EC, Germany square off over telecoms law

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BRUSSELS -- The European Commission on Wednesday took the German government to court over a law that will allow Deutsche Telekom to block rivals from using its ultra-fast broadband network.

The European Union's antitrust regulator filed suit over the €3 billion ($4 billion) high-speed Internet network at the EU's highest court, the Luxembourg-based European Court of Justice.

EU media and information society commissioner Viviane Reding said she has repeatedly warned Berlin without success that the law -- which came into effect in February -- broke EU telecom rules.

"We want to ensure that Germany can benefit from a healthy, competitive and fully functioning market and encourage both competition and investment in broadband markets," she said. "This is why we have decided today to go to court."

German Economy Minister Michael Glos has said the protection is needed to ensure Deutsche Telekom's returns from the huge investment in building the network, which is intended to provide a vehicle for such services as Internet TV.

The fiber-optic system, which uses the so-called VDSL technology, allows transmission of data at 25 times the speed commonly used today. However, public demand for VDSL services has been slower than Deutsche Telekom had hoped for and the telecoms bill is intended to increase confidence in the future of new Internet connections.

Indeed, at 16.4%, overall broadband penetration in Germany is already significantly weaker than in other EU member states such as Denmark and the Netherlands, which have a penetration of nearly 30%.

Deutsche Telekom already has spent about €1 billion ($1.3 billion) to connect 10 bigger cities to the network and offer combined Internet, phone and TV services. The group threatened to pull the plug on building the Internet service if it had to open up to rivals, potentially jeopardizing 5,000 jobs. The company is already cutting 32,000 German positions through 2008 after fixed-line phone revenue slumped for four consecutive years.

But EC officials are adamant that national governments are no longer authorized to set restrictions on emerging markets such as broadband Internet.

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