Germany slams brakes on local loop competition

The German upper house of parliament, the Bundesrat, decided last week not to approve an amendment to the national telecommunication bill that would have created greater competition in local telephone networks, a spokeswoman for the Bundesrat says.

          The German upper house of parliament, the Bundesrat, decided last week not to approve an amendment to the national telecommunication bill that would have created greater competition in local telephone networks, a spokeswoman for the Bundesrat says.

          The decision means it is very likely the European Commission will take the German Government to the European Court of Justice for failing to abide by a European Union directive designed to liberalise the telecommunication market.

          The bill, which was approved earlier in the year by the lower house of parliament, the Bundestag, aims at breaking former monopoly telephone company Deutsche Telekom's near 95% grip on the so-called local loop by allowing call-by-call and preselection services. These services allow other companies to provide telephone and dial-up Internet service over infrastructure leased from Deutsche Telekom (DT).

          The Bundesrat is made up of the heads of the German states, called Länder. Wolfgang Clement, president of the populous state of North Rhine Westphalia (NRW), opposed the amendment on the grounds it would have a negative impact on companies that invested in local network infrastructure and would discourage others planning to make such investments.

          NRW has several competitive local carriers in addition to DT. Around 60 local carriers currently provide service in Germany.

          Clement sees no opportunities for small and medium-size operators to benefit from the new legislation, he said in a statement. The state president referred to the speed at which the German telecommunication market has been liberalised as "too fast."

          The European Commission warned Germany that its laws failed to provide for competition in the market for local telephone services in June 2000, when a European directive on call-by-call and preselection services came into force.

          After sending Germany a warning letter it put the procedure on ice while Chancellor Schroeder's government set to work drafting the amendment that was thrown out today by the upper house.

          The commission was taken unawares by the decision in the Bundesrat. "We are assessing the situation and reserve the right to take whatever action is necessary," says Per Haugaard, commission spokesman for internet and telecom issues.

          One commission official who requested anonymity said it is "pretty likely" that the commission will take Germany to court. But he added that no such action is likely before the German elections in the second half of September.

          The German telecommunication regulator, RegTP, regrets the decision and can expect "plenty of problems" with the European Commission, a spokesman says. Earlier in the year, the commission issued a warning to Germany to amend its rules allowing for greater competition in local loop services, according to the spokesman.

          The bill will not be put back on the agenda until after the September elections, the RegTP spokesman says.

          (Additional reporting by Paul Meller in Brussels.)

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