Telekom from competition. The commission added that the price for bitstream access ‘should prevent any margin squeeze and should therefore be sufficiently below Deutsche Telekom’s retail prices.’

Reding’s aim is to accelerate broadband penetration in Germany, which, at 13% of households at the end of March 2006 (source: TeleGeography’s GlobalComms database), is just half that achieved in the Netherlands and Finland. The commission also wants to reduce Telekom’s dominance, estimating that it controls 60% of the broadband market compared to BT’s 25%. Ms Reding also wants to encourage prices to fall, especially in rural areas, where tariffs can be three times higher than more liberalised markets.

The commission’s decision is the latest in a series of setbacks for Telekom, which just ten days ago issued a profits warning; chief executive Kai-Uwe Ricke is also reported to be out of favour with investors – particularly the US private equity group Blackstone – which are pushing for him not to have his contract extended beyond next year.

Germany, Deutsche Telekom (DT)