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Markets in flux

07.12.2015

Press release

  • Competition in the retail telecommunications markets continues to evolve dynamically. Regulation of the vast majority of wholesale services remains essential.
  • Vectoring in the vicinity of main distribution frames will accelerate the roll-out of high-performance broadband networks. A technology monopoly held by a single provider should be prevented.
  • The competitive pressure exerted by innovative over-the-top services such as Skype or WhatsApp must be taken into account in regulatory decisions.

The Monopolies Commission today presented its special report pursuant to Section 121(2) of the Telecommunications Act (TKG), entitled ‘Telecommunications 2015: Markets in Transition’. In it, the Commission assesses the current state and development of competition in the telecommunications markets and acknowledges the Federal Network Agency’s regulatory practice in the telecommunications sector.

The Monopolies Commission takes a largely positive view of the Federal Network Agency’s work. Unlike the Agency, the Monopolies Commission considers operator (pre-)selection to be unnecessary and reiterates its call to abandon the regulation of subscriber lines in the fixed-line sector. Regulation of the vast majority of wholesale services remains essential, as competitors’ offerings are largely based on access to the dominant operator’s infrastructure. For the first time, the authority has defined geographically distinct regional markets for bitstream access. This makes it possible to take greater account of regionally varying competitive developments than before and to dismantle regulation where it has become superfluous.

Vectoring technology is of great importance for the rapid and comprehensive roll-out of high-performance broadband networks. The Monopolies Commission advocates allowing all companies wishing to expand their networks to use this technology, in principle, even in the immediate vicinity of main distribution frames. However, the draft regulatory order currently submitted by the Federal Network Agency sets high barriers to competitors’ participation.

There is a fear that – unlike in the case of the first vectoring decision in 2013 – the Federal Network Agency will not succeed in preventing Deutsche Telekom from maintaining its technological monopoly on the so-called ‘last mile’ in the vicinity of the main distribution frames.

Daniel Zimmer, Vorsitzender der Monopolkommission

The Monopolies Commission reiterates its call for the federal government to sell its stake in Deutsche Telekom AG, amounting to around 32 per cent, at the earliest opportunity. This would resolve the conflict of interest arising from its dual role as legislator and shareholder. In its view, the sale of these shares is not only urgently required for regulatory reasons, but would also generate substantial funds that would flow into the federal budget and could potentially be used to support the roll-out of broadband in Germany.

In view of the great importance of an efficient provider switch for effective competition in telecommunications markets, on the one hand, and the high and rising number of consumer complaints in this area, on the other, the Monopolies Commission advocates stricter enforcement of the existing rules governing provider switches. It also calls on the legislator to drastically increase the statutory fines for infringements relating to switching providers.

In the mobile telecoms sector, the industry’s consolidation process has continued. The Monopolies Commission expects that major mergers, such as the recent one between the network operators Telefónica and E-Plus, will tend to dampen rather than strengthen competition among the remaining providers. At present, however, it is still too early to draw definitive conclusions regarding the actual competitive effects on the mobile telecoms markets.

Traditional telecommunications companies are increasingly facing competition in retail markets from providers of innovative services such as Skype and WhatsApp. To ensure a level playing field, efforts should be made to harmonise regulatory obligations for functionally similar services. Furthermore, regulatory decisions must take into account the competitive pressure exerted by so-called over-the-top services. This competition could also suggest a scaling back of traditional regulation.

The Monopolies Commission generally views the European Parliament’s latest decisions on roaming charges positively. Although the abolition of roaming charges brings many benefits for consumers, care should be taken to ensure that roaming services are not misused by implementing an appropriate ‘fair use policy’.

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