Deutsche Telekom is threatening to withdraw its flat-rate Internet access service.
Deutsche Telekom’s (DT) Internet subsidiary T-Online, which today announced its new chairman will be former Deutsche Bank executive Thomas Holtrop, is at war with the German telecoms regulator RegTP. The issue is the same one that has proved contentious in the UK – wholesale unmetered Internet access. RegTP has insisted that Deutsche Telekom must offer this to all Internet service providers by February 1 next year. At the moment, ISPs have to pay on a per-second basis, so ISPs offering flat rate services are making large losses. Many have had to withdraw the service as uneconomical.
However, DT argues that if it offered wholesale flat-rate packages, this would put pressure on an ageing core network not designed to handle large amounts of data; the investments it would have to make in upgrading it would slow its provision of broadband DSL services. A reasonable objection to this argument is that T-Online’s package, which costs $34 per month, gives consumers unmetered access and doesn’t yet appear to have brought the network crashing down. Presumably, a wholesale package that gave Deutsche Telekom the same revenues as the T-Online deal (after all, T-Online is an independent subsidiary, not a wholly-owned unit of the company) would allow it equally well to upgrade the network. It is hard to view the current situation as anything other than unfair cross-subsidy.
DT seems to accept this objection. However, the step it wants to take to correct the imbalance is not, perhaps, the one German Internet users are hoping for. Closing down its flat-rate offer would remove T-Online’s advantage – but it would not do much to realize the German government’s aim of boosting Internet use. And RegTP is unimpressed by the withdrawal, stating that it will have no impact on its ruling. If Deutsche Telekom is to avoid opening up its network by February 1, it will have to take the regulator to court and win. Given the support in the government, the media, and the general public for cheaper Internet access, DT will have a difficult task on his hands.
