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May 11 — A decision by Germany's telecom regulator, Bundesnetzagentur (BNetzA), to allow Deutsche Telekom A.G. exclusive use of vectoring technology in order to increase Internet speeds in parts of Germany is on hold after the European Commission launched an antitrust probe May 10.
The probe was triggered by complaints from Deutsche Telekom's competitors, digital content businesses and politicians claiming that exclusive access to the technology, which increases bandwidth over copper telephone lines, would restrict broadband competition in the country and run afoul of the EC's Digital Single Market initiative.
In a case that has major implications throughout the EU's 28 member states, the EU executive body said in a May 10 statement that the probe was needed because the decision by BNetzA appears likely to have a considerably restricting effect on alternative operators.” The agency needs to consider the “impact the upgrade would have for decades to come,” the EC said.
The European Commission has the right to reverse national regulators' decisions if it determines that they would restrict competition in the EU single market.
BNetzA approved Deutsche Telekom's exclusive use of broadband vectoring technology in areas close to DT's exchanges, where its use was previously prohibited by the regulator, to help achieve the German government's goal of boosting Internet speeds to above 50 megabits per second to 1.4 million households in the coming year. BNetzA issued the decision at the end of 2015 and notified the European Commission of the decision in April. The German government owns 30 percent of Deutsche Telekom.
“The Commission recognizes BNetzA's proposal would lead to broadband speed gains across Germany,” said European Commissioner for Digital Economy and Society Gunter Oettinger in the EC's May 10 statement. He added that the European Commission is working closely with the Body of European Regulators for Electronic Communications on the issue and “and may, at the end of the investigation period, either lift its reservations or issue a recommendation under EU telecom rules, which will urge BnetzA to amend or withdraw its draft measure.”
Vectoring technology currently only works when it is applied to an entire bundle of copper cables, according to the European Commission.
“At this current stage of technological development this prevents the physical unbundling of individual subscriber lines by alternative operators,” the European Commission said in its statement accompanying its decision to launch the probe. Instead of physical unbundling, competitive operators would be offered two alternative virtual access products, both of which give rise to concerns about competitors' ability to compete with DT in a cost-effective manner.
The European Telecom Network Operators Association (ETNO), which represents incumbent telecom operators throughout the EU — many of which, including Deutsche Telekom, were formerly state-owned monopolies and still hold dominant market share — backs the German regulator.
“Vectoring will ensure that German citizens get speedy access to fast broadband,” ETNO Spokesman Alessandro Gropelli told Bloomberg BNA in a May 10 e-mail statement. “We hope that the ongoing regulatory review will not delay roll-out plans.”
Deutsche Telekom said it was confident that the European Commission ultimately would approve its exclusive use of vectoring. “`Without vectoring, many rural areas will remain the monopoly of cable providers and will be excluded from competitive offers,'' the company said in a statement.
Competitive telecom companies have been trying with minimal success to gain significant market share in European markets since telecom liberalization in the late 1990s that ended national carriers' monopoly control over telecommunications markets. Those companies, many of them small enterprises, insist BNetzA's decision would inhibit competition.
“If this measure were implemented in the German market it would most likely create a serious throwback for competition, ultimately harming German consumers and businesses,” Gijs Phoelich, the chairman of the European Competitive Telecoms Association (ECTA) told Bloomberg BNA in a May 10 e-mail statement. ECTA represents competitive operators and describes itself as “the leading pan-European telecoms association promoting market liberalization and competition in the European communications sector.”
“The exclusive character of the installation of vectoring equipment by the dominant operator would obstruct the investment plans of all other players to deploy fiber,” Phoelich said, “and virtually re-monopolize the market.”
The issue has also triggered debate over what market conditions will promote enhanced broadband infrastructure investment in the EU. ETNO insists Deutsche Telekom's exclusive use of vectoring technology would boost infrastructure investment competition; ECTA disagreed.
“ECTA has very serious concerns regarding the consequences of this measure, which, if implemented, would jeopardize sustainable competition by wiping out challenger operators and their investments from the market and obstructing the path of fiber investments they would be ready to make if enabled by a fair regulation,” Phoelich said.
ECTA's viewpoint is backed by thirteen members of the European Parliament, who sent a letterto the European Commission objecting to the BNetzA decision. The parliamentarians argued that allowing Deutsche Telekom to use vectoring technology would retard the roll-out of fiber networks that would offer broadband speeds twice as fast as those supported by vectoring.
“The quality of the service that can be delivered with vectoring technology is not that much higher than what is currently available,” Sabine Verheyen, a German member of the European Parliament who orchestrated the letter sent to the European Commission, told Bloomberg BNA.
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