German alternative telcos reacted furiously Tues. to a document h...

Ministry of Economic Affairs (BMWi) said the European Union is wrong to equate effective competition with absence of market power. “This could lead to the conclusion that the primary goal of regulation is the removal of extensive market power. This creates a danger of inefficient and excessive regulation, as natural monopolies and bottleneck positions are virtually characteristic for the telco market, and temporary monopoly positions represent a key element in dynamic processes of competition,” BMWi said. It urged the EC, when revising the NRF, to devise a “feasible concept” for whether and how to regulate in new markets, “especially with a view to encouraging innovations and investments.” DT rivals “are very concerned that this paper is the beginning of a change in strategy in Germany, away from regulating the ex-monopolist,” Swidler Berlin lawyer Axel Spies said on behalf of the German Competitive Carriers Assn. (VATM). Easing regulatory checks and balances even for a limited time would devastate DT’s competition in the broadband and other emerging sectors, he said. It would let DT “occupy new market sectors unchecked, pushing the competitors out of those sectors, which will devaluate the billions and billions of euro” they've already spent on infrastructure and new services, and discourage foreign investment. Germany lags behind other European countries in regulatory efficiency and broadband investment, according to the European Competitive Telecom Assn (ECTA). In Dec., the organization said studies show regulation spurs investment, and it pointed to low investment in Germany, “where the incumbent has maintained a strong grip and the regulatory environment is weak” (CD Dec 2 p8). DT has been pushing a regulatory “moratorium” on fiber VDSL deployment, something German telecom regulator BNetzA said last month it wouldn’t approve (CD Dec 27 p6). But the govt.’s apparent swing toward regulatory holidays for dominant players has competitors up in arms. If rules are lifted, Spies said, it will pit Germany against other member states, undermining efforts to harmonize European telecom. VATM also questioned BMWi’s reliance on a 2004 U.S. Supreme Court case, Verizon v. Trinko, in concluding temporary monopolies are needed to obtain dynamic competition. Trinko dealt with antitrust law’s role in a regulated telecom environment, not with whether to maintain preemptive regulation in markets not yet found to have effective competition, Spies said. In its paper, BMWi recommended use of benchmarking, cost-benefit analyses and other tools to monitor the effectiveness of rules and their enabling laws at the national and European level. Competition among regulatory models would enable nations to find more successful schemes sooner and junk less-effective ones more quickly, the govt. said.