Germany queries strategy of selling off cable sector

Date: 20/02/1997

THE president of Germany's powerful cartel office has questioned the European Commission's authority to boost competition in the telecoms sector by forcing dominant phone companies to sell their cable television networks.

Cartel office President Dieter Wolf is casting doubt on the Commission's right to take the dramatic step of forcing Deutsche Telekom to divest its ownership of Germany's only national cable network. “I do not see a legal basis for such action,” he said, adding that both the cartel office and Germany's ministry of economic affairs would favour a sell-off.

Officials have insisted that Competition Commissioner Karel van Miert has no plans at present to come forward with such a proposal.

But officials at the Berlin-based cartel office claim the possibility of forcing Deutsche Telekom to weaken its hold on its cable network has been investigated, and it is one of the options being examined as part of a study ordered by the competition supremo into the confused regulatory framework for the phone and cable services market across Europe.

National rules currently allow some companies such as Deutsche Telekom to enjoy a dominant position in offering cable services. In the UK, however, dominant phone company British Telecom is banned by the government from offering cable services as a means of encouraging other firms into the market.

Van Miert's officials privately admit that encouraging cable companies to supply phone services to rival those provided by existing operators is a cornerstone of their strategy for more telecoms competition when the market opens up in January 1998.

On that date, cable companies will be able to offer ordinary telephone links, as is already possible in the UK.

That competitive scenario, and the extra investment needed to make it possible, is unlikely to be achieved if Deutsche Telekom's cable network is being asked to vie for customers with its parent company.

Commission insiders have echoed the doubts of the cartel office president about Van Miert's power to act.

“Establishing a legal basis would be a problem. Competition rules might be possible, but we are dealing with a legacy of a monopoly situation rather than a development in the market,” said an official, adding that the Commission did not have the armoury commanded by US authorities when it came to demanding divestment.

Forcing Deutsche Telekom to give rival phone companies access to its cable networks might be a second-best option, said Wolf. However, this alternative would not force it to invest the millions of ecu necessary to 'go the last kilometre' and bring cable connections to all the homes that might want them.

Deutsche Telekom says it is making no comment until officially asked to reply to the Commission's report on the cable and telecoms market.

The other options being examined in the study are maintaining the existing situation, or lifting all barriers for telecommunications companies to offer cable television services. Its interim findings are due in April.