Rivals Hit Report as Deutsche Telekom Deregulation Effort
A report ranking German telecommunications market policies the worst of five major EU countries has angered rivals of Deutsche Telekom. They fear that the government will use it to justify more protection for the former monopoly. A central finding of the study -- ordered by DT and done by the German Institute of Economic Research -- was that more state support for the incumbent could close a gap between Germany and the other nations. The report paints a “distorted picture” that could promote DT’s efforts for regional price deregulation, the German Competitive Carriers Association said.
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The survey compared the policies of Germany, Spain, France, Italy and the U.K. for their telecommunications markets. The analysis covered fiscal measures, labor market conditions, competition policy, state support and state shareholding. It counted policies as favorable to incumbents if they spur demand for communications services, don’t restrict incumbents’ business strategies or help incumbents.
The fiscal measures studied included tax incentives for information and communication technology and taxes paid by incumbents relative to profits. Labor-market conditions were measured by the overall market rigidity of each country’s employment regulations, and by the leeway granted incumbents in choosing personnel strategies to get the most productivity.
The competition-policy analysis was based on merger cases, the report said. State support was measured in government promotion of ICT and financial support for infrastructure and those policies’ success. The shareholder indicator reflected incumbents’ debt and state ownership.
France and the U.K. scored highest overall, the report said. The study said France is the country most willing to use its position as a major shareholder to protect France Telecom and that its antitrust policy is most favorable to the incumbent. British Telecom benefits from strong U.K. support for e-government, liberal labor market rules and favorable fiscal measures, the report said.
Spain’s ranking suffered from its reluctance to support its telecommunications industry indirectly, stronger labor- market controls and lack of state ownership in Telefonica, the report said. Telecom Italia benefits from an array of fiscal measures and other policies that foster telecom markets, but its competition policy is the most unfavorable to the incumbent, it said.
“Germany’s scores are mostly below average” because of modest state fiscal support of DT and “rather unfavorable” competition policy, the report said. Further liberalization of labor markets and additional state support “could quickly lead to a diminution of the gap,” it said.
The study misrepresents the situation in Germany, telecommunications lawyer Axel Spies said for the competitors’ association. DT is battling for regional deregulation which, if granted, will open the door to predatory pricing that pushes rivals out of lucrative markets, he said. Shielding DT from regulation won’t benefit competition, he said.
In intensely competitive places, DT could cut its end- customer rates far beyond the level of cost savings of competitors, Spies said. That would cause significant revenue losses to rivals and make it harder for telecom providers and cable network operators to refinance infrastructure investments, he said. Regional pricing will also increase the workload of regulator BNetzA and tangle with the goal of closing the digital gap between rural and metropolitan areas, he said.
The U.K. Office of Communications won European Commission approval this year to deregulate 65 percent of Britain’s wholesale broadband market. That’s the first time a regulator has acted regionally, rather than nationally, basis (CD Feb 15 p7). Austria has also introduced regional deregulation, Spies said. Unlike those countries, Germany still has no wholesale IP bitstream product that competitors can use, he said. DT hasn’t offered that despite an order to do so, Spies said.
The competitors’ group fears regional regulation could render obsolete the “tedious process” of introducing a new bitstream product, leaving providers to face an uncertain pricing structure, Spies said. The organization expects BNetzA to publish this month an analysis of Germany’s bitstream market adopting a stance on regional deregulation, he said. DT didn’t respond to questions by our deadline.