Europe approves Deutsche Telekom vectoring upgrade after further concessions

The European Commission has decided to let German telco Deutsche Telekom upgrade its fixed network with vectoring technology, having received assurances over competitive safeguards.

DT wants to upgrade its copper network using vectoring technology to increase broadband speeds. The German telecoms regulator BNetzA had approved the plans but the EC wasn’t happy about the potential for this upgrade to take resources away from other German telcos who lease fixed line capacity from DT, and initiated an investigation earlier this year.

BNetzA then went back to DT to work out how to placate the EC and seems to have been successful as the plans have now been approved. The additional concessions covered competitive safeguards and while they were sufficient to address the EC’s immediate concerns, further will be required down the line (so to speak) to prevent a repeat investigation.

“As a result of our intervention, the German regulator has drawn a better balance between network upgrade and high quality access for competitors,” said Günther Oettinger, Commissioner for the Digital Economy and Society. “The additional safeguards BNetzA now proposes protect sustainable competition and create incentives to invest in future-oriented networks for the gigabit society. However, further improvements must be made and we will remain vigilant to ensure that they are made.”

Here’s what the announcement had to say about those further improvements: “BNetzA proposes to remove the restriction on the number of alternative operators which can access street cabinets to provide connectivity services and to grant access to ducts and dark fibre for two years to those alternative operators currently present at the local exchange.

“These measures will allow a more efficient use of existing infrastructures. In addition, the fact that alternative operators will be able to deploy vectoring in more areas than before, together with BNetzA’s commitment to improve further one of the access products led the Commission to endorse the overall proposal.

“However, the Commission also points out certain aspects which require further improvement. Since the use of vectoring in the areas of 550m around a local exchange means that alternative operators cannot directly access the wires linking customers’ premises to the local exchange to provide high-speed broadband, the Commission requires BNetzA to ensure that competitors have an adequate and alternative means of offering internet access to customers.

“The Commission has also called upon BNetzA to improve their plans concerning the technical specifications for the main replacement product (a Layer-2 virtual access product) and notify them to the Commission. The Commission will then assess these proposals against the guidance in the Explanatory Note to the Commission’s 2014 Recommendation on Relevant Markets and the more detailed expectations expressed in today’s decision. It is essential that the new virtual access product will replicate the main characteristics of the today’s physical product.”

Aside from the implications to DT and the German broadband market this is viewed as a test case regarding the EC’s attitude to telecoms investment. On one hand it’s urging telcos to invest heavily on infrastructure but in the other it has the power to attach onerous conditions to that investment. This seems to be a good compromise and will indicate to telcos that the EC is open to reason.

UPDATE – 14:00, 20/07/16 – Vodafone has issued a statement on the decision:

Vodafone maintains the view that the optimum outcome for German businesses and consumers – and across the EU as a whole – would be the rapid deployment of world-class, future-proof and competitive networks capable of gigabit speeds (1 Gbps/1000 Mbps), rather than short-term incremental upgrades to outmoded copper networks. Attempts by former incumbents to remonopolise EU telecoms through anticompetitive measures must also be guarded against closely.

While the Commission has announced its acceptance of the revised proposal, it has made this conditional on BNetzA ensuring additional improvements to the conditions under which alternative operators can access Deutsche Telekom’s network. Vodafone views it as positive that BNetzA will be required to submit separately to the Commission its detailed plans concerning both the quality and prices for the access product in order to avoid harm to competition. 

For this to be effective, Vodafone welcomes the Commission’s confirmation of BNetzA’s assurance that competitors will not lose their current physical access at exchanges – which means that vectoring cannot be activated – until the Commission has reviewed these detailed plans and an acceptable replacement wholesale offer is in the market. The Commission has agreed also with Vodafone that Deutsche Telekom should not restrict the ability of alternative operators to access Deutsche Telekom’s ducts.

We look forward to the publication in the coming days of the Commission’s formal decision for the full details of this important decision and to the German regulator’s consultation on the replacement wholesale offer. The German regulator now has a duty to provide a fair compromise and a competitive solution that will allow Germany to evolve into a gigabit society.

UPDATE 2 – 17:30 20/7/16 – The European Competitive Telecommunications Association has also issued a comment:

ECTA and its members take note of this decision but still think that the new measure does not promote or safeguard competition but actually grants an unjustified competitive advantage to the incumbent operator by removing physical unbundling. Maintaining a strong level of competition by ensuring physical network access by the alternative operators is the most efficient way to promote a Gigabit Society and to guarantee innovation and affordability which will result in genuine end-user benefits.

ECTA will study the European Commission’s comments letter in detail, it welcomes yesterday’s critical comments by the European Commission and stresses that the implementation of the BNetzA decision should be such that it does not result in wiping out challenger operators from the market and obstruct the path for their fibre investments. ECTA trusts in the Commission’s announcement to remain vigilant as regards to the definition of the characteristics of the virtual product which is linked to the vectoring proposal.

ECTA urges BNetzA to take utmost account of the comments and suggestions by the European Commission and to enable more forward-looking solutions that are compatible with competition, allow for investments by all market participants, and therefore foster Germany’s path towards innovation.