BERLIN — Teutonic telco giant Deutsche Telekom suffered a major blow Monday as the European Commission urged it to open its $4.2 billion high-speed broadband network to rivals in order to increase competition and break its market dominance.
Company has recently set up its VDSL broadband service in several German cities and argues that the massive scale of its investment should make it exempt from competition regulations for three years.
Deutsche Telekom is unlikely to get any sympathy from European Media Commissioner Viviane Reding, who has threatened legal action against Germany for infringing EU rules if its parliament exempts Deutsche Telekom from competition.
Government officials in Berlin have been considering a draft bill that would limit competition in new markets and allow Telekom to refuse rivals access to its next-generation Internet network.
Noting the “well-known competition problems in the German broadband market,” Reding urged telco regulator Bundesnetzagentur (BNetzA) to take action “without any further delay to ensure that both competitors and consumers can profit from fairer competition in Germany.”
The German government holds 14.6% in Deutsche Telekom while state-owned development bank KfW controls 16.6%, which it wants to sell. With the conglom’s share price in steady decline, however, that looks increasingly difficult.
Deutsche Telekom’s high-speed VDSL network is 60 times faster than regular pipes and gives the telco a huge advantage over other providers.
EC move is just the latest setback for the telco, which recently issued a profit warning after losing 1 million subscribers in the first half of the year and expects a painful profit drop of about $1.3 billion this year.