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EU telecoms commissioner talks tough after German rift

The warning came after a very public spate recently between her office and Germany’s Federal Networks Agency after it had agreed to virtually no government regulation for two to three years for Deutsche Telekom AG’s new 3bn euro ($3.5bn) high-speed fiber-optic network.

The disagreement eventually forced the German government to back down after rivals accused it of blatant protectionism. The problem came after the new German coalition government that took power last November had already agreed with to exempt Deutsche Telekom’s network from regulation in order to ensure it acheived adequate returns.

The European telecoms commissioner, Viviane Reding, was furious and sent a letter to Germany’s Federal Networks Agency saying she had serious concerns about the German regulator’s decision to take a hands-off approach to Deutsche Telekom’s new network.

The measure also attracted strong criticism from Deutsche Telekom’s foreign competitors operating in Germany. They were highly critical of the stance of the German government, and said it would allow Deutsche Telekom to set excessive access prices, or even prevent access to its network. They also said it could be a dangerous precedent for other countries.

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The Bonn, Germany-based carrier had said it would spend 3bn euros ($3.5bn) over two years to upgrade large parts of its network. The upgrade means the carrier will strip out large parts of its old copper wire network and replace it with high-capacity fiber-optic cable capable of speeds of up to 50MBps. The roll-out will then cover 10 unnamed German cities by mid-2006, and by 2007 this will reach 50 of Germany’s largest cities.

In the end, the pressure from Reding forced Germany to back down. But this humiliating climb-down was not forgotten in Berlin, and Germany now wants a more flexible approach from the European regulators, arguing that businesses need to be able to recoup the cost of their investments if they are to remain competitive.

However, in a speech on Thursday in Vienna, Reding, was unrepentant and issued a blunt warning to European member states, reminding them about the rules governing telecom investments.

It is absolutely crucial that we all understand that this (common rules agreed by member states) is a European process, and that the European Commission cannot tolerate fragmented national approaches which may favor only the former national incumbents and could thereby block the development of a true European eCommunications market, she said.

She also pointed out in her speech that while information and communication technology, ICT, represents a modest but growing 6% of the EU economy, it generates 25% of the EU’s growth and 40% of its productivity gains.

ICT is also transforming micro and sectoral-level economics, said Reding. Productivity gains at firm level through innovations such as e-procurement are transforming business performance.
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CBR Staff Writer

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