Report: No Workable Competition on the German Telecommunications Market

In Berlin, Wednesday, the Association of the Providers of Telecommunications and
Value-Added Services (Verband der Anbieter von Telekommunikations- und
Mehrwertdiensten, or VATM for short) presented its double report on “Market
Leadership and Market Restriction on Telecommunications Markets”.

authors of the study, Professor Hermann-Josef Bunte of Hamburg and Professor
Paul Welfens of Potsdam, have reached the
unanimous conclusion that Deutsche Telekom AG still controls the
telecommunications market, and that therefore there is no workable
competition in this market.

According to the professors, since it is important from the point of view
of economic policy not to gamble away the initial successes of competition
intensification through premature deregulation, the
regulatory authorities should continue with their established remuneration
regulation and further develop that regulation accordingly.

The report also warns against giving in to demands – from the political
arena, for instance – and using market restriction to negate the
requirements of market leadership. Market restriction should not be used as
a “trick” to reduce the regulation necessary according to the purpose
of the Telecommunications Law.

The study thus confirmed the view of the
VATM that in the current stage of competition, it is absolutely necessary
for Telekom prices to receive authorization before they are
introduced; this is the so-called ex-ante regulation. Otherwise, give-away
prices, cross-subsidization, and obstructive practices will be given free

The DSL offers from Deutsche Telekom are a striking
example of this. In this area, the company achieved a market share of over
90 percent before the subsequent abuse proceedings could even get underway.
In light of this, the regulatory authorities’ decision – now
just a few hours old – to exempt connections in Turkey from price
regulation seems especially dubious to competitors.

This is even more
surprising because the department responsible for the decision has
itself established that, with its market share of over 33 percent, Deutsche
Telekom AG has greatly surpassed the critical limit for control of the
market. According to the VATM, there is also growing danger to
competition from the increasing number of strategic bundled offers from
Deutsche Telekom AG.

The ex-monopolist is managing to avert efficient price
control through complex bundled rates. At the same time, a
transfer of power is taking place on the market from monopolized market
segments, such as customer connections, to areas that already display a
considerably higher degree of competitive intensity, such as
long-distance and international calls.

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