EC, Germany face off on Internet bill

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BRUSSELS -- The German government is on a collision course with the European Commission over a draft German law that would grant extraordinary protection to Deutsche Telekom's high-speed Internet network.

The law, due to take effect in January, would give Deutsche Telekom a temporary monopoly over a €3 billion ($3.9 billion) fiber-optic network that uses high-speed lines to transmit live television programs.

However, the Commission -- the European Union's executive authority -- has warned Berlin that any attempt to prevent Deutsche Telekom from opening the network to competitors would incur an immediate lawsuit at the European Court of Justice in Luxembourg.

"This law is incompatible with both the letter and the spirit of EU law," Commission spokesman Martin Selmayr said Friday. "The Commission would have no choice but to launch infringement proceedings at the EU's Court when the law comes into force."

Commission officials say national governments are no longer authorized to set restrictions on emerging markets such as broadband Internet, which are supposed to remain free to competition.

The German lower house of Parliament, the Bundestag, confirmed the bill Wednesday, and upper house the Bundesrat is due to vote Dece. 15. It will become law once it is signed by German President Horst Koehler, which is expected in January.

The draft law was demanded by the Social Democratic Party (SPD), the junior partners in the current governing coalition. SPD officials say that Deutsche Telekom should be allowed exclusive rights to its own infrastructure as it invested vast sums to build it, while competitors like United Internet and Freenet.de are just hoping to join after the fact. Kai-Uwe Ricke, Deutsche Telekom's chief executive, is calling for sole control of the network for three years.

The German government, which owns 32% of Deutsche Telekom, would be severely embarrassed by any EU court action. Germany is scheduled to take over the six-month rotating presidency of the EU in January and is expected to set an example during its helming.

But the Commission says it will stand firm on the issue. In a letter sent last month to German Economy Minister Michael Glos, the Commission warned: "The draft legal text would clearly have the effect of unilaterally favoring the company that remains dominant in broad sections of the German market."

EU law forbids companies that invest in infrastructure from gaining "a monopoly rent as a result of a dominant market position," said the letter, which was signed by EU Competition Commissioner Neelie Kroes and Media Commissioner Viviane Reding.
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