German Regulator may enter into public contract with Deutsche Telekom about VDSL Vectoring

On 27 August 2015, the German telecommunication regulator Federal Network Agency (FNA) published a legal expert opinion according to which the FNA could enter into an agreement with incumbent Telekom Deutschland GmbH (Telekom) about VDSL vectoring roll-out. Telekom wants to implement vectoring technology around the main distribution frames (MDFs). If vectoring technology was adopted at the MDF, competitors would no longer have physical access to the copper wire of the local loop. Instead they would have to rely on virtual bit stream access. The Telekom therefore asked the FNA to adapt the regulatory framework concerning competitors’ access to the local loop in February this year. In return the Telekom declared to be willing to commit itself to invest in VDSL vectoring infrastructure and to implement vectoring technology at all (close to) 8000 MDFs until 2018.

In this context, the FNA commissioned Professor Kühling of Regensburg University to assess whether an agreement between FNA and Telekom in this regard would be legal under German administrative law. According to Kühling’s expert opinion, German public law permits such an agreement. The agreement would however be subject to a number of conditions. Firstly, Telekom’s investment commitments and the regulatory adaptions would have to be considered separately. Thus, the agreement would need to be limited to unilaterally obliging Telekom to invest in vectoring infrastructure. The FNA on the other hand must not be obliged to loosen access regulation. However, the regulator would be authorized to consider Telekom’s investment obligation within its margin of discretion. Secondly, the agreement would need to entail a penalty fine if Telekom fails to comply with its investment obligation. And thirdly, the agreement would have to be subject to immediate enforcement. The report also points out that such an agreement was not common practice in the public sector and that there is a certain legal uncertainty because of the lack of case law in this regard.

The FNA stated that it would start negotiations with Telekom soon.