Deutsche Telekom fined €12.6 million for market abuse

The Commission announced its decision yesterday, imposing a fine of €12.6 million. It follows complaints by numerous start-ups in the German telecommunications market. Deutsche Telekom, which still holds 95% of the telecoms market and has the most complete network in the country, has been obliged since 1998 to give rival firms access to the so-called local loops.

A local loop is the physical circuit between the customer's premises and the telco's local exchange. New entrants on the telecommunications markets need access on fair and non-discriminatory terms to the local loops ("local loop unbundling") to be able to offer retail services to end-customers, as it would be impossible to replicate such a network built over a century.

According to the Commission, effective local loop unbundling is key for the spread of electronic communications services. It was imposed on the incumbent operators by legislation at EU level and in some Member States, including Germany, also at national level.

However, the market is not developing fast enough and competition regulators are keen to protect its growth.

The Commission is concerned that there has been little change in the market since 1998 and Deutsche Telekom remains the dominant provider of broadband and narrowband retail services. It has reduced the prices charged to rivals for access onto the network, the latest reduction being in May this year, but the price charged is still above that charged to Deutsche Telekom’s own network customers.

Rivals cannot compete with the prices.

Competition Commissioner Mario Monti said in a statement:

“This is clearly harmful to consumers, because competition between operators is the best means to bring the overall prices down. That is why we have acted against unfair prices by Deutsche Telekom and are determined to be vigilant on any infringements of this nature."