RegTP accused of unbundling compromise - Company Business and Marketing

CommunicationsWeek International, April 16, 2001 by Peggy Salz-Trautman

The regulator refused Deutsche Telekom's request tar higher line rental fees, but has yet to enact laws encouraging competition, some argue.

The new leadership of Germany's regulatory authority RegTP has made key rulings that knock back Deutsche Telekom's attempts to charge alternative carriers higher prices for local loop access. But some say the measures do not go far enough to help competition.

In a long-awaited decision, the RegTP set new charges for access to the local loop effective from 1 April, requiring competitors to pay Deutsche Telekom a monthly rental of DM24.40 for unbundled copper pair wiring. Telekom had lobbied for DM34.03 a month (CWI 5 February 2001, p. 4) but was turned down by the RegTP, which two years ago set the price at DM25.40.

According to Joachim Dreyer, president of the VATM, Germany's main association of telecoms providers, the "slight reduction in prices will prevent real pressure from being put on Telekom," and act as a barrier to increased competition in the local loop.

The RegTP could easily have gone "a step further in encouraging competition in the local loop based on the facts and material it had at its disposal." Dreyer argued. "At least Telekom didn't manage to push through its totally exaggerated idea of pricing." he added.

Carriers have been cautiously monitoring the actions of new RegTP president Matthias Kurth, who belongs to the government's ruling party, saying that this first decision would be a litmus test for the authority's resolve to maintain a clear and predictable competitive framework in the German market.

One mark is not enough

But Donatus Kaufmann, director of legal and regulatory affairs for GTS Deutschland GmbH, of Frankfurt, said the price reduction "doesn't respect the concerns of telcos." Kaufmann said the former price--one German mark higher--did little to increase competition. "So it follows that we can't expect the mere reduction of one mark to change that situation significantly," he said. About 98% of the local loop is still firmly in the grip of the incumbent, he claimed.

The RegTP also approved new one-off installation and disconnection fees for the lease or return of local loops, setting the basic price for installation of a leased line at DM181.09--roughly 5% less than the former charge of DM191.64. For a disconnection, competitors will pay DM74.45 in future, instead of the current DM107.70.

Telekom has yet to set a price for local line sharing, and the RegTP has said it will wait to see what offer Telekom comes up with before it takes any steps to intervene.

"It took years to fight for unbundling and we still haven't resolved the issue of price," said GTS's Kaufman. "In the case of line sharing we have the same situation in that we have a service but not the price."

Jury still out on T-DSL practices

Following a separate investigation into Telekom's digital subscriber line pricing and policy of bundling DSL access with its own T-Online services, the RegTP ruled it could make "no objections to Telekom's current T-DSL prices in regulatory terms," although it did admit that "a lack of detail" in the pricing documentation Telekom presented "indicated that Telekom's prices failed to cover costs in all cases."

Rivals had accused Telekom of offering DSL at dumping prices in an effort to squeeze out the competition. They argue that Telekom's actions to date have allowed it to grab over 90% of the DSL market in the last few months.

The RegTP said it would not take action against Telekom's below-cost DSL prices because Telekom can't help the fact that its size allows it to use different economies of scale in its pricing. "No predatory effect [of Telekom's pricing] has been proven," the RegTP stated.