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EU says German telecommunications law protects Deutsche Telekom

European Union regulators began a legal fight to force Germany to revise a telecommunications law, arguing the legislation protects former monopoly Deutsche Telekom AG from competition.

The law, passed by Germany's upper house of parliament in December, took effect February 24. Media Commissioner Viviane Reding has vowed to sue Germany, which holds the EU presidency in the H1 of 2007, unless it scraps some provisions in the legislation. „I regret that Germany has chosen to ignore the Commission's concerns about this new telecom law despite several clear warnings from the Commission,” Reding said in a statement today.
The law, which stemmed from Chancellor Angela Merkel's agreement with her coalition partners in 2005, affects whether Bonn-based Deutsche Telekom AG will be forced to open its new fiber-optic network to rivals such as United Internet AG that didn't pay for start-up costs. Deutsche Telekom plans to invest as much as €3 billion ($4 billion) in the network.
German Economy Minister Michael Glos said in a February 23 statement that accusations that the legislation gives some companies „regulatory holidays” are „unfounded.” Deutsche Telekom, which is 32% owned by the government, has said it may halt spending on the network unless the company gets guarantees that it will have exclusive access long enough to recoup investments. The fiber-optic system, which uses the so-called VDSL technology, allows transmission of data at 25 times the speed commonly used today.
Deutsche Telekom has spent about €1 billion to connect 10 bigger cities to the network and offer combined Internet, phone and TV services. Rene Obermann, who took over as chief executive in November, hasn't given expansion details for the network. Pulling the plug on the network may jeopardize 5,000 jobs, Deutsche Telekom has said. The company is already cutting 32,000 German positions through 2008 as fixed-line phone revenue slumped for four consecutive years. (Bloomberg)