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European Commission opens an in-depth investigation into German regulator's plan to allow Deutsche Telekom to upgrade its network

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The European Commission has opened an in-depth investigation of the German telecoms regulator's (BNetzA's) intention to allow Deutsche Telekom (DT), to upgrade its network with vectoring technology in areas close to DT's exchanges, where this was previously prohibited by the regulator. In particular, the Commission has concerns about the potential impact of BNetzA's current proposal on the development of sustainable competition and on longer term incentives for investment in future-oriented networks for the Gigabit Society.

Vectoring technology can upgrade copper networks to bring higher broadband speeds. It is used as an intermediary upgrade technology instead of the deployment of optical fibre networks However, the technology currently only works when it is applied to an entire bundle of copper cables. At the current state of technological development, this prevents the physical "unbundling" of individual subscriber lines by alternative operators. Instead of physical unbundling, alternative operators would be offered two alternative, active or "virtual" access products, both of which give rise to concerns as currently proposed.

The Commission recognises that BNetzA's proposal would lead to broadband speed gains in parts of Germany (of the 6 million households affected, approximately 1.4 million would receive speeds above 50 Mbit/s for the first time). However, the proposal is likely to have a considerably restricting effect on alternative operators who buy access from DT to compete in serving end users. In the view of the Commission, the alternative access solutions offered by BNetzA are not yet sufficient to ensure an appropriate safeguarding of competition, including competition to invest, both now and in the future.

BNetzA's draft plan makes it highly likely that only DT could install the vectoring technology which would serve more than 90% of the 6 million households in question. The main alternative method through which competitors could gain access to the last mile of the subscriber line (a Layer-2 Bitstream product at around 900 Broadband Network Gateways in Germany) is in BNetzA's own view not (yet) a functional equivalent to physical unbundling due to technical restrictions in the product design. This would deny DTs' competitors the degree of control needed to differentiate their retail offers and enhance consumer choice. The other option (a higher-specification virtual unbundling product at affected street cabinets) would place physical and economic limitations on access by alternative operators which are likely to weaken competitive pressure in the short term.

In the light of the above the Commission has decided to open an in-depth investigation into BNetzA's draft measure. The investigation will assess whether solutions can be found, which are better suited to safeguard competition and future investment while still allowing for speed-enhancing network upgrades.

The Commission now has three months to discuss the case with BNetzA, in close cooperation with the body of European regulators (BEREC), in order to remove any elements giving rise to serious doubts as to compliance with EU law. The Commission may, at the end of the investigation period, either lift its reservations or issue an Article 7a Recommendation, which will require BNetzA to amend or withdraw its draft measure.

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