EC warns Germany on broadband competition

The European Commission said Monday that it has threatened the German government with legal action unless it scraps a new law that protects Deutsche Telekom AG from competition in the broadband Internet access market.

The Commission is sending a letter of formal notice to the German government after repeated warnings not to adopt the legislation. It is using a fast-track procedure that gives Germany just 15 days to reply to the warning before a case is opened at the European Court of Justice in Luxembourg.

"I regret that Germany has chosen to ignore the Commission's concerns about this new telecom law despite several clear warnings from the Commission," said European Union Telecom Commissioner Viviane Reding in a statement.

Germany has argued that Deutsche Telekom should be granted a so-called "regulatory holiday" because of the massive investments it has made in its broadband infrastructure.

The Commission disagrees. "The granting of regulatory holidays to incumbent operators is an attempt to stifle competition in a crucial sector of the economy, and in violation of the EU telecom rules in place since 2002," Reding said.

The Commission's action focuses on specific amendments in the German law that effectively exempt Deutsche Telekom's fast Internet access network (VDSL) from competition. The amendment was requested by the company, which is still partly owned by the German state.

Under E.U. rules, regulatory holidays must be granted in consultation with the Commission and regulatory authorities in other member states.

Last October Reding and her colleague, the E.U. Competition Commissioner Neelie Kroes, sent a letter to German Minister of the Economy Michael Glos in which they expressed their serious concerns about the draft law and warned of legal action if the law was not brought in line with European law.

Germany ignored the warning from Brussels. It also ignored advice from the German telecom regulator, the 'Bundesnetzagentur.'

The infringement procedure started Monday is the sixth proceeding pending against Germany under E.U. telecom rules. If Germany fails to get into line with European telecom rules it could face hefty daily fines imposed by the court.