Annual Report 2005

| Annual Report Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway

Tulpenfeld 4 53113 Bonn, Germany 2005 Tel +49 (0) 228 14 - 0

Fax +49 (0) 228 14 - 8872 Federal Network Agency 2 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

14 Triple play in Germany

Contents

President’s message 4

New responsibilities 8

Organisation chart 12

Triple play in Germany 14

Telecoms 22 Market watch 24 Consumer advice and protection 45 International developments 55 Ruling Chamber decisions 57 Administrative court proceedings 64 Technical regulation 67

Post 88 Market data 90 Public petitions and consumer protection 98 Ruling Chamber decisions 101 International activities 104 Administrative court proceedings 105 CONTENTS 3

22 88 108 130 Telecoms Post Energy Railway

Energy 108 Regulation in Germany 110 Electricity 115 Gas 122 Market watch 125 Consumer Advice service 129

Railway 130

Agency’s functions, structure and core tasks 132

Specialist Group for Regulatory Issues (WAR) 136

Strategic plan 2006 138

List of abbreviations 150

Contact points 156 4 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

President’s message

The Federal Network Agency is pleased to present its ﬁrst Annual Report documenting a concept, virtually unique in Europe, of integrated regulation for different network-based industries. Whereas regulation of the telecoms and postal markets can look back on a seven-year history and therefore has access to facts and analyses, our work in the electricity, gas and rail sectors is still in its infancy and is concerned with diverse fundamentals.

It is often asked whether these different sectors are suitably accommodated under one roof, or whether this is not asking too much of one institution.

Certainly, the products and services, the technologies and market structures are different for mail, gas, electricity, railways and telecommunications. That said, there is a common thread running through the Agency’s functions and an economic policy mandate guiding our work.

Despite natural and partial network monopolies, our job is to promote competition in these markets which are pivotal to the national economy, and to give customers and consumers greater choice. Whereas the fruits of competition and the opening of the markets – more offers, innovative products and lower prices – are evident in telecommunications in particular, general unease and a climate of suspicion between users and suppliers prevail in the gas and electricity markets.

Responsible for this are not just the large hikes in energy prices, but above all the lack of pricing transparency and the great differences in transport and access costs.

Thus important pioneering work is being done to bring transport costs down to efﬁcient levels and to improve diversity of service by setting clear access conditions.

The Federal Network Agency will not inﬂuence worldwide energy price levels, but it can make sure that German consumers get the best deal for their money, that lively competition and a wide range of services become the norm and that customers can switch supplier. PRESIDENT’S MESSAGE 5

In the rail markets, too, there is still much potential for competition. Our work will help to get more trafﬁc from new providers off the road and onto the rail.

The situation in the postal market has not changed signiﬁcantly. In principle, fair, workable competition exists in the parcels, express and courier market. In the letter market, by contrast, the emergence of any such competition continues to be stymied by Deutsche Post AG’s exclusive licence. Independently of this, however, price levels for letters in Germany have again fallen as a result of regulation.

It is pleasing to note continued growth in the telecommunications market, driving the German economy as a whole. Growth and competition are not mutually exclusive, but mutually beneﬁcial, and have launched a huge wave of innovation and investment.

This growth is due, in the main, to two factors: • the spread and use of mobile communications, • use of the Internet and the spread of broadband access. 6 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

However, the ﬁxed network, where voice has been challenged by low-cost mobile offers, has experienced a renaissance with DSL and will be a strong engine of growth for some time to come.

There were around 10.4 million DSL lines in use at the end of 2005, and thus an increase of 3.6 million customers in this one year alone.

27 percent of households now have a DSL connection (after 17 percent in 2004). The disproportionately high increase in competitors’ market share is thus not surprising, but simply a result of competition. At the time of the last report the competitors provided only 9 percent of the DSL lines, a ﬁgure that had more than quadrupled by the end of 2005 to reach 38 percent.

Yet it should not be forgotten that these success stories have been possible only as a result of consistent, competition-oriented regulation.

And so I am concerned about a debate that often lacks nuance, supposedly saying “over-regulation must stop, so that investment and innovation can be promoted”. Apart from the fact that such arguments always come from a particular lobby, this report demonstrates exactly the opposite of what the proponents suggest as fundamental changes. Opening up monopoly networks, particularly in the access area, has spurred a new round of investment and dynamic growth in the telecoms market.

The Federal Network Agency is still able to respond to new trends with the necessary ﬂexibility. Both the EU regulatory framework and the German Telecommunications Act (TKG) provide scope – as with international calls, for instance – to withdraw regulation when competition has developed sufﬁciently.

The continuation and review of the regulatory framework should therefore be discussed objectively as part of the 2006 EU reviews. Creating a single European competition framework is appropriate if only because a large number of telecoms companies operate across Europe and would rightly categorise national “go-it-alone” approaches as a market barrier. PRESIDENT’S MESSAGE 7

On balance, this report is positive and better for competition than many had predicted.

However, the Agency is always happy to engage in dialogue and to respond to facts- and arguments-based criticism.

After all, our aim is to create planning and investment certainty for the business world, so that opening up and providing access to monopoly networks continues to drive innovation and growth.

Matthias Kurth President 8 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

New responsibilities

The Agency’s work in 2005 – besides a number responsibility of the Federal Railway Authority of important activities to do with the continu- (EBA). Reference is made to the chapter on ing duties of the former Regulatory Authority rail regulation for more on the Agency’s func- for Telecommunications and Posts – was tions and powers under the General Railway determined by two main events: Act (AEG). Thus another important network- • assuming responsibilities associated with based economic sector has been added to the regulating the gas and electricity markets, Agency’s remit. • preparing to assume responsibilities for securing non-discriminatory access to Back in July 2002, in its 14th Report 2000/2001 railway infrastructure. “Network Competition through Regulation”, the Monopoly Commission called for the intro- Enactment on 13 July 2005 of the Second duction of ex ante regulation of access to net- Energy Statutes Reorganisation Act also works and other infrastructure facilities in amended the Energy Industry Act (EnWG). the energy and rail sectors, recommending This gave the Agency responsibility for the that a “general regulatory authority for net- legal aspects of gas and electricity supply. work-based sectors” be set up, incorporating Reference is made to the chapter on energy the existing Regulatory Authority for Tele- regulation for more details of the Agency’s communications and Posts. Staff rotation functions and powers in respect of securing within the new authority should ensure that access to gas and electricity networks, price individuals did not become too associated regulation included, and supervision of com- with any one sector or business. pliance with unbundling and other regulations. At this stage it should just be said that What seemed highly unlikely then – at least the amended Energy Industry Act has wid- as far as the staff at the former Regulatory ened the former Regulatory Authority’s remit Authority were concerned – has now become to include two sectors that are very important reality. In his monitoring report on the impact for the economy overall. of negotiated network access on energy policy and competition published on 31 August 2003, Enactment of the Third Railway Legislation the then Minister of Economics and Labour Amendment Act on 28 April 2005 also tasked proposed that the Regulatory Authority for the Agency with securing non-discriminatory Telecommunications and Posts be charged access to railway infrastructure as from with gas and electricity regulation. The law- 1 January 2006. Previously, this had been the makers took up and implemented this pro- NEW RESPONSIBILITIES 9

posal in the amended Energy Industry Act. still not completed. Staff and resources are And, during negotiation of the amendment deployed where required and further staff of the General Railway Act, it was decided to taken on and organisational adjustments widen the Regulatory Authority’s remit still made in line with the dictates of efficiency. further to include access to railway infrastructure, transferring these responsibilities Yet this should not give the impression that from the Federal Railway Authority. the Agency has not also taken forward the telecoms and postal sectors, both as regards Consequently, a name change was needed. organisation and the issues involved. In the After considering various proposals, the law- period under review restructuring has taken makers finally decided on “Federal Network place here, too. For instance, sections have Agency for Electricity, Gas, Telecommunica- been concentrated or tasks transferred in tions, Post and Railway” (Bundesnetzagentur order to maximise the efficient use of human für Elektrizität, Gas, Telekommunikation, resources. The organisation chart reflects the Post und Eisenbahnen), which was put into Agency’s structure at the end of 2005. effect on 13 July 2005. Although not legally bound to do so, the However, much more radical for the regulator Agency, in building up its energy regulation, and its staff than the actual name change was has partially implemented the Monopoly creating the organisation for the new energy Commission’s ideas on staff rotation. Vacancies and rail sectors. An energy start-up team was have been advertised both internally and brought into being in 2004, well in advance externally, so that at all levels there is a mix of the adoption of the legislation, to address of experienced staff from the Agency, experts the basic organisation and energy issues. It from the private sector, and job beginners. should not be forgotten that the creation of This guarantees the desired transfer of exper- a wholly new area is a tremendous challenge tise from the telecoms and postal sectors. for any organisation, and one that has to be The Agency has also drawn on the know-how met by the existing staff on top of their normal of established staff in the energy sector. It duties. Included in the start-up team therefore has filled the resulting telecoms and postal were staff from various organisational units, vacancies using available established posts, performing their normal duties in addition to prevent the telecoms and postal sectors because of staffing constraints. from suffering a damaging loss of staff.

Meanwhile, the Agency has four more Ruling Not yet included on the organisation chart is Chambers, responsible under the Energy the rail regulation start-up team established Industry Act for most of the decision-making, on 1 January 2006. The core of this team is made and a specialist department, Department 6, up by twelve members of the Federal Railway comprising twelve sections in all. At present, Authority who moved to the Federal Network more than one hundred members of staff are Agency with the transfer of responsibilities employed in these units, and recruitment is on 1 January 2006. Unlike in the energy ﬁeld, 10 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

sector-specific railway expertise does not have of significant market power, or dominant to be acquired from scratch. Rather, a smooth position. Because of the former monopolies, transition has been possible as a result of one company only, as a rule, is subject to taking over experienced staff from the Railway regulatory intervention. In the energy and Authority. In all, the Agency has received 21 railway sectors, by contrast, regulation gener- established posts from the Railway Authority. ally extends to all operators of infrastructure. The vacancies will now be filled without delay. The result is many regulated companies and Also, the rail regulation working group set many rulings. Moreover, in the energy and up last year following the energy model has railway sectors, only part of the value chain, sought to obtain further posts for rail regula- access to the networks, is subject to Agency tion from those responsible for the budget. A regulation. In telecommunications, the decision is still pending, however. The Agency set of legal instruments extends over the would like to see the creation of a separate whole of the value chain and thus also covers department for rail regulation comprising regulation of retail products and prices, for five sections. It is not planned to set up a instance. Ruling Chamber, nor is this envisaged by the legislation. The 2006 organisation chart The Agency’s work in 2006 will focus on com- would then be widened accordingly. pleting the energy department and rapidly establishing the rail regulation department. One of the reasons for the assignment of The Agency will make every possible effort to responsibilities in the energy and railway enhance synergies arising from its experience sectors was the experience the Agency had of and parallels in the individual sectors. gained in opening up former monopoly markets to competition. Through its regulation of the telecoms and postal sectors the Agency has acquired considerable know-how that is transferable, at least in its fundamentals, to other network-based sectors. In economic terms, network-based sectors in which the networks constitute the bottleneck that requires regulation, follow the same principles. Even if the legal underpinnings differ, many of the basic procedures and regulatory principles are the same. Most of what is new, and thus most of the challenges, lie in the – often technically completely different – framework conditions and the workings of the different network sectors. Here, the Agency, in addition to building up its own expertise, will also avail itself of external help, for instance from other public authorities or from experts in the field, in order to make essential decisions for the competitive development of the markets.

There are also differences, for instance, in the companies primarily affected by regulatory measures. In post and telecoms, core regulation measures generally depend on the presence NEW RESPONSIBILITIES 11 12 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

President

Vice President Vice President

Department Z Department IS Department 1 Department 2 Department 3

Business Support Information Telecommunications Legal Aspects of Postal Regulation Technology Regulatory Telecommunications and Security Economics Regulation, Frequency Regulation

Z 1 Z 2 22 Organisation, Personnel General Legal Affairs, Frequency Management Finances, Controlling

Z 11 Z 21 IS 11 111 211 221 311 Organisation, General Legal Affairs, Information Technology Economic Aspects of Legal Aspects, Sector- Radio Frequency Economic and Legal Personnel Management, Part 7 TKG Legal Issues, Telecommunications Speciﬁc Control of Anti- Utilisation Concepts, Aspects of Postal Markets Occupational Health Data Protection, Regulation Competitive Practices International Affairs, Regulation and Safety Administrative Offences Telecoms Frequency Usage Planning, Innovative Radio Applications

Z 12 Z 22 IS 12 112 212 222 312 Policy, Personnel Tariff and Contribution IT Solutions Development Market Watch, Spectrum Management Broadcasting Market Watch, Rates Representation Charges Legislation Rates Benchmarking Procedures, Market and Benchmarking, Quality of Legislation, Senior and Competition Aspects Service Measurement Upper Grade Service Staff, Special Unit Further Training

Z 13 Z 23 IS 13 113 213 223 313 Medium and Basic Grade Collection Services, Workﬂow Structuring Business Management Frequency Award and Satellite Services, Fixed Special Network Access Service Staff, Salaries, Tax Matters and Modelling and Accounting Issues, Assignment Policy, Services < 30 MHz, Short- and Interconnection, Remuneration, Travel and Cost Accounting Wireless Technologies Term Usage, Civil/Military Compliance with Universal Relocation Expenses Telecoms, Frequency and Site Postal Union Acts, External Examination of Rate Coordination and Internal Accounting, Proposals Examination of Rate Proposals

Z 14 Z 24 IS 14 114 214 224 314 Buildings, Budget, Information Requests, Internet Economy Determination of Int. Mobile Radio Frequency Licensing Policy, Licence Real Property Budgeting Civil Defence Frequency Requirements, Coordination, Digital Grant, Reporting Compatibility Principles, Cellular Networks, Public Requirements, Frequency Usage Plan Paging Networks, Railway International Postal and Public Safety Authorities Affairs (Coordination and and Organisations, Aero- Universal Postal Union) nautical, Maritime Mobile and Inland Waterways, Radionavigation and Radio- determination Services Z 15 Z 25 IS 15 115 215 225 315 Centralised Internal Purchasing, Electronic Signature International Trunked Radio, Special Non-Public Radio Market Deﬁnition, Administration, Motor Vehicles, Telecommunications Award Proceedings, Applications, Amateur Market Dominance Library, Special Unit Accident Compensation, Affairs, Assignment-Related Radio Translation Service Special Unit Reporting Requirements Aspects of Tariff and Sickness Allowances Contribution Charges Legislation

Z 26 IS 16 116 216 226 316 Controlling, Provision Continuity Market Deﬁnition, Universal Service, Radio Relay Universal Service, Transaction and Cost Telecommunications Market Analysis, Public Affairs, Consumer Issues Accounts, and Post, Technical Section 12 TKG Consumer Issues, Quality Management Implementation of Procedures Dispute Resolution Panel Intercepts

IS 17 117 Compliance with Data Numbering Policy Protection and Postal and Telecommunications Privacy, Telecommunications Security

118 Number Administration ORGANISATION CHART 13

Management Office General Staff Council Staff Council 01 02 03 04 05 06 07 General Spokesperson for Disabled Persons Office of the Litigation/ International Press Office, Ruling Chambers Advisory Council/ Internal Auditing Spokesperson for Disabled Persons President and Legal Disputes Coordination Public Relations Office Committee of Fed- Equal Opportunities Commissioner Vice Presidents, eral States Repre- Data Protection Commissioner Procedural Issues sentatives Office

Ruling Chamber 1 Ruling Chamber 2 President’s Chamber Department 4 Department 5 Department 6 Retail Markets Licensing and Fixed Line Networks Technical Regional Ofﬁces Energy Regulation Universal Service Telecommunications in Telecommunications Regulation and Post, Radio Spectrum Responsible for markets: Resources 1 – 6, 19, 20, 27*

Ruling Chamber 3 Ruling Chamber 4 41 42 Electromagnetic Standardisation Wholesale and Retail Wholesale Markets, Compatibility, Markets, Fixed Line Networks, Recognition of Broadband Access, Local Loop Conformity Assessment Mobile Bodies Responsible for markets: Responsible for markets: 7, 12 – 18, 21 – 27* 8 – 11, 27*

Ruling Chamber 5 Ruling Chamber 6 411 421 511 601 607 Market Surveillance, Technical Regulation and Coordination of the Economic Policy Issues Distribution Network Rates Regulation Regulation, Electricity Matters relating to the Standardisation Issues for Radio Monitoring and Access (Gas) and Special Control Grids EMC and the R & TTE Act Fixed and Special Radio Inspection Service (PMD), of Anti-Competitive Services Centralising Ofﬁce, Practices PMD Equipment and Postal Markets Procedures

412 422 512 602 608 Ruling Chamber 7 Ruling Chamber 8 Radio Compatibility, Technical Regulation Combating the Misuse Incentive Regulation, Transmission Network Securing Efﬁcient and and Standardisation of Value Added Services, Benchmarking Access (Electricity), Regulation, Gas Networks Use of System Charges Interference-Free Use of Issues for Innovative Number Administration, Cross Border Trade in Electricity Frequencies Communications Radio Compatibility and Electricity Services, Numbering, Frequency Assignment Telecoms Security Coordination Aspects, International Liaison and Coordination Ofﬁce

413 423 513 603 609 * Commission Recommendation Technical EMC Issues, Technical Regulation Use of Public Ways, Market Watch, Statistics, Transmission Network Ruling Chamber 9 Standardisation and Standardisation Section 6 TKG Monitoring Electricity/ Access (Gas), Cross Border (2003/311/EC) of 11 February 2003 nos 1 – 18, national identiﬁcation Issues in Broadcasting Notiﬁcation Duties Gas Trade in Gas Use of System Charges Gas nos 19 – 27

414 424 604 610 Protection against Radio Technical Regulation and Regional Locations Unbundling, Legal Issues, Use of System Charges Frequency Fields Standardisation Issues Offices Consumer Advice (Electricity) for Mobile Services and Universal Mobility Augsburg Landshut München Regensburg Rosenheim Berlin Magdeburg Dortmund Detmold Kassel 415 425 Meschede 605 611 Recognition of Technical Regulation and Münster Network Operation Use of System Charges Conformity Assessment Standardisation Issues for Issues, Quality of Supply, (Gas) Bodies Universal Services and Eschborn Darmstadt IT-based Data Processing Open Network Provision, Neustadt Securing Billing Accuracy Saarbrücken under the Telecoms Hamburg Itzehoe Customer Protection Kiel Ordinance Rostock Schwerin

416 Hanover Bremen 606 612 Göttingen Legal and Economic Leer Distribution Network Cooperation with State Policy Issues, Access (Electricity) Regulatory Authorities, Department 4 Legal Karlsruhe Freiburg Energy Security of Affairs Konstanz Supply Act Reutlingen Stuttgart Cologne Krefeld Mülheim Organisation chart Leipzig Dresden Erfurt December 2005

Nurem- Bayreuth berg Fulda Schwäb. Hall Federal Network Agency for Electricity, Gas, Würzburg Telecommunications, Post and Railway

Tulpenfeld 4 53113 Bonn, Germany

Tel +49(0) 228 14 - 0 Fax +49 (0) 228 14 - 8872 [email protected] www.bundesnetzagentur.de

in Bonn at other locations (Berlin, Mainz, Saarbrücken) 14 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Triple play in Germany TRIPLE PLAY IN GERMANY 15 16 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

The emergence of triple play loyalty and further boost the growing market The term “triple play” is increasingly on for broadband. everyone’s lips. It refers to a business model that bundles voice, Internet access, television Customers can currently choose from three and video services into a single package for triple-play platforms, the first of which are customers with a broadband connection. the cable TV networks. The core business of Triple play has also been the subject of several the network operators, which was previously studies. According to a survey carried out confined to transmitting television and radio by Insight Express in 2005, 81 percent of ADSL signals, has now extended into the realm of (Asymmetric Digital Subscriber Line) sub- broadband data services and voice telephony. scribers in Europe were interested in the pos- This became possible once the cable networks sibility of obtaining triple-play services from were upgraded to offer return channel capa- a single provider, while the figure for Germany bility right into the home. was even higher at 96 percent. In Germany, Steria Mummert Consulting estimates that Conventional telephone networks that have the market for triple-play services will grow been upgraded to provide DSL access constitute to three million households by 2010, gener- a second platform. Telecoms network operators ating revenue of around € 1 billion. Some are now adding broadband Internet access, 60 percent of the companies surveyed indicate video-on-demand and Internet TV to their that they are willing to invest in the launch of traditional core business of telephony. triple-play services in the next three years. In fact, providers are planning to invest around Mobile wireless networks are in the process € 4 billion in new broadband structures. And of becoming a third platform. Wireless pro- 2006 will see a further step towards a triple- viders – originally confined to voice trans- play future with the launch of Internet-based mission – are increasingly branching out into television (IPTV) and other services. data and video services. UMTS opens the door to broadband Internet services, video Triple play is attracting growing attention, communication and TV entertainment. And which is why this section is devoted to a brief the arrival of technology that allows mobile overview of the topic. Triple play benefits phones to receive digital broadcasts will the consumer by combining separate bills for enable users to enjoy inexpensive, unlimited TV, Internet and telephone, not to mention mobile TV and radio. Mobile operators are customer service, into one. The service gains restricted by their limited bandwidth, however, are often accompanied by price savings: if and in the near future will not be in a position triple-play services are all provided through to offer a mass-market product to replace the the same technological platform, the customer home television set.1 no longer has to pay for multiple connections, such as DSL and cable TV. In order to It is also possible to combine triple-play services deliver triple play, companies need technol- on different platforms: customers may, for ogies that are able to supply telephony, example, obtain DSL and mobile phone Internet and video services. And whatever services from a single provider. At present, the platform, it is essential that it provide an however, true triple play is only offered by extremely reliable, high-bandwidth connec- cable TV networks. tion to the end customer, one that is capable of carrying phone calls, TV channels and Internet traffic simultaneously. In terms of marketing, triple play can serve to tweak customers’ interest, strengthen customer 1 Source: Solon Management Consulting GmbH & Co. KG TRIPLE PLAY IN GERMANY 17

Triple-play platforms

Cable TV network Telephone network/DSL Mobile network

Telephony VoIP Analogue Mobile telephony ISDN VoIP

Mobile Internet Broadband Broadband Internet Internet broadband Internet (UMTS)

Television Television IPTV Mobile television

Triple play on the cable TV network cable is then used to bring the signals into the Cable network operators intending to offer home. Some cable networks already offer Internet and telephone services have to bandwidth of 20 Mbit/s for Internet use, which upgrade their existing networks, which were makes it possible to transmit two high-deﬁni- designed for TV transmission only, to offer tion television channels (HDTV) at the same return channel capability. This requires time.2 increased bandwidth, which in turn opens the door to multimedia services. By employing In order to take advantage of triple-play data compression techniques, the transmission services, all that customers need is a modem of digital video then becomes economically installed between the cable box and the TV viable. The modernisation of Germany’s cable set, PC and telephone. A special decoder and TV networks began sluggishly. This was an HDTV-capable TV set are required in order due primarily to the high cost of upgrading to receive HDTV signals. the networks, as well as the fact that cable companies often had no direct relationship According to cable TV operators, by the end with end users (network level 4). Subsequent of 2005 the number of households that could advances in technology have reduced the be connected to networks with return channel upgrade costs and since 2003 the cable TV capability totalled some six million (18 percent). operators have been pushing ahead strongly In reality, however, at the end of 2005 there with the modernisation of their networks. were only 240,000 customers who accessed the Internet via a cable modem. By the end After the telephone network, the cable TV of 2007, approximately 45 percent of all the network is the largest communications grid households that constitute the potential offering direct access to customers. At present, market could be in a position to receive Inter- 53.5 percent of all German households are net and telephone services via cable.3 connected to this network and there is the potential for this ﬁgure to grow to around 68 percent. Upgraded cable networks use

ﬁbre-optic cables between the head-end and 2 Using IPTV technology the last distribution point. Broadband coaxial 3 Source: Solon Management Consulting GmbH & Co. KG 18 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Triple play on the telephone network/ thanks to voice over IP (VoIP). Furthermore, using a DSL platform DSL lines can be used to watch films (video on Traditional two-wire telephone access net- demand) and IPTV. Very high bit-rate DSL works have been upgraded for digital broad- lines are able to carry very high definition band transmission. Digital subscriber lines video transmissions as well as several TV are available in a number of variants, which channels (HDTV) in parallel. This makes it transport data at different bit rates depending possible for individual end users to customise on the distances involved. ADSL2+ technology the service they receive, which includes allows data to be transmitted at up to 24 Mbit/s, content from all over the world transmitted while the latest variant – VDSL or very high at top quality. bit-rate DSL – promises speeds of up to 50 Mbit/s. VDSL technology is in the process DSL providers who wish to add Internet-based of being introduced and requires hybrid net- television to their product portfolio must work structures that employ fibre-optic cable upgrade their networks to deliver the high as far as the cable distributor. This means that bandwidths needed to transmit films. Video two-wire lines need only be used between the data can in fact be transmitted at speeds well exchange and the end user, thereby opening below 1 Mbit/s using streaming technology, up the possibility of higher bit rates. Invest- yet this method is only viable for small images ment in fibre-optic network upgrades is and the quality is often inadequate. Only the therefore required in order to achieve very latest digital compression and transmission high bit rates. After this, the next step is to technology can deliver the high-quality, bring fibre to the home (FTTH): this would full-screen images demanded by many users. entail an extension of the fibre-optic cable all Using MPEG-2 (Motion Pictures Expert Group 2) the way to the end user. compression technology, it is possible to transmit PAL (Phase Alternate Line4) TV pic- Broadband Internet access is the best-known tures at a reduced bandwidth of 3 – 4 Mbit/s. application of DSL technology. It is possible With the more advanced MPEG-4 and WMV9 to surf the Internet using the broadband (Windows Media Video 9) technologies, it is connection and, at the same time, make possible to reduce bandwidth still further, to telephone calls over the subscriber line and around 2 Mbit/s. HDTV, which is set to become conventional telephone network. Telephone the standard for the future, requires over calls can also be made over the DSL line itself 20 Mbit/s bandwidth for MPEG-2 transmission

Use of ﬁbre-optic and copper cables in DSL networks

Local exchange and main distribution Cable distributor Terminal distributor End user frame approx 1,700 m approx 300 m

ADSL line Optical ﬁbre Copper

VDSL line Optical ﬁbre Optical ﬁbre for VDSL Copper Backbone

FTTH line Optical ﬁbre to the home TRIPLE PLAY IN GERMANY 19

and approximately 10 Mbit/s in the case of Handheld) and DMB (Digital Multimedia MPEG-4 and WMV9. Broadcasting). Although not compatible with each other, the two are similar in terms of the Taking account of the maximum bit rates that quality of images they deliver. DVB-H was can be achieved with the network technology developed from DVB-T (Digital Video Broad- available, the scenario in Germany looks like casting-Terrestrial) and uses the same spectrum, this: ADSL lines, which currently predominate, which has become available thanks to the are capable of transmitting up to 6 Mbit/s. This switch from analogue to digital television. means that, if older compression techniques DMB is based on the DAB (Digital Audio Broad- are used, two PAL channels can be carried casting) radio standard. It was developed in at the same time. If either of the newer com- Germany and has already been used with pression techniques is used, it becomes possible success in Asia. Both DVB-H and DMB are to carry up to three channels. However, the currently being tested in Germany in order reliable transmission of HDTV signals is only to identify their respective advantages and possible with ADSL2+ technology, where the disadvantages. In some countries5, these maximum bit rate is 24 Mbit/s, or the even transmission technologies are already in faster VDSL and VDSL2 standards. regular use.

Consumers can choose from a range of devices Today’s UMTS mobile phones are already able for viewing IPTV. End users who want to keep to receive television signals, although UMTS their television separate from their PC can fit technology is not suitable for simultaneous any television set with a set-top box capable reception by large numbers of people. The of receiving IPTV. And if the PC is to be used to arrival of HSDPA (High-Speed Downlink watch television, users simply need a media Packet Access) technology in 2006 will boost PC with suitable specifications. Future products the performance of UMTS networks from may combine the set-top box with a games 384 kbit/s at present to around 1.8 Mbit/s and, console, and in the medium term it is expected in a few years time, to as much as 7.2 Mbit/s in that the boundaries between different types the downstream link. If, however, thousands of device will become more fluid as multi- of mobile phone users were to access tele- media services expand their reach through- vision services at the same time, UMTS cells out the household. would be unable to cope. By contrast, in the case of DVB-H and DMB the number of Triple play on the mobile phone network simultaneous users is not a significant factor: The third triple play platform that needs to be DVB-H and DBM are broadcasting standards mentioned consists of mobile phone networks, and individual customers therefore do not operating either in an independent capacity use up capacity. or in conjunction with broadcasting networks. Such constellations can deliver telephony, Booz Allen Hamilton estimates that this market Internet and television services to mobile will be worth € 200 – 300 million by 2007. phones and other handheld devices and are Various consumer studies have uncovered a included here for the sake of completeness. relatively large interest in mobile TV on the The mobile user profile, terminal equipment, part of end users. Market research as well price level and restricted transmission rates as the experience of other countries suggests mean that this platform occupies a special that customers would be willing to pay niche with regard to triple play. approximately € 10 a month for such a service.

There are two mobile TV broadcasting stan- 4 The current TV transmission standard in Germany dards: DVB-H (Digital Video Broadcasting- 5 USA, South Korea 20 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Events with mass appeal, such as football In view of the large number of DSL providers, games, the World Cup, the Olympic Games, the number of companies offering triple-play international exhibitions, major concerts services via DSL is likely to grow, although this and big political occasions present excellent will depend on the availability of attractive opportunities to showcase mobile television content. The fact that, as of the end of 2005, and the kind of content it can deliver. It is not DSL technology had not yet been used to yet clear when the German market for mobile provide triple-play services means that triple- television will ﬁnally reach maturity. play users are to be found predominantly among the ranks of cable customers. They are Supply and demand at the end of 2005 joined by customers of companies that offer At the end of 2005, there were over twenty cable TV and a telephone/DSL service either providers of triple-play services in Germany, separately or in combination. At the end although some of them only offered their of 2005, the number of such consumers was services to a local audience. Most of these estimated to be around 150,000, up from companies were originally cable network approximately 60,000 in 2004. operators. It needs to be emphasised that at least eight companies offer triple-play services Opportunities and risks on two platforms, namely telephone/DSL and By the end of 2005, only a small proportion of cable TV. Although this approach presents the broadband connections in operation were end users with a one-stop shop for triple-play being used for triple-play services. A survey services, there are fewer network synergies for of DSL providers found that the demand for companies to reap. More than ten companies high-speed DSL lines (faster than 3 Mbit/s) had offer triple-play services on a single platform, slowed in 20056. It is estimated that, at the in this case cable TV. This group includes end of 2005, some 90 percent of all the private Germany’s three main cable operators: Kabel broadband connections in operation delivered Deutschland, Kabel Baden-Württemberg and less than 6 Mbit/s bandwidth. It will therefore Unity Media, with their subsidiaries iesy, ish be interesting to see if the increasing avail- and Tele Columbus. In addition to the afore- ability of triple-play services leads to a growing mentioned operators, the German market demand for higher-bandwidth connections. also included a number of regional cable TV providers at the end of 2005. The arrival of faster ADSL2+ and VDSL lines and the modernisation of cable TV networks As of the end of 2005, the telephone network/ may lead to increasing competition between DSL platform had not been used to provide cable TV operators and DSL providers. At Internet TV as part of a triple-play portfolio. present, the greater size of its customer base The video-on-demand services offered by would seem to give DSL the competitive edge several companies via DSL lines are deemed over cable TV. However, it is not yet apparent to fall short of true IPTV. Various press reports how intense the competition will be between indicate that a number of ﬁxed network oper- these two platforms. For instance, the cable ators and DSL providers, including DTAG, network operators have limited scope to Arcor, HanseNet and Versatel, are thinking expand into the Internet and telephony about entering the TV market and plan to markets, at least in the medium term, owing launch TV services via DSL ahead of the 2006 to the fact that large parts of their networks World Cup. It is even possible that Internet have yet to be upgraded. On the other hand, service providers without their own network the DSL providers will be hampered by the will enter the triple-play market in the future. structure of Germany’s television market,

6 Source: DSL-Magazin.de TRIPLE PLAY IN GERMANY 21

which includes numerous free TV channels. The triple-play platforms described all have This makes it unlikely that there will be a one feature in common: they are aimed in the wholesale switch from conventional television first instance at urban areas. It is well known services to DSL providers. It is instead expected that there are generally few or no high-speed that DSL providers will expand into high-value connections in rural areas, via either cable TV pay TV or on-demand services in the medium networks or telephone networks/DSL lines. term. There are also certain legal questions to UMTS coverage is similarly sparse at present. resolve with regard to broadcasting. It will, however, be possible to improve access as further technological advances are made. In western Europe, the triple-play market is Wireless technologies such as WIMAX (World- expected to continue growing to around € 7.5 wide Interoperability for Microwave Access), billion by 2010. The DSL infrastructure will may open up the possibility of triple-play probably account for most of this revenue.7 delivery in areas where the distances involved rule out high-speed physical connections. The The experience of other countries, such as geographical reach of broadband platforms France, shows that triple play has strong can be extended by using wireless links to potential. However, even though some triple- bridge the gap between the dial-in node and play services are already available in Germany, the subscriber. At the end of 2005, the Federal there remains the basic question of whether Network Agency began distributing spectrum the strong growth seen in other countries for such services, thereby paving the way for can be replicated here. There are indeed the spread of these technologies. some problems that need to be solved before Germany’s dual-play services can be trans- formed successfully into a triple-play market. For instance, the wide range of free TV chan- Market for triple-play services nels available – Germany has more than any in western Europe7 (€ billion) other country in Europe8 – is likely to prove a particular obstacle to the provision of tele- 7.5 vision services via DSL, while there is also the 1.4 issue of broadcasting rights to consider. Only 6.5 if the content is sufficiently attractive will 1.2 there be significant consumer interest in 5.5 new TV services. Potential customers will 1.0 also be drawn to triple play by the prospect of the price savings that can be achieved by 4.1 purchasing products in a bundle instead of 0.7 individually.

2.5 In light of these factors, DSL and cable TV 0.4 providers will seek to undercut each other in 1.3 order to win customers. However, it is not yet 0.2 apparent how intense the competition will 1.1 2.1 3.4 4.5 5.3 6.1 be between the two platforms.

2005e 2006e 2007e 2008e 2009e 2010e*

7 Source: Solon Management Consulting GmbH & Co. KG Cable * e = estimated 8 Source: A.T. Kearney GmbH DSL 22 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Telecoms

Market watch 24

Consumer advice and protection 45

International developments 55

Ruling Chamber decisions 57 Administrative court proceedings 64

Technical regulation 67 TELECOMS 23 24 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Market watch

This section addresses the current situation and developments in the telecoms market by examining selected market data. A review of companies, investments, infrastructure and jobs is followed by an analysis of the various services, focusing on the number of customers, quantity of trafﬁc and volume of revenue.

TOTAL MARKET FOR TELECOMS SERVICES These services continue to account for a large part of the overall revenue growth in 2005. Revenues Revenues in the telecoms services market rose Investment by 4 percent to € 66.8 billion in 2004, up The volume of real investment in the German from € 64.2 billion in 2003.1 Total revenues telecoms market totalled € 5.7 billion in 2004. for 2005 are expected to be approximately After rising continuously in the first years € 68.3 billion.2 This means that total telecoms following liberalisation, investment peaked revenues have risen continuously from € 44.2 at € 11.5 billion in 2001. Within the next two billion in 1998, when the first steps were taken years, investment had halved to € 5.5 billion to liberalise the market, to € 66.8 billion in in 2003. This downward trend stopped in 2004. However, the growth has not been 2004. Since the 2001 peak, the decline in constant across the whole market. The fixed investment has reflected the decision of line services segment (comprising line rental Deutsche Telekom AG (DTAG) to slash capital and call charges) is the largest in terms of expenditure from € 6.3 billion in 2001 to € 2.6 revenue. After several years of decline, this billion in 2003. The decline stopped in 2004, segment has been experiencing a significant when the company invested approximately upturn since 2002. This is due in particular to the same amount as the previous year. Capital a stronger inflow of revenue from broadband expenditure by competitors peaked in 2000 services. Revenues in the second-largest before dropping to € 2.9 billion in 2003. There segment – mobile telephone services – have was a slight upturn to € 3.1 billion in 2004, of enjoyed uninterrupted growth since 1998. which € 0.3 billion was allocated to the cable

1 Cumulative revenues comprising revenues of Deutsche 2 Definitive figures for 2005 are not yet available. The 2005 Telekom AG and its competitors in Germany. figures cited here are estimates (shown in tables with “e”). TELECOMS | MARKET WATCH 25

TV network. Capital expenditure by DTAG was owned by DTAG. This leaves DTAG’s com- therefore lower than the investments made petitors with a share of 36 percent. by its competitors. The decline in investment since 2001 is largely confined to the fixed net- Microwave links are used in situations where, work, an area in which expenditure has fallen for economic or other reasons, it does not from € 8.4 billion in 2001 to € 3.0 billion in 2003, make sense to use a physical connection. thereby reaching a new low since liberalisation Such links are able to bridge distances of up began. In the mobile market, investment has to 100 km, depending on the spectrum used. been climbing again since 2002, rising to In 2005, there were over 65,000 microwave € 2.5 billion in 2003 and € 2.6 billion in 2004. links in operation in Germany, covering a Compared to the period between 1998 and total of 538,000 km. 2000, however, the pace of growth remains modest at € 0.1 billion per year. Free Space Optics (FSO) is a cost-effective way of creating a network between buildings in Infrastructure urban areas. FSO systems are easy to install In 2003, DTAG’s competitors stepped up efforts and use highly concentrated infrared beams to expand their fixed network coverage. This to transmit data at speeds of over 1 Gbit/s and reduces the distance for the origination and up to a maximum distance of two kilometres. termination of calls through the DTAG network to the networks of alternative providers. In addition to the fixed network, Germany By the end of the first quarter of 2005, five also possesses a mobile infrastructure that companies had interconnected their networks offers nationwide coverage. As of the end of with all DTAG exchanges that offer an inter- the first quarter of 2005, this comprised working function, while a further four carriers 64,000 GSM and 22,000 UMTS radio base were almost in the same position. DTAG has stations. Optical fibre transmission systems, set up 474 interconnection sites throughout as well as point to point and point to multi- Germany, at which DTAG’s interconnection point links are employed in the backbones of partners can interconnect with its fixed the mobile networks. In fact, the boundaries network. in the backbone between fixed and mobile networks are somewhat fluid.4 Optical fibre technology makes it possible to transport an almost limitless volume of data Major steps are being taken to expand the across great distances and is highly resistant broadcasting infrastructure. The growth of to external interference. Modern transmission digital terrestrial broadcasting (DVB-T) is pro- techniques offer a maximum capacity of ceeding apace. Digital television is replacing several Tbit/s in each fibre. Signals can be analogue technology in urban areas before transported over 100 km without the use gradually spreading throughout the whole of an amplifier. These characteristics make of Germany. Berlin, northern Germany, North optical fibre the obvious choice for the Rhine-Westphalia, the Rhine-Main area, network backbone as well as the numerous Bavaria, central Germany and Mecklenburg- local sub-networks. At the end of the first Western Pomerania have already gone digital, quarter of 2005, telcos in Germany had with other key regions set to follow in 2006. almost 310,000 km3 of optical fibre links The goal is to roll out this new technology to at their disposal, 199,000 km of which was the largest possible audience in the shortest

3 Different cables contain different numbers of fibres. It is 4 The figures for the optical fibre infrastructure and for therefore impossible to draw any conclusion about the point to point and point to multipoint links also include quantity of fibres available on the basis of these figures. elements used by mobile networks. 26 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

possible time. Last but not least there is the 57,300 in 2003. Of these, 33,400 worked cable TV infrastructure. After a critical period in the fixed network market (including in which investment in modernisation was cable TV), down from 36,100 in 2003. The halted, the existing cable networks are now remaining 20,900 were employed in the being upgraded in many places to provide mobile market (compared to 21,200 in digital TV, Internet access and telephony in 2003). Within the mobile market, network addition to the current analogue services. operators provided 15,800 jobs and service providers 4,900. The figures for 2003 Employment were 15,800 and 5,200 respectively. The At the end of 2004, there were 225,100 people remaining 200 jobs in 2004 were in other employed by telcos in the German market. segments of the mobile market. This constitutes a decline of 5,500 (2.4 percent) from the previous year. The DTAG Group FIXED NETWORK SERVICES reduced its workforce in Germany by 2,500 (1.4 percent) during 2004, after cutting 4,500 Narrowband access jobs (2.5 percent of the workforce) in 2003. At the end of the first quarter of 2005, there This strategy has been observed since market were 26.8 million analogue lines (public opening began. In 2004, 60 percent of the telephones and cable telephony included), cuts were made in the company’s fixed net- 12.1 million basic rate ISDN lines and 125,000 work division, while in 2003 this division accounted for all of the job losses. Growth in competitors’ At the end of 2004, DTAG’s competitors telephone lines employed 3,000 fewer people than they had done the previous year, a fall of 5.2 percent. Million This reduction was confined almost entirely to the fixed network. The level of employment in 3.5 the mobile market remained approximately stable in 2004, following a decline in 2002 3.19 3.0 and 2003. The overall picture reveals that the downsizing begun by DTAG’s competitors in 2.5 2.46 2002 is now slowing. 1.99 2.0 The number of people working in the telecoms services market can be divided along different 1.47 1.5 1.37 lines: between DTAG (within Germany) and its competitors on the one hand, and between 0.97 1.02 1.0 the fixed and mobile networks on the other: 0.70 0.69 0.49 0.5 0.33 • At the end of 2004, DTAG’s workforce 0.25

in Germany numbered 170,800 people 0.02 0.03 0.03 0.03 0 (compared to 173,300 the year before). 2001 2002 2003 2004 2005e Approximately 8,100 of these were employed in the mobile market, down

from 9,100 in 2003. Total Basic rate ISDN lines Analogue lines • DTAG’s competitors employed a total (incl. public telephones and cable telephony) of 54,300 people in 2004, compared to Primary rate ISDN lines TELECOMS | MARKET WATCH 27

primary rate ISDN lines in operation. This lines are basic rate ISDN lines. Growth in the produces a combined total of approximately number of analogue lines and basic rate ISDN 54.8 million telephone channels at the end lines, which are mainly used by residential of the first quarter, which can be extrapolated customers, has far outstripped the spread of into a year-end figure of more than 55.1 mil- primary rate ISDN lines, which are used only lion. The total number of telephone channels by businesses. The latter now account for less is arrived at by counting one channel for an than 2 percent of the market. analogue line, two for a basic rate ISDN line and 30 for a primary rate ISDN line. At the end At the end of the first quarter of 2005, there of the first quarter of 2005, there was a total were 70 companies, besides DTAG, that of around 7.6 million DSL lines in operation, offered analogue and ISDN lines on the basis most of which were used in combination of either local loop access agreements with with an ISDN line. Alternative operators had DTAG or their own facilities. Thus there was increased their market share to 8.8 percent a choice of access provider for over half the by the end of the first quarter, providing population. DTAG’s competitors have enjoyed 4.82 million telephone channels in total. varying degrees of success in increasing their Their market share is expected to have risen share of regional markets in recent years. to around 11.8 percent by the end of 2005. At the end of the first quarter of 2005, their Across the country, alternative operators market share in some parts of Germany – accounted for 2.0 percent of analogue lines measured by the number of telephone (excluding public telephones but including channels – was far in excess of the national cable telephony), 14.1 percent of basic rate average of 8.8 percent, and even exceeded ISDN lines and 22.7 percent of primary rate 20 percent in some local networks. The success ISDN lines at the end of the first quarter of of the regional phone companies can be 2005. There is a general trend on the part of traced to a combination of wholesale services customers to upgrade their telephone lines. supplied by DTAG, use of their own infra- This is reflected in the declining number of structure, broad-based marketing strategies analogue lines, which are being replaced by and low pricing. ISDN lines or augmented by DSL lines. A comparison of fixed and mobile telephone The growth in the number of mobile phone channels shows that there are now far more users has resulted in a further drop in the mobile voice channels available than there total number of payphones and cardphones, are fixed. with their numbers falling to 106,000 at the end of 2004 and 105,000 by the end of the In recent years the number of fixed channels first quarter of 2005. The competitors’ share has barely changed while the number of of this market rose from 3.6 to 3.8 percent. mobile voice channels increased by 10 percent There has recently been a renewed upturn between the end of 2003 and the end of 2004. in the use of public telephones, notably by In the course of 2005, the number of mobile travellers from within the euro zone who voice channels is likely to have grown by use payphones. a further 7 percent to approximately 76 million. This clearly shows that wireless technol- Between 2001 and 2004, the total number ogy is in a position to seriously challenge of competitors’ lines tripled to approximately fixed networks. At first glance, these figures two million. In the year under review, this seem to emphasise in particular how fixed figure is likely to have increased to 3.2 million, and mobile lines complement each other. It reflecting a growth rate of 60 percent. Around must be remembered, however, that the only three quarters of all competitors’ telephone reason for the slight rise in the number of 28 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Growth in ﬁxed and mobile channels

Million

80 76.0 71.3 70 64.8

59.1 60 56.1

50.2 54.7 55.2 50 52.5 53.8 54.3 48.2 48.2 40

23.4 20

1999 2000 2001 2002 2003 2004 2005e

Fixed channels Mobile channels

fixed channels is the switch from analogue to 10.7 million broadband Internet connections ISDN lines; although the number of house- were operational in Germany at year’s end. Of holds in Germany is rising, the total number these, approximately 10.4 million were DSL of fixed lines is actually falling. This indicates lines, 240,000 relied on cable modems, 9,600 a growing trend on the part of consumers to used powerline technology and around substitute mobile phones for fixed lines, a 57,000 were satellite-delivered. Unlike Inter- trend that is made readily apparent by the net access via satellite, which is also available increasing proportion of households that can from DTAG, powerline and cable modems only be contacted by mobile phone. Accord- are only offered by competitors. DSL accounts ing to the market research institute IPSOS, for approximately 97 percent of all broad- the proportion of mobile-only households band connections and therefore remains the in Germany rose from 4 percent in 2003 to dominant access technology in Germany by 7 percent in 2004. some margin.

Broadband access technologies At the end of 2005, DTAG’s competitors had In Germany, ﬁxed-network broadband access an estimated share of around 40 percent of all is usually provided via digital subscriber lines broadband connections – double the ﬁgure (DSL), cable TV (cable modem), powerline for the previous year. and satellite. An estimated total of around TELECOMS | MARKET WATCH 29

DSL lines some 80 percent of all resold lines in opera- The DSL market continues to grow at a fast tion at the end of the first quarter of 2005. pace. This is partly due to the decision of DTAG to begin reselling its T-DSL lines in mid- In addition to DTAG, there were over 60 com- 2004. Resale has presented competitors with panies offering DSL lines in 2005, either an alternative means of gaining customers, through resale or self-operated infrastructure. making it no longer necessary for them to Most of these providers are companies that operate their own lines. The resale business have set up their own access networks in model allows alternative providers to sell particular cities or regions and therefore only DTAG’s DSL lines under their own name. offer services at a local level. In addition to Although DTAG retains responsibility for the these regional operators, there are a small actual provision of the line, competitors are number of companies who offer DSL lines now able to offer a one-stop service covering throughout Germany. The introduction of connection and access charges5 in areas where resale is expected to lead to an increase in the they do not have their own access network. number of providers offering their services Competitors that wish to pursue this option nationwide. However, due to the limitations must first sign a contractual agreement with of the technology, DSL coverage does not yet DTAG. Interest in reselling DTAG’s DSL lines extend to all households. has been seen from companies that also provide direct access themselves as well as With an estimated total of around 10.4 million from pure Internet Service Providers (ISPs) DSL lines in operation at the end of 2005 – an without an access network of their own. It is increase of 3.6 million in the space of a year – estimated that the latter group accounted for it appears that competition is hotting up. In addition to strong growth in the resale segment, significant gains have also been Total number of broadband connections made by alternative network operators – both and relative share of DSL regional and national – that provide their end customers with DSL lines either via their own infrastructure or by leasing loops from DTAG. These providers were believed to account 10.7 million for almost 2.5 million lines at the end of 2005, nearly a threefold increase on 2004. The growing popularity of local loop rentals as a means of providing DSL access has also been 6.9 million accompanied by an increase in line sharing.

With a total of around 6.8 million DSL lines at 4.5 million the end of 2004 and an estimated 10.4 million at the end of 2005, Germany remains the 3.2 million European leader in terms of the sheer number 1.9 million of DSL lines in operation. 98 % 98 % 98 % 97 % 97 % 98 % DSL penetration was up in 2005, with an estimated 27 percent of German households 2001 2002 2003 2004 2005e

5 As well as the actual connection, customers also need Other broadband connections an Internet access agreement that allows them to use DSL the Internet for a certain fee. 30 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

DSL lines in operation (millions) now having a DSL line. In terms of actual line provision, DTAG was predicted to hold a national market share of some 72 percent at 10.38 2.48 the end of 2005. It therefore remains the biggest player in the market, although its competitors have been able to seize signiﬁ- 1.50 cant market shares in certain regions. Some 6.77 0.92 competitors claim to have already captured

0.25 over 50 percent of the market in some cities.

4.40 0.40 The products offered by alternative access 3.16 0.19 network operators generally include a 1.87 charge for Internet access in addition to the 0.06 telephone and DSL line. This means that

1.81 2.97 4.00 5.60 6.40 for the most part, their customers obtain a complete package of telephone line, DSL line 2001 2002 2003 2004 2005e and Internet access from a single source. In contrast, Deutsche Telekom’s T-DSL customers Competitors can choose from almost the entire range of T-DSL resale DTAG Internet price plans that ISPs offer to T-DSL users on the basis of wholesale products furnished by DTAG.

DSL lines in Europe

Austria 525,230 Belgium 1,113,641 Cyprus 17,994 Czech Republic 181,000 Denmark 714,529 Estonia 75,133 Finland 763,283 France 7,802,442 Germany 8,138,941 Greece 91,869 Hungary 297,237 Ireland 144,376 Italy 5,175,270 Latvia 49,465 Lithuania 69,804 Luxembourg 47,048 Malta 23,799 Netherlands 2,204,067 Poland 532,284 Portugal 576,258 Slovakia 64,539 Slovenia 95,932 Spain 3,268,602 Sweden 1,038,747 United Kingdom 5,784,002

Source: European Commission, July 2005 TELECOMS | MARKET WATCH 31

The price war among providers of DSL lines technology have led to a sharp fall in costs, grew even more intense in 2005. Whereas the € 1,500 price tag means that such services in 2004 it was possible to obtain a complete remain the preserve of business users. There package comprising a telephone/DSL line and are currently fewer than 1,000 customers who flat rate Internet access for approximately use bi-directional services. Hybrid services € 40, by the end of 2005 comparable packages only use satellite links for the forward chan- cost as little as € 30. nel, thereby significantly reducing the cost and making the service much more attractive Cable access to end users. In this case, the telephone line High-speed Internet access via a cable TV serves as the return channel. At the end of connection is proving increasingly popular 2005, approximately 56,000 users operated in Germany. There are now almost 40 cable such systems. network operators that provide this service. They offer competitive rates and transmission Traffic volumes speeds of up to 20 Mbit/s. The number of The volume of narrowband traffic continues households opting for Internet access via to fall and was estimated to be 337 billion cable modem has increased from 45,000 at minutes in 2005. This is due to a shift in Inter- the end of 2002 to an estimated 240,000 net traffic away from narrowband telephone three years later. Cable companies are rapidly lines to broadband (DSL). A closer look at the modernising their infrastructure with the individual segments reveals the following result that at the end of 2005 over six million trends: households had a cable connection capable of delivering such a service. Local and extended local traffic6 The decline in local traffic that took place Powerline between 2000 and 2002, partly as a result of Powerline provides high-speed Internet the substitution of mobile phones for fixed access by using electricity networks to trans- lines, was offset and even reversed in 2003 with port data. This means that nationwide the introduction of carrier (pre-)selection7 for coverage is possible and is a reason why local calls. After preselection and call-by-call powerline technology has attracted much made it possible to opt for a low-cost com- international interest. There are six compa- petitor, consumers have been making more nies in Germany that offer powerline services. local calls and talking for longer. In contrast, At year’s end, some 9,600 households had the volume of extended local traffic is falling opted for Internet access via this medium, slightly. Growth in local traffic can be ascribed while a further 155,000 could be connected entirely to DTAG’s competitors, whose gains with a minimum of delay. in this segment exceeded DTAG’s losses. In 2004, alternative carriers accounted for a Satellite Satellite links provide Internet access almost irrespective of the local infrastructure. 6 The difference between local and extended local traffic Satellite technology can be used in areas that, is as follows: local traffic is traffic to all destinations not requiring a prefix “0”. Extended local traffic is traffic for technical reasons, are not served by DSL to adjacent local networks or to local networks with a or cable TV networks with return channel 20-km radius or to destinations possibly within a larger capability. It is available in two forms: in the radius but priced at the same levels as local traffic. case of a bi-directional service, both the up- 7 The amendments to the Telecommunications Act of 21 October 2002 laid the groundwork for the introduc- and the downlink are carried by satellite. tion of carrier selection in the local network. Call-by- This requires the use of relatively expensive call and preselection have been available in the local systems and, although recent advances in network since 25 April 2003 and 9 July 2003 respectively. 32 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

third of all call minutes in the local network substitution, its effects were offset by the and their share is estimated to have risen to overall growth in long-distance traffic. In more than 40 percent in 2005. 2004, the volume of traffic dropped, possibly due to the impact of mobile communications The popularity of carrier selection is not the and an increase in e-mail. only reason for the growth in the competitors’ share of the local call market. Another factor Fixed to mobile traffic is the increase in the number of lines operated Growth in fixed to mobile traffic has recently by competitors. In 2004, (pre-)selected carriers slowed. The 2003 growth rate of 7 percent fell accounted for 15.2 billion minutes or 60 percent to 3 percent in 2004 and an estimated 2 per- of all local call minutes generated by com- cent in 2005. This is clearly linked to the high petitors, while competitors with direct access level of mobile phone penetration, which accounted for the remaining 40 percent means that many calls are now made directly (10.1 billion minutes). between two mobile phones instead of from a fixed line to a mobile. Long-distance traffic Until 2003, growth in long-distance call traffic International traffic was almost linear. Although this segment, Recent years have seen a slight increase in too, experienced a degree of fixed-mobile international traffic.

Call minutes in the ﬁxed network 1997 – 2005

Call minutes (bn)

400

355 354 345 346 350 337 144 160 114 174 178 301 300 91

245 250 53 232 197 200 210 211 178 12 192 194 185 178 172 150 159

100

0 1997 1998 1999 2000 2001 2002 2003 2004 2005e

DTAG (incl. self-supply and public telephones) Competitors Total TELECOMS | MARKET WATCH 33

Growth in the competitors’ share Internet traffic of the local call market Internet access has a tremendous influence on overall traffic trends. The volume of dial-up Call Internet connections over the fixed network minutes (bn) rose until 2001. However, since 2002 narrowband access has been in decline. Users are 30 increasingly turning to broadband connec-

25.3 tions as their preferred means of accessing 25 15.2 the Internet. This led to a particularly sharp

drop in narrowband trafﬁc in 2003 and 2004, 20 a trend that was expected to be even more

apparent in 2005. 15 13.8 7.1 In contrast, the volume of broadband Inter- 10 10.1 net trafﬁc – measured in gigabytes – has been

18 % 33 % growing continuously, a testament to the 5 6.7 unremitting demand for broadband services.

Growth continued to be strong in 2005, when 0 the volume of data sent over broadband was 2003 2004 estimated to be 650 million Gbytes.

Local trafﬁc (carrier [pre-]selection) Local trafﬁc (direct access)

Narrowband Internet trafﬁc

Minutes (bn)

160

140

127 124 121 120 113

103 100

82 80

40 32

0 1999 2000 2001 2002 2003 2004 2005e 34 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

The decline in narrowband traffic and the of 2005, alternative providers accounted for significant gains made by broadband are due 53 percent of all call minutes. in part to the migration of many users from narrowband access to DSL and cable modems. Revenues However, the growth in the volume of data Following a period of temporary decline due generated by broadband connections since to price cuts, revenues from fixed network 2004 does not match the increase in the services have been rising again since 2001. number of lines. One of the reasons for this In 2005, revenues of network operators, is that even the less intensive Internet users Internet Service Providers without their own are increasingly opting for broadband, access network and resellers of voice services thereby reducing the average volume of totalled an estimated € 25.1 billion, up from traffic generated by each connection. € 24.7 billion the previous year.8 Excluding resellers, the figures for 2004 and 2005 were Competitors’ share of traffic € 24.0 billion and € 24.4 billion respectively. The diagram below gives an overview of the The competitors’ share of revenues9 from changes in competitors’ market share in fixed network services, comprising fixed each segment. It is estimated that at the end prices and call charges, grew from 28 percent

Changes in the competitors’ share of trafﬁc in each ﬁxed network segment* (in %)

80 74 % 71 % 69 % 70 % 70 67 % 66 %

59 % 60 56 % 54 % 51 % 51 % 48 % 47 % 49 % 50 46 % 45 % 43 % 49 % 41 % 42 % 44 % 40 % 38 % 40 41 % 41 % 34 % 33 % 35 % 30 % 35 % 28 % 30 20 % 34 % 33 % 33 % 25 % 23 % 24 % 26 % 19 % 20 % 21 % 20 21 % 18 % 16 % 16 % 18 %

10 6.4 % 9 % 4.7 % 2.3 % 1 % 0 1998 1999 2000 2001 2002 2003 2004 2005e

Local Extended local Long-distance Mobile International Internet (narrowband) Other * DTAG trafﬁc includes self-supply and public telephones TELECOMS | MARKET WATCH 35

in 2004 to 29 percent in 2005, with their segment10, on the other hand, are a testament share of ﬁxed price revenues climbing from to the successful marketing of telephone 7 to 9 percent. and DSL lines. It should be noted that the competitors’ share of revenue in a particular Particularly striking is the large proportion market segment is usually less than its market of revenues from international calls that now share expressed in terms of call minutes. goes to competitors, and the strong growth This is due to the fact that the end user prices that they have enjoyed in this segment. Gains of these providers are generally lower than in the competitors’ share of local call revenues those of DTAG. Of course, competitors can can be traced to the introduction of carrier only hope to win market share from the (pre-)selection as well as the growing propor- former monopolist by competing on both tion of telephone lines now operated by alter- price and quality. native providers. Advances in the ﬁxed price

Changes in the competitors’ share of revenues between 2003 and 2005* (in %)

33 Local call charges 25 11

40 Extended local call charges 36 30 51 43 Long-distance call charges 40

48 Extended local and long-distance call charges 41 38

43 Local, extended local and long-distance call 36 charges 29 46 All call charges 42 37

44 Charges for calls to mobile networks 39 35

63 Charges for international calls 60 53 62 Charges for Internet access (narrowband) 59 58

44 Charges for Internet access (broadband) 40 38

37 Other 35 35

2005e

2004 * Figures for absolute revenues can be found in the Federal Network Agency’s 2003 Activity Report for 2004/2005, volume D, annex 1, p. 362 ff.

8 Provisional estimate for 2005. The ﬁgures quoted are 90 Market shares of network operators and Internet cumulative revenues generated by network operators Service Providers without their own network. from services provided to end customers and resellers 10 Fixed price revenues include revenues from one-off of voice services, by the resellers of voice services and monthly basic charges for telephone and DSL themselves and by Internet Service Providers offering lines (paid by both end customers and resale customers) Internet access services. as well as revenues from ﬂat rates. 36 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Voice over IP (VoIP) to change if there is an increase in the number 2005 was the first year in which a number of providers offering broadband connections of VoIP services were available that bore as a separate product – and not in combination comparison with conventional telephone with a telephone line – or if cable network services in terms of quality and design. This operators make further inroads into the tele- means that VoIP now has the potential to phone market. It will only be possible to realise make an impact on the market. As a rule, VoIP the full potential of VoIP when the products services require a broadband connection, available offer the same quality of service as Internet access and a product from a VoIP a traditional telephone line. If this can be provider. These components can either be achieved, competition will hot up considerably purchased as a package from a single provider as providers vie for direct access to end users. or, if the individual elements are available The availability of wholesale products, separately, purchased from different sources which allow companies without their own and put together by the end user. infrastructure to serve end customers directly, will therefore play an important role in At the end of 2005, there were around 50 com- stimulating competition. panies offering mass-market VoIP services in Germany, compared to fifteen at the end of In terms of customer numbers and revenue, 2004. In contrast to earlier product offerings, it is estimated that VoIP services have made which were entirely software-based and comparatively little impact to date. At the needed the PC to be switched on in order end of 2004, approximately 500,000 people to work, today’s products are far more user- possessed VoIP soft- or hardware, of whom an friendly. Special IP telephones are no longer estimated 250,000 were active users. Accord- needed (a conventional phone with an adaptor ing to providers’ forecasts, these numbers are will suffice), nor does the PC always need to likely to have doubled by the end of 2005. be switched on. New hardware products also VoIP services are therefore still in an early make it possible to use both VoIP and a conven- stage of development and their impact as a tional fixed line at the same time. Customers competitive force in telecoms markets has are usually assigned a phone number. In most yet to become fully apparent. cases, this is a local number, although in future national numbers in the 032 range will also In September 2005, the Federal Network be used. These numbers are intended for a Agency published its “Key elements in the range of services including VoIP. Some service regulatory treatment of Voice over IP” as well providers do not assign a number to their as an action plan. In its deliberations, the customers, which means that their services Agency took account of the fact that VoIP can only be used to make outgoing calls. services have only recently arrived on the market and it is not yet clear how durable VoIP services have the potential to compete existing and future business models will be. with conventional telephony in terms of both The Federal Network Agency has therefore lines and call minutes. However, there are few opted for an evolutionary approach, which services available to date that can completely allows the emerging market to develop replace existing analogue or ISDN lines. Those with little intervention by the regulator. that do exist generally consist of a simple The Federal Network Agency will only step broadband connection combined with a VoIP in if and when intervention is required. product and are provided by companies that have their own infrastructure. Services of this For the Federal Network Agency, the ultimate type have so far had no impact in terms of objective of any regulation of VoIP would competition in the market. This is only likely be to ensure that, once VoIP has reached TELECOMS | MARKET WATCH 37

maturity, the various services are competing “free” call minutes, or even unlimited calls, on a level playing field. In the medium term, at particular times (eg weekends). Mobile VoIP services will be required to meet the companies are also seeking to enhance the same criteria as conventional services. In appeal of their product and to make wireless light of these factors, the Federal Network a viable alternative to the fixed network. To Agency favours transitional arrangements this end, they are offering special prices of (eg technical regulations) as a suitable means three cents per minute for phone calls to of supporting this potential source of innova- fixed line numbers at weekends and outside tion while at the same time serving the public business hours, as well as special prices for interest with regard to the legal obligations calls to fixed lines made from within a Home- that providers must meet. The prospect of zone. The industry has been shaken up VoIP products developing into a genuine, further by the recent arrival of discounters long-term alternative to conventional tele- in the market. phony largely depends on whether they can offer a comparable quality of service. Lining up against them are the providers of conventional fixed network services, the Price trends cable TV companies and the ISPs, some of In 2004, there was a profusion of special offers whom are offering free phone calls or free from providers of fixed network services. Internet telephony between their customers These included waiving the one-off connection in an effort to secure and expand their charge, giving users free call minutes and customer base. At the end of 2005, for instance, offering equipment to new ISDN and DSL customers could make unlimited VoIP calls customers at a discounted rate or free of to German landlines for a fixed price of charge. The strong demand for DSL prompted approximately € 10 per month. And it is also nearly all providers to extend their special customary for VoIP services to include a offers beyond the end of 2004. certain number of free minutes.

An ISDN line with DSL access and an Internet Price competition used to be restricted to flat rate is currently available for approxi- providers of conventional fixed network mately € 30, considerably less than it would services, yet it is increasingly being waged have cost in 2003. And at the end of 2005, a between, as well as within, segments. Tradi- DSL line including telephone service and an tional phone companies are competing Internet and telephone flat rate could be had with providers of Internet telephony and for as little as € 40 a month. There has also mobile companies to satisfy the demand for been a continued trend towards pricing communications services, and there have options whereby customers pay a monthly already been the first signs of substitution, premium in return for cheaper calls at certain in terms of both call and line providers. Mobile times; in some cases, the price will cover all networks already account for 16 percent of the customer’s phone calls. all phone calls, and their operators view fixed network customers as a potential source of Mobile operators are offering price plans additional growth. whereby customers pay a fixed price for a certain number of call minutes each month Although connection charges rose in 2004, (50, 100, 200 or 500). There is no line rental and call charges fell. The Federal Statistical Office’s any extra call minutes they use are charged 2004 price index for telecommunications and invoiced separately. Some mobile providers services consequently dropped by 0.4 com- continue to offer additional packages that pared to the previous year’s average. Of provide customers with a certain number of course, there is a certain time delay before 38 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

changes in consumer behaviour are reflected for example, monthly fixed charges accounted in the index. for € 6.5 billion in revenue, less than the € 8.5 billion generated by national calls billed The deregulation of voice telephony on 1 Jan- on a per-minute basis. In 2005, however, uary 1998 triggered a rapid growth in compe- providers of fixed network services generated tition. In the next three to four years, prices an estimated € 9.1 billion from fixed charges fell sharply until they almost reached the level and just € 4.3 billion from the charges for they are at today. For today’s consumers, the individual national calls. price of a national call is now just 5 percent of what it was before liberalisation. This trend also shows just how effectively a competitive market adjusts its pricing There is a clear trend towards combined structures in line with the preferences of its product offerings and flat rates. The figures customers, with flexible and innovative pro- clearly show a shift in favour of monthly price viders benefiting most from the competition plans that charge a flat rate for calls. In 1999, unleashed by this shift towards flat rates.

Changes in ﬁxed and variable revenues from ﬁxed network services

€ (bn)

9.1 9 8.5 8.5

8.0 8 7.4 7.2

7 6.7 6.7 6.5 6,2 6 5.8 5.5

5 4.9

4.3 4

0 1999 2000 2001 2002 2003 2004 2005e

Revenues from ﬁxed charges (excl. DSL) Revenues from variable charges (local, extended local and long-distance calls) TELECOMS | MARKET WATCH 39

Wholesale products provided by DTAG for of the 474 sites where this is possible, while a fixed network competitors and ISPs further four carriers were almost in the same In most cases, competitors that wish to position. This means that a total of nine carriers provide access and call services are reliant on now offer full (or almost full) network coverage wholesale products offered by the established and, having set up their own infrastructure, operator, such as call termination and origi- have less need for wholesale products. There is nation. If alternative providers interconnect also an increasing degree of interconnection their networks with DTAG exchanges that between competitor networks. A final point offer an interworking function, they also worthy of mention is the reduction in the incur interconnection charges. DTAG has set price of various wholesale products. up 474 interconnection sites throughout Germany. In addition, competitors generally Access to DTAG’s loops lease loops from DTAG in order to obtain In addition to their own lines and wireless links, direct customer access. In doing so, they incur competitors rely primarily on DTAG facilities, costs for using the buildings and other namely local loops, to obtain customer access facilities of the established operator. Carriers (via analogue, ISDN and DSL lines). In most cases, offering preselection services also have to pay these are unbundled copper pairs, although DTAG for programming its switching systems sometimes DTAG’s optical fibre links are used. with the corresponding prefix. In the case This system allows competitors to offer their end of call-by-call services, competitors rely on customers a telephone line or DSL access with- the established provider to invoice the end out having to set up their own infrastructure. At customer or to at least provide the billing data. the end of the first quarter of 2005, some 95 per- The DTAG infrastructure, in this case leased cent of all telephone and DSL lines provided lines, is also frequently used for connections by competitors were realised via leased loops. to and between the carriers’ switches. Finally, ISPs pay to use DTAG’s narrowband and broad- Competitors interested in this wholesale band connections for transporting data. product must first sign a contractual agreement with DTAG. In 2005, DTAG signed around 100 At the end of 2004, payments for all of the agreements of this type with competitors. DTAG wholesale products mentioned above totalled € 2.65 billion, thereby showing little DTAG offers local loops in different product change from the previous year (€ 2.7 billion). variants. In 2004, the combined rentals of This contrasts with the growth in revenues all product variants that were in operation generated by fixed network competitors and amounted to 1.96 million, rising to over three ISPs, which climbed from approximately million by the end of 2005. The main reason € 6.1 billion in 2003 to around € 6.8 billion for this sharp climb is the increased demand at the end of 2004. Around 61 percent of this for high-speed local loops on the part of total was therefore the result of value creation competitors, who wish to use them to on the part of alternative providers, a leap of provide broadband services. Line sharing 6 percent from the previous year. also continues to gain ground.

The increasing interconnection between Germany is the European leader in terms of the DTAG infrastructure and the networks of local loop rentals, accounting for 58 percent its competitors is one of the reasons why the of all unbundled local loops in Europe as of latter have become less reliant on wholesale mid-2005. products in recent years. By the end of the ﬁrst quarter of 2005, ﬁve operators had inter- Co-location is a prerequisite for local loop connected their networks with DTAG at all access. DTAG provides a room for this purpose 40 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Growth in DTAG’s local loop rentals

Million

3.5

3.24 3.0

2.5

1.96 2.0

1.35 1.5

0.94 1.0

0.62

0.5 0.32

0.13 0.03 0 1998 1999 2000 2001 2002 2003 2004 2005e

European local loop rentals

Austria 97,044 Belgium 6,760 Czech Republic 1,035 Denmark 62,567 Estonia 3,607 Finland 210,861 France 255,584 Germany 2,936,000 Greece 3,883 Ireland 1,903 Italy 1,163,195 Luxembourg 2,964 Netherlands 60,811 Portugal 27,891 Spain 132,416 Sweden 45,185 United Kingdom 38,418 Source: European Commission, July 2005 TELECOMS | MARKET WATCH 41

at the site of the main distribution frame for tors, was estimated to be worth € 7.9 billion the relevant access area. At the end of 2004, in 2005.11 competitors were using around 2,600 such co-location facilities and this number is likely MOBILE SERVICES to have risen slightly in the course of 2005. According to DTAG, at the end of the first Subscribers quarter of 2005 there were approximately German mobile operators and service provid- 7,000 co-location facilities available, through ers continued to grow their customer base in which competitors could access around 2005. Provisional figures show that there 15 million analogue lines, some six million were around 79.2 million mobile subscribers12 basic rate ISDN lines and approximately in Germany at the end of 2005. New customers 74,000 primary rate ISDN lines. The infra- were attracted by innovative price plans structure therefore exists for customers who offering discounts and flat rate charging. are using these lines to switch from DTAG to One of the ways in which these price plans cut another network operator. In fact, these the cost of mobile telephony is by providing figures indicate that some 56 percent of all a service that does not include a subsidised telephone lines in the DTAG network are now mobile phone. accessible to competitors. Between 2003 and 2005, Germany’s two Carrier business (interconnection) largest networks, T-Mobile and Vodafone, When customers make a call, they are often lost market share (measured in terms of their relying on the services of several network subscriber base) to their two smaller com- operators. If they opt for call-by-call, the access petitors, E-Plus and O2. The fastest growth network operator they have chosen has to was recorded by O2, which has boosted its pay for the call to be routed to its own network market share by some 4.6 percent since 2002. by the operator who owns the customer’s line. And if the number being dialled is in a different Call volumes network, the operator of that network charges Growth in the number of subscribers has a fee for the call terminating service. The sharp been accompanied by a rise in the volume of increase in the number of network operators incoming and outgoing traffic, although the since liberalisation began has given rise to a volume of outgoing calls from mobile net- complicated web of relationships. Intercon- works is growing faster than the incoming nection agreements – of which there were 104 traffic. This is due to both the rise in mobile between DTAG and alternative carriers at the phone penetration and the pricing strategies start of 2005 – form some of the main strands of the mobile providers. Outgoing calls from of this web. mobile networks into the fixed network and to other mobile subscribers, especially those The carrier services market, comprising in the same network, in most cases cost far revenues generated between network opera- less than calls made from fixed to mobile

11 Revenue generated by operators of Internet platforms tion services, billing and collection services, and pre- with ISPs that do not have their own infrastructure is not selection. Page 36 of the Federal Network Agency‘s included under carrier business, which does however Activity Report for 2004/2005 contains more details include all Internet and IP services between network about the composition of this market. operators. Carrier services further include all connec- 12 Number of mobile phone contracts. A user may have tion and access services provided by operators when more than one mobile phone contract. Figures for interconnecting their networks.The leasing of DTAG’s 2005 include UMTS. local loops also forms part of this market, as do co-loca- 42 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Mobile subscribers

Subscribers

90,000

96.0 % 79,200 80,000 86.4 % 71,316 70,000 78.5 % 64,800 71.6 % 68.1 % 59,128 60,000 56,126

58.6 % 48,202 50,000

40,000

30,000 28.5 % 23,446

20,000 17.0 % 13,913 10.1 % 6.8 % 8,286 10,000 4.6 % 5,554 2.2 % 3.0 % 0.3 % 0.7 % 1.2 % 3,764 1,768 2,482 273 532 953 0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Total network subscribers Penetration

networks. The very high market penetration already have no use for a fixed line because also means that more and more people can network operators now offer a special Home- now be contacted via mobile phone. Combined zone service that allows customers to use with falling prices, the result is a shift in call their mobile phone like a landline when they traffic from fixed networks to mobile networks. are in or near their home.

An examination of all outgoing calls from Revenues ﬁxed and mobile networks reveals that there In 2005, mobile providers generated revenues is a certain degree of substitution taking of approximately € 28 billion. In the case of place, as can be seen from chart on the right. network operators, this included revenues from end customers (eg line rental, calls, Mobile services still account for only a small data, mobile phones), revenues from service proportion of all calls made – 16 percent in providers (wholesale products) and revenues 2005 – yet their share is growing steadily. In from carriers (eg call terminating, roaming). the future this trend may be accelerated by In the case of mobile service providers, the low-priced discounter services, ﬂat rates for main sources of revenue were end customers mobile phones and sharply reduced prices as well as commissions and bonus payments. for calls to landlines. Many mobile subscribers TELECOMS | MARKET WATCH 43

Market shares of mobile operators Outgoing calls from ﬁxed (by subscriber base) and mobile networks

in % Minutes (bn)

100 350 6.6 6.5 7.7 8.6 10.4 12.3

13.7 13.3 90 12.4 12.7 13.3 13.6 300 278

80 273 83.8 40.0 39.1 38.3 38.1 270 37.8 265 36.8 249 86.3 85.0 70 250 244 87.2 230 87.4 89.8 60 92.4 200 50

40 150 30

20 100

10 39.7 41.1 41.6 40.6 38.5 37.3 50 0 16.2 13.7 15.0 2000 2001 2002 2003 2004 2005 7.6 12.6 12.8 0 10.2 1999 2000 2001 2002 2003 2004 2005e T-Mobile Deutschland GmbH Vodafone D2 GmbH Outgoing traffic from national fixed networks (%) E-Plus Mobilfunk GmbH & Co. KG Outgoing traffic from national mobile networks (%) O2 Germany GmbH & Co. OHG

Growth in mobile trafﬁc

Minutes (million)

45,000

41,019 40,000 37,089

38,862 35,000 33,970 31,288 35,329

30,000 32,662 25,004 29,624 25,000 17,401 20,000 23,794

15,000 14,795 10,000

5,000 1999 2000 2001 2002 2003 2004

Outgoing trafﬁc from mobile networks Incoming trafﬁc to mobile networks 44 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

UMTS on demand. And they are even branching out There has been a proliferation of UMTS- from TV to offer additional services such as capable wireless devices since UMTS was Internet and telephony. First, however, they launched in mid-2004. This allows network must upgrade their networks and the infra- operators to offer their customers a wide range structure investment this will require is likely of interesting services, including video, music to prompt further consolidation and coopera- and game downloads for mobile phones. Users tion in the market. Cable TV already accounts can visit the online portals of their network for one-third of all ﬁxed network investment operator and try out the different services on by alternative providers (€ 0.3 billion). offer (eg shopping, news and sport). UMTS also makes it possible for customers to surf the world wide web from their mobile phone; current connection speeds are up to 384 kbit/s. Network operators offer a variety of hardware solutions for Internet access, including UMTS routers and laptop cards. Some network operators report that up to 3 percent of their customers are already using UMTS services. Add to this the proliferation of attractive services and the continuing expansion of network coverage and it seems likely that the UMTS customer base is set to grow strongly. It is estimated that there were two million UMTS users at the end of 2005.

BROADCASTING/CABLE TV

According to ﬁgures from the Société Euro- péenne des Satellites (SES), at the end of 2004 53.5 percent of the 36.18 million German households with television received their signal via cable (including those households that receive signals via a satellite master antenna yet do not have their own satellite receiver). Almost 42.7 percent of households had their own satellite dish, while 3.8 percent received terrestrial television. These ﬁgures reveal that cable and terrestrial links continue to lose ground to satellite reception.

Faced with mounting competition from satellite services and the advent of digital video broadcasting (DVB-T), cable operators are increasingly attempting to secure their customer base by introducing new services. For instance, they are expanding digital television coverage, which makes it possible to offer subscription packages as well as video TELECOMS | CONSUMER ADVICE AND PROTECTION 45

Consumer advice and protection

CONSUMER ADVICE SERVICE The Agency has responded to this demand by boosting the number of staff employed to Consumer enquiries provide this service. These individuals are The Federal Network Agency was once again needed in particular to cope with the addi- a successful consumer advocate in 2005, tional workload arising from the enlargement offering expert advice and assistance in the of the Agency’s mandate to encompass energy ﬁeld of telecommunications. issues. In 2005, the Consumer Advice service received 41,011 enquiries and complaints. The Federal Network Agency’s Consumer Advice service continued to prove very The enquiries and complaints regarding popular in 2005, underlining the importance charges in telephone bills were primarily of this work. concerned with call charges in the ﬁxed

Enquiries and complaints in 2005 The main issues were: 41,011 in total • Charges on telephone bills 17.5 % • Contracts 16.9 % • Unsolicited direct marketing (fax spam, phone scams etc.) 13.4 % 9,407 26,417 • Numbering 8.2 %

• Prices/charges of telecoms providers 6.0 % 5,187 • 0190/0900 premium rate services (incl. diallers) 5.4 % • Technical matters (incl. DSL availability) 4.0 % • Other 28.6 % Consumer helpline E-mails Letters/faxes 46 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

network (eg forwarding by information number portability and the options for services, premium rate services and fees for blocking numbers. terminating calls in alternative networks), text messaging services and calls to 0137 numbers, The Consumer Advice service receives numer- as well as hotly disputed Internet charges ous enquiries regarding the prices and (arising from diallers and disagreements charges of individual telecoms providers. regarding the volume of data and the amount The fact that providers’ price lists are pub- of time spent online). lished in the Federal Network Agency’s MarktbeobachtungenOfficial Gazette leads consumers to believe Contractual matters continue to account for that the Agency is responsible for regulating a largeVullaore proportion dunt of nonsequat consumer complaints, augueriuscil ipitthe ali prices and charges of all telcos. Consumers which focus in particular on poor customer complain, for instance, that certain telecoms service in terms of rectifying problems as well providers lure new customers with low prices as the alleged failure of telcos to adhere to and then make changes at short notice that contractually agreed terms and conditions render their service less attractive. with regard to the charges billed, periods of notice and the ability to switch providers. There is a constant flow of complaints relating to difficulties in obtaining DSL lines. Consum- Despite the entry into force of the Second ers lament the fact that DSL is not available Ordinance Amending the Telecommunications in certain regions, as well as the long waiting Customer Protection Ordinance (TKV) and time for a DSL line or for the activation of of the Premium Rate Services Act (MWDG), their DSL port. Although problems of service consumers still complain about unsolicited provision are typical of such a fast-growing direct marketing received in the form of faxes, market, the Agency endeavours to regulate text messages or e-mails. The main source the market and the spectrum in such a way of complaints, however, are phone scams as to facilitate the provision of broadband whereby consumers are prompted to call a services by market participants. certain number. Such scams now employ 0137, 0180 and local numbers in addition to COMBATING NUMBER ABUSE the more familiar 0190/0900 numbers. Overview Another major source of complaints are The Telecommunications Act (TKG) empowers premium SMS, whereby customers are pro- the Federal Network Agency to intervene vided with information and entertainment in cases where it has reliable information on services in the form of text messages. The unlawful use of numbers, in particular in charges are then added to their telephone order to prevent further abuse taking place. bill. Customers complained in particular about Under its responsibility for numbering illegal advertising for these services, as well as administration, the Federal Network Agency the difficulty of objecting to the prices charged may issue orders and take any other suitable and terminating subscriptions. Discussions measures to secure compliance with the legal between the Federal Network Agency and the provisions and with the conditions it has companies involved have resulted in voluntary imposed in connection with the allocation of measures on the part of industry to protect numbers. This can include issuing a warning, consumers (eg publishing the names of withdrawing the number in question, ordering content providers on the Internet). the network operator to deactivate the number, requesting the bill-issuer not to issue Many of the enquiries received concerned bills for the number or even prohibiting numbering, where the main issues are certain business models. TELECOMS | CONSUMER ADVICE AND PROTECTION 47

In the period under review, the Federal Net- experience in this sector has led it to issue an work Agency dealt with 46,393 consumer order that supplements and modiﬁes existing enquiries and complaints (submitted in rules. The order regulates the behaviour, writing and by telephone). Furthermore, a provision, installation and activation of diallers total of 3,960,728 applications to register used by consumer devices with a graphical diallers have been received since the entry interface, as well as the way in which such into force of the MWDG. These have been diallers establish a connection. It modiﬁes the either approved or rejected, unless they were requirements pertaining to the display of withdrawn by the applicants or – depending pricing information, the request for explicit on the date they were received and the consent on the part of the user, the registration complexity of the individual case – are still procedure, the declaration of conformity and being processed. the installation features.

Consumers may submit a formal request in The complaints received by the Federal Net- order to ascertain the service provider ulti- work Agency about chargeable diallers have mately responsible for a particular 0190 pre- revealed that in many cases consumers who mium rate number. A total of 3,899 written use a dialler are unaware of the costs that are responses were provided in such cases during involved. This is because many dialler providers the period under review. The numbering fail to adequately indicate the price for using administration call centre answered a total of their service. The Federal Network Agency 32,883 calls and e-mails, of which 4,176 related now requires that a prescribed approval to 0190/0900 numbers. Detailed consumer window appear on the screen prior to establish- complaints were examined by the Federal Net- ment of the chargeable connection (see work Agency, which intervened in 287 cases. illustration). This window must cover at least one third and at most two thirds of the screen. New approval window for diallers It is now also mandatory to indicate the price The Federal Network Agency regulates the for the service in the approval windows prior dialler sector in order to protect both con- to download and installation/activation of sumers and legal providers. The Agency’s the dialler. In addition, formulations such as 48 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

“free access tool”, which might suggest that Some companies have challenged steps taken the service is free of charge, may no longer to combat dialler abuse in court. However, be used in the three approval windows. in none of these cases has a decision of the Federal Network Agency been reversed by To protect the user of a dialler from being a court, either in full or in part. deceived or confused by an identical structure of the three approval windows, the design of Telephone spam the approval windows that are shown prior Complaints about spam (unsolicited direct to download and installation/activation must marketing) were again a major theme for the clearly differ from the layout of the third Federal Network Agency in the year under approval window. Last but not least, the new review, with the Agency receiving a total of requirements prohibit diallers from leaving 19,846 spam-related complaints during this the user’s computer without their consent. period. The complaints concerned spam sent The new requirements entered into force on by fax, text message and e-mail, as well as 17 March 2005, although old diallers that did “one-ring fraud”, whereby the phone rings not comply with the new rules could still be brieﬂy, prompting the called party to check used until 16 June 2005. Registered diallers and return the missed call. Doing so, however, are entered into a Federal Network Agency will cause them to dial a 0190/0900 number database, which consumers can access online or similar. The amended Telecommunications (www.bundesnetzagentur.de >Verbraucher Act empowers the Federal Network Agency to > Dialer/Spam/Rufnummernmissbrauch). intervene in all instances where spam is sent The fact that a dialler is registered with the using a telephone number. Anyone sending Federal Network Agency is not a guarantee spam is considered to be breaking the law. of quality. Nevertheless, diallers that are not Furthermore, the sender does not normally registered or do not satisfy the minimum reveal his identity and also fails to provide requirements may not be used. numerous other pieces of information required by the Distance Selling Act, thereby Steps taken to combat dialler abuse committing a further infraction. The use of The Federal Network Agency again had to telephone numbers to send spam is therefore revoke the registrations of a large number of diallers with retroactive effect. This action was taken after consumer complaints and spot checks revealed that, contrary to the Complaints about telephone declaration of conformity submitted by the spam in 2005 applicant, there were many areas in which 19,846 in total the minimum requirements had not been fulﬁlled.

According to the Federal Network Agency’s 7,947 11,256 interpretation of the law, by revoking registration with retroactive effect, the Agency also lifts the obligation on consumers to pay for using the diallers in question. This includes the period during which the rogue 643 diallers were initially registered. During the period under review, the Federal Network Fax spam Agency also prohibited several providers Telephone spam from issuing invoices and collecting payment. E-mail spam As of December 2005 TELECOMS | CONSUMER ADVICE AND PROTECTION 49

deemed to be illegal on a regular basis. In In the period under review, the Federal view of growing media convergence, the Network Agency received a total of 19,846 Federal Network Agency does not make a complaints about spam. Of these, 11,256 distinction between unsolicited messages complaints referred to fax spam, 7,947 to sent by fax, e-mail or text message, as long as telephone spam and 643 to e-mail spam sent the message contains a telephone number. using a telephone number. The courts have expressly conﬁrmed the powers of the Federal Network Agency to In several egregious cases, the Federal Net- pursue in the public interest violations of the work Agency prohibited the business model Unfair Competition Act (UWG). employed by the offending companies. A decision by the Federal Network Agency to In view of the large number of spam-related prohibit one particular business model was complaints received by the Federal Network upheld by the relevant administrative court, Agency, a separate mechanism was introduced as were the Agency’s decisions in a number for spam victims on 15 March 2005. The aim of other cases. is to channel complaints more effectively and to simplify the procedure for consumers. Details of the steps taken to combat spam- Victims of spam can now send their complaints related abuse, including a list of the numbers to a dedicated fax number or e-mail address that have been deactivated, can be found on at the Federal Network Agency. Both options the Federal Network Agency’s website. have proved very popular. In addition, the Federal Network Agency now offers over-the- In mid-2005, the Federal Ministry of Econom- phone advice about spam sent using a tele- ics and Technology decided that the Federal phone number, as well as advice on diallers Network Agency should serve as Germany’s and premium rate services. representative in the Contact Network of Spam Authorities (CNSA), which brings together

Statistics showing action taken to combat abuse

Number

Written and verbal enquiries from consumers About diallers 21,559 About spam 19,846

Formal requests to ascertain the service provider with ultimate responsibility, pursuant to section 43a(1) of the TKG in conjunction with section 152(1) of the TKG 4,988

Total 46,393

Total number of dialler registrations Since the entry into force of the Premium Rate Services Act 3,960,728 During the period under review 1,740,569

Dialler registrations withdrawn during the period under review 502,634

Questions received during the period under review from parties obliged to register 1,210

Number of times the Federal Network Agency’s dialler database has been accessed during the period under review 2,277,929

Bans on billing and collecting payment issued during the period under review 54 50 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

those European entities responsible for data, which might include information about combating spam in their respective countries. the time and duration of a call, is covered by In 2005, the CNSA agreed on a procedure for provisions that safeguard the privacy of tele- sharing complaints about spam in order to communications, which protect more than facilitate the cross-border criminal prosecution just the content of the call. of spammers. After the liberalisation of the telecoms market, Pricing information the telecommunications data and content The TKG sets forth certain requirements for referred to above are now in the hands of providers of 0190/0900 numbers with regard numerous private telcos instead of a single to the provision of pricing information. Any state-owned monopoly. The TKG imposes infringement of these requirements constitutes stringent requirements on telcos in order a misuse of the number and prompts the to safeguard the right of telecoms users to Federal Network Agency to intervene. Com- privacy as well as their right to determine plaints of this nature were again received in how their personal data is used. the period under review, in response to which the Agency issued a warning or deactivated The 2004 amendment to the data protection the number in question. provisions of the TKG resulted in an increased number of enquiries and complaints on the Administrative offence proceedings and part of consumers, a trend that continued referrals to the public prosecutor into 2005. The legalisation of reverse searches, A wide range of cases relating to diallers, spam, for instance, has proved a source of annoyance, pricing requirements and formal requests for particularly among consumers who place a information became the subject of adminis- premium on data protection. In response, trative offence proceedings. Approximately the Federal Network Agency has informed 85 cases resulted in ﬁnes of up to € 50,000. consumers about the legal underpinnings of Some cases involving administrative offences reverse searches, thereby clarifying the rights are currently being heard by local criminal of consumers in their dealings with telcos. courts, while any evidence of a possible There were also a large number of enquiries criminal offence was passed on to the appro- about itemised bills, which under the TKG priate public prosecutor. may only show those calls that incur a separate charge. Customers with ﬂat rates were there- PRIVACY OF TELECOMMUNICATIONS AND fore informed that, unless calls are billed DATA PROTECTION individually, itemised billing is not possible.

Safeguarding the privacy of telecommunica- In many cases, consumer complaints prompted tions and protecting the personal data of further investigations of telcos’ activities, telecoms users are at the heart of customer which in some instances uncovered violations protection. The Federal Network Agency is of data protection law. For example, the responsible for monitoring and, if need be, Federal Network Agency was alerted to a enforcing compliance with those provisions situation in which consumers contacting the of the TKG that address the privacy of tele- call centres of certain mail order companies communications and data protection. would suppress their caller ID, only for the telco to circumvent this feature without Personal data is collected and processed at authorisation and reveal their number to the time a contract for telecommunications the call centre so that the customer could be services is concluded as well as in the course identiﬁed and greeted by name. The Federal of actual service provision. The latter set of Network Agency intervened and took steps to TELECOMS | CONSUMER ADVICE AND PROTECTION 51

find a solution that satisfied data protection provisions of the TKG. The two bodies do not requirements while also taking the mail just discuss current data protection issues in order companies’ interests into account. the realm of telecommunications, rather they coordinate their efforts when dealing The period under review also saw a fine levied with important cases in order to enhance on a telco that had illegally used subscriber the effectiveness of data protection. data for the purpose of direct marketing. This marked the first use of administrative fines DISPUTE RESOLUTION proceedings to enforce the data protection provisions of the TKG. Under the TKV, customers may ask the Federal Network Agency to conciliate in a It must be emphasised, however, that the vast dispute with their voice telephony or public majority of companies endeavour to comply telecoms network access provider. It was for with the law and its data protection provisions. this purpose that the Agency set up a dispute It is therefore the task of the Federal Network resolution service in June 1999, in line with Agency to inform providers of telecommuni- the amended regulations published in its cations services as well as consumers about Official Gazette. the data protection requirements of the TKG. Some companies have even taken it upon An application for dispute resolution will themselves to contact the Federal Network only be admitted if the applicant can assert Agency before launching a new service in violation of their statutory rights, if judicial order to ensure that it complies with data proceedings with the same disputed subject protection law. The entry into force of the matter are not pending, if an attempt to amended Telecommunications Act has made reach agreement with the defendant has it all the more imperative to ensure that been made beforehand, if the defendant has companies are kept up to date. not cited limitation of action to the applicant and if clarification of a fundamental issue is In 2005, the Federal Network Agency again not compromised. paid particular attention to VoIP services, which allow users to make telephone calls As a rule, dispute resolution by the Federal over IP networks such as the Internet. After Network Agency is carried out in writing. It examining the results of a public consultation is also voluntary. It follows, therefore, that on this topic, the Federal Network Agency the procedure is regarded as closed as soon considers that VoIP services are in principle as one of the parties refuses to cooperate. governed by the same laws as conventional The aim is amicable agreement. It fails if the voice services with regard to the privacy of applicant withdraws their application after telecommunications, data protection and the procedure has begun, if the defendant public safety. This is partly due to the fact that refuses to consent to conciliation or withdraws it is often no longer possible for the consumer their consent, or if the proposal made is not to distinguish between VoIP and conventional accepted. In deciding to invoke the process, services and that, to a large extent, the former the applicant must bear in mind that it is an services aim to replace the traditional tele- out of court dispute resolution procedure. phone line. The Federal Network Agency’s service assesses both parties’ statements on the case, including In addition, the Federal Network Agency associated documentary evidence, as well worked closely with the Federal Data Protec- as declarations regarding the legal position. tion Commissioner, who also has a duty to It then works out a proposal based on the ensure compliance with the data protection parties’ positions and aimed at a compromise 52 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

between the conflicting demands. The out- dispute resolution procedure. If a proposal come thus fundamentally depends on the is put forward, the dispute resolution service willingness of the two sides themselves to shall determine the costs as appears fair, clarify the facts and to compromise in order taking into account the findings of fact. to reach a solution. Under the Code of Civil Procedure Introduction Act (ZPOEG), the In 2005, the dispute resolution service was Federal Network Agency’s dispute resolution called in to conciliate on 280 occasions; in service is classified as “another conciliation 39 percent of the cases it was possible to body”. This means that the service – except in instigate the procedure. In 13 percent of the the case of implementation by a federal state cases, the application was withdrawn after of the ZPOEG – can in pecuniary disputes the Federal Network Agency commented on before the local courts when the value of the the case or notified the applicant of the legal matter in dispute does not exceed € 750, take requirements and the rules of procedure. the place of the mandatory procedure before Finally, in a third of the cases, the Federal a conciliation body set up or recognised by Network Agency was forced to reject the the state administration of justice. It should application after determining that, within be remembered that a settlement made the meaning of the TKV, the customer’s rights through the agency of this dispute resolution had not been infringed. service is not an executory title within the meaning of the Code of Civil Procedure (ZPO). In many cases, defendants refused to partici- There is a minimum fee of € 25 for this service. pate in the out-of-court settlement procedure. The fee increases in line with the value of the subject matter and is incurred once the In 82 percent of the dispute resolution proce- defendant has agreed to take part in the dures that were instigated, it proved possible

Applications for dispute resolution

13 % Applicant withdrew application 39 % Dispute resolution 9 % Currently under review procedure instigated

39 % Application deemed invalid

9 % Procedure closed by applicant 61 % Amicable agreement 9 % Procedure closed by during negotiation defendant

21 % Proposal put forward and accepted TELECOMS | CONSUMER ADVICE AND PROTECTION 53

either to reach an amicable agreement in of their place of residence or work, must have the course of negotiations or to agree on a access at an affordable price and whose compromise proposal put forward by the provision to the public as a basic service has dispute resolution service. become indispensable. The activities of the Federal Network Agency in this field focused The requests for dispute resolution cited the on connection to the public telephone same grievances as last year. In the main, network and the provision throughout these were: Germany of public pay telephones. The • Disputed charges on telephone bills. Agency also joined in the European debate • The quality of telecoms and customer about the future of universal services. services. • Differences of opinion between consumers The TKG requires that DTAG notify the Federal and providers on charges billed, the use Network Agency if it intends not to offer of premium rate services and the use and universal services to the full extent or to offer duration of use of online services. them under less favourable conditions. In this case, it must signal such intentions one year Most of the disputes concerned sums of prior to their taking effect. No such notifica- between € 100 and € 1,000. tion has been received. The Federal Network Agency holds the view that market forces will The Federal Network Agency’s dispute generally ensure the provision of universal resolution service forms part of BundOnline, services and that it need only intervene if a a federal government initiative to make universal service is not being adequately or suitable administrative services available on appropriately provided by the market, or if the Internet. The aim is to provide a modern, there is reason to fear that such a provision user-friendly service by making it possible to will not be secured. submit and process applications electronically. “Connection to a public telephone network” To meet these requirements, the IT processes is at the heart of the universal service. In the used to provide the dispute resolution service period under review, the Federal Network have been completely restructured in order Agency received enquiries on this topic from to improve service efficiency. In recent years, 424 consumers. These enquiries show that information on the different options open the provision of universal services is secure at to consumers and on how to submit an the present time and is likely to remain so in application has been made available on the future. Federal Network Agency’s website, thereby enhancing the service of “Dispute resolution Connection to the public telephone network pursuant to section 35 of the TKV”. And start- also permits “functional Internet access” via a ing in 2006, consumers will be able to submit narrowband connection. In so far as is techni- applications and monitor their progress cally feasible, this universal service also online. This improvement means that all includes the features call waiting, call for- citizens now have a quick and easy means of warding and call hold/broker’s call. reaching the dispute resolution service. The rapid growth in the number of broad- UNIVERSAL SERVICE – TELECOMS band Internet connections to the public telephone network, offering transmission Universal services are defined as a minimum speeds in excess of 128 kbit/s, is also worthy of set of publicly available services of specified special note. quality to which every end-user, irrespective 54 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

The robust growth in the national broadband market, the plans to regulate spectrum use and the comments of the European Commis- sion indicate that there is no need at present to modify universal service requirements with regard to broadband Internet access.

The Federal Network Agency also focused on ensuring the provision throughout Germany of public pay telephones, another universal service. At the end of 2004, there were 105,000 payphones and cardphones in Ger- many. The decline in the number of public pay telephones has been accompanied by a rise in mobile phone use; there are now some 78 million mobile subscribers in Germany. This is why the Federal Network Agency has joined forces with local authority associations and DTAG to devise a new structural concept that takes account of the changed usage patterns: the “basic telephone”. The basic telephone will eliminate some of the more sophisticated features while continuing to provide a basic service even at uneconomic locations. The aim of the pilot project is to test the suitability of the basic telephone as a low- cost device and to see how well it is received by users. Once this phase is complete and the pilot project has been evaluated, a decision will be taken at the start of 2006 as to whether the basic telephone is acceptable and can be installed at locations that are used extremely infrequently. To date, no user complaints have been reported, apart from a very small number of people who were unhappy with the reduced features available. The pilot project is supported by a dedicated advisory board led by the Chairman of the Inter-State Working Group. In addition to the Federal Net- work Agency, the advisory board also brings together representatives of DTAG, leading local authority associations, consumer associations and WIK Consult. TELECOMS | INTERNATIONAL DEVELOPMENTS 55

International developments

By the end of 2005, the Federal Network May 2005 saw the publication of the ERG Broad- Agency had completed and consolidated its band market competition report (ERG [05] 23), analysis of 12 of the 18 markets identified in which used 13 country case studies to inves- an EU Recommendation that seeks to roll tigate the development of competition in back sector-specific regulation where it is broadband access markets. no longer needed. In addition, the IRG/ERG examined the The new regulatory framework assigns greater important topic of national markets for importance to the cooperation between wholesale international roaming. The result national regulators throughout Europe. This was a joint position paper produced by the is reflected in the participation of the Federal Wholesale International Roaming working Network Agency in the Independent Regula- group and published in September 2005 tors Group (IRG) and the European Regulators under the title “On the Coordinated Analysis Group (ERG). The ERG seeks to encourage of the Markets for Wholesale International coordination between national regulatory Roaming” (ERG [05] 20rev1). authorities by promoting a consistent application of the European regulatory frame- September 2005 also saw the publication of work. In order to achieve this, it brings agreed “Guidelines for implementing the together independent national regulators Commission Recommendation C (2005) 3480 with representatives of the Commission. on Accounting Separation & Cost Accounting Systems under the regulatory framework for Last year, the ERG addressed the growing electronic communications”. popularity of VoIP services and what this means for regulators. In February 2005, it In general, it can be concluded that European published a Common Statement on VoIP that cooperation is an increasingly prominent focused on issues of numbering and access to factor in the decisions of the national regulator emergency services. The incorporation of VoIP and that as a result, regulators must invest services into “traditional” fixed network greater resources in these links. This is partic- markets (markets 1 to 6 in the Recommenda- ularly apparent in the drafting of administration) is currently being investigated. tive orders, which must reflect the common position with regard to remedies. In addition, 56 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

contact with professional colleagues from other regulatory authorities has proved to be a valuable source of information and ideas, which makes it imperative to play a regular and active part in working group meetings and to assist in drafting documents. Partici- pation in these working groups is now at least as important as our presence in “traditional” committees such as COCOM, if not more so. The procedure set forth in Article 7 of the Framework Directive means that it is no longer possible for one country to isolate itself from regulatory developments in other countries and to disregard the comments of the Commission. TELECOMS | RULING CHAMBER DECISIONS 57

Ruling Chamber decisions

RULING CHAMBER 2 competitive practices in the markets for telephone services, resale, public payphones Under the Telecommunications Act (TKG) the and preselection, in 2005 pronounced on, in rates and rate-related components in DTAG’s all, two ex post rates regulation cases, 18 anti- general terms and conditions for telephone competitive practices cases and one case to services and leased lines are, until further issue a provisional obligation. Substantive notice, subject to ex post rates regulation and decisions brought the completion of one ex additionally to the special control of anti- post case, 11 anti-competitive practices cases competitive practices pending the comple- and the procedure for determining a provi- tion of market analysis and any subsequent sional regulatory order. One case of anti- imposition of remedies by the Agency. competitive conduct resolved itself through Additionally, DTAG has been obliged, until withdrawal. Also, under the notification a final order based on the outcome of the procedure, the Chamber looked at 18 sets current market definition and market analy- of DTAG’s pricing measures, checking them sis procedures is issued, to notify the Agency, for compliance with the TKG. Altogether, two months before the planned effective 140 companies and interest groups were date, of its rates measures in respect of retail invited to attend proceedings. prices for access to the public telephone network at a fixed location, publicly available Processing preselection orders local and/or national telephone service via electronic interface provided at a fixed location and publicly After DTAG cancelled the agreements on the available international telephone service electronic transmission of preselection order provided at a fixed location (notification data that it had concluded in June 2004 with requirement). DTAG likewise had to commit a number of core network operators and that to enabling its customers to use the call by contained a provision on liability exemption, call and preselection facility pending the the companies filed an anti-competitive issue of a final order based on the outcome practice application under section 42 TKG. of the current market definition and market analysis procedures. DTAG was then prohibited by the Chamber from making its offer of an agreement on the Ruling Chamber 2, responsible for rates electronic transmission of preselection order regulation and the special control of anti- data contingent upon presentation of a written 58 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

declaration of intent from the customer. The DTAG continues to provide most of the broad- defendant was also prohibited from using band Internet connections in Germany under information acquired in connection with the brand name T-DSL. The T-DSL ZISP product carrying out preselection orders to win back enables Internet service providers to offer customers, and thus ordered to continue T-DSL customers Internet services over a the agreement until acceptance by the com- platform of their own. T-DSL ZISP provides plainant for a maximum, however, of four the link between the T-DSL connection and weeks after publication of the notice. The the competitors’ Internet platform. application was found to be without sufficient cause on the other counts of anti-competitive The previously agreed rate of € 0.52 for use conduct. of the basic T-DSL ZISP line was lowered to € 0.49 for each 10 kbit/s unit of capacity. The Action brought by DTAG against the decision reduction is bigger still when set against the was allowed by Cologne administrative price of € 1.5625 for each 10 kbit/s that DTAG court in its ruling of 26 October 2005 in part had filed for. only. With regard to the part of the decision quashed by the court, the Agency has filed for Leased lines (CFV/SFV) non-admission so as to enable a review by the Further market analysis studies were made Federal Administrative Court. on the supply of leased lines in the period under review, so that a regulatory order has Refusal by DTAG to supply local loops not yet been issued. Thus it was necessary Further cases concerned an abuse of DTAG’s to consider whether there were any special significant market power through its lack circumstances prior to the completion of of non-discriminatory treatment of telecoms these studies that necessitated action to secure service providers obtaining, like retail competition and to protect users’ interests. customers, AGB products at retail prices. A A case that Ruling Chamber 3 had opened provisional order was issued pending a final on this was closed, however, after T-Com, the decision, requiring DTAG to continue to provider of carrier leased lines and standard supply providers with AGB services, ie ordinary leased lines (CFV/SFV), declared itself willing and ISDN lines as set out in the general terms to keep the pricing status quo pending the and conditions for the telephone service. issue of a regulatory order. DTAG was forbidden in particular to make supply contingent on signing “conditional Introduction of simyo by E-Plus agreements”. Ruling Chamber 3 on 12 July 2005 settled a dispute between the service provider Mobilcom RULING CHAMBER 3 Communicationstechnik GmbH (mobilcom) and the mobile operator E-Plus GmbH & Co. KG In 2005, Ruling Chamber 3 was responsible for (E-Plus) about its new “simyo” brand. In its telecommunications regulation and energy decision the Chamber concluded there was no regulation. When Chambers 6 to 9 were set obvious reason for absolute equal treatment up in November 2005, the responsibility for and that, considering the circumstances of energy regulation was then transferred to the case, different treatment was permissible them. under the terms of the licence and also under standard competition rules, if there was Internet objective justification. This included, most The Agency approved the charges for the main notably, first-mover competition which was, broadband interconnection service currently in principle, a desirable expression of com- available with effect from 1 November 2005. pliant behaviour. TELECOMS | RULING CHAMBER DECISIONS 59

Online flat rate dispute resolution case Following the European Court of Justice, the debitel AG had also referred a dispute with Agency’s Ruling Chamber 3 had first to E-Plus Service GmbH & Co. KG for resolution. investigate whether DTAG, under its current Here, too, the case involved possible discrimi- subscriber data provision agreements, nation in the introduction of a new offer, merely supplied “mandatory data” – which this time an online flat rate for the use of was the case – and second, what costs could be data services delivered primarily over the billed. Under the Court of Justice ruling, only defendant’s UMTS network. This case was the costs of provision could be recognised, also decided in favour of the mobile operator. not those for setting up and updating the databases. The data had to be collected Advertising directory enquiry and updated by telephone service providers services on telephone books anyway. The costs for this were paid by the On 2 February 2005 Ruling Chamber 3 issued customers already. Thus the Court found a decision about a complaint from telegate that a costly second use of the data by the AG in respect of what it considered to be anti- telephone companies should not happen. On competitive practices by DTAG’s subsidiary 17 August 2005 the Agency therefore ruled DeTeMedien in the preparation of telephone that the annual costs DTAG charged users of books and classified directories. subscriber data should be reduced by around 98 percent from € 49 million to € 770,000. In its ruling the Chamber concluded that This decision borders on a paradigm shift, although competition was affected by DTAG’s since the huge reduction in the cost price conduct, this was not to be regarded as for subscriber data could lead to greater unfair or as not objectively justified. True, a market entry in the downstream markets study submitted by telegate was able to set for directory enquiry services and to greater out convincingly that telephone books and competition there. classified directories were important means for advertising numbers for directory enquiry RULING CHAMBER 4 services provided by telephone, yet there were enough other ways of advertising tele- Last year, the Chamber dealt with 14 rates gate’s directory assistance services. telegate’s proposals for access services, seven filings for filings against the subsidiary DeTeMedien access orders under section 25 TKG, 70 filings proved inadmissible. for a partial amendment of interconnection orders and two dispute resolution cases. A With regard to the discrimination accusation, particular focus of the Chamber’s work was the Chamber concluded that DTAG had not the issue of the very first regulatory orders breached the rules because it had treated for the interconnection markets and the local telegate in just the same way as every other loop access market. And finally, in early 2005, company in processing the information it the Chamber had to decide on eight cases had provided for publication in directories. that were still open at the end of 2004. Some of the cases such as those concerning the Rates for the provision of subscriber data regulatory orders and approval of the rates On 25 November 2004 the European Court for local loop access, were widely followed of Justice (EuGH), in a ruling on a submission by the competing companies and their from a Dutch court, clarified the interpre- industry associations. Accordingly, decisions tation of the voice telephony directive that had to be taken on the large number of addresses the provision of subscriber data requests from the competitors and associations and recognisable costs at European level. to attend proceedings. 60 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

In addition to its responsibilities for regulation network provided at a fixed location, includ- of markets 8 to 11 of the Commission Recom- ing local call conveyance via primary rate mendation on relevant markets, Ruling interface to calls to online services” and Chamber 4, in the course of the year, tempo- “Transit services in the fixed public telephone rarily assumed some of the responsibilities of network via primary rate interface plus call Ruling Chamber 3 in connection with staffing origination from national networks to online changes brought about by the Agency’s new services”, the Agency also issued a regulatory responsibilities for energy regulation. order on 16 November 2005 in respect of Marktbeobachtungenthese. The order obliged DTAG, amongst The main decisions are set out below. other things, to make transparent its whole- Vullaore dunt nonsequat augueriuscil ipitsale ali prices for access services in the markets Regulatory measures in the markets for call relevant to the case, in particular its whole- origination, call termination and transit sale connection rates for ISPs (AfOD) and its services in the public telephone network Internet access wholesale flat rates (OVF), and (markets 8 to 10) to give the Agency information, upon request, on the volume of wholesale products Regulatory order on DTAG offered externally and used internally, with The definition and analyses of wholesale the corresponding revenues. markets 8, 9 and 10 of the Commission Recommendation carried out immediately In light of the depth of regulation previously – after enactment of the Telecommunications under the old TKG, primary rate interface was Act 2004 showed the President’s Chamber classed as general network access – it was duly that DTAG had significant market power decided not to impose an access obligation (SMP) in most of the markets. on DTAG with the resultant ex ante rates regulation duty. In light of this, Ruling Chamber 4, after carrying out a national consultation and Hence the rates for access services in the submitting the draft measure to the Commis- markets “Call origination on the public tele- sion, issued a regulatory order on DTAG phone network provided at a fixed location, imposing a number of obligations strength- including local call conveyance via primary ening the rights of competing companies in rate interface to calls to online services” and some regards. “Transit services in the fixed public telephone network via primary rate interface plus call The rates for interconnection services and origination from national networks to online for granting colocation are subject to ex ante services” are subject only to ex post rates approval by the Agency, measured by the regulation. The order in full is published on criterion of the cost of efficient service the Agency’s website. provision. Regulatory order on alternative In line with the scope provided by the new access network operators Telecommunications Act, DTAG was ordered Another work item for the Ruling Chamber to publish a reference offer for its interconnec- last year was the preparation of regulatory tion and colocation services. orders on alternative access network operators and opening of the associated cases. As the outcome of the definition and analysis This was necessary against the following of markets 8 to 10 also showed DTAG to have background. The Commission had vetoed SMP in the markets warranting regulation the initially notified market definition and “Call origination on the public telephone market analysis draft on market 9 where it TELECOMS | RULING CHAMBER DECISIONS 61

concerned alternative access network opera- current ones. The increases arose chiefly from tors. In the draft, the President’s Chamber an increase in the hourly rates, accepted by had concluded that the alternative fixed net- the Chamber – even if lower than the rates of work operators did not have SMP, in particular increase stated by the complainant – in light on account of DTAG’s countervailing market of, amongst other things, the introduction power in termination services. Because of the of the 34-hour week, a costing amendment Commission’s veto, the draft on market 9 has from the complainant in respect of particular, been revised again with regard to the alter- basically justified times given, and updated native operators and amended to the effect frequencies in process costing. that all the alternative access network operators have SMP in their particular network Higher tariffs for preparing the switching and in the relevant call termination market. The cascading documentation were approved. Agency has decided that this assessment This was because of the acceptance, for will also apply to alternative access network the first time, of the cost statements on the operators operating in future in the above “subcontracts” that have to be drawn up for sense in termination markets. every cascading path. With cascading, the “Customer Sited” interconnection links are Against the background of this modified provided one behind the other to allow determination, the Chamber then consulted competitors to bundle their traffic to and on a template draft. This envisages, most from the points of interconnection. notably, an obligation on access network operators to provide interconnection and However, prices up to 75 percent lower as part of this, termination services in their than those filed for by DTAG were approved respective networks. The rates should be almost throughout. Virtually all the cost regulated ex post. The consolidation proce- components were reduced. dure required by the legislation is still pending; it will be carried out shortly. Regulatory measures in the market for wholesale unbundled access to metallic Rates for interconnection links loops and sub-loops for the purpose of (without colocation) providing broadband and voice services In the period under review it was again time (market 11) for approval of the rates for interconnection links (ICAs). These links comprise the switch- Regulatory order for access to the local loop ing and transmission equipment needed On 20 April 2005 the Chamber issued a where the networks meet (points of inter- regulatory order for market 11 of the Commis- connection). sion Recommendation. The order imposed a number of obligations on DTAG, it having The new rates payable from 1 December 2005 been found by the President’s Chamber to were approved largely on the basis of cost have SMP in the national market for access statements, even if individual components to the local loop. had to be established from an alternative source, or even completely disregarded, on The rates for access to bundled and unbundled account of a lack of proof. loops and for colocation are subject to ex ante approval based on the costs of efficient All the new rates for interconnection links service provision. were approved at levels below the current ones. By contrast, the provisioning charges The obligation under the old TKG to grant approved were slightly higher than the unbundled access in the form of pure optical 62 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

fibre was revoked in the order. The market about 10 percent lower than the previous analysis had shown this market not to war- charge. With new lines, the reductions can be rant regulation. Action taken by a competing as much as 32 percent. The charges approved company against this decision was unsuccess- are up to 50 percent lower than DTAG’s ful in the first instance at Cologne administra- proposals. tive court. In accordance with the scope provided by the new TKG, DTAG also had to The termination charges for most of the access commit to publishing a reference offer for variants are also considerably lower. In access to the local loop and for colocation. future, the competitors will pay 71 percent less, namely now only € 5.80 instead of € 19.95 Monthly rentals for access to the local loop as before, for termination of the simple 2-wire Publication of the local loop access order was copper pair if the end customer changes followed by the approval of new monthly provider or returns to DTAG at the same time. charges for access to loops, the so-called last When this does not happen, the termination mile. This decision was thus taken fully on the charge falls by 21 percent from € 36.65 to basis of the Telecommunications Act 2004, € 29.10. without recourse to transitional provisions. The second decision addressed the rates for Accordingly, the monthly charge for the most line sharing. A monthly charge of € 2.31 from common variants, the simple 2-wire copper 1 July 2005 was determined for access to the pair and the 2-wire copper pair high, was high frequency portion of the local loop. This reduced retroactively from 1 April 2005 by is slightly less than 5 percent of the price a further 9.75 percent from € 11.80 to € 10.65. previously approved by the Chamber and Thus the charge approved was almost 40 per- proposed by DTAG. There were likewise cent less than DTAG’s proposal of € 17.40. reductions in the one-off provisioning and Charges up to 48 percent lower than previ- termination charges for line sharing. The ously were also approved for rental of the transfer and new line tariffs were reduced by other access variants. Again, the Chamber up to 17 percent. For a simple transfer, com- referred to a cost model drawn up by WIK petitors in future will have to pay € 51.43 to identify market prices. instead of € 60.82. For the first time, line- sharing termination charges – as those for the Following these approvals, the monthly local local loop – were differentiated according to loop rentals now constitute a good average of whether the end customer switched provider the countries using the same cost criteria. The or not. The more favourable price, applicable rates were again approved for a period of two when the customer switches at the same years ending 31 July 2007. time, is around 83 percent lower than the previous price, and the tariff applicable when One-off charges for access to the local the customer does not, is around 19 percent loop and line sharing charges lower. Finally, on 3 August 2005, two important decisions were taken on local loop access rates. By international standards, too, the German The first concerned the approval of new one- prices occupy a good position; they are in the off charges for provisioning and termination Top 3 level within the EU countries. The prices retroactively from 1 July 2005. for access to the high frequency portion of the local loop are lower than those in France where A provisioning charge of € 43.10 was approved line sharing has already proved itself to be a for the simple transfer of a 2-wire copper pair successful business model. without work at the end customer’s. This is TELECOMS | RULING CHAMBER DECISIONS 63

Voice call termination on individual mobile networks (market 16) In light of the expiry on 14 December 2005 of the vodafone-V.1 termination charge, the Agency on 1 December 2005 ﬁxed new termination rates to apply from 15 December 2005. The Chamber used an international benchmarking exercise to set a per minute rate of € 0.11 plus a markup for fewer than nine, or four, points of interconnection implemented.

Telecoms cases in 2005

Ruling Chamber Total

BK 1 BK 2 BK 3 BK 4

Rates regulation 20 1 14 35

Abuse 18 38 56

Regulatory orders Section 10 and 11 TKG determinations 6 6 Imposition of obligations 0

Interconnection orders 2 79* 81

Imposition of obligations Section 12(2) TKG provisional obligations 1 3 4

Reference offers 2 2

Others Mediation, complaints, approvals, dispute resolution 2 2 4

Total number of cases 6 39 43 100 188

Numbers invited to attend 140 139 294 573

* of these, 70 to change existing interconnection orders 64 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Administrative court proceedings

In 2005 again, a number of court cases (main As far as interconnection was ordered under the and summary proceedings) against the Agency new TKG, the court confirmed that the orders were opened. Most of the cases completed in had legitimately been made on the basis of 2005 were decided in the Agency’s favour. section 25(1) TKG 2004. With regard to rates approved, the court stated that under section In the telecoms sector there were 124 main 150(1) TKG, just the “determinations of market proceedings and 31 summary proceedings dominance made ... prior to the entry into in all. Of the 124 main proceedings, 46 are force of this Act and the resulting obligations now closed. Of these, 42 were decided in the shall remain in effect”, but not, however, Agency’s favour, three against and one case the previously applicable legal situation ended in partial defeat. Of the 31 summary (in particular, the approval criteria of the proceedings, 25 were decided in 2005. The old TKG) as a whole. Yet the market analysis Agency won 21 of these cases and lost three, required under the TKG 2004, not available while one ended in partial defeat. before completion of the market definition and market analysis procedure, can be The focus of the legal disputes and rulings replaced by a concrete, individual determina- on telecoms issues in 2005 was interpretation tion on market dominance made by the of the provisions of the TKG 2004, most Agency under the TKG 1996. Regarding the notably as regards the transitional provisions charges to be set, the court saw section 25(5) of section 150. sentence 3 TKG as the reference in law to sections 27 to 38 TKG and determined that Cologne administrative court did not raise the Agency had rightly measured the termi- any objections to the Agency’s mobile termination charges using the section 28 TKG nation charges order (D2, O2 and E-Plus) in criteria and had rightly not raised objections. response to the applications from 01051 Tele- In two cases (E-Plus and D2), 01051 Telecom com and 01081 Telecom. However, with regard and 01081 Telecom have meanwhile lodged to E-Plus’ mobile termination charges, the an appeal on a question of law (6C17.05 and decision was taken only after the Agency’s 6C18.05). modified application under the summary proceedings (1L6/05; 1K8432/05; 1L624/05; In summary proceedings, Cologne admin- 1L683/05; 1L277/05, 1K765/05 and 1L319/05). istrative court turned down an application TELECOMS | ADMINISTRATIVE COURT PROCEEDINGS 65

from DTAG stating that it was not required Agency’s section 42 ban on DTAG’s use of to have the rates for its T-DSL ZISP basic con- preselection order data passed on to it by nection approved (1L3263/04 – 18. 05. 05). competitors for preselection purposes, to win Indeed, an approval requirement did not back customers. In its decision the court ensue from section 39 TKG 1996, nor from sec- expressly affirmed the applicability of the tion 150(1) TKG in conjunction with previous abuse ruling of section 42(1) TKG in conjunction approvals for T-DSL ZISP basic connections. with section 150(1) TKG before the issue of a But the approvals issued before enactment sections 10 and 11 regulatory order. The court of the TKG 2004 continue to apply even after stated that the lawmakers had decided to repeal of the old TKG, via section 150(1), as close any regulatory gaps by applying the obligations linked with the finding of domi- new TKG provisions. In DTAG’s use of pre- nance. However, this held good only until selection order data to win back customers expiry of the period fixed in the approval it saw an abuse of SMP, as other companies’ decision, since section 150 TKG ordered solely competitive scope was impaired without the continued validity of concrete, individual objectively justifiable reason. True, there were obligations whose scope was limited by what no objections even to powerful companies was actually regulated in the decision. This persuading customers to migrate. However, means that a TKG 2004 approval requirement DTAG did not obtain the data as a result of its must be looked at when an approval issued own activity as an access network operator, and given a time limit under the TKG 1996 but solely because of its dominant position in expires after enactment of the TKG 2004. this capacity and competitors’ reliance on its services. In objective terms, DTAG’s attempts In a decision taken on 7 July 2005 (1K4556/04) to entice customers away were likely to affect on DTAG’s parcel offers, Cologne administra- competition substantially. Whether and to tive court further stated with regard to sec- what extent its action to do so was ultimately tion 150(1) sentence 1 TKG that there had to successful, however, was irrelevant. be a close connection between dominant position and resulting obligation. Covered by However, the court ruled that it was unlawful section 150(1) sentence 1 TKG were only such to oblige DTAG not to make the processing of obligations as needed no further regulatory act a preselection order dependent on a written of implementation. This was not directly declaration of intent from a customer. While applicable to the determination of an approval it recognised that the abuse ruling of section requirement; rather, it had to be implemented 42 TKG was designed to limit the economic in the form of approval grant. and contractual scope open, in principle, particularly to DTAG, it said it should be In its judgment of 26 October 2005 (1K4639/05) remembered that this was a matter of civil Cologne administrative court rejected an law powers explicitly granted to DTAG by law appeal from DTAG against the preselection (section 174 of the Civil Code, or BGB). It could obligation imposed by the Agency. The court not be assumed that the TKG should generally regarded imposition of this obligation on displace the Civil Code’s requirements as to the basis of section 40(1) sentence 1 TKG in form. On this, the Agency filed a complaint conjunction with section 150(1) TKG as lawful. against denial of leave to appeal. It affirmed the reasonableness of this action, notwithstanding DTAG’s voluntary commit- In a decision dated 24 August 2005 (1L803/05) ment to continue the preselection obligation. and a judgment dated 17 November 2005 (1K2429/05) Cologne court confirmed the In a further decision on 26 October 2005 legality of the revocation, by regulatory order (1K4418/05), Cologne court affirmed the for the local loop market (market 11), of the 66 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

obligation on DTAG to grant unbundled access wrongly determined the appropriateness of to fibre optic lines. Arcor has meanwhile the rate of interest, was rejected by the court lodged an appeal (6C28.05). In its decision on 19 December 2005. The court stated that the court stated that the Agency, in its three it could not be definitively decided whether criteria test according to section 10(2) sentence there was scope for interpretation under 1 TKG, had accurately determined that the section 31(2) TKG, yet under section 31 TKG offer in question was not part of a market in there were many indications that this was which the conditions of section 10 TKG were given. Contrary to DTAG’s view, summary met. When one of the three cumulatively proceedings could not clarify whether the needed conditions of section 10(2) sentence Agency had exceeded its scope for interpre- 1 TKG was not met, market regulation was not tation; this was hence open. warranted. Since the third criterion, at any rate (markets in respect of which the application of competition law alone would not adequately address the market failure(s) concerned), was not fulfilled in this case, it was enough to apply competition law. Access to fibre loops is not essential for competition at retail level, since DTAG’s competitors connect many more end customers via their own fibre optic lines.

In its ruling of 19 August 2005 (13A1521/03) Münster higher administrative court addressed the matter of the Agency’s scope for interpretation with regard to price controls under the old TKG. Unlike Cologne administrative court in its decision of 6 February 2003 (1K8003/98), the Münster court, while denying that a public authority had scope for interpretation in setting an appropriate return on capital according to section 3(2) of the Tele- communications Rates Regulation Ordinance (TEntgV), did establish that there were no objections to either the Agency’s imputed rate of interest or to the depreciation period for conduit systems. DTAG’S complaint against denial of leave to appeal (6B70.05) has meanwhile been rejected, on 15 December 2005, by a ruling from the Federal Adminis- trative Court.

Also, DTAG’s most recent application under section 35(5) sentence 2 TKG (1L1586/05) seeking a temporary order by means of which to receive higher rates for access to the local loop and access to the primary connection point in two variants because the Agency had TELECOMS | TECHNICAL REGULATION 67

Technical regulation

Spectrum management and Telecommunications Administrations Spectrum is a finite resource and the goal (CEPT), namely the Conference Preparatory of spectrum management is to allocate this Group (CPG) and the Frequency Management resource in order to satisfy demand. In doing (FM) and Spectrum Engineering (SE) working so, it is important to think beyond current groups, continued in 2005 with input from spectrum usage to the development of the the Federal Network Agency. Preparations market and the impact of technological also cover the representation of European advances. Extensive planning is required at interests at meetings of the working groups both national and international level in order in the Radiocommunication Sector of the to ensure that the available spectrum can International Telecommunication Union be used by a wide range of applications and (ITU-R) in Geneva. technologies without this causing interference or inefficiencies, and to establish a level play- In the year under review, the Federal Network ing field and effective competition in tele- Agency again sent delegates to the CPG and to communications markets. all other project groups, where they occupied senior positions and represented German Preparations for the 2007 World interests. Radiocommunication Conference As the only body authorised to amend the A national group has again been set up under Radio Regulations, WRC-07 will again have the leadership of the Federal Ministry of important decisions to make on spectrum Economics and Technology to prepare the utilisation at a global level. Just two examples German positions. The “downstream” groups of the issues to be addressed are IMT-2000/ tasked with working out the details were UMTS and further developments and addi- headed by the Federal Network Agency in tional frequency bands for aeronautical 2005 and are open to interested professionals. telemetry and aeronautical radio. European harmonisation The preparations, in particular the organisa- In view of the advance of globalisation and tion of European activities for WRC-07 and the goal of the European Union to create an cooperation between the working groups of internal market, it is becoming increasingly the Electronic Communications Committee important to harmonise international (ECC) and the European Conference of Postal spectrum usage. This means that national 68 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

regulators must help to shape international band were adopted. The goal of these deci- developments and take them into account sions is to harmonise European usage by in their planning. Decisions taken at interna- establishing binding rules that tie certain tional level directly affect individual countries, services and applications to specific frequency as the scope for deviation at national level is bands. Commission decisions on SRDs and very limited. The Federal Network Agency IMT-2000/UMTS have been drafted, with the therefore works alongside the German govern- former likely to be adopted in the near future. ment to play an active part in the international process of harmonisation. Another field of activity in European Com- mission bodies is work in the Telecommuni- The Federal Network Agency is a member cation Conformity Assessment and Market of the Radio Spectrum Policy Group (RSPG), Surveillance Committee (TCAM), where a high-level EU body that addresses policy the Federal Network Agency addresses the issues. The RSPG adopts Opinions that shape regulatory aspects of European spectrum strategy in key areas of spectrum manage- harmonisation. In drawing up the air inter- ment. In 2005, considerable effort was devoted face descriptions subsequently notified to the to the preparation of an Opinion on Wireless Commission, the Federal Network Agency Access Policy for Electronic Communication makes sure that the regulatory aspects of Systems (WAPECS). The RSPG also focused on the spectrum are addressed so as to secure activities connected with its earlier Opinions harmonised, fair opportunities for all providers on secondary trading and digital broadcasting. in the European market while guaranteeing In addition, work began on an Opinion regard- national and CEPT-wide efficient and inter- ing scientific use of spectrum. ference-free use of frequencies.

The Federal Network Agency is also represent- The Electronic Communications Committee ed on the EU’s Radio Spectrum Committee, (ECC), part of the European Conference of which issues mandates to CEPT on issues of Postal and Telecommunications Administra- substance and determines, on the basis of tions (CEPT), is responsible for radio and the reports submitted, EU-wide technical spectrum matters throughout the whole of implementing measures. These measures Europe. It has a number of permanent work- are then binding on all EU Member States. ing groups and project-based groups set up to tackle speciﬁc tasks. The Federal Network In 2005, mandates were issued to CEPT Agency was actively involved in framing the regarding IMT-2000/UMTS, short-range CEPT-wide conditions for frequency use. devices (SRDs), the Terrestrial Flight Telecom- munications System (TFTS), spectrum infor- Of particular interest to Germany were the mation using the CEPT-developed European ECC decisions that established a regulatory Frequency Information System (EFIS) und framework for the IMT-2000/UMTS extension ultra wideband (UWB). Planned mandates band, opened the spectrum reserved for for broadband wireless access (BWA) and for ERMES to new applications, allocated new mobile satellite services including terrestrial frequency bands for high-density satellite components in the 2 GHz band, as well as a applications and framed the conditions for second mandate for SRDs, are almost complete. short-range devices (including radio frequency identiﬁcation or RFID). In 2005, Commission decisions on ERMES (harmonised use of the spectrum hitherto GSM and UMTS consultations reserved for ERMES), WLAN in the 5 GHz band In May 2004, the Federal Network Agency and short-range radar (SRR) in the 24 GHz launched two consultations in preparation TELECOMS | TECHNICAL REGULATION 69

for the distribution of further spectrum: paves the way to establishing similar physical the “Consultation for the award of further and economic conditions for spectrum usage spectrum for public digital cellular mobile by D and E network operators. communications below 1.9 GHz” and the “Consultation on the availability of spectrum In the process of adjusting the regulatory for Universal Mobile Telecommunications framework to ensure fair competition, how- Systems (UMTS)/International Mobile Tele- ever, it is not necessary to increase the amount communications 2000 (IMT-2000)”. The consul- of spectrum available to E network operators. tations are known as the “GSM concept” and The 900 MHz band should not, therefore, be the “UMTS concept” respectively. awarded to E network operators in addition to their existing allocation. Instead, E network The Federal Network Agency aims to produce operators will be required to transfer part a number of individual concepts that will of the existing uses from the 1800 MHz band eventually form an overall strategy covering to the E-GSM bands and to return cleared all forms of wireless access in a range of 1800 MHz spectrum (in a single block) to the frequency bands. The main elements of this Federal Network Agency. This spectrum will strategy will be more flexible frequency subsequently be made available to the market usage conditions, technological neutrality in a process that falls outside the scope of this and the efficient use of spectrum. Issues concept. Under the GSM concept, all rights to relating to competition must also be taken use GSM frequency assignments will expire into consideration alongside technical and on 31 December 2016. regulatory factors. Seventeen comments were received in the The consultations on methods for awarding course of the public consultation and a pre- spectrum for GSM and UMTS applications are liminary evaluation is now complete. The taking place simultaneously in order to avoid Federal Network Agency must weigh the an artificial scarcity of spectrum, which conflicting interests highlighted by these might occur if spectrum were awarded in comments. For instance, the aim of stimulating parts and which would distort the market. competition by allowing a new operator to the The aim is to ensure that market players have enter the market must be weighed against as much information as possible, thereby the goal of establishing common technical creating the transparency needed for future standards with regard to existing GSM opera- spectrum assignment. tors, a goal which in turn encourages technological progress. The Federal Network Agency GSM concept and key elements adopted the GSM concept on 21 November The GSM concept envisions a two-stage 2005 and it was published in the Agency’s process. First, E network operators will be Official Gazette on 30 November 2005 together required ex officio to transfer part of the with the associated subplans 226 and 227. existing GSM uses from the 1800 MHz band to the 900 MHz or E-GSM band (GSM extension UMTS concept and key elements band). In the second stage, a decision is then Known as the “UMTS concept” for the sake of taken about the reassignment of the spectrum simplicity, the consultation on the availability cleared by this transfer. The agreement of the of spectrum for UMTS applications is, strictly Federal Ministry of Defence to relinquish its speaking, still in its infancy. The consultation right to use the 900 MHz range in spring 2004 sets forth key elements by way of an initial has made it possible to transfer existing uses framework, yet it does not contain concrete to this frequency band. The clearance of the ideas for awarding spectrum. Instead, the E-GSM band was a long-standing goal and object of the consultation is to develop the 70 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

UMTS concept by expanding on these key same as for the networks licensed in 2000 – elements. will be sufficient for a new UMTS network. This means that, as in 2000, new entrants At the heart of the consultation is the idea that will also be catered for. The Agency further available spectrum in the UMTS core band, intends to make UMTS/IMT-2000 spectrum which was auctioned in 2000, and frequencies available at the earliest possible date in line in the UMTS extension band, which will be with demand. The award mechanism should available following harmonisation from 2008, be in place by the end of 2007, even if no will be awarded together. One of the main applications for spectrum have been received. objectives of the consultation is to obtain In order to make spectrum available, the information from the market about the actual regulatory framework governing the award level of demand for UMTS spectrum, taking mechanism (bid process, auction, application into account advances in technology. This procedure) must be clear, as must the use of information will then inform the design of the spectrum (ie allocation). If spectrum is prospective award mechanisms. scarce, the TKG states that, as a general rule, spectrum is to be awarded by auction. The consultation will also examine the question of whether existing wireless local loop The Federal Network Agency must therefore (WLL) assignments in the UMTS extension first decide if there is sufficient spectrum to band could remain in effect beyond the end meet demand. If demand outstrips supply, of 2007, when they are currently due to or if several applications have been made for expire. The goal is to make additional UMTS particular frequencies, the President’s spectrum available in line with demand and Chamber can specify that an auction must at the earliest possible opportunity. be held or an invitation to tender issued. The choice of award mechanism will be deter- The key elements of the UMTS concept state mined by the actual number of applications that in Germany spectrum for UMTS/IMT received and the proven demand for the 2000 services can be made available in the spectrum in question. Once all the comments core band. They also note that, in addition have been evaluated, the Federal Network to the core band, Germany’s entire UMTS Agency will finalise the concept for awarding extension band, subdivided into FDD and UMTS/IMT-2000 spectrum, which will be TDD bands, is designated for UMTS/IMT-2000 followed by a concrete award mechanism. from 1 January 2008. This affects the WLL Twenty-four comments were received by the applications that currently use the extension allotted deadline. band and that are limited until the end of 2007. These are fixed service applications A discussion on the availability of spectrum for and, according to the ordinance implementing UMTS/IMT-2000 was held on 27 October 2005 the National Table of Frequency Allocations, in response to the comments received. The applications of this type are only permitted discussion explored the conflicting interests to use this spectrum until the end of 2007. of UMTS network operators and prospective The possibility of extending usage beyond new entrants on the one hand, and the opera- this date will therefore be determined by the tors of broadband wireless access (BWA) and feasibility of changing the National Table of fixed service applications on the other. The Frequency Allocations as well as the actual results of this meeting were then used to demand for mobile applications. draw up the aforementioned finalised UMTS concept for Germany, which was published in The Federal Network Agency assumes that a the Official Gazette of 21 December 2005 to basic package of 2 x 10 MHz (paired) – the give market players a final opportunity for TELECOMS | TECHNICAL REGULATION 71

comment. The UMTS concept will then form • 196 for VHF the basis for an award mechanism. • 357 for HF • 1 for MF Wideband PAMR • 27 for TV Wideband spectrum for public access mobile • 183 for T-DAB radio (PAMR) was awarded to two companies • 118 for DVB-T. that submitted applications in 2004. However, the submission of further applications after Digital broadcasting the specified period had ended prompted the The President’s Chamber has specified key opening of a new application window at the elements for assigning DVB-T spectrum. In end of June 2005. The number of further appli- the year under review, the Federal Network cations submitted during this window means Agency was able to successfully complete a that the demand for spectrum now exceeds number of DVB-T frequency assignment supply. In such a scenario, the 17 February 2004 proceedings, including proceedings for the decision of the President’s Chamber states that federal states of Saxony, Saxony-Anhalt and an auction must be held to award wideband Thuringia. PAMR spectrum. The decision of the President’s Chamber is currently being challenged and Assignment proceedings have been opened the award procedure is therefore on hold for further notified coverage areas in the until this matter has been resolved. states of Baden-Württemberg and Rhineland- Palatinate. These procedures are due to be Frequency assignments for completed next year. By the end of 2005, a innovative radio applications total of 242 DVB-T frequencies had been In 2005, some 650 frequency assignments assigned for commercial operation, while were issued under section 58 of the TKG for the total number of frequency assignments the purpose of developing and testing new for T-DAB now stands at 1,073. technologies and for research projects or similar. Assignments for innovative and Frequency usage for earth stations experimental radio services may be at variance Under the EC package of directives, individual with the specifications of the National Table assignment is needed for the frequency of Frequency Allocations and the Frequency applications of earth stations in bands shared Usage Plan, but variant use must not be with other services (radio relay, as a rule) allowed to degrade the services and usages and for those of earth stations near airports. included in the Table and the Plan. In each case, a frequency and location coordination procedure must be carried out, and The new developments in 2005 focused on: near airports a study of compatibility with the first frequency assignments for mobile the electronic systems of aircraft, so as to systems in the 2.6 GHz UMTS extension band, secure interference-free and efficient co-exis- the operation of the first networks for testing tence of the different applications. wireless links between end customers in the 3.5 GHz band (WiMAX), and the development In 2005, the Federal Network Agency issued of electronic RFID anti-theft systems in the 192 individual spectrum assignments. In most 866 MHz band. cases, the spectrum was assigned to larger stations for point to point transmissions (eg to Broadcasting route Internet traffic and for transmission In 2005, the Federal Network Agency pro- paths in crisis-hit regions) and for the provision cessed the following frequency assignments of wide area coverage (eg for TV channels). for broadcasting services: 72 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Assignments for satellite networks frequencies on the basis of the Frequency Satellite earth stations are often operated as Usage Plan and the Frequency Assignment part of networks. These usually comprise a Ordinance to users such as the emergency number of terminals whose frequency usage services (BOS), the German air traffic control is monitored and controlled mainly by the authorities, the waterways and shipping network operator. The end customer (eg the administration and the railways. user of a VSAT terminal) has no influence of any kind on the frequency-related properties Frequencies used by the Federal Ministry of of the terminal. This would suggest that the Defence in the bands reserved exclusively for operator of the satellite network be assigned military purposes do not need to be assigned frequencies for the applications of the entire by the Federal Network Agency. In the bands system, thus covering operation of the termi- used for civil and civil-military purposes, nals as well. however, it is necessary for the Agency to assign frequencies to military users such as International notification and the Bundeswehr, NATO and foreign armed coordination of satellite systems forces. The amended TKG contains a new paragraph addressing “Orbit Positions and Frequency Temporary use assignments Usage by Satellites”. Upon application, the Temporary use assignments are issued by Federal Network Agency carries out the the Federal Network Agency for sporting, advance publication, coordination and cultural and other media events. The spectrum notification (filing) of satellite systems with is generally needed for only a few hours or the International Telecommunication Union days. (ITU) in Geneva. If frequencies and orbit positions are available, if the application is In 2005, the Federal Network Agency issued compatible with other frequency usages and a total of 2,180 temporary use assignments. other satellite system notifications and if These covered, in all, 11,157 usages in a variety there is no detriment to public interest, the of bands between 146 MHz and 22 GHz for applicant is assigned the rights to orbit and 996 events. Most of the assignments were for frequency usage. Only then may the system motor racing (eg Formula 1 and the German be brought into use and operated. touring car championships), cycle races, winter sports and the FIFA Confederations The Federal Network Agency also provides Cup 2005. support and assistance in the international coordination of orbit and frequency usage International frequency coordination rights. In this lengthy process of international for mobile services coordination, the Federal Network Agency In order to ensure the efficient and interfer- represents Germany’s interests and seeks to ence-free usage of spectrum along Germany’s ensure that frequencies and orbit positions borders, rules must be drawn up together with are available for German users. The Agency is the spectrum management administrations also responsible for the protection, under ITU in neighbouring countries. The HCM Agree- procedures, of terrestrial services in the many ment sets forth a binding framework of rules bands that are shared with satellite services. for the international coordination of frequencies used by mobile services and fixed radio Frequencies for public authorities services. The Federal Network Agency has Frequencies are also required by a number of been the managing administration for the public authorities for the performance of their HCM Agreement since the end of 2004. duties. The Federal Network Agency assigns TELECOMS | TECHNICAL REGULATION 73

Operator certificates The 3,400 to 3,600 MHz band has attracted Participation in aeronautical and amateur increasing attention as it is associated with radio requires special knowledge. The regu- advances in technology that are expected to lator therefore holds special examinations make high-speed wireless Internet access a and certifies that successful candidates do viable economic proposition. indeed possess the required knowledge of aeronautical radio by issuing operator In two consultations, at the start of 2005 certificates. Approximately 4,600 operator and in July 2005, the public was given the certificates were issued in 2005. opportunity to state their views on the new assignment mechanism. The Federal Network Professional mobile radio Agency plans to introduce a two-stage proce- Professional mobile radio (PMR) consists of dure that satisfies demand while at the same various non-public applications. A particular time ensuring that spectrum usage is flexible distinguishing feature is that it is tailored to and technology-neutral. The first stage will users’ individual needs and does not require see registration of the intended usage; the an external network operator. Despite the second will convert registration into assign- steady advance of public mobile services, ment proper if concrete rollout plans for a professional mobile radio has consolidated coverage area have been submitted within its position as a customised communications an eight-month period. By introducing medium for closed user groups. Traditionally, registration, the Agency is aiming to assign the core of PMR has been trunked radio. A spectrum to reflect real requirements. Only special offshoot is public safety radio for the those submitting definite plans for opening police, the fire brigade and other emergency up areas will be assigned spectrum. The services. Paging, too, is of major importance. intention is to avoid this scarce resource A further subdivision of non-public mobile being blocked for any length of time. If the radio is telemetry and telecommand (remote assignment requests in any one region cannot control, remote data retrieval, transport be met, the market players will be given the management systems, warning systems). opportunity to find compatible solutions themselves before award proceedings are Fixed point to point links initiated. They will be able to decouple their Fixed point to point links are a low-cost, flexible use of frequencies by agreeing spatial or alternative to leased lines and independent technical measures, for instance, before an cable projects as a means of digital communi- official decision is taken. cation and data transfer. Thanks to these significant advantages and the increasing The final details of the assignment procedure availability of high bandwidths, demand for were announced on 21 December 2005. fixed point to point links continued to grow Applications to register for the assignment of strongly in the year under review. The cost- BWA spectrum can be made until 28 February effectiveness of such links means that they 2006. are not only suitable for bridging the last mile, but also for setting up mobile networks Market surveillance under the incorporating a number of locations. EMC Act and the RTTE Act In order to meet the obligations imposed by Fixed point to multipoint links the EU’s EMC and RTTE Directives, the Federal In 2005, the Federal Network Agency devised Network Agency carries out tests on electrical and launched a new procedure for assigning equipment in the market. These two directives spectrum for broadband wireless access were transposed into national legislation by applications in the 3,400 to 3,600 MHz band. the German Electromagnetic Compatibility 74 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Act and the German Radio and Telecommuni- 176 (or 2.59 percent of the sample) failed to cations Terminal Equipment Act respectively. meet the requirements of the EMC Directive Checks are carried out on a sample of the and 640 (41 percent of the RTTE products equipment in the market in order to verify tested) failed to meet the requirements of the the following points: RTTE Directive. • Compliance with the CE marking requirements All in all, this translated into an average • Plausibility of the EC conformity irregularity rate of 9.78 percent in all marking declarations and conformity declaration checks. Put • Compliance with the EMC protection into figures, this means that the number requirements of irregularities decreased by just under • Information on intended use and any 4 percent compared with the previous year operating restrictions applicable to radio (2004 = 13.41 percent). and telecoms terminal equipment • Conformity with the essential require- Measurements ments of the RTTE Directive, namely safe In 2005, 1,411 series and 92 one-off products operation, EMC and efficient spectrum (unique products, very small series and use. expensive products) were measured. Irregu- larities were discovered in 538 series and 21 The goal of the Federal Network Agency as one-off products, which meant that 38 per- market regulator is to protect consumers cent of the series products and 23 percent of and to prevent companies from gaining the one-off products that were tested failed competitive advantage by offering products to meet the EMC protection requirements that do not meet the above requirements. or the RTTE essential requirements. This The Agency therefore does not review all the means that the number of irregularities high- products in the market but instead seeks lighted by measurements increased by about to identify and filter out those that are sub- 4 percent compared with the previous year standard. Consequently, the results of market (2004 = 34 percent). surveillance do not reflect the overall quality of products in the German market. In the year under review, checks were also carried out on 103 products to determine Market surveillance by the Federal Network whether they adhered to the RTTE essential Agency under the EMC Act and the RTTE Act requirements (in terms of equipment and involved a total of 11,864 separate activities product safety). The checks focused on the in 2005. These activities encompassed checks essential requirements with regard to electrical of 501 different parties that place equipment functionality, temperature stability, and on the market and 1,769 different suppliers of correct and complete information on infor- electrical/electronic goods, corresponding to mation plates. Formal faults and exceeded a sample of 8.43 percent and 1.84 percent of limits were found in 23 cases. This translates each group respectively. A total of 8,340 series into an irregularity rate of 22 percent. and one-off products were tested or visually inspected. Follow-up actions A scaled procedure was again used in 2005 Marking verification to assess compliance with the protection In the year under review, 8,340 devices were requirements of the EMC Act and the RTTE examined to verify that they satisfied marking Act. Breaches of the Acts can thus be addressed requirements and that their conformity dec- in a more nuanced way. After discovery of an larations were correct. Of the devices tested, infringement, the party responsible for the TELECOMS | TECHNICAL REGULATION 75

placing on the market is heard. Only after Placing on the market notification for radio the hearing has taken place and the docu- equipment operating on Community-wide mentation has been scrutinised is a decision non-harmonised frequencies on further action taken. Radio equipment operated on frequencies whose use is not harmonised throughout the Over the year, 566 sales bans were imposed Community must, pursuant to the RTTE Act and under the EMC Act and 608 under the RTTE the RTTE Directive, be notified to the Federal Act on grounds of non-compliance with the Network Agency at least four weeks before protection/essential requirements or on being placed on the German market. The aim grounds of faulty marking. This represents is to secure efficient use of the radio spectrum. an increase of almost 15 percent in the The Agency confirms that it has received the number of sales bans compared with 2004. notification and gives manufacturers and placers explanatory notes about the assignment Radio Equipment and Telecommunications needed (general or individual assignment) Terminal Equipment Act and information on any restrictions on using The entry into force on 8 February 2001 of the the frequencies in Germany. In some cases, Radio Equipment and Telecommunications placers must be advised that operation of the Terminal Equipment Act marked the trans- radio equipment they intend to place on the position into German law of Directive 1999/5/EC market is not possible in Germany. of the European Parliament and of the Council on radio equipment and telecommunications The average number of notifications received terminal equipment and the mutual recogni- by the Federal Network Agency in 2005 was tion of their conformity (RTTE Directive). The 206 a month (see page 76). Compared to the Act regulates the placing on the market and previous years (275 a month in 2003; 250 a free movement in the European single market month in 2004), this represents a decline of of radio equipment and telecommunications approximately 17 percent from the 2003 peak. terminal equipment. The discontinuation of the costly and occasionally time-consuming Public telecoms network interfaces certification procedure for equipment that The provision of public telecoms network falls under the scope of the RTTE Act means interface specifications is to enable equipment that products can now be brought to market manufacturers to develop terminal equipment much more quickly. Innovative products in supporting use of all the services provided particular can now reach the market much over the interface and to allow all the relevant faster than was possible under the old rules. tests of the interface-related essential requirements to be carried out. Although the experience with its application has been largely positive so far, both EU and The RTTE Act requires public telecoms net- non-EU equipment manufacturers and those work operators to disclose their network placing equipment on the market still, after interfaces. This requirement is deemed to have more than four years, need clarification of been met when the Federal Network Agency the access procedures. More than 205 queries has been advised of the source for obtaining from interested individuals as well as the specifications or of their reference, so that commercial market players from Germany publication in the Official Gazette is possible. and other countries were answered in 2005, In all, the Agency has received around 1,000 mostly within a short space of time (cf 2003 – interface specifications from public telecoms approximately 200 queries, 2004 – around network operators. About 20 percent of the 220). operators make their specifications available directly for download. 76 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Notiﬁcations received in 2005 under section 10(4) RTTE Act/Article 6(4) RTTE Directive

January 205

February 174

March 175

172 April 2

May 289 3

June 232

213 July 2

August 205

September 258

275 October 3

November 157

December 117

0 50 100 150 200 250 300 350

Total number 2,472 Operation prohibited in Germany in ten cases

Compatibility FM transmitters operating at frequencies Activities to secure compatibility before new between 87.5 and 108 MHz. Furthermore, a services are introduced were again undertaken new ECC Recommendation on arrangements in close cooperation with other international for systems operating in the 71 – 76 GHz and administrations and the developers and 81 – 86 GHz bands creates the ﬁrst harmonised potential operators of the new technologies. technical framework for ﬁxed service applica- Radio compatibility issues were addressed by tions intended for use at higher frequencies. the Federal Network Agency in international CEPT and ITU bodies such as the CEPT ECC SE The Federal Network Agency is also support- (Spectrum Engineering) working group. ing much of the other work on compatibility that is currently underway in the ECC and ITU. The Federal Network Agency was able to For example, the Agency has sent employees provide constructive input pursuant to the to join a CEPT WG SE project team focusing introduction of compatible ultra wideband on drawing up technical requirements that (UWB) applications (eg communications will allow airline passengers to use GSM systems, sensors, through-wall radar) at mobile phones (GSM 900, GSM 1800, IMT- frequencies below 10.6 GHz. Realistic com- 2000) on board an aircraft. In addition, work patibility tests were carried out and recom- is underway to identify critical technical mended in order to establish a common and parameters for a new ECC Decision in respect binding European legal framework for micro of the IMT-2000 extension band. TELECOMS | TECHNICAL REGULATION 77

Electromagnetic compatibility external customers on the application and standardisation interpretation of EMC standards, the EMC In the interest of consumers, all electrical and Act, the RTTE Act, the TKG and the relevant electronic equipment, systems, installations European Council Directives. More complex and networks must satisfy certain minimum problems were discussed, where possible, or key requirements with regard to unwanted with experts from the German Commission emissions and resistance to interference. for Electrical, Electronic and Information This is necessary to protect radio services and Technologies of DIN and VDE (DKE); solutions applications as well as energy and telecoms and interpretations were then agreed with networks. The committees of the International industry representatives. One of the key areas Electrotechnical Commission (IEC) are under discussion was without a doubt the responsible for drawing up worldwide stan- application of standards in cases where they dards for electromagnetic compatibility (EMC), have been overtaken by the convergence of which are then incorporated into the harmo- services and technologies. It was possible to nised European EMC standards produced by draw some general conclusions about many ETSI and CENELEC, the custodians of European of the problems that were identified in telecoms and electrotechnical standards. applying standards. These conclusions now The Federal Network Agency applies these inform market surveillance as well as the standards when checking products as part work of the standardisation bodies themselves. of its market surveillance duties and when dealing with complaints about interference EMC and the environment; site certification lodged under the EMC Act and the RTTE Act. In order to protect persons exposed to electro- By playing an active part in the committees magnetic fields created by radio transmitters, that draw up standards, the Agency is able to the Federal Network Agency assesses fixed influence the form they take. The goal is to radio transmitters with an equivalent isotropic help maintain the adequate level of protection radiated power (EIRP) equal to or more than that exists at present. 10 W. It does this on the basis of the Ordinance concerning the Controls for the Limitation of Unwanted emission limits have now been Electromagnetic Fields (BEMFV). Operators set for all types of high-frequency industrial, requiring a certificate of safety for their site scientific and medical (ISM) equipment up to must give the Agency details of the relevant 18 GHz. And limits are also in place for modern technical parameters. Taking account of all the IT equipment (ITE) and telecoms terminal relevant local field strengths, the Federal Net- equipment (ie for all ICT equipment) in work Agency then determines the exclusion frequency bands up to 6 GHz. zone that must be enforced to keep people at a safe distance from the transmitter. The The efforts of the Federal Network Agency transmitter may only be put into service if have resulted in a new CEPT ECC Recommen- it is clear that the exclusion zone can be main- dation that sets forth criteria for assessing tained at the site in question. interference from wired telecoms networks. The Agency expects that the new ECC Recom- EMF measurements mendation will enhance the transparency of The Federal Network Agency carries out EMF European administrative action. measurement programmes under the above Ordinance to document its site certification Advising on the application of EMC standards procedures. In 2005, these audits were again In the year under review, one of the Federal carried out in close cooperation with the Network Agency’s main tasks was again to environment ministries of the federal states. provide specialist advice to internal and Of the total of 2,000 measurement locations, 78 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Number of locations in each federal state where EMF measurements were taken in 2005

Baden-Württemberg 129 Bavaria 243 Berlin 101 Brandenburg 99 Bremen 56 Hamburg 49 Hesse 136 Lower Saxony 161 Mecklenburg-Western Pomerania 126 North-Rhine/Westphalia 229 Rhineland-Palatinate 140 Saarland 45 Saxony 107 Saxony-Anhalt 120 Schleswig-Holstein 105 Thuringia 85

1,000 were picked by the environment Local authority transmitter site database ministries. The Federal Network Agency For reasons of data protection, access to this included these locations, unchanged, in the database by local and regional authorities is programme and evaluated the ﬁndings password-protected. The database contains for entry in its EMF database: a listing of all the sites of operational radio www.emf.bundesnetzagentur.de. transmitters for which the Federal Network This collaboration clearly demonstrates to Agency has issued a certiﬁcate of safety. the public the good working relationship between the Agency and the federal states.

EMF database Transmitter site database The EMF database comprises two main data sets. One shows the sites of fixed radio transmitters that require operating clearance, ie 55,491 site certification, from the Federal Network Agency. The other shows the locations of checks of compliance with public exposure thresholds. For every location there is an information window giving details of either the transmitters (in the case of transmitter 23,034 sites) or the EMF measurements (in the case of test locations). Between the date on which the database went live (28 January 2004) and 2,102 December 2005, some 5.7 million searches were made by visitors to the website. This heavy use confirms that the database has Users become an established source of information Searches for the general public. Certifications viewed TELECOMS | TECHNICAL REGULATION 79

EMF monitoring of cases concerned electromagnetic incom- The Federal Network Agency has devised a patibility with other electrical or electronic concept for an automatic measuring system (or equipment and devices. The introduction of EMF monitor) that will enable the permanent digital television (DVB-T) was accompanied monitoring of electromagnetic fields created by a slight fall in the number of cases of by radio transmitters in the frequency bands interference to sound and TV broadcasting, between 9 kHz and 3 GHz. EMF monitors will whereas the number of cases of interference improve transparency and risk management to other radio services remained at more or and are expected to be ready for use in 2006. less the same level. The processed measurements will be made available to the public in the EMF database. Approximately 1,150 cases of interference were reported in the spectrum used by aeronautical Radio monitoring and inspection service radio. Of these, 840 concerned frequencies One of the primary tasks of the Federal Net- used by emergency services. There were also work Agency’s radio monitoring and inspec- some instances of interference to radiolocation tion service (PMD) is to secure the efficient services; these were successfully resolved, and interference-free use of spectrum and however. In the interests of safety, reports of an environment of electromagnetic compat- interference to radio applications used in air ibility. To perform this task, the service pos- travel are of course given top priority. A quick sesses the latest fixed and mobile measuring response time is therefore guaranteed and equipment and maintains a presence in many some stationary measuring facilities even of the Agency’s service centres throughout operate around the clock. Germany. The service undertakes extensive and varied monitoring and inspection activities, In the period under review, there were more focusing in particular on eliminating inter- than 73 reports of interference to GSM mobile ference, checking frequency uses, market communications and 53 cases of interference surveillance, measuring electromagnetic affecting UMTS mobile communications. fields and identifying unauthorised spectrum usage. EMF measurements by the inspection service In the period under review, the radio moni- Interference investigations toring and inspection service continued its Clearing up cases of electromagnetic and radio annual programme of EMF measurements and interference always has top priority, particu- inspected certified, fixed radio transmitters larly if sensitive services and applications are pursuant to the Ordinance concerning the affected. These include radio applications Controls for the Limitation of Electromagnetic used in air travel (eg voice transmission and Fields. Measurements were again taken at navigation services) and by emergency services around 2,000 points in order to determine if or other public bodies. Fully-equipped mea- EMF values were within acceptable parameters. suring vehicles as well as a variety of specialised It was once again noted that at none of these vehicles are used alongside stationary mea- locations had the thresholds been exceeded. suring facilities and direction-finding systems As in the past, the federal states were involved in order to determine both domestic and in choosing the sites at which measurements foreign sources of interference. were taken. By publishing the results on its website (in the EMF database), the Federal The largest category of interference addressed Network Agency continues to inject a large in 2005, as in previous years, was that affecting dose of objectivity into the debate about broadcast receivers and other transmitting electromagnetic fields. and receiving stations. Only a small percentage 80 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Space radio services Recognition of conformity assessment bodies The Leeheim monitoring earth station helped Enactment of the Functions Assignment and to ensure the efficient use of spectrum by Recognition Ordinance (BAnerkV) tasked the satellites (downlinks) in Europe by carrying Federal Network Agency with recognising out a number of measurement requests. and assigning functions to conformity assessment bodies (CABs) in respect of radio equip- The station’s capabilities are unparalleled in ment, telecoms terminal equipment and Europe. For this reason, a memorandum of electromagnetic compatibility. understanding (MoU) was drawn up under which the monitoring earth station at Leeheim Mutual recognition agreements conducts measurements for other countries Another of the Federal Network Agency’s that are willing to cover the costs. Current tasks deriving from the Functions Assignment signatories are the telecoms administrations and Recognition Ordinance is the recogni- of France, the UK, the Netherlands, Switzer- tion of CABs for third countries in the shape land and Spain. The majority of internal and of mutual recognition agreements (MRAs). external requests concerned investigations into satellite and transponder load. Twelve In order to further international economic requests were processed in the period under cooperation, the EU has signed agreements review. The number of requests that have with the following non-EU countries: the US, been received but have yet to be processed Canada, Australia, New Zealand, Japan and mean that the Leeheim monitoring earth Switzerland. These MRAs allow the CABs of station will continue to operate at full capacity one country to assess particular products in 2006. The processing of these requests will according to the rules of the other, as if they of course be put on hold to deal with any were resident there themselves. The agree- emergencies that arise. ments cover, in their sectoral annexes, a variety of products and areas. In Germany, the Federal Tour de France, Deutschland Tour, Ministry of Economics and Technology is the World Youth Day and other events body authorised to designate CABs for the Major events such as the Tour de France, sectoral annexes dealing with radio and tele- Deutschland Tour, Confederations Cup 2005 coms equipment and electromagnetic com- and the World Youth Day in Cologne attract patibility. However, determining the compe- considerable media attention, which usually tence of these bodies is the job of the Federal means a lot of broadcasting equipment (eg Network Agency. In all, 20 CABs have so far radio equipment, wireless cameras and micro- been recognised by the Agency under these phones, and speedcams for the finish line). MRAs, notably the agreements in place Event organisers, media organisations and between the EU and the US and Canada. millions of listeners and viewers all expect the equipment to work without a hitch to deliver Telecoms legislation and economic policy uninterrupted picture and sound coverage of aspects of technical regulation the event. The Federal Network Agency plays Technical regulation can give rise to issues a key role in ensuring that this is the case. In that need to be addressed from both a legal the year under review, the Agency once again and an economic standpoint. Particular coordinated and assigned the spectrum importance is attached to the achievement needed both before and during the event. In of regulatory goals, such as ensuring that addition, the radio monitoring and inspection there is a level playing field for competition service verified spectrum usage on site and and safeguarding user and consumer interests. immediately tackled any cases of interference Legal considerations are grounded in the that arose. TKG, the EMC Act and the RTTE Act. TELECOMS | TECHNICAL REGULATION 81

One of the main focal points in this regard caused by buildings means that field strength was the development of next generation is sometimes inadequate for this purpose. networks (NGNs), which the Federal Network The use of indoor repeaters offers a means Agency continued to monitor in 2005 in of offsetting this. Indoor repeaters boost the order to ascertain the impact this might have DVB-T signal and retransmit it on the same on the regulatory landscape and regulatory frequency. However, if input and output are tools. not properly decoupled this procedure can easily result in uncontrolled oscillations that The Federal Network Agency also worked disrupt the entire area. A working group of with regional media authorities and the the Technical Telecoms Regulation Committee digital access office (GSDZ) to draw up process (ATRT), which advises the Federal Network descriptions for joint procedures pursuant to Agency, has been charged with drawing up Part 4 of the TKG (Broadcasting). The descrip- minimum technical requirements and asses- tions were supplemented by a joint paper sing whether such devices have consumer setting forth key elements that reaffirm the applications and, if so, under what conditions. intention of the Federal Network Agency and The working group is expected to report its the regional media authorities to work findings at the start of 2006. The results of together in pursuit of successful outcomes. this work will also inform the rollout of digital video broadcasting handheld (DVB-H). Interface specifications and notifications The Federal Network Agency continued to DVB-H is based on DVB-T and allows for the draw up and notify air interface specifications transmission of up to 40 channels at a time, in 2005. Interface specifications are provided delivering video and additional services to pursuant to the RTTE Act. They contain all the low-resolution mobile devices. In the past, information needed for manufacturers to DVB-H has been restricted to point to multi- conduct independent tests with regard to the point services. However, the advent of the relevant requirements for radio equipment. Internet Protocol Datacast (IPDC) standard The draft specifications are discussed with opens the door to interactivity by defining a interested manufacturers and users, at which convergent system that links DVB-H and GSM/ point they become public. They are then sub- GPRS/UMTS. There are nevertheless certain mitted to the European Commission for the issues of content protection and rights purpose of notification as part of the Europe- administration that still need to be resolved. wide process of information sharing. Finally, the interface specifications are put into force Digital Multimedia Broadcasting (DMB) by Official Gazette order and published technology makes it possible to transmit two online. In the year under review, 37 interface or three channels delivering video content to specifications were completed and entered mobile devices. DMB represents an extension into force by this means. This means that of digital audio broadcasting (DAB) and DMB there are now 45 interface specifications signals can be broadcast over the existing DAB available on the website of the Federal Net- network infrastructure on VHF channel 11 and work Agency. It is also possible to order in the L band. The video coding standard is printed copies. MPEG-4, which ensures a good image quality for small displays, even at transmission speeds Portable and mobile reception of less than 400 kbit/s. The Bavarian Regulatory Consumers should be able to receive digital Authority for Commercial Broadcasting video broadcasting (DVB-T) signals with (BLM) is currently preparing a pilot project portable indoor devices. At the periphery of that will test the use of DMB in Regensburg. a coverage area, however, the attenuation 82 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Cable TV network transition services also emerged as a prominent concern The year under review saw further progress in a public consultation about VoIP regulation. in the transition from cable TV networks to Network operators and service providers multimedia, interactive, broadband net- are encouraged to seek solutions that meet works. The large, multimedia networks now the needs of the public and the emergency in place in fifteen German cities are capable service authorities. of delivering a triple-play combination of TV, Internet access and Internet telephony. The Quality of service standardisation next stage in the development of cable net- Quality and price play a key role in a compe- works will entail a move towards HDTV signals. titive market. The Universal Service Directive This currently takes the form of satellite- therefore requires that adequate and up-to- broadcast DVB-S2 signals, which offer HDTV date information on quality of service (QoS) capability. They are transmitted to the be made publicly available. This is to enable head-end before being transmodulated for both end users and providers to make more the relevant cable network. The increasing informed decisions and to influence com- convergence between consumer electronics petition accordingly. Appropriate standards and information technology makes it impor- form the basis for the provision of comparable tant to take account of the need to cater for and transparent QoS information; hence their different network configurations. The Federal availability is vital. Network Agency must ensure that EMC standards for radio services are adhered to, ETSI and ITU-T working groups are tasked in particular in the case of services that use with drawing up appropriate standards the same spectrum. In line with the aims of that define quality of service and permit regulation, the Agency works to ensure that comparisons to be made. The Federal Network the appropriate standardisation bodies Agency takes a very active part in these implement the technical regulatory frame- studies. The role of these working groups work with regard to security, access to includes the preparation of standards for emergency services, quality of service and describing, recording and measuring quality interoperability. of service. Most notably, they define, specify and standardise quality parameters describing Access to emergency services and measuring telecoms service quality from The growing popularity of VoIP and the the user’s point of view. These parameters technical difficulties that hamper VoIP access range from general ones such as service and to the local emergency service centre operator, billing to parameters for the quality of voice, particularly in the case of nomadic usage, fax, data and mobile services and parameters have focused attention on the cooperation for Internet access services. The Federal needed between infrastructure owners and Network Agency also chairs individual service providers. This is all the more important subgroups, coordinates the preparation of in view of plans to automatically transmit the certain standards and hosts working group location of the caller to the service centre. meetings in its Mainz office. This mechanism This is a problem that also affects other has enabled the creation and implementa- countries, which is why the European Tele- tion through ETSI and ITU-T of standards communications Standards Institute (ETSI) is governing the quality of telecoms services investigating a range of possible solutions. and networks. The Federal Network Agency has joined these efforts as part of its preparations for drawing A public consultation was carried out to up the technical directive provided for in examine the question of providing information section 108 of the TKG. Access to emergency about the quality of broadband Internet TELECOMS | TECHNICAL REGULATION 83

connections in the national market to end in availability in individual number ranges. customers. The results are available on the Its main tasks in this regard consist of structur- Federal Network Agency’s website: it is ing the numbering space, drawing up the recommended that service providers gather assignment rules, setting the conditions and publish quality information voluntarily. of use for the various number ranges and assigning numbers to network operators, Metering and billing service providers and consumers. Accurate billing requires the correct recording of data pertaining to actual service usage Efforts in 2005 focused on the provision of and the proper application of contractually suitable number resources for VoIP services, agreed charges. As the customer has no means and in particular on a modification of the of determining whether or not providers rules for assigning local numbers. Other have established the charges in accordance developments worthy of note include the with the contractual arrangements, provision final decision to deactivate 0190 numbers has been made in the Telecommunications and the consultation regarding changes Customer Protection Ordinance (TKV) to to the rules for assigning numbers used by secure billing accuracy. Under the TKV, all information services. providers of publicly available telecoms services whose prices are calculated and Provision of suitable number billed on the basis of time and/or distance are resources for VoIP required to demonstrate to the Federal Net- Rules for the assignment of national numbers work Agency on an annual basis that their in the 032 range entered into force in Novem- billing systems and processes are functioning ber 2004 and assignment began in January properly, irrespective of the service provided, 2005. The large number of applications and the bandwidth used and the transmission assignments is a clear indication of the strong and switching technology employed. In 2005, demand for these numbers. demonstration of compliance was given in 128 cases. Non-compliant providers were There have also been calls to use local numbers asked to take action to meet the TKV require- in order to meet the demand for VoIP services. ments in full and to report to the Federal Key elements exploring this idea were drawn Network Agency accordingly. A number of up and published for discussion in November telecoms providers had to be reminded that, 2004; written comments could be submitted pursuant to the TKV, compliance must be until the start of 2005. The comments have demonstrated each year. Some were asked since been examined and the main findings for a demonstration of compliance as a result made public. Modified assignment rules are of new services offered. Administrative due to be published in the first half of 2006. fines proceedings were initiated to enforce compliance in six cases. Deactivation of 0190 numbers A final decision was taken in September 2005 Numbering not to extend the period for deactivating The TKG states that the administration and 0190 numbers. As determined in 2001, the assignment of numbers in Germany is the telephone numbers had to be deactivated by responsibility of the federal government. year’s end 2005. To facilitate changeover to This duty has been performed by the Federal the 0900 numbers, the Federal Network Network Agency since 1998. The Agency Agency also issued an order stating that a makes sure that all market participants enjoy 20-second recorded announcement would non-discriminatory access to number be allowed on the 0190 numbers in the first resources and that there are no bottlenecks six months of 2006, giving a replacement 84 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

number and the price of a call to that number. Assigned The recorded announcement itself must be number Local Opera- blocks networks tors free of charge. This was the outcome of a Year-end 1998 3,088 710 53 consultation held by the Agency in summer 2005. Year-end 1999 6,750 2,636 72 Year-end 2000 50,861 5,200 89

Changeover to the 0900 numbers has many Year-end 2001 59,372 5,200 86 beneﬁts for consumers. For instance, the Year-end 2002 63,653 5,200 81 type of service can be recognised by the digit Year-end 2003 68,843 5,200 76 the follows the 0900 code: “1” stands for information, “3” for entertainment and “5” Year-end 2004 80,283 5,200 74 for adult services. This makes it possible to Year-end 2005 94,283 5,200 85 block certain types of content.

Services can be individually priced. The As of January 2005, operators may also apply price must be stated in all promotions and for national numbers. These numbers are in a recorded announcement given at the likewise used for public telephone lines yet, beginning of every call. The price is the same unlike local numbers, are not tied to a partic- from all fixed networks. In contrast to the ular geographic region. The numbers are 0190 numbers, there is no “chain assignment”. assigned in blocks of 1,000 and can be awarded The rights holder can be easily identified to network operators and service providers. By using information on the Agency’s website. the end of 2005, 1,020 blocks of 1,000 numbers had been assigned to 33 operators. Review of assignment rules for information services The Federal Network Agency also assigns tele- A consultation with market players was held phone numbers for public cellular services to in the middle of 2005 in order to clarify the operators of GSM or UMTS/IMT-2000 mobile future development of information services. networks. These numbers are assigned in The primary aim of the consultation was to large blocks of 10 million numbers apiece; gather more information about the anti- the assignment of three blocks in 1999 and a cipated level of demand for such services. Central questions included the allocation of an additional number range for information services and the assignment of these numbers Total for portal services. The review of the comments at year’s Assigned numbers 2005 end 2005 submitted is largely complete and the findings Numbers for user groups (in will be reported to the market players. blocks of 100 to 10 million) 9 38

Number blocks for Int. Number statistics Virtual Private Networks Network operators that provide ﬁxed-line (IVPNs) (in blocks of 10 million) 7 59 connections to the public telephone service can apply to the Federal Network Agency for blocks of 1,000 numbers in Germany’s 5,200 local networks. They can then use the num- Total at year’s bers for their customers. By the end of 2005, Assigned numbers 2005 end 2005 a total of 94,283 number blocks had been Carrier codes 16 99 assigned to 85 operators. Numbers for DQ services 11 89 TELECOMS | TECHNICAL REGULATION 85

Assigned number blocks Assigned Total (10 million num- number blocks Assigned in at year’s bers apiece) (total) Service 2005 end 2005

1999 3 3 (0)800 12,965 174,171

2000 10 13 (0)180 12,066 127,405

2001 4 17 (0)900 11,341 92,109

2005 3 20 (0)700 5,197 102,802

further 14 blocks in 2000/2001 satisfied initial Individual numbers are assigned in the follow- demand and it was only at the end of 2005 ing ranges: 0800 freephone numbers, 0180 that further blocks needed to be assigned. shared cost numbers, 0900 numbers for premium rate services and 0700 personal Blocks of numbers were also assigned in other numbers. The table above shows how many number ranges. These included numbers numbers had been assigned by the end of for user groups and for international virtual 2005. private networks. The Agency receives so many applications The Federal Network Agency also assigns for these types of numbers that it has imple- 0137 numbers, which are used for channelling mented an electronic assignment procedure. large volumes of traffic to specific destinations Numbers are also assigned individually in (eg television call-ins). Prior to liberalisation, cases where the volume of applications is this service was provided by the legal prede- lower but the significance for the industry cessor to Deutsche Telekom AG using the same is just as high. number range. Until a new range is available, the Agency will continue to assign these The Federal Network Agency also assigns numbers to network operators and service 019 numbers for online services. Just like the providers who wish to offer comparable mass application 0137 numbers mentioned products. Sixteen blocks of 10,000 numbers above, 019 numbers were assigned by the were assigned in the year under review. legal predecessor to DTAG before liberalisation.

Total at year’s Assigned numbers 2005 end 2005

National Signalling Point Codes (NSPCs) 96 2,495

International Signalling Point Codes (ISPCs) 17 408

Portability codes 24 221

Closed User Group Interlock Codes (CUGICs) 0 23

Charging reference branches 10 135

Equipment manufacturer codes for telematic protocols 0 16

Notiﬁcation of International Carrier Codes (ICCs) 1 13

Individual TETRA Subscriber Identity (ITSI) 4 11

International Mobile Subscriber Identity (IMSI) 5 27

Data Network Identiﬁcation Codes (DNICs) 0 17 86 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Technical numbers with differences or of ceasing to provide his In addition to numbers that can be dialled activity and of any changes in his undertaking. in public telephone networks, the Federal There are currently 2,045 telecoms providers Network Agency also assigns technical and operators registered with the Federal numbers that can be used for such purposes Network Agency; a list is available on the as network control. There was a particularly Agency’s website. strong interest in National Signalling Point Codes (NSPCs) in the period under review.

Section 112 TKG information requests The diagram on page 87 shows the growth in the number of requests between 2001 and 2005. For the performance of their duties, security authorities receive information (via the Federal Network Agency) from the customer data ﬁles (name and address of telephone subscribers) kept by telecoms service providers. The number of public authorities and telecoms service providers that participate in this procedure has grown steadily over the years. Currently, around 1,000 security authorities are registered with the Agency and can retrieve customer data from 85 telecoms service providers.

Abolition of licensing Under the new TKG, activities that previously required a licence no longer need special authorisation from the Federal Network Agency. The switch from ex ante to ex post regulation will facilitate market entry by removing the barrier of obtaining a licence. Operators of public telecoms networks and providers of commercial public telecoms services are still required to notify the Agency of their activities. This permits the Agency to maintain an overview of the market in order to better assess the level of competition. Rights already granted under licences, for instance rights of way, remain in effect.

Notification requirement Any person operating a public telecoms network on a profit-oriented basis or providing a publicly available telecoms service on a profit-oriented basis is required to notify the Federal Network Agency without undue delay of beginning to provide, of providing TELECOMS | TECHNICAL REGULATION 87

Section 112 automated information procedure

Security authorities Federal Network Agency Service providers

Million

14 13.9

10.1 10

8.1 8

6 5.5

4 3.4 3.2 2.9 2.7 2.0 2 1.5

0 2001 2002 2003 2004 2005

Requests from security authorities Retrievals from service providers 88 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Post

Market data 90

Public petitions and consumer protection 98

Ruling Chamber decisions 101

International activities 104

Administrative court proceedings 105 POST 89 90 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Market data

In 2005 revenues in the German postal erated by DPAG’s competitors. Thus DPAG market totalled around € 23 billion. More will still hold around 93 percent of the market, than 70 percent of the postal market – mainly despite certain areas having been opened courier, express and parcel services, but also up to competition. parts of the letter market – are already open to competition. Just under two thirds of The widening of the competitive area by revenues in the postal services market was 8 percentage points in early 2006 is the result accounted for by Deutsche Post AG (DPAG). The of the lower monopoly weight and price rest was generated by a number of providers, limits that took effect on 1 January 2006 (the the majority working in the courier, express weight limit was lowered from 100 g to 50 g, and parcel segment. and the price limit from € 1.65 to € 1.38). How- ever, letters weighing up to 50 g account for Anticipated revenues for 2005 in the areas almost three quarters of letter items altogether. subject to licence (conveyance of letter items Thus the reduced weight limit has little impact weighing up to 1,000 g) are around € 10.2 bil- on the extent of the competitive area. lion, some € 700 million of which will be gen- The February 2005 Federal Cartel Ofﬁce (BKartA) ruling on consolidation (for more Development of competitive area details, see the section “Administrative court 1997 – 2008 (in %) proceedings”) extended the competitive area further; yet this does not mean that the added competition potential falls entirely to

97 77 67 58 50 100 DPAG’s competitors. 98 % 33 42 50 3 23 Findings of the market study until 1997 19981 – 20031 – 20052 20061 – from in the licensed area 2002 2004 2007 20081 The market study run by the Agency in early 2005 requested data from altogether 1,337 Monopoly area Competitive area licence holders on their revenue and sales volumes for 2004 (results) and 2005 (expected 1 Change due to Postal Act 2 Change due to consolidation ruling ﬁgures). POST | MARKET DATA 91

There was further proof of the trend, obser- licence. Thus there is a level playing field for vable for some years now, towards the new all market players, DPAG included. market players’ higher quality services (D services). In 2000, these services accounted Between 2002 and 2005, the total number of for only 27 percent of licence holders’ total formal delivery orders rose by 40 percent and revenues; in 2004 this figure had risen to revenues by almost 23 percent. With around 49 percent. And the trend is upwards – for 27 million formal delivery orders, the com- 2005, 52 percent is expected. A detailed petitors anticipate gaining a 39 percent share account of higher value services is given in of sales in 2005 and up to 32 percent of reve- the Agency’s Official Gazette No 1 dated nues. DPAG’s ten biggest rivals will capture 11 January 2006. They include same-day and some 20 percent of the market. time-certain delivery services, track and trace services and integrated mail logistics services. Most of the licence holders are small and The latter is an end to end solution covering medium sized enterprises, or SMEs (up to the production and transmission of electronic € 0.5 million and over € 0.5 million annual messages from sender to recipient, with a revenues respectively). This is so mainly guaranteed quality of service. Add-ons are because the volumes needed for large-scale possible, as the user requires. operation are not possible on account of the exclusive licence DPAG still holds. Independ- The strong increase in formal delivery orders – ently of this, however, there has been particu- meanwhile the speciality of several competi- larly strong growth – as in past years – in the tors – is also remarkable. The so-called service number of medium sized enterprises (from of documents is a special case in the Postal 42 at the end of 2000 to 140 at the end of Act. It is not covered by DPAG’s exclusive 2004). The licence holders expect this trend

Licence holders’ revenues (excluding DPAG) in the licensed area

2002 2003 2004 2005e Services1 € million € million € million € million

PZA 2 service of documents1 5.0 18.5 73.6 111.7

A ≥ 200 g or > 5 times the price 35.6 26.1 37.6 49.3 from 2003: > 100 g or ≥ 3 times the price

B letter post items of identical content > 50 g 92.5 88.0 107.4 133.0

C document exchange service 1.2 1.0 1.0 1.0

D higher quality services 125.8 183.4 260.6 366.7

E dropoff at DPAG acceptance ofﬁces 9.2 13.5 10.8 12.6

F collection from DPAG PO box facilities 3.6 6.4 5.6 6.6

G letters to other countries possible 16.2 6.4 9.2 only from 1. 1. 2003

H letters from other countries possible < 0.1 < 0.1 < 0.1 only from 1. 1. 2003

Old-type licences (bulk mail) 32.6 34.4 25.4 14.3

Total 305.5 387.6 528.5 704.5

1 See too Ofﬁcial Gazette No 1 published 11 January 2006 2 PZA = formal delivery orders (public law service of documents, section 33 Postal Act) 92 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Breakdown of licence holders’ revenues to continue in 2005. Also, the “established” by licensable services (excluding DPAG) medium sized enterprises have consolidated in € million and expanded their position in the market (revenue growth of up to 50 percent – albeit

800 at low levels). The income situation of the new players has also improved and this pleasing 111.7 700 trend will continue in 2005, according to their reports.

600 366.7 Market structure and market shares 73.6 500 DPAG is expected to generate revenues of 260.6 around € 9.5 billion in the letter market (subject 18.5 400 183.4 to licence) in 2005 (some € 6.0 billion of this in the monopoly area). Thus it will still hold 5 some 93 percent of the market for services 300 125.8 1 provided under licence. Its share of the market 83 225.0 that is open to competition (worth around 200 0 219.0 193.2 46.5 178.5 164.2 € 4.2 billion) will be around 83 percent. 100 126.7 Jobs

0 The average number of people employed in 2000 2001 2002 2003 2004 2005 2004 in the area subject to licence (conveyance

Formal delivery orders of letters up to 1,000 g), according to the Higher quality services companies’ ﬁgures, was 181,086, of whom Other letter services

Formal delivery orders – volumes

2002 2003 2004 2005e million pieces million pieces million pieces million pieces

DPAG 48.0 47.0 43.2 42.1

Competitors 1.2 4.7 17.3 27.0

Total 49.2 51.7 60.5 69.1

Competitors’ share 2.4 % 9.1 % 28.6 % 39.0 %

Formal delivery orders – revenues

2002 2003 2004 2005e € million € million € million € million

DPAG 276.0 261.0 237.9 233.3

Competitors 5.0 18.5 73.6 111.7

Total 281.0 279.5 311.5 345.0

Competitors’ share 1.8 % 6.6 % 23.6 % 32.4 % POST | MARKET DATA 93

Number of companies by revenue group 2000 to 2005

€ 500,001 > € 1 million up to € 10,001 up € 100,001 up up to up to € 10,000 to € 100,000 to € 500,000 € 1 million € 10 million > € 10 million

2000 91 178 129 23 15 4

2002 96 186 149 32 41 7

2004 181 263 175 53 77 10

2005e 159 257 188 66 96 13

Monopoly and competitive part of 33,478 were employed with the new licence the letter market 2005 holders. Without the competitors, these jobs would not exist. Hence they are making a

Monopoly part Competitive part valuable contribution to easing the pressure ~ € 6.0 billion ~ € 4.2 billion on the labour market (see page 94).

Jobs in the letter market

~ € 6,0 billion ~ € 3.5 billion DPAG shed around 30,000 jobs (17 percent) in the letter market between 1999 and 2004. This reduction was not reﬂected in falling ~ € 367 million ~ € 338 million sales/revenues: on the contrary, the number Letter market 2005 as a whole ~ € 10.2 billion of letters conveyed has continued to rise over the last few years and there have been no Monopoly part signiﬁcant differences in revenues. DPAG revenues

Competitive part DPAG revenues Competitors’ revenues for higher quality services ~ € 705 million Competitors’ revenues for other letter services

Market structure in the licensed area

Revenues (in € million) Volume (million pieces)

2003 2004 2005e 2003 2004 2005e

Market as a whole 9,900.0 10,000.0 10,200.0 16,600.0 17,000.0 18,100.0

Licence holders’ share (excluding DPAG) 387.6 528.5 704.5 615.8 909.5 1,198.7

Licence holders’ market share 3.9 % 5.3 % 6.9 % 3.7 % 5.4 % 6.6 %

DPAG’s market share 96.1 % 94.7 % 93.1 % 96.3 % 94.6 % 93.4 % 94 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Licensing provision of postal services. Of these 2,030 Until the end of 2007, companies other than companies, some 660 have now exited the DPAG can provide postal services that are not market (eg as a result of returning the licence, reserved by the exclusive licence. These services insolvency, ceasing to trade, etc). Around 470 are listed and deﬁned in the Agency’s Ofﬁcial of the remaining 1,370 licence holders are Gazette No 1 published on 11 January 2006. not actively part of the market, ie they are not generating revenues. Accordingly, the By year’s end, the Agency had granted a total Agency assumes that somewhat more than of 2,030 companies – with the number of 900 licensed companies are active in the applications totalling 2,100 – a licence for the market and generating revenues.

Jobs in the letter market

225,000

194,838 187,328 200,000 183,957 178,630 180,774 181,086

177,188 175,000 166,773 162,165 154,903 152,446 147,608 150,000

125,000

100,000

75,000

50,000 33,478 28,328 21,792 23,727 25,000 17,650 20,555

DPAG 0 Competitors Total 1999 2000 2001 2002 2003 2004

Licence applications, licences and market exits

31. 12. 2005 1998 1999 2000 2001 2002 2003 2004 2005 Total

Licence applications 384 291 210 238 181 235 265 313 2,117

Licences granted 164 455 241 221 179 238 255 277 2,030

Licences denied 3 1 0 0 0 3 3 0 10

Market exits 0 17 70 134 181 68 81 105 656 POST | MARKET DATA 95

Letter prices and price levels service for which – as in Germany – no guaran- The table below gives a price level (volume- teed transit time is given, but at most a prob- weighted prices) for Germany of € 0.77 able, but non-binding one. An international (rounded) until the end of 2002 and of € 0.725 comparison of such price levels can include a from January 2005. The price level for DPAG’s number of products with different price listed products has thus fallen by around structures (see table below for examples). It 6 percent since the end of 2002. This price also evens out differences that could distort a level in itself is not very informative. It only comparison restricted to one product only – becomes so when compared with other eg a standard letter weighing up to 20 g. companies’ price levels, or in an international comparison. A comparison with other German The prices of the products chosen were estab- companies’ price levels cannot be made as lished in € or the national currency. These the products named cannot be offered by prices were then weighted, as for the German others at the moment on account of DPAG’s price level. The sum of the separate weighted statutory exclusive licence. Thus only an prices gives the price level in € or the national international comparison is possible. currency. The price level in the peer countries in € or the national currency was then convert- Peer countries were the EU countries, Norway, ed using the consumer parities determined Switzerland, the US, Canada, Australia, New by the Federal Statistical Ofﬁce in accordance Zealand and Japan. Products were chosen that with the German currency scheme. most closely matched DPAG’s postcard, standard letter, compact letter, large size letter and Germany is the only country in Europe that maxi letter products. Compared was the fastest has recorded a steady decline since 2002 in method of conveyance in the standard letter the price level for letters.

DPAG prices

until end of 2002 from 2003 from 2005

Postcard € 0.51 € 0.45 € 0.45

Standard letter (≤ 20 g) € 0.56 € 0.55 € 0.55

Compact letter (≤ 50 g) € 1.12 € 1.00 € 0.95

Large size letter € 1.53 € 1.44 € 1.44

Maxi letter € 2.25 € 2.20 € 2.20

Price and weight structures for letters up to 50 g

October 2005 D [€] UK [£] A [€] GR [€] F [€] USA [$] NL [€]

Standard letter (up to 20 g) 0.55 0.30 0.55 0.49 0.53 0.37 0.39

Compact letter (21 – 50 g) 0.95 0.30 0.75 0.69 0.82 0.60 0.78

Compact vs standard letter + 73 % + 0 % + 36 % + 41 % + 55 % + 62 % + 100 % 96 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Letter price levels (€) 2002 – 2005 (August 2005)

Sweden

Italy

Norway

Germany

Greece

France

Luxembourg

Belgium

Portugal

Finland

Austria

Denmark

Netherlands

Switzerland

USA

Japan

Ireland

Canada

United Kingdom

Spain

Australia

New Zealand

€ 0.00 0.10 0.20 0.30 0.40 0.50 0.60 0.70 0.80 0.90

2002 2003 2004 2005 POST | MARKET DATA 97

Provision of worksharing services, The provision of access to DPAG’s worksharing access to PO box facilities and change services and discounts for consolidators as of address information well has considerably widened competitors’ To encourage market entry and competition scope for action in the letter markets (for in the market for licensed postal services, more details, see the section “Administrative the Postal Act (PostG) obliges the incumbent court proceedings”). to grant requesting players access to its infrastructure and services. Such access agreements Access to PO box facilities must be submitted to the Agency to ensure, A dominant provider of postal services subject amongst other things, that the incumbent is to licence is obliged to allow competitors, in compliance with the legal provisions. for a fee, to deliver postal items to the PO box facilities it operates. In 2005, DPAG submitted Access to worksharing services 27 such access agreements to the Agency. A worksharing service is that part of a conveyance service, otherwise provided end to end Access to change of address information under licence, that remains after deduction An incumbent is also obliged to give competi- of a requesting party’s input. A dominant tors access to information it holds on changes provider of postal services subject to licence of address. In 2005, DPAG submitted 59 such must provide worksharing services. Under access agreements. determinations made by the Agency’s Ruling Chamber 5, both customers and competitors of DPAG are offered access to these services in its outbound mail sorting centres (BZA), where outbound mail is consolidated, and in its inbound mail sorting centres (BZE), which handle the delivery of incoming mail.

Worksharing agreements 2005

Type of item

Individual items 1 Infopost 2 Total

Point of access BZA BZE BZE All types

Contracting party End users 140 230 65 435 Competitors 1 1 0 2 Consolidators 87 91 13 191

Total 228 322 78 628

1 to both BZA and BZE BZA: outbound mail sorting centre (start), BZE: inbound mail sorting centre (end) 2 BZE only 98 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Public petitions and consumer protection

In 2005, the Agency received 1,651 public of 12,000 fixed-location facilities specified petitions, complaints and enquiries on postal in the Postal Universal Service Ordinance issues. (PUDLV). Complaints continued to be received about actual or perceived deficiencies in Many of the submissions were about DPAG’s universal service provision as set out in the decision to scale back its retail outlet network Ordinance and the provision of postal services by the end of 2005 to the minimum number as set out in the Postal Services Ordinance

Public petition statistics 2005

Petitions %

Access to postal services (letter boxes, retail outlets in particular) 494 29.9

Delivery 290 17.6

Loss 175 10.6

Charges 150 9.1

Provider’s handling of complaints 94 5.7

Late or delayed delivery 76 4.6

Damaged items 59 3.6

Change of address 37 2.3

Behaviour and competence of provider’s staff 26 1.6

Posting 11 0.6

Cross-border mail 11 0.6

Access to customer service information 8 0.5

Other (ﬁnancial services included) 220 13.3

Total 1,651 100.0 POST | PUBLIC PETITIONS AND CONSUMER PROTECTION 99

(PDLV). A not inconsiderable number of the Representatives from some 30 groups (includ- submissions, however, related to matters ing consumer associations, trade associations, outside the Agency’s remit (eg the Postbank’s users, providers, scientific and research financial services). experts) took part. Discussions focused on securing universal service and the extent of Any real universal service deficits established universal service in the future competitive were remedied by DPAG straightaway, fol- environment (from 1 January 2008). The lowing the Agency’s request. Thus no formal Agency’s Activity Report 2004/2005 contains action such as the imposition of fines was a wide-ranging statement on this, setting out necessary in 2005. a number of recommendations for adapting the Universal Service Ordinance. Conciliation The Postal Services Ordinance of 21 August Fixed-location facilities 2001 regulates the rights and obligations of The Universal Service Ordinance prescribes postal service providers and their customers. a minimum of 12,000 fixed-location facilities Under the Ordinance, customers can apply nationwide where letter and parcel service to the Agency for out of court dispute resolu- agreements can be signed and implemented. tion, particularly in the case of loss, theft, or At least 5,000 of these facilities must be staffed damage to postal items. The preconditions with company employees until 31 December are that the applicant can claim violation of 2007. Compliance with the requirements statutory rights, no case with the same matter is monitored with an information and notifi- in dispute is pending, an attempt to clarify cation system agreed with DPAG. the matter with the defendant has been made beforehand and the customer, as a business The number of fixed-location facilities has customer, has no special arrangements with declined by almost 18 percent since the end the postal service provider. The aim is an of 1997. The closures are all in locations where amicable settlement. The procedure closes such facilities are not absolutely necessary either with agreement between the parties or under the Universal Service Ordinance or with the Agency determining that agreement DPAG’s voluntary commitment. In response between the parties has failed to come about. to numerous petitions and enquiries about Little use of the conciliation option was made the restructuring of the retail outlet network, in 2005. Of a total of 18 applications, seven DPAG declared itself willing to take account were concluded successfully; two failed of local circumstances in justified individual because the parties could not agree between cases and to change its proposed action. Thus themselves; one failed because the applicant in 242 cases either a partner outlet or a Post- withdrew, and five are still open. Three Service outlet was set up. applications had to be rejected because the requirements for invoking the procedure In all, the number of fixed-location facilities were not given. has undergone the changes shown in the chart on page 100. Universal service Provision of basic postal services to all cus- Letter boxes tomers throughout the country (universal The Postal Universal Service Ordinance does service) is secured until the end of 2007. With not specify the number of letter boxes. It a view to its Activity Report 2004/2005 and on merely includes an arrangement on distance the Advisory Council’s recommendation, the which states that there must be a sufficient Agency, in October 2005, held a workshop on number to ensure that customers in urban continuation of the universal postal service. residential areas will not, as a rule, need to 100 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

go farther than 1,000 metres to reach one. DPAG has voluntarily committed to provide around 108,000 letter boxes across the country until expiry of its exclusive licence on 31 December 2007. On 31 December 2005 DPAG maintained some 110,000 letter boxes, thus comfortably meeting its self-imposed target. DPAG has also committed to ensuring, through appropriate measures, that letter boxes are not emptied before the last collection time. The Agency has not received any information or complaints that would lead it to believe that DPAG is not meeting its obligations.

Number of ﬁxed location facilities

Total number of ﬁxed-loca- Own-company- Year* tion facilities staff outlets

1997 15,331 10,095

1998 14,482 7,946

1999 13,948 5,956

2000 13,663 5,590

2001 12,818 5,331

2002 12,683 5,030

2003 13,514 5,513

2004 13,019 5,379

2005 12,671 5,671

Statutory at least at least requirement 12,000 5,000

* on 31 December Source: DPAG POST | RULING CHAMBER DECISIONS 101

Ruling Chamber decisions

Rates regulation 2007, the rates of price change and the second- Price cap ary conditions. Since all the conditions were Under the price cap, the Chamber in autumn met, the rates for the fourth price cap period 2005 approved the rates for letter services running from 1 January 2006 to 31 December subject to licence. The main point to note about 2006 were approved on 18 October 2005. this was that the decision marked falling price levels in Germany for the fourth time Under the price cap, the Agency also explicitly in succession. established that DPAG’s internal accounting was in compliance with the requirements of In 2006, price levels will be down 0.2 percent section 10(2) of the Postal Act (separate account- in view of the specified 1.8 percent rate of ing). Thus DPAG was in a position to provide growth in productivity and the 1.6 percent the Agency with all the cost statements and rate of inflation. For international mail, a documents it needed for its benchmark reduction in postal charges for heavier items decision, including verifiable financial rela- was accompanied, however, by a marked tions between the relevant postal services. increase in the lower weight steps. Thus a Publication of such data is not envisaged standard letter to another country will cost either under the EU Postal Services Directive € 0.70 in future. DPAG justified its higher or under the German Postal Act. prices for international mail with reference to the higher terminal dues payable to foreign Service of documents postal companies. It also stated that charges The approval of rates for the service of docu- across Europe for an item comparable to its ments under the rules of procedure and the standard letter averaged € 0.69. laws governing service in administrative procedure constitutes a particular form of With its reductions in some of the domestic rates regulation, under which the criteria charges (eg the compact letter down to € 0.90 of section 20(1) and (2) of the Postal Act are from € 0.95) and the above adjustments in applied to all such service providers. Thus the international mail, DPAG has met the price stipulations that the rates may not contain cap reduction requirements (– 0.2 percent). any surcharges or discounts and may not be Looked at, as in the past, was compliance with discriminatory are widened to include all the the baskets specified for the period 2003 to providers of this service, although they are 102 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

otherwise applied solely to dominant com- were for national licence holders, too. There panies. were filings both for new entrants’ rates and established providers’ changed rates. As a result, the Chamber must make sure Altogether in 2005, service of document in particular that companies do not offer rates were approved in 209 cases and thus customer-specific charges, as these would the first steps taken towards making this a automatically be discriminatory. Different competitive field of activity. charges for different regions, distance-sensitive and volume-based charges, by contrast, are Special control of compatible with the approval provisions. anti-competitive practices With innovative pricing models, postal service In the course of 2005 the Chamber, as part of providers thus have added scope to reach its control of anti-competitive practices, gave more customers. Price differentiation is also consolidators the go-ahead to use a new being increasingly used by companies offer- numbering variant enabling parallel numbering service of documents. More and more, ing and sorting. Doing away with a second the courts and public authorities are inviting processing run means that consolidators, tenders for the formal delivery order service, under their agreements, can consolidate thereby often initiating bids competition. larger volumes in the time window between Greater competition then drives average collection from the customer and dropoff at price levels down, and the customer benefits. DPAG and tap further customer potential.

The Chamber has also addressed further In the previous year the Chamber had already development by DPAG of its formal delivery ruled in a single case that this kind of consec- order product. DPAG has refined this product utive numbering had no disadvantages for by offering, in addition to the conventional DPAG as regards verifying the total volumes form, electronic features (ePZA). As the elec- posted and that refusal to accept mail was tronic variant is possible only with a minimum therefore anti-competitive. This decision was annual volume of 10,000 pieces per year and extended to include all consolidators. customer, the Chamber was able to approve rates of € 5.10 (10,000 to 29,999 pieces per year) Further, the Agency had issued an order in and of € 5.07 (from 30,000 pieces per year) several cases for consolidators to be given until 31 December 2006 in both cases. The non-discriminatory access to the network. decision to approve the rates was based on DPAG is obliged in particular to align the the fact that the electronic variant bundles consolidators’ contractual conditions with certain production steps, thus enabling cost those in customers’ contracts. Divergent savings. These cost savings, in turn, are greater arrangements were then only allowed if the than the additional costs that arise as a result Chamber had expressly recognised the of the electronic features, so that ultimately, objective justification for them. These orders the rates for approval declined compared to removed further market entry barriers and the traditional form. enabled mail to be prepared for dispatch considerably more efficiently. The unweighted average price approved at the end of 2005 was around € 3.70, VAT not As regards the general arrangements for drop- included. The trend continued for competitors off at 15:00 hours at mail centres, the Chamber to further extend their field of activity. DPAG was not able to establish any unjustified hin- is still asking € 5.60, the approved rate since drance, provided DPAG granted consolidators 2003. The 2005 approvals were largely granted later dropoff times under their existing capac- to regional licence holders, although some ity and equal treatment with large customers POST | RULING CHAMBER DECISIONS 103

and feeds from their own network were basically secured.

In response to several complaints, the Chamber investigated the prices for counter parcels with an eye to cross-subsidisation. Assessment of DPAG’s cost statements showed that the charges contained no discounts, nor were they discriminatory. Nor did anything come to light in response to further, general criticisms to justify the assumption of unfair or anti- competitive cross subsidisation.

Chamber cases Number

Rates regulation 210

Abuse 4

Interconnection 4

Invitations to attend proceedings 1 104 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

International activities

Universal Postal Union chairmanship of the Supervision/Market Data In consultation with the Federal Economics WG, through which CERP exercises its influ- Ministry, the Agency plays an active role in ence on the European Committee for Stan- international postal affairs at all levels, dardization (CEN). attending the annual conferences of the Council of Administration and the Postal European Union (EU) Operations Council of the Universal Postal The EU Directive provides for a committee Union, a UN specialised agency for postal composed of representatives of the Member affairs with 189 member countries. States to assist the Commission. Germany is represented in this committee by the Federal European Committee for Economics Ministry and the Federal Network Postal Regulation (CERP) Agency. Within the 45-country-strong European Conference of Postal and Telecommunications European Committee for Administrations (CEPT), the European Standardization (CEN) Committee for Postal Regulation (CERP) is the Under the EU Directive, quality of service body that addresses postal issues. The Agency and technical standards must be specified takes part in its biannual plenary meetings and harmonised. Determining the measuring and provides input for the Policy Issues WG methods (principles and minimum standards) (priority areas: international liberalisation is one of the tasks of CEN’s Technical Com- trends, WTO, definition of the postal sector), mittee (TC 331), which works to the EU. The Economic Issues WG (priority areas: post regulatory authorities and – for the most part – office branch network, cost accounting) and the postal providers are represented in the for the overarching Steering Group. It has relevant bodies. POST | ADMINISTRATIVE COURT PROCEEDINGS 105

Administrative court proceedings

Regarding the question of what services 2005 the Münster court confirmed its initial constitute higher quality within the meaning decision, essentially giving the same reasons. of the Postal Act and hence to which DPAG’s However, for all three constituent facts in prerogative does not apply, was dealt with by the Postal Act it now regards the normative the courts as follows. requirements of the Universal Service Ordi- nance as the uniform benchmark, as this DPAG has meanwhile accepted standardised enables a comparison throughout that is cases such as same-day delivery, day-certain free of subjective influences. In its ruling of delivery, and track and trace services, provided 6 October 2003 the court still used the postal these are as published in the Official Gazette service actually provided against which to order (15/2004, page 829 ff, item B1 of Annex 2), assess “special features” and “higher quality”. and has withdrawn its appeals. However, the The appeal on points of law allowed this. company continues to contest all the licences The legal action in the matter of integrated granted by the Agency to providers of over- logistics service is at the first court hearing night delivery or integrated logistics services. concerning the case.

In matters of overnight delivery the Federal A ruling from the Federal Cartel Ofﬁce has Administrative Court (BVerwG) granted opened up access to worksharing services DPAG’s appeal against the ruling by Münster for commercial enterprises providing mail higher administrative court afﬁrming the preparation services for letters below the lawfulness of the licences solely on procedural weight and price limits of the exclusive licence grounds, and handed the case back to the and widened the scope for competitors’ opera- Münster court. The oral proceedings were held tions in the letter markets. Following this before the Münster court on 7 December 2005. ruling, access to worksharing services for The question of the lawfulness of the licence consolidators/competitors granted solely out- for time-certain delivery was no longer the side the area of the exclusive licence unfairly subject of the appellate proceedings, because – discriminates against companies bundling according to the adjudicating senate in the mail from a number of senders (in the area reasons for the judgment – it had not been of application of the exclusive licence) and the subject of the proceedings on appeal on dropping it off, presorted, at DPAG’s mail points of law. In its judgments of 7 December centres. DPAG was forbidden to refuse these 106 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

companies access to worksharing services In two – essentially identical – rulings issued and to grant them discounts; moreover, the on 10 May 2005 the Cologne court rejected ruling was to take effect straightaway. The complaints from DPAG customers about Düsseldorf higher regional court provisionally access to worksharing services ordered by the confirmed the Cartel Office’s decision in Agency’s Ruling Chamber 5. They had sought summary proceedings. In a ruling on 13 July mailing terms beyond those ordered (including 2005 the Düsseldorf court ordered a suspen- sorting, minimum mailing volumes, level of sion of proceedings on the main issue until charges). The court made some fundamental two parallel, similar cases before the European pronouncements on access orders. Accord- Court of First Instance and the European ingly, an order that concerns contract terms Court of Justice (EuGH) had been decided. is an adminstrative act that shapes a private law relationship, and is not divisible either as The first of these is about a breach of contract. regards the service and the discount or as In its decision of 20 October 2004 the European regards the form the service takes. This also Commission called on Germany to take applies to the rates. In the court’s view, DPAG measures to stop commercial mail preparation has decision-making scope in drawing up the firms from being disadvantaged in accessing standard terms and conditions that regulate worksharing services by not being granted the access details. The rulings also included quantity-based discounts for feeding self- pronouncements on the question of whether prepared mail directly into DPAG’s outbound section 44 of the Postal Act, which refers to and inbound mail sorting centres. The Com- provisions of the Telecommunications Act of mission stated that certain provisions of 25 July 1996, is considered a dynamic reference. the German Postal Act breached the EU com- In the Chamber’s view, section 44 of the petition rules and the Postal Directive. Mail Postal Act – at least for procedural law (and preparation firms in Germany were being presumably also for law of administrative discriminated against through being denied procedure before the Agency’s Ruling discounts that large customers feeding self- Chambers) – refers to the relevant provisions prepared mail to sorting centres enjoyed. of the Telecommunications Act of 22 June The case brought by the Federal Republic of 2004. In this legal view, the possibility of appeal Germany and DPAG against the Commission’s and thus of one trial court ceases to apply in decision is currently before the European Chamber proceedings in the postal sector, Court of First Instance. to allow legal certainty to be created more rapidly. The Chamber allowed the appeal on In a further case, Cologne administrative questions of law that had been lodged against court suspended proceedings (action taken one of the rulings. by a consolidator against a ruling by the Agency on refusal of access to worksharing services) in order to obtain a preliminary decision from the European Court of Justice. However, the action has now been withdrawn and the order of 30 June 2004 to refer the matter to another court repealed on 21 November 2005 by a ruling from the Cologne court, as the legal issue raised was no longer relevant to the action. POST | ADMINISTRATIVE COURT PROCEEDINGS 107 108 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Energy

Regulation in Germany 110

Electricity 115

Gas 122

Market watch 125

Consumer Advice service 129 ENERGY 109 110 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Regulation in Germany

The European requirements of the Acceleration made available to the Federal Network Agency Directives (electricity and gas, 2003) were and the state regulatory authorities. implemented with the renewed amendment of the energy statutes; on 13 July 2005 the Cooperation with the state Second Energy Statutes Reorganisation Act regulatory authorities took effect with a completely reworked Energy Regulation of the energy networks (gas and Industry Act (Energy Act). The departure from electricity) in the Federal Republic of Germany the negotiated access approach marked a was included in the remit of both the Federal paradigm shift in third party access. Network Agency and the state regulatory authorities by the mediation procedure in the Regulated are not the energy markets as such, legislative passage of the Energy Act. Major that is to say the generation, procurement energy suppliers and those operating on a and sale of gas and electricity. Rather, the wider regional basis are subject to supervision grid is the object of regulation under the new by the Agency under the arrangements of the Energy Act. As a rule, this constitutes a natural Energy Act. Smaller suppliers (with fewer than monopoly and is in the hands of the established 100,000 customers) and companies operating utilities. This being so, just the system-bound exclusively within the borders of a federal nature of energy transport poses a serious state come under the remit of the regulatory obstacle to market entry. Regulation there- authority of that particular state. The Agency fore aims to open up the energy markets works very closely with the state regulatory to competition by securing low-cost, non- authorities in order to secure the consistent discriminatory third party access. Regulation implementation of the Energy Act and to of the network should then lead to competition achieve the aims of regulation, both for the at other levels of the value chain. companies affected by regulation and for the consumer. The aim of this cooperation is Monitoring the unbundling of network opera- to unify and standardise energy regulation tions from the other areas of activity of energy processes and proceedings. supply, creating clear, non-discriminatory arrangements for third party access by means To achieve this aim, themed consultation of determinations and the control of anti- groups and working groups have been set up. competitive practices, and applying efﬁciency- In these groups, representatives from the oriented cost controls to the rates are the ﬁrst state regulatory authorities and the Federal effective instruments the Energy Act has Network Agency consult on issues and tasks ENERGY | REGULATION IN GERMANY 111

and work out common positions. The most • work in international bodies, important of these is the committee of federal • EC Regulation on cross-border exchanges state representatives, set up at the Agency in electricity, under section 60 a of the Energy Act and • international trade in gas. comprising representatives from the state regulatory authorities responsible for per- Reporting to the Commission forming duties under section 54 of the Act. Together with the Federal Economics Ministry In the year under review, the committee met and the Cartel Office, the Agency, at the request for several sessions, addressing mainly the of the Directorate-General for Energy and issues of incentive regulation and access to Transport (DG TREN), drew up a national report the gas networks. on the integration of the electricity and gas markets, based on the directives and setting Cooperation with the Federal Cartel Office out national developments. The reports from The Agency works closely with the Cartel Office the national regulatory authorities provided in all areas of energy regulation. A lively, a module for the Commission’s report on pro- fruitful exchange takes place between the gress in creating the internal gas and electric- two organisations at all levels. The exchange ity market (“5th benchmark report”) of 15 Nov- covers both the issues themselves and the ember 2005. Further, the Agency responded organisational arrangements to achieve to a request for information from the Directo- results-oriented cooperation in the area of rate-General for Competition (DG COMP) on application of the Energy Act and the Compe- 14 June 2005 as part of a sector inquiry. tition Act (GWB). Issues-based and processes- based working groups form the basis for Cooperation with other targeted, harmonised and consistent decision- regulatory authorities making by the two authorities. Under section The Federal Network Agency is a member of 58(3) of the Energy Act the Federal Network the European Regulators Group for Electricity Agency and the Federal Cartel Office must and Gas (ERGEG) and the Council of European work towards a consistent interpretation of Energy Regulators (CEER). While ERGEG the Energy Act to preserve the context of the acts as the Commission’s formal advisory Competition Act. group, CEER is an informal platform for an exchange on all the relevant issues under International cooperation the responsibility of its members. Duplicated The Federal Network Agency performs its work is avoided by close cooperation and duties in the international, and in particular agreement. Consultation on CEER working the European, arena to promote the develop- papers, as far as ERGEG and the Commission ment of an internal market for electricity and believe these to be of general interest, is gas in the European Union. This involves, carried out via ERGEG. amongst other things, cooperation with the European Commission and the regulatory The Agency is closely involved in the tasks authorities of the other Member States, and the addressed by ERGEG and CEER. Thus in early application of Regulation (EC) No 1228/2003 2005 it agreed to head the group Workstream on conditions for access to the network for Efficiency Benchmarking in the Information cross-border exchanges in electricity. Exchange & Benchmarking Task Force. It assists in virtually all the other CEER and The following work items were addressed in ERGEG working groups. the period under review: • assistance in meeting the European CEER’s Single Energy Market Working Group Commission’s reporting requirements, dealt with two working papers on which 112 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

ERGEG had held a public consultation. The The Agency’s energy regulation start-up team first was about the development of regional had already paved much of the way (both as electricity markets, while the second was regards the methodology and the data collec- concerned with a roadmap for a competitive tion and evaluation). Once the Energy Act single gas market in Europe. These projects took effect, this work could be continued will be continued in 2006 in the ERGEG specifically in line with the legal mandate. Regional Electricity Markets Task Force and the Gas Market Integration Task Force. Within The participation of academia is secured basi- CEER’s Information Exchange & Benchmarking cally through the award of advisory reports Task Force, the Agency exchanges experience and projects. Under the 2005/2006 research with other European regulatory authorities programme the Wissenschaftliches Institut in order to take forward the national incentive für Infrastruktur und Kommunikationsdienste regulation concept. Further, the Task Force GmbH (WIK Consult) was commissioned with made a comparative analysis of the status, four advisory reports. Tenders were invited for resources and responsibilities of 27 regulatory four further reports and two advisory projects. authorities in Europe in its CEER Regulatory The award proceedings for the national tenders Benchmark 2005. were completed on 14 October 2005 and those for the international tenders on 28 October ERGEG’s Ad Hoc Reporting Task Force support- 2005. Invitations to tender are currently ed the Commission in defining the reporting invited for a further project. requirements for the 5th Benchmark Report and made an analysis of the development of International experience of the European energy market, based on the incentive regulation systems national contributions submitted. International experience of incentive regulation systems is taken into account not just by The Agency is also involved in the activities of being the subject of an advisory report, but the Florence Electricity Forum and the Madrid also by being the subject of an intensive Gas Forum. The participants are national exchange of experience with other regulatory regulatory authorities, the Commission, authorities that takes place both at bilateral government representatives and industry level and also within a working group of the and consumer representatives. They meet Council of European Energy Regulators (CEER) twice yearly to discuss the problems arising in on efficiency benchmarking. implementing the internal market, to exchange experiences and to draw up standards. Workshops were held under the aegis of this working group on 12 September 2005 and INCENTIVE REGULATION 17 November 2005 with a high turnout from the European regulatory authorities. Moreover, The Agency is tasked under section 112 a(1) of the Agency provides the chair of the corre- the Energy Act to present a report to the federal sponding Task Force. government, by 1 July 2006, on the introduction of incentive regulation pursuant to section 21 a Consultation process of the Act setting out a concept that is exe- The participation of the federal states and the cutable under the statutory provisions. The economic circles affected is secured via a broad- report is to be drafted with the participation of based consultation process that goes beyond the federal states, academia and the economic just the agreement called for in section 112 a(2) circles affected, and should also take account of the Energy Act. A monthly series of discus- of international experience of incentive sions and consultations began on 16 August regulation systems. 2005 in two main bodies. In one, the Agency ENERGY | REGULATION IN GERMANY 113

gives public sector representatives its work on a fully operational and competitive internal the fundamentals of the incentive regulation market is affordably priced, non-discrimina- system for discussion. In the other, presenta- tory and transparent access to the network. tions of the Agency’s work to the energy asso- To achieve this, the European, just as the ciations and operator and user groups are German, lawmakers consider it vital that increasingly being made with specialist input operation of the transmission and distribution from the economic circles affected. system is kept separate from the production and supply activities of the vertically integrated Consultative documents are prepared on par- energy supply company. ticular issues. The first (Price Cap/Revenue Cap) was presented to the consultation group This requirement, which in some cases involves on 8 December 2005, after being agreed be- considerable restructuring for companies in forehand with the members of the discussion the industry, was analysed in depth in the group. The second (General Productivity first few months of the Agency’s widened Trends) will be presented in January 2006. remit and discussed with operators and market players in the upstream and downstream The consultative documents and the responses markets. Addressed, in particular as regards will inform the Agency’s draft report. Com- legal unbundling (section 7 Energy Act) and ments will also be invited on the draft. Subse- operational unbundling (section 8 Energy quently, the report will be finalised in accord- Act), were questions on measures and defini- ance with section 112 a of the Energy Act and tions to secure the necessary independence provided to the federal government on 1 July of management and those with management 2006. functions in the operating companies.

Data collection As regards the use of information (section 9 Essential to the development of a concept of Energy Act), it was a matter, in particular, of incentive regulation is a large-scale, reliable setting questions for an analysis of business data base. To minimise the need to collect data processes and identification of the economi- from the companies themselves, the use of cally relevant data. The requirements of further sources (eg state statistical and geolo- section 9 of the Energy Act, which affect all gical offices) is envisaged alongside the surveys energy supply undertakings irrespective of themselves. The surveys undertaken so far their size, will not allow the current architec- were linked with the surveys for the electricity ture of the EDP systems in energy data manage- (22 September 2005) and the gas benchmark- ment and billing to be fully continued. How ing exercise (26 September 2005), as most of far the requirements of the new IT landscape the data requested were also needed for the go was investigated at the detailed level of report on incentive regulation. Further data, individual business processes and explored in needed solely for incentive regulation pur- an intensive dialogue with the undertakings, poses, were also requested in the electricity software manufacturers and new market benchmarking survey. players in order to find suitable solutions.

UNBUNDLING Equal treatment programme Under section 8(5) of the Energy Act, energy Organisational unbundling supply undertakings have to establish an equal The unbundling provisions of section 6 ff of treatment programme for their employees in the Energy Act are based on the EC Directives network operations. This obligation does not on liberalising the internal electricity and gas apply to companies with fewer than 100,000 markets. As stated there, the precondition for customers (“de minimis” companies). The 114 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

equal treatment programme incorporates binding measures on conducting the business of the system in a non-discriminatory way. The aim is to give employees practical help about what the unbundling arrangements mean for them in their day-to-day work in network operations.

Both employees and the Agency must be notiﬁed of the equal treatment programme. The obligation to submit such a programme arose when the Energy Act took effect on 7 July 2005. The Agency then published a Communication in its Ofﬁcial Gazette calling on energy suppliers to comply with this requirement.

The next step for energy suppliers is to draw up a report setting out all the measures taken to implement the programmes. The Agency will work together with the industry in developing efﬁcient, common standards for the reports, which are to be presented annually. ENERGY | ELECTRICITY 115

Electricity

SECURITY AND QUALITY OF SUPPLY the Agency is endeavouring to clarify the course of events and is investigating indica- One focus of the Agency’s work is security of tions of possible problems with the construc- supply/interruptions to supply. Alongside tion material for the pylons (Bessemer steel). voltage and level of service quality, security The Federal Institute for Materials Research of supply is the central component of quality and Testing (BAM) in Berlin has been commis- of supply. Following enactment of the sioned to draw up a report on this issue by amended Electricity and Gas Supply Act on way of assistance for the Agency. 13 July 2005, energy supply system operators, under section 52 of the Act, have to present SYSTEM CHARGES to the Agency a report on all the breakdowns in supply that have occurred. These reports Regulation of system charges will be funda- must be presented by 30 June each year mental in securing competition. System for the previous year. The Agency, in close charges account for around one third of the consultation with the association of German retail price. It is the Agency’s aim in regulat- network operators (VDN), has drawn up ing these to enhance operator efficiency and requirements as regards the content and thus achieve suitable prices. form of these reports. The Agency was keen to be guided by international standards and Once the Energy Act took effect on 13 July to minimise the burden on the operators. 2005, charges for access to supply networks The data for the report are thus limited to the became subject to approval by the regulatory main facts needed to describe an interruption, authority under section 23 a of the Energy such as time, duration, extent and cause. Act, until an ordinance specifies that system charges are to be determined by way of With reference to its responsibilities under incentive regulation. Also, consolidating section 65 of the Energy Act in conjunction this, intervention against anti-competitive with section 11 ff to monitor security of supply, conduct on the part of the operators is possible one of the Agency’s recent tasks has been to under section 31 of the Act. Additionally, look into the major disruption to RWE’s energy with certain special forms of use of the system, supply in and around Münster in December individual charges for access must be approv- 2005. Together with the Federal Economics ed on a case by case basis, provided the Ministry and the regional energy authorities legal requirements are fulfilled (section 19(2) 116 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Electricity Network Charges Ordinance until 31 October 2005 to submit their applica- [StromNEV]). tions. The Agency has six months, from the time the documentation is received in full to Approval of general charges decide on approval of the charges. The first Under section 54 of the Energy Act the Agency decisions are expected in spring 2006. is responsible for approving the general charges for access to the electricity networks Benchmarking (electricity) under of transmission and distribution operators section 21(3) Energy Act to whose distribution networks at least To monitor operators’ business management 100,000 customers are connected, directly efficiency, the Agency is empowered to carry or indirectly, or whose distribution network out regular benchmarking under section crosses a federal state border. The Agency 22 ff of the Electricity Network Charges has general responsibility, within the meaning Ordinance. Benchmarking is incorporated of section 54 of the Energy Act, for approving in the approval procedure as a starting point the charges of 100 operators. for assessing efficiency. Data on grid structures, supply and demand structures, system Parallel to the passage of the legislation, the charges and their revenues, and operator Agency’s energy regulation start-up team has costs are requested from operators in all parts begun devising a price regulation concept. of the country. As part of the preparations for approval of the charges, the associations of both operators Based on the data collected, various indicators and users have been involved at an early stage are defined per operator – separately for each by way of a consultation procedure. A draft network and substation level – whose “rank- electronic data collection sheet was posted ing” basically constitutes the comparison. on the Agency’s website to standardise entry Standardised units (eg costs per km circuit of the data needed for approval of the charges. length) are compared with one another to take The electronic data collection sheet has been account of the different dimensions of the agreed with all the federal states in the com- facilities. Also, operators are put into structural mittee of federal state representatives and classes (for each network and substation level will be used for all the network operators in from high voltage downwards). Comparing Germany. operators like this gives the Agency valuable indications of efficiency. Thus, under section So as to receive data from the network opera- 21(4) of the Energy Act, there is a presumption tors in as structured and standardised a form of inefficiency if the benchmarking shows that as possible, the Agency, on 5 October 2005, the indicators under comparison exceed the set out further requirements regarding the average figures of the indicators of comparable structure and content of the report to be operators. presented under section 28 of the Electricity Network Charges Ordinance and on the In its determination of 21 September 2005 the form and time of its transmission. A section Agency ensured that it would receive the data 28 report on calculation of the system charges it needed from the operators in a form that and the electronic data collection sheet are was as structured and standardised as possible. an integral part of the application referred Data collection for the first round of bench- to in section 23 a(3) of the Energy Act. The marking, concerning the financial year 2004, process of collecting data began on 14 October was completed by 1 November 2005. The results 2005 when the electronic data collection of the current benchmarking exercise will sheet was made available on the Agency’s be published in 2006 in the Agency’s Official website. The network operators then had Gazette. ENERGY | ELECTRICITY 117

Approval of individual system charges Four decisions taken on 24 November 2005 If it is clear from available or forecast con- marked the first affirmative responses to sumption data or as a result of technical or applications for the approval of individual contractual factors that a final customer’s system charges. part of the maximum load will differ significantly from the annual maximum load of all Special anti-competitive proceedings withdrawals from this network or substation Under section 19(3) of the Ordinance, an level (“atypical grid usage”), operators of operator of a network or substation level energy supply networks must offer this final must offer a user whose use of the facilities customer an individual charge under section in the network or substation level is solely 19(2) sentence 1 of the Electricity Network own-purpose, at their request, an appropriate Charges Ordinance, in derogation of section 16. charge for use of these facilities. While such Agreeing the application of individual charges charges are not subject to approval, any is subject to approval by the regulatory refusal by an operator to make such an offer authority (section 19(2) sentence 5 of the Ordi- may invoke section 31(1) of the Energy Act, giv- nance). Last year saw a total of 52 individual ing the user the right to submit an application charges approval proceedings opened in to the regulatory authority to investigate the connection with atypical grid usage. operator’s conduct. Under special anti-competitive proceedings the regulatory authority The Agency is currently holding talks with the can then issue an order for measures to operator and user associations on the subject secure the operator’s compliance with the of an appropriate methodology for calculating obligations of section 19(3) of the Ordinance. individual system charges for atypical grid usage. The aim of the talks is to develop cost At the end of 2005 seven cases of abuse pur- accounting conventions that accommodate suant to section 31 of the Energy Act in con- all the important electricity industry aspects. junction with section 19(3) of the Ordinance The solutions reached will be incorporated in were awaiting completion. the decisions to be taken under section 19(2) sentence 1 of the Ordinance in the first few THIRD PARTY ACCESS months of 2006. Connection to distribution networks Under section 19(2) sentence 2 of the Ordinance In the period under review the Agency handled a final customer must be offered an individual complaints connected with refusal to provide charge when the electricity taken from a connection as per section 17(1) of the Energy general network for their own consumption Act. Municipal utilities and companies had at a withdrawal point reaches the figure of sought connection at a higher voltage level 7,500 hours per year and when the power than the one they were already connected to, consumption at this point was more than 10 or connection to a customer’s substation. In gigawatt hours in the preceding calendar year. this latter case, the complaint was withdrawn Agreeing the application of such individual following agreement between the company charges requires the approval of the regulatory and the operator. The review of the complaints authority (section 19(2) sentence 5 of the concerning connection at a higher voltage Ordinance). level had not been completed by the end of 2005. Also, on the issue of system connection, Since the Ordinance took effect on 29 July a number of complaints on the costs and on 2005, 23 cases have been opened to approve the contributions to the infrastructure were agreement of the application of individual dealt with. Connection costs are the costs for system charges. creating a new connection to the system. 118 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Contributions to the infrastructure, by and formats for data that have to be provided, contrast, are charged for the provision of a for instance when a customer switches particular connection capacity. Here, too, supplier. Section 14 of the Electricity Network the Agency considers whether or not the Access Ordinance sets out requirements on charges are reasonable. changing supplier as a core business process, while section 22 contains the Agency’s obliga- Contractual form of third party access tion to specify a nationwide, uniform format Third party access is not the same as connec- for the data transfer. Powers to take decisions tion to the system. Under section 23 ff of the on business processes and data formats are Electricity Network Access Ordinance (Strom- set out in section 27(1) subparas 8, 11 and 17 of NZV), supplier agreements/network usage the Ordinance. Since extensive negotiations agreements are to be concluded between between the network operators and the user operators and those entitled to access. These associations on common business processes agreements must accommodate the provisions have not been successful, the Agency is now of the Energy Act and the above Ordinance drawing up the requirements; these will and comply with the minimum requirements include binding data formats with which to of section 24(2) and section 25(2) of the Ordi- handle the processes. nance. Under section 115(1) sentence 2 of the Energy Act, agreements on connection to Access to transmission networks the grid and access to energy supply systems The German electricity transmission network with a longer duration must be conformed comprises the very high voltage and the high to the provisions of this Act and the relevant voltage interconnectors in the interconnected ordinance at the latest six months after the network of the four German transmission effectiveness of an ordinance enacted under system operators (TSOs): E.ON Netz GmbH, sections 17, 18 or 24, as far as one of the parties RWE Transportnetz Strom GmbH, Vattenfall to the agreement requests this. Europe Transmission GmbH and EnBW Trans- portnetze AG. The aim of regulation is to The Electricity Network Access Ordinance took enable non-discriminatory competition effect on 29 July 2005. Thus supplier agree- between suppliers in the power supply system. ments and network usage agreements with a The Agency is concerned, as far as is necessary longer duration than six months after enact- with a view to competition and within the ment of the Energy Act must be conformed to scope provided by the new legislation, to the new legal situation as from 29 January 2006 improve conditions for energy trading within at the request of one of the parties. Numerous single control areas and among the four enquiries on the legality of the supplier agree- control areas. The Agency’s transmission ments and other usage agreements were network access activities since the Energy Act received by the Agency in the period under and the Electricity Network Access Ordinance review. The Agency has not examined the took effect have basically covered the follow- agreements individually, but is preparing ing: addressing principles for procuring and general clarification of the fundamental billing control energy and addressing ques- issues contested by the market players. tions of balance group management and intraday schedules. Change of supplier, business processes, data exchange Control energy Competition in the electricity market is funda- To secure reliable operation of the electricity mentally restricted by a lack of, or inefficient, system, the same amount of power as matches business processes between the market players. consumption must be provided at all times. Business processes concern the time limits Thus unforeseen fluctuations in the energy ENERGY | ELECTRICITY 119

fed into and drawn from the system must be so-called balance group agreement. This balanced out by the TSOs in their particular agreement regulates the relationship between control area by increasing or reducing power traders and TSOs in dealing with energy from the power plants or the industrial con- supplies via a balance group. To be able to sumers at short notice. The control energy supply customers throughout the country, needed is obtained from the suppliers by power suppliers need a balance group in every way of competitive tendering. A distinction control area, as a rule. Clearly, traders are is made between three different forms of interested in a nationally standardised form control energy: primary, secondary and of these agreements, in order to reduce the minute reserve. transaction costs. Many traders consider it a good time to take this step because an adjust- The Energy Act and the Electricity Network ment of all the balance group agreements is Access Ordinance call for control energy to necessary anyway to effect compliance with be obtained by competitive tendering. A the requirements of the Energy Act and the condition set by the Federal Cartel Office in Electricity Network Access Ordinance. 2001 led to the introduction of this market- based form of obtaining control energy. The The Electricity Network Access Ordinance Cartel Office’s requirement that tenders be gives the Agency wide-ranging powers to invited for primary and secondary balancing specify individual arrangements in the agree- energy for a period of six months and daily ments for the TSOs (powers to make determi- for the minute reserves has been successively nations as provided for by section 27 of the met by all four TSOs. The legislative purpose, Ordinance). Alternatively, the Agency can set out in section 1 of the Energy Act, is a secure follow the procedure set out in section 28 in and low-priced supply of electricity for society respect of reference offers, by means of as a whole. Accordingly, the TSOs, bearing in which the balance group agreements can mind their responsibility for their respective be comprehensively settled. systems, are obliged under section 22(2) of the Energy Act to cooperate to reduce expen- The initiative taken by one of the four TSOs diture on control energy. Fundamental to this to present a new agreement to the balancing cooperation is the establishment of a joint group managers in its own control area has Internet platform for inviting tenders for come in for widespread criticism. Here, the control energy. The transitional provisions in Agency has managed to have various passages section 30 of the Electricity Network Access in the agreement, for instance that concerning Ordinance state that the Internet platform is abuse caused by too big or two small feeds, to be set up for minute reserves by 1 January reworked by the company. Also, the TSO will 2006, and for primary and secondary balanc- approach the three others to consider the ing energy by 1 July 2006. possibility of standardising all four agreements. Such a consensual solution might In December 2005 the TSOs submitted a make complex reference offer proceedings concept to the Agency on a joint invitation to superfluous. However, the outcome of the tender for minute reserves. The Agency then negotiations is not yet clear. consulted on this with the market players concerned. Separately, the settlement periods for balancing power that the TSOs have to observe in Balance group management relation to the balancing group managers To enable trading in a TSO’s network to take are currently under discussion. Under the place and power supplies to be handled, wording of section 8(2) of the Ordinance, traders and suppliers need to conclude a TSOs must settle for balancing power with the 120 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

balancing group managers not later than two congestion management. Forum 2005 then months after the particular billing month. Yet decided on their continuation. Thus the second all four TSOs have taken up the option provided round of Mini Fora will begin in early 2006. for in section 8(2) of the Ordinance to request The issues, besides congestion management, an extension of this period. The Agency is will be the further development of cross border currently considering whether and for how intraday trading and control energy markets. long an extension can be granted. The issues the European Electricity Regulatory Scheduled intraday trading Forum is addressing also occupy the attention At present, traders can announce schedules of the CEER Electricity Working Group and informing TSOs of their planned electricity the ERGEG Electricity Focus Group, with supply and trading transactions for the the following topics being dealt with in the particular day (on the basis of quarter-hourly individual Task Forces: figures), until 14:30 hours of the day before. Section 5(2) of the Electricity Network Access • The Electricity Infrastructure Task Force Ordinance, however, states that schedules has drawn up uniform criteria for granting within a control area and schedules extending special licences for new interconnectors. beyond a control area can be changed every The Electricity Market Task Force has quarter of an hour, at least three quarters of drafted recommendations on uniform trans- an hour in advance. parency arrangements and compared the role of the energy exchanges in matters of The TSOs submitted a compliance concept congestion management. The Quality of to the Agency providing for implementation Service Task Force has prepared an annual by the end of 2006. The TSOs kept to their Europe-wide report, the “Benchmarking proposal to set up an interim solution pending Report on quality of electricity supply”. final implementation of the legal requirements. Following assessment of the responses • The Cross Border Trade & Inter Transmission of the market players surveyed, the Agency, System Operator Task Force drafted guide- carefully monitoring the situation (requiring lines for the establishment of a new com- monthly reports) began putting the interim pensation mechanism for cross border solution into effect in January 2006. Imple- flows between TSOs. The System Operation mentation of the legal requirements is expect- Task Force in 2005 drew up congestion ed to begin not later than 1 January 2007. management guidelines that have been incorporated in the comitology procedure. CROSS BORDER TRADE IN ELECTRICITY Further, issues such as the integration of control energy markets, the comparison The Agency is involved in a number of bodies of rules on the reliability and security of at international level. In September 2005 it the individual synchronous network areas was represented for the second time at the and aspects of congestion management European Electricity Regulatory Forum in were addressed by this Task Force. Florence. The Agency’s presence is welcomed by the German power industry, as it is keen Performing the responsibilities under the cross to make the special features of the German border exchanges in electricity Regulation network structure known in the European The Agency’s duties in cross border trading in debate. Forum 2004 saw the emergence of electricity derive primarily from Regulation regional discussion fora, the so-called Mini (EC) No 1228/2003 on conditions for access to Fora. These were held for the first time in late the network for cross border exchanges in 2004/early 2005 and focused particularly on electricity. The Regulation standardises the ENERGY | ELECTRICITY 121

conditions for organising cross border trading the ﬁrst round of Mini Fora at the end of 2004/ for the Member States of the European Union. beginning of 2005. A focus of the discussions Section 56 of the Energy Act mandates the between the four TSOs, the German energy Agency with performing the regulatory exchange European Energy Exchange AG responsibilities. (EEX) and representatives from associations of traders, users and network operators, the The aim is to promote the creation of a real Economics Ministry and the Agency is the internal market in electricity by intensifying possible further development of the currently cross border trading. In 2005, this chieﬂy established explicit auctions. meant for the Agency monitoring the introduction of new allocation mechanisms at the German borders in three country-related areas: France, Switzerland and Poland/Czech Republic. The beginning of 2006 saw an improvement in the allocation methods for scarce transmission capacity at these borders. To take the situation forward, the Agency held consultations on award proceedings in the three regions, together with the French regulatory authority CRE for French/German capacity award. All the interested players had the opportunity to put forward proposals on improving the proceedings. The many responses from the players were incorporated in the Agency’s comments to the TSOs on the auction rules submitted.

In its comments the Agency also called for further development of the methods to award transmission capacity in the course of 2006. This includes the possibility of secondary trading of the capacity acquired by players as from mid-2006, introduction of intraday capacity trading on the German-French border at the beginning of 2007 and further development of intraday capacity trading on the German-Swiss border in early 2007 at the latest. Also, by the end of 2006, the methods for calculating transmission capacity are to be improved with the aim of maximising available capacity. Putting these requirements into practice will be one of the Agency’s main tasks in this connection.

At national level the various aspects of congestion management are discussed in the congestion management study group, established at the Agency as a consequence of 122 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Gas

SYSTEM CHARGES federal responsibility. For around 160 others, the charges are approved by the Agency Currently, 778 gas network operators are through an official delegation of powers, that registered in Germany with the Federal Net- is to say the federal states concerned have work Agency. These operators charge gas opted to delegate their regulatory powers to suppliers for access to the networks. Charges the Agency. are calculated on the basis of the specifications of the Energy Act (section 23 a) and the Gas In 2005, talks were held between the various Network Charges Ordinance (GasNEV), and players, with input from the Agency, with a constitute a significant part (around a third) view to finding a uniform charging system of the prices final customers have to pay. for the local distribution networks. So far, the Regulatory price controls are thus important discussions have centred around an approach as regards limiting energy costs for final under which similar customers should pay customers in Germany. The Federal Network similar charges, irrespective of the actual Agency has specified the structure and content access situation. of the reports that network operators are required to present for the approval proce- Benchmarking (gas) under dures, including a data collection sheet for section 21(3) Energy Act supply network operators, in order to have In the first round of benchmarking for the a proper picture of the cost and revenue gas industry, a large volume of company- situation for efficient consideration of the specific data had to be sent to the Agency by applications for approval of the charges. 1 November 2005. Often, the data received Following in-depth consultation with the were incomplete, so that the process of con- industry associations, network operators and solidating and plausibility checking continued state regulatory authorities, the Agency, in a well beyond 2005. In some cases, complaints decision taken on 20 December 2005, was able were filed with the higher regional court in to finalise the operators’ reporting require- Düsseldorf. Some companies had found the ments and the details of the applications. time for providing the data too short, or the extent of the data requested excessive. These Applications for approval of access charges complaints had not been settled by year’s end. must be submitted by 30 January 2006. A second round of benchmarking is sched- Currently, 72 network operators come under uled for 2006. ENERGY | GAS 123

Applications for exemption from cost-oriented SYSTEM ACCESS approval under section 3(2) GasNEV Exempted from the approval requirement Access to the gas supply system is regulated of section 23 a of the Energy Act are operators in section 20(1b) of the new Energy Act. This of supraregional transmission systems that provision lists the rules for access. The Gas calculate their charges in accordance with Network Access Ordinance (GasNZV) then section 3(2) of the Gas Network Charges took effect a few days after the Energy Act Ordinance and that have notified the Agency was adopted, and provides the details of accordingly, without delay, after 1 January access. Autumn 2005 saw the establishment 2006. When providing notification they of a consultation group in which all the rele- must also demonstrate that their transmis- vant industry associations and groups were sion system, for the most part, is exposed to included, whose mandate was to implement effective existing or potential pipeline com- the legal provisions and draw up a concrete petition. Network operators demonstrate this access model. The group met four times in to the Agency by showing compliance with 2005, addressing issues such as the establish- the minimum requirements (as per section ment of market areas/subnetworks, the 3(2) of the Ordinance) and other conditions. integration of storage facilities, the creation In 2005, in agreement with the Federal Cartel of efficient balancing mechanisms and the Office, extensive preparations were made for realisation of capacity trading options, besides assessment of the notifications. Additionally, agreeing a practicable, non-discriminatory “the existence of effective or potential com- access model complying with the require- petition” must be demonstrated. ments of section 20(1 b) of the Energy Act.

The Agency has 13 such notiﬁcations to hand. A working group was also set up at the same To help it with its assessment, it has sent time as the consultation group to discuss, with requests for information to gas traders in representatives from the Economics Ministry Germany and other countries, to industrial and the federal states, the issue of a generally customers and to municipal utilities. The binding access model. Also, the Specialist requests for information comprise questions Group for Regulatory Issues (Wissenschaft- on users’ practical experience of competition. licher Arbeitskreis für Regulierungsfragen, This information is important if the assessment or WAR) met on 17 November 2005 to debate of pipeline competition is to be placed on a the economic consequences of the new legal broad information base accommodating situation. Bilateral talks were held between the both sides of the market. Agency and particular industry associations and business analysts about the details of Operators not able to demonstrate that their access and other special aspects of the new transmission network is, for the most part, energy framework. The aim is to apply, within exposed to effective existing or potential pipe- the implementation period set in section line competition are required to carry out 20(1 b) of the Energy Act, a generally recog- cost-oriented charging. If there is effective nised access model at every supply level, in competition, the Agency carries out a separate order to stimulate competition, to facilitate benchmarking exercise limited to the charges switching supplier and thus to introduce and revenues. This then provides the basis on more elements of the market economy to which the charges of the companies operating the pipeline market. in this competitive environment are created. Non-discriminatory access to storage facilities is also important for healthy competition. An important precondition for this is the 124 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

publications that the storage facility operators in line with the groups’ terms of reference are required to effect under section 28(3) of and the topics additionally introduced by the the Energy Act. All operators, many of whom international industry associations: have not been compliant, have been sent a • balancing principles, letter reminding them of their duties. Their • a concept for regional energy markets as a compliance continues to be monitored. step towards the European internal market, • interoperability issues of gas quality, and Important for the creation of transparency for • a report on the monitoring of the storage all market players is the publication, required guidelines. under sections 20 and 21 of the Gas Network Access Ordinance, of information relevant to the system and to use of the system. All operators have been called upon, in letters and in a publication in the Ofﬁcial Gazette, to comply with this requirement. In all its letters the Agency pointed out that it would have to take supervisory measures under section 65 of the Energy Act in the event of non-compliance.

Relevant to obtaining a general view of the capacity situation and to the possible issue of an access order is the operators’ duty to notify the Agency of each instance of refusal to provide access. This requirement is anchored in section 20(2) of the Energy Act and was met in 2005 in rudimentary form only. Hence a letter has been sent to the operators urging regular compliance with their notiﬁcation duties.

INTERNATIONAL GAS TRADING

A main focus here is cooperation with the European Commission and the regulatory authorities of the other EU Member States in the CEER and ERGEG working groups. In the gas sector, the main issues addressed in the period under review were monitoring the implementation of the Guidelines for good TPA practice for storage system operators, the development of balancing principles, discussion of the preferred approach in calculating available capacity and a comparison of the European TSOs’ costs and charges.

The main ﬁndings were presented and discussed at the Madrid Gas Forum in September 2005. The following issues were addressed, ENERGY | MARKET WATCH 125

Market watch

The Federal Network Agency has begun its companies likewise have the highest shares. monitoring activities as per section 35 of The two leading companies RWE and E.ON the Energy Act. Monitoring is concerned not only have high market shares, but their with market conditions and the situation importance is further increased by the large as regards competition. Market watch, one number of stakes they hold in other power of the activities, will be the subject of the supply companies (municipal utilities in monitoring report required under section particular). These often give them a decisive 63(4) of the Energy Act. It should help to influence on the competitive behaviour of create market transparency and test how the associate companies. Local suppliers still effectively the Energy Act is working. account for over 90 percent of final customers supplied on the basis of a standard load profile. Structure of the electricity market Overall, the electricity market is highly con- In summer 2003, according to the Federal centrated. This applies to both sales and power Economics Ministry’s monitoring report, plant capacity. Electricity sales in Germany there were around 20 new companies in the are characterised by the vertical division into market supplying households in all parts of nationwide related utilities, regional supply the country. There are no indications that companies and local municipal utilities. The this number has significantly changed in wholesale level can be divided into the spot the meantime. market and the futures market on the one hand, and into the bilateral OTC (over the Since the market was opened between 1998 counter) market and the energy exchange on and 2004 the following rates of change have the other. The volume of trade at the German been found in the individual segments: energy exhange EEX has been rising steadily since its establishment.

Better contract With regard to downstream distribution, E.ON Change of with the exist- Market segment supplier ing supplier and RWE both hold between 25 and 30 percent of the market, Vattenfall Europe below Households 5 % 25 % 25 percent and EnBW less than 10 percent. Small industrial Power traders have captured more than customers 7 % 50 % 15 percent in all. In the market for supplying Large industrial customers 41 % 59 % active power end customers the four main 126 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

An important point is that a new contract with on the EEX spot market. Phelix Peak is the an existing supplier is a sign of competition simple average of the prices of the hours 8 to also. A new contractual offer is always a 20 (8:00 hours to 20:00 hours) on the EEX spot response to competition. There are higher market. rates of change with large industrial customers. Here, all the customers have either changed There was a clear increase in the monthly supplier or concluded a new agreement with average of both the Phelix Base and the Phelix their current one. Peak over the given period. The Phelix Base average for 2005 was € 45.97/MWh and thus Electricity price trends some 61 percent up on the 2004 average of Wholesale electricity prices have climbed € 28.54/MWh. The Phelix Peak average for rapidly and are currently in the spotlight. The 2005 was € 55.99/MWh and thus some 65 per- chart below shows the spot market prices on cent up on the 2004 average of € 34.02/MWh. the EEX energy exchange for the period Janu- ary 2004 to December 2005 using the monthly The chart on page 127 shows the prices for averages of the spot market indices Phelix the baseload and peakload futures traded on Base and Phelix Peak. Phelix stands for Physical the EEX derivatives market for the front year Electricity Index. Phelix Base is the simple (2005 in 2004, 2006 in 2005). Again, the average of the prices of all 24 individual hours monthly average was taken. The development

Prices on the EEX spot market from January 2004 to December 2005*

€ / MWh

100 93.33 90

80 81.18

69.63 70 56.37 60 58.75 57.90 62.62 54.24 53.72 45.79 46.58 43.15 45.31 50 46.67 47.99 45.19 45.34 40.37 37.10 35.72 47.52 40 36.47 34.98 34.45 35.62 35.18 33.49 32.23 33.65 35.34 39.58 38.16 30.23 29.30 37.81 29.17 29.85 29.60 30 27.35 31.05 31.63 30.82 28.18 27.32 29.61 26.54 26.51 25.57 20

Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec 04 04 04 04 04 04 04 04 04 04 04 04 05 05 05 05 05 05 05 05 05 05 05 05

Phelix Base Phelix Peak * Price data from www.energate.de ENERGY | MARKET WATCH 127

of these two indices is particularly important Federal Association of Energy Users (Bundes- for the German electricity market as they are verband der Energie-Abnehmer, or VEA) often used as a reference for retail pricing. The shows price increases of between 1.1 ct/kWh prices on the derivatives market reflect players’ and 1.7 ct/kWh for eight typical cases in a expectations of price trends and thus act as comparison of the price levels for 12 December pointers for local suppliers’ and industrial 2005 with those for 13 December 2004. The customers’ supply contracts, for instance. prices in the list are market prices such as those in new or extended contracts with a The comparison of average annual figures duration of one year. shows the baseload future for the front year to have risen from € 33.49/MWh in 2004 by Structure of the gas market around € 7.8/MWh to € 41.27/MWh in 2005 and The Agency’s monitoring report will also the peakload future for the front year from provide a detailed analysis of the structure € 49.13/MWh in 2004 by around € 7.2 /MWh of the gas market; thus little can be said here. to € 56.35/MWh in 2005. Germany’s main sources of natural gas are 16 percent own production with imports from The clear increases in the wholesale market Russia (35 percent); Norway (24 percent); the are also reflected in the retail price trends. Netherlands (19 percent); United Kingdom, Thus a list of electricity prices drawn up by the Denmark and others (6 percent). Six companies

Prices on the EEX derivatives market Futures rollover front year January 2004 to December 2005*

€ / MWh

100

70.98 70 61.90 60.32 60 58.78 64.04 56.77 51.89 50.60 51.34 50.67 58.54 49.11 49.37 50.60 50 46.55 46.11 46.54 46.49 50.85 50.93 51.67 49.04 47.04 43.70 43.77 46.45 46.73 47.76 38.79 45.06 40 43.30 34.12 35.15 34.13 35.07 33.76 41.08 32.80 33.77 38.30 32.74 31.53 34.88 30 34.68 33.50 33.93 32.72 31.78

Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec Jan Feb Mar Apr May June July Aug Sep Oct Nov Dec 04 04 04 04 04 04 04 04 04 04 04 04 05 05 05 05 05 05 05 05 05 05 05 05

Baseload futures rollover front year Peakload futures rollover front year * Price data from www.energate.de 128 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

have an estimated share of at least 5 percent to provisional calculations by the Federal Ofﬁce, of the German wholesale gas market. The three the border price per TJ natural gas in October largest companies account for some 80 per- 2005 was 43.3 percent higher at € 4,976.04 (this cent of available gas capacity. accords roughly with 1.79 ct/kWh) than the price in October 2004. The average border price To increase liquidity in the gas market, rose by 29.9 percent in the period November Ruhrgas AG, under a special requirement, will 2004 to October 2005 from € 3,190.34 (approx auction a total of 200 billion kWh of natural 1.15 ct/kWh) to € 4,145.85 (approx 1.49 ct/kWh) gas from its long term supply contracts over per TJ natural gas, compared to the period a period of six years (gas release programme). November 2003 to October 2004. There will be six separate yearly auctions, starting in 2003. Natural gas is being provided for The border price increase can also be seen in three auctions in Bunde/Emden and three in the municipal utilities’ kilowatt-hour rate, Waidhaus. May 2005 saw the third auction, published by energate, an estimated price at with the delivery point in Bunde/Emden. which the utilities obtain gas, free “citygate”, from long distance importers. The estimate is Liquidity in the national gas market is insuf- based on an HEL (light heating oil) index. The ﬁcient. Unlike in the electricity sector that price is adjusted every quarter, the time lag has the EEX energy exchange in Leipzig, the in indexing is three months and the average domestic gas market – except for the auctions price is formed over a period of six months. The in the gas release programme – has hardly price does not include tax on natural gas, but established itself as a trading centre. According the standard discount on it. Thus the kilowatt- to the operating company, the Eurohub Bunde hour rate on 1 October 2004 was 1.45 ct/kWh, gas trading hub deals in marginal quantities contrasted with 2.27 ct/kWh on 1 October 2005, only. up some 57 percent.

So far, the appearance of new suppliers has The higher prices that importers and down- had little effect on the market structure. New stream distributors have to pay have also led national and European energy trading com- to marked increases in the retail prices. Thus panies such as Trianel, Natgas, BP, Sempra, a list of industrial gas prices published by the Essent and Nuon have not yet fundamentally Federal Association of Energy Users (VEA) changed the structures of the gas market. The showed price increases between 1 October 2004 new regulatory framework for access to the and 1 October 2005 of between 0.35 ct/kWh networks and storage facilities is essential to and 0.89 ct/kWh in the individual categories. improving liquidity and to making natural gas eligible for quotation on the exchange. The European comparison of gas prices published by the UK consultant Energy Advice Ltd Gas price trends likewise shows price rises for Germany on the The border price published by the Federal Ofﬁce same scale. The comparison of gas prices in- of Economics and Export Control (Bundesamt cludes both domestic and industrial supplies. für Wirtschaft und Ausfuhrkontrolle, or BAFA) In the domestic area, the price of 4.71 ct/kWh is the statistical average price of all gas sup- in October 2004 with a volume of 30,000 kWh/ pliers’ imports to Germany and shows the price year rose by 0.71 ct/kWh or approx 15 percent of natural gas at the German border. As a rule, to 5.42 ct/kWh in October 2005. it follows the price for mineral oil, with a slight delay. The border price is derived from the volume and value of the imported gas, and does not include tax on natural gas. According ENERGY | CONSUMER ADVICE SERVICE 129

Consumer Advice service

The Energy Act brought with it the introduction, by the Agency, of a consumer advice service for electricity and gas customers. In the ﬁrst few months, most of the queries had to do with energy prices. As the Agency is responsible for regulating access to and charges for use of the system, it can advise only on these issues. It does not advise on gas and electricity tariffs. It provides both individual advice for consumers and, on its website, answers to frequently asked questions (FAQs), a glossary on the energy industry, and further useful links. 130 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Railway

Part of the Agency’s remit is supervision of The Rail Infrastructure Usage Regulations compliance with the legislation on access to (EIBV) detail the right of access to infrastruc- rail infrastructure. ture and services and, in particular, the legal claim to non-discriminatory treatment, The relevant legal norms were amended in addressing the following: 2005 to implement Community requirements. • right of non-discriminatory access to rail infrastructure, The number of companies and authorities • charging issues (basis of calculation, with access entitlements and the number of calculation criteria, discounts), companies with obligations was extended by • giving infrastructure operators and those the General Railway Act (AEG). Rail network with access entitlements a sounder basis operators and service facilities operators, on which to plan. under the provisions of the Act, must calculate their charges for access to train paths, service facilities and associated services in such a way that competition is not inhibited. Most notably, charging may not favour particular companies or authorities with access entitlements over others with such entitlements, without objectively justiﬁable reason. RAILWAY 131

The new Regulations include both a multi- Under the legislation, the Agency can open stage dispute resolution procedure and more cases on its own initiative and upon applica- transparent arrangements for dealing with tion. In particular, probes can be made of conflicting requests for train paths and • the rail network conditions of use and facilities. Such conflicting requests are dealt the service facilities conditions of use, with in three stages: • the arrangements on the levels or • weighing the situation with reference structure of an infrastructure company’s to the priority criteria specified in the infrastructure or other charges. Regulations, • allocation based on the higher regular The rail regulatory functions were trans- costs price, ferred to the Federal Network Agency on • allocation based on a bid above the level 1 January 2006. Proceedings on access of the regular costs (highest price). disputes opened before that date have been taken over by the Agency. Also included in the Regulations are incen- tives to improve the efficiency of rail traffic and to strengthen intermodal competition. Accordingly, rail track operators must grant their customers, those with access entitlements, rebates if the infrastructure service falls below the agreed standard. 132 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Agency’s functions, structure and core tasks

The Federal Network Agency was set up responsibility for supervising compliance on 1 January 1998 as the – now defunct – with the legislation on access to rail infra- Regulatory Authority for Telecommunications structure under the General Railway Act (AEG). and Post (RegTP) as a higher federal authority within the scope of business of the Federal Further tasks flow from other specialty laws Economics Ministry (BMWi). It took over the such as the R & TTE Act (FTEG), the Amateur responsibilities of the former Federal Post Radio Act (AFuG) and the EMC Act (EMVG). and Telecommunications Ministry (BMPT) The Agency is the competent authority under and the Federal Post and Telecommunications the Electronic Signatures Act and as such is Office (BAPT). A challenge for the Agency now tasked with setting up and monitoring a lies in taking over the functions flowing from secure and reliable electronic signatures the new Energy Act, which came into force infrastructure. The Agency was given powers on 13 July 2005. Reflecting this, the name by enactment of the new TKG on 25 June 2004, Regulatory Authority for Telecommunications in particular, with regard to number misuse and Post was changed to Federal Network (eg diallers), putting it in a position to make Agency for Electricity, Gas, Telecommunica- a yet greater contribution to consumer pro- tions, Post and Railway. tection.

First and foremost, the Agency’s remit is, The following is an outline of the Agency’s through regulation, to promote competition remit. in the telecoms, postal and energy markets, to ensure the provision of appropriate and The Agency’s tasks and workﬂows are complex adequate services across the country, to and wide in scope. They range from highly guarantee non-discriminatory network access specialised cases addressed in quasi-judicial and to provide frequency regulation arrange- proceedings in its core regulation areas, right ments. These responsibilities are detailed in down to its nationwide presence for technical the Telecommunications Act (TKG), the Postal trouble-shooting. Act (PostG) and the new Energy Act (EnWG), and are regulated additionally in ordinances Its task-oriented organisation, enabling the and other implementing provisions. On Agency to deal with these tasks efﬁciently, is 1 January 2006 the Agency also assumed described in the following. AGENCY’S FUNCTIONS, STRUCTURE AND CORE TASKS 133

The regional offices are mainly responsible when both elements – pro-active, require- for technical matters. They provide advice, ments-dictated deployment on the one hand for instance, on compliance with the TKG and and motivated staff on the other – are made with electromagnetic compatibility provisions to coincide, can the Agency’s functions be (EMV and EMVG). They are also responsible performed cost-effectively and efficiently for frequency assignment for mobile radio even in times of tight budgetary resources. and PMR systems, for instance. Another important area is the resolution of radio This staff management system, coupled with interference using state of the art facilities, the recruitment of new employees particularly monitoring compliance with regulations qualified for the tasks ahead, enabled the generally and carrying out radio monitoring Agency in 2005 successfully to assume the and inspection orders. The regional offices’ wide-ranging duties of energy regulation. responsibilities also cover monitoring compliance with the terms and conditions of The Agency’s highly disciplinary field of postal licences. As a result of certain tasks activities requires experts from a wide range (such as the processing of medical allowances of backgrounds. These include law, economics, for all the staff, call centres) being transferred engineering, mathematics, information tech- to the regional offices, the headquarters can nology and administration. The Agency has focus on its core tasks and local staff are 2,358 members of staff whose posts are taken meaningfully employed. from four civil service grades (senior, upper, medium, basic). These grades are also appli- Streamlined organisation, achieved by a cable to staff who are not civil servants. reduction in the number of regional offices, is to enhance efficiency and service provision. Analysis of staff by grades: Decisions on the closure and concentration of particular regional offices take account of Senior grade fundamental aspects such as infrastructure, (around 12 percent of those employed) closeness to the customer and the market, These posts are filled by legal experts and nationalwide presence, and cost. Staff levels economics and business economics graduates are adapted to requirements in a socially with various specialisations. Many are acceptable manner. communications engineers. A small number are graduates in other disciplines specific to Human resources their particular field of work. A modern staff management system is a priority at the Agency. When there are con- Upper grade straints on staffing levels, it is even more (around 35 percent of those employed) necessary to deploy staff optimally. It is only Most of the non-technical staff are adminis- possible to do so if staff planning takes account trative and business economics graduates of work requirements and the skills and incli- from higher education colleges. Most of the nations of the staff in equal measure. Only technical staff are communications engineers. 134 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Medium grade been taken up, four of which are provided for (around 50 percent of those employed) the ﬁrst time in Magdeburg, the new training The large majority of non-technical staff centre. Thus in 2005, a total of 61 young men have completed civil service traineeships in and women were trained at the Agency in administration. The technical staff have had these two occupations. vocational training as telecoms mechanics or communications technicians. Budget The Agency’s income and expenditure is Basic grade budgeted for in section 09, chapter 0910 of (around 3 percent of those employed) the federal budget. These staff, most of whom have completed apprenticeships, work in a variety of areas The table below shows the expenditure for such as internal administration or messenger the years 2005 (target and performance) and services. for 2006 (budget).

The Agency has also been providing places The income for 2005 includes collections for trainees since 1999. In 2005, a total of six subsequently made because of legal disputes young people joined the Agency as ofﬁce and changes in the law. communication trainees. Since 2003, traineeships in electronic equipment and systems The chart below shows the expenditure (target have been offered; 13 of these places have for 2006 in line with the ﬁrst government bill).

2005 2005 target performance 2005 target Type of income €’000 €’000 €’000

Telecoms fees, contribution and other charges 93,450 155,453 71,390

Fees and other charges under the Postal Act 90 139 100

Other administrative income, rents, disposals 890 2,396 1,060

Administrative income 94,430 157,988 72,550

Other income 15 10 17

Total income 94,445 157,998 72,567

2005 2005 target performance 2005 target Type of expenditure €’000 €’000 €’000

Staff costs 88,440 88,353 104,447

General administrative expenditure and appropriations 32,471 29,915 35,939

Investments 11,515 11,533 10,227

Total expenditure 132,426 129,801 150,613 AGENCY’S FUNCTIONS, STRUCTURE AND CORE TASKS 135 136 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Specialist Group for Regulatory Issues (WAR)

The Agency is regularly advised by, amongst Prof. Dr. Dres. h. c. Arnold Picot others, the Specialist Group for Regulatory Chairman Issues (WAR). Its members are experts in Ludwig-Maximilians-Universität München scientific, economic, business management, Institut für Unternehmensentwicklung socio-political and legal policy matters. Last und Organisation year, the Group met with the President and Vice Presidents and other members of the Prof. Dr. Juergen B. Donges Agency six times. Deputy Chairman Wirtschaftspolitisches Seminar The following issues were addressed: der Universität zu Köln • taxes in the Energy Act, • unbundling under the Energy Act, Prof. Dr. Wolfgang Ballwieser • incentive regulation tendering, Ludwig-Maximilians-Universität München • report on access to gas networks/gas Seminar für Rechnungswesen und Prüfung network access consultation group, • WIK presentation on modelled networks Prof. Dr. Charles B. Blankart and unbundling, Humboldt-Universität zu Berlin • incentive regulation (focusing on price cap Wirtschaftswissenschaftliche Fakultät and revenue cap, general productivity in Institut für öffentliche Wirtschaft the incentive formula, scheduling), und Wirtschaftspolitik • problems of establishing a reasonable fictitious return on equity, Prof. Dr. Torsten J. Gerpott • updating frequency usage plans 226 Gerhard Mercator Universität Duisburg and 227, Fachbereich für Wirtschaftswissenschaft • presentation of the UK regulator OFCOM’s telecoms unbundling model, Prof. Dr. Ludwig Gramlich • regulatory questions in connection with Technische Universität Chemnitz broadband optical fibre (Group’s report). Professur für öffentliches Recht und öffentliches Wirtschaftsrecht Also, the Group drew up a statement on DTAG’s optical fibre access network extension project. SPECIALIST GROUP FOR REGULATORY ISSUES (WAR) 137

Univ.-Prof. Dr.-Ing. Hans-Jürgen Haubrich RWTH Aachen Leiter des Instituts für Elektrische Anlagen und Energiewirtschaft (IAEW)

Univ.-Prof. Dr. Bernd Holznagel, LL.M. Universität Münster Direktor des Instituts für Informations-, Telekommunikations- und Medienrecht (ITM) Öffentlich-rechtliche Abteilung

Prof. Dr. Herbert Kubicek Universität Bremen Fachbereich 3: Angewandte Informatik

Dr. Karl-Heinz Neumann Wissenschaftliches Institut für Kommunikationsdienste GmbH Bad Honnef

Univ.-Prof. Dr. Dr. Franz Jürgen Säcker Freie Universität Berlin Fachbereich Rechtswissenschaft Institut für deutsches und europäisches Wirt- schafts-, Wettbewerbs- und Energierecht

Prof. Dr. Wolfgang Ströbele Universität Münster Lehrstuhl für Volkswirtschaftstheorie

Prof. Dr.-Ing. Peter Vary RWTH Aachen Institut für Nachrichtengeräte und Datenverarbeitung 138 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Strategic plan 2006

TELECOMMUNICATIONS This is mainly concerned with reviewing the regulatory framework (2006 Review) and the Promoting the development of the regulatory challenges posed by, for instance, European Union internal market Next Generation Networks (NGNs). In furtherance of the European regulatory framework, market definition and market In addition to the market analysis procedures analysis procedures will be carried out in 2006 and the issue of regulatory orders, eg on and the regulatory orders based on them bitstream access and termination of calls to drawn up, as far as this has not been completed. mobile networks, the Ruling Chambers will Cases in point are the leased lines market, also revisit reference offers for interconnect access and call origination on public mobile access services as per section 23 of the TKG, telephone networks, international roaming as far as companies are obliged to make refer- in mobile networks and broadcasting trans- ence offers. Decisions must also be taken in a mission services. It also involves national con- number of rates regulation cases such as those sultations on the drafts and the consolidation concerned with the phasing out of the EBC procedure in Brussels, bearing in mind the interconnection charges and rates for the scope for deregulation. Markets that are not terminating services of alternative operators. included in the Commission Recommendation but in respect of which there are indications of Encouraging efficient investment in the need for regulation must also be defined infrastructure and promoting innovation and analysed. In this connection there con- Defining and analysing the bitstream access tinues to be a number of legal, economic and market and the debate on the rollout of technical issues. DTAG’s optical fibre network show clearly how important the subject of innovation and The Agency’s experience with the consultation regulation is. There is a conflict of interests and consolidation procedure, in particular, between access to wholesale products for will be available to the Federal Economics broadband services on the one hand and the Ministry, allowing it to bring the whole of the call for a limited exemption from access regu- experience base to the international debate. lation on the other. The Agency is hoping This includes the Agency’s input in amending initially for voluntary agreements between the legislation. Participating in the IRG and the ERG, the Agency also takes an active part 1 The ERG Work Programme can be downloaded from in implementing the ERG Work Programme.1 www.erg.eu.int/workprog/index_en.htm STRATEGIC PLAN 2006 139

those concerned and a dialogue between all The Agency is also considering whether there the players. It will also be necessary to note is a need for regulatory action in the retail whether, in each case, the criteria for a “new broadband markets. Market definition and market” are really met. The Agency is plan- market analysis procedures will be carried ning to consult on the drawing up of criteria out for the broadband access and the Internet to identify new markets and of guidelines and access markets on the basis of the data surveys interpretation principles for the regulatory made of the actual market conditions. Should treatment of new markets. a company be found to have significant market power (SMP), a decision on suitable regulatory Taking the framework conditions for measures will be taken. These market analyses Voice over IP (VoIP) forward could also provide a basis on which to assess In September 2005 the Agency published key access resale products under possible regula- elements on the regulatory treatment of VoIP. tory decisions. These were the first framework conditions for this dynamic market segment. The Agency is Next generation networks and working on the assumption that the market in the interconnection of IP networks and around VoIP will continue to experience Future network structures discussed under rapid change, and considers it a major chal- the heading of Next Generation Networks will lenge to be able to respond quickly and flexibly be based on the principle of packet switching. to regulatory requirements as and when they End users will then be connected to NGNs arise. Thus the framework conditions will be over a variety of access technologies (UMTS, amended and refined to reflect developments. DSL, possibly WIMAX, etc) and use a variety of services (voice, data and, in future, possibly Broadband services and TV services too). NGNs enable changes in the broadband infrastructure value added, since value can be added at the The importance of broadband services such functional levels (access, transport, control as VoIP, broadband Internet access, and video and service) by different providers. and TV services will continue to grow, which is why the provision of broadband network Until the transition to NGNs is complete, there infrastructure services and their regulatory will be a relatively long migration phase from treatment is an important issue. The provision circuit switched networks to the new network of broadband wholesale products is key to structures. For the Agency, this will present a further growth in these markets. Thus the host of regulatory challenges. analysis will look at how the individual wholesale products are to be shaped. The interaction • The question arises of how IP networks between these (regulated) wholesale products should be interconnected in practice. To will be examined, as will any possible inter- answer this, the Agency has set up an action with other wholesale products offered advisory project group whose terms of on a voluntary basis. reference are to investigate the framework conditions for interconnecting IP net- 140 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

works, using a set of questions with which – meetings of the high ranking EU Radio to do so, and then to develop possible Spectrum Policy Group (RSPG), the EU scenarios. One of the main work items is Radio Spectrum Committee (RSC) and to draw up a new interconnect regime for the CEPT Electronic Communications voice telephony. The project group, headed Committee (ECC), by the Agency and involving distinguished • monitoring and assessing compliance telecoms experts, began work in August with the coverage requirement of at least 2005 and has set itself a period of one year. 50 percent of the population in the UMTS It will publish its findings in a final report. networks, • DRM, or Digital Radio Mondiale, a digital • Another issue is service interoperability. system in long wave, medium wave and Questions of access and of guaranteeing short wave, drawing up key elements for interoperability will feature more promi- awarding spectrum for DRM, nently in the production processes of • demand-driven provision of transmission future network structures with their capacity for broadcasting and multimedia potential for a greater division of labour. services, most notably mobile TV, The Agency is therefore likely to have to • provision of frequencies for the 2006 resolve more and more questions of access, World Cup, eg to database services or to billing services, • launching award proceedings for Broad- in section 18 TKG procedures. band Wireless Access applications in the band 3,400 to 3,600 MHz. Spectrum management The following projects are planned to Standardisation encourage competition and innovation: A precondition for the introduction of inno- • implementation of an E-GSM concept, ie vative services is standardisation at national – shifting some of the frequency usages and international level. Standardisation is a in the E networks to the 900 MHz band market process of enormous strategic impor- with a view to further developing tance. Members of the Agency provide input mobile communications, for the standardisation bodies, eg the Inter- – extending the frequency assignments national Telecommunication Union (ITU), of D1, D2 and E1 to 2016, the European Telecommunications Standards – launching a consultation on released Institute (ETSI). The Agency’s contribution in spectrum at 1800 MHz, 2006 will focus on the following activities: • preparation of an award concept for 3G • the structure and features of NGNs, includ- (1.9 and 2.6 GHz), ing interoperability, convergence aspects, • agreeing spectrum trading arrangements, open interfaces, separation of transport, • evaluating the study on flexibility in network control, service and applications, spectrum management and drawing up availability, security, end to end quality, concepts to adapt and redesign spectrum consumer protection, management, • use of fixed network numbers in the • preparing international conferences and Internet environment (ENUM project), meetings, most notably • consideration of the emergency calling – Regional Radiocommunication Con- facility in the new network and service ference (RRC 06) for the revision of structures (emergency calls using VoIP, Stockholm 1961, location information for emergency calls, – World Radiocommunication Confer- emergency calls from vehicles, so-called ence (WRC) 2007, e-calls); communications structures in crises and disasters (warning the popula- STRATEGIC PLAN 2006 141

tion using radio-based communications Consistency requirement technologies), Consistent pricing is an essential part of a • broadcasting transmission technologies competitive environment enabling fair com- and access platforms (interfaces for open petition between companies with different access), network and service concepts. The principles • electromagnetic compatibility of cable TV for securing consistent rates regulation must networks, broadcast receivers and multi- therefore be further developed accordingly. media equipment (standards, emission Independently of individual cases on central limits). aspects of the consistency requirement, it is planned to concretise and communicate Securing fair competition and promoting positions so as to give players planning markets with sustainable competition certainty. In this connection, it will also be Basic rates regulation issues necessary to take account of how the rates are A trend towards more complex tariff structures drawn up for the case of a resale obligation. can be noted. In particular, the greater importance of bundled offers and flat rates is making Safeguarding user and consumer interests it necessary to tighten up the criteria of section Consumer protection will be an important 28 of the TKG. Notes were published in August issue in 2006 as well. Below are some of the 2005 on objectively unreasonable bundling concrete projects: within the meaning of section 28(2) para 3 of • continuing the “Basic telephone” project, the TKG. This will be followed up by issues of • widening the range of information pro- unjustified discounts and margin squeezes vided on the Agency’s website on topics being addressed more closely, in light of prac- of interest to consumers, tical experience to date. The aim is to enable, • assisting in the amendment of the con- for instance, criteria to be defined on the basis sumer protection legislation set for 2006 of which the replicability by efficient com- in the telecoms sector and drawing up petitors of offers from the dominant company prohibition measures to deal with com- can be judged. This, in turn, is vital if the risk pany breaches, of market power being leveraged is to be • introduction of online procedures for effectively countered and sustainable com- mediation as per section 35 of the Tele- petition in the retail markets promoted. communications Customer Protection Ordinance (TKV) and conceptual further The last rates regulation case showed the development after the initial experiences need, in costing efficient service provision, have been analysed. to consolidate the basis for establishing non- infrastructure costs (operating costs, rentals, Continuing its activities to combat the abuse common costs). In rates proposals, the percent- of premium rate numbers, the Agency in 2006 age of costs that cannot be allocated directly will observe and evaluate the effects of the is very high and also subject to considerable changed minimum requirements for diallers, fluctuation. Thus further studies on the level of in particular new business models and abuse non-infrastructure costs and relevant markup scenarios as a corollary. Due to the discontin- rates will be carried out in order to generate ued use of 0190 numbers on 31 December 2005 reliable findings on how to attribute these cost and greater use of the 0900 range for premium components and in order to refine the meth- rate services it will be important to monitor odology for efficient costing with reference compliance with the Agency’s stipulations and to alternative cost models for the Agency’s the requirements of section 43 b in conjunction future decisions. with section 152(1) of the TKG (including pricing information requirements). 142 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Securing efficient and interference-free EMF monitoring use of frequencies Under the activities to protect persons exposed Frequency usage plan to electromagnetic fields, the prototype of a One of the spectrum management activities transportable EMF monitor was devised in is updating the frequency usage plan as 2005 for independent measurements over a part of implementing the Frequency Band period of several weeks. In 2006 it is planned Allocation Ordinance. to put several of these into operation and to make the results available for the general Market surveillance under the EMC public in the Agency’s EMF database on its and the R & TTE Directive website. The findings will supplement the Equipment is increasingly being placed on Agency’s long-running measurement pro- the market via electronic sales platforms gramme, the findings of which can also be (Internet). The Agency will therefore draw up viewed in the database (so far, only “snap- and implement a concept for the systematic shots” of the emissions are possible). inclusion of these sales platforms in the market surveillance system. Protection of public safety interests Technical implementation of intercepts Technical compatibility The Agency is on hand in the standardisation Advancing digitisation and broadband signal bodies to advise on the activities for inter- transmission are calling for new technical ception systems in connection with Internet compatibility criteria and coordination meth- access (DSL, cable and WLAN) and VoIP. For ods, currently under study and development 2006 a new version of the technical directive by the Agency. They will then be placed on specified in section 110(3) of the TKG (TR TKÜ) the agenda of national and international is planned. bodies for discussion and agreement. Automated information procedures The main work items for 2006 are: In carrying out automated information • terrestrial digital video broadcasting procedures under section 112 of the TKG, the (DVB-T) planning for the ITU Regional Agency is making a valuable contribution to Radiocommunication Conference 2006, protecting public safety. Following the issue • aspects of compatibility with bands for of a new ordinance under section 112(3) of the next generation mobile and WLAN, TKG, a technical directive will be drawn up • assisting with the EMC standard on with the participation of the associations con- emissions from wired telecoms networks, cerned, telecoms companies and the author- • further developing models to derive ised bodies, providing details of procedures. limits for permissible emissions from equipment, systems and installations, Securing the efficient use • compatibility studies for new road of numbering resources transport telematics. As technologies and the markets advance, changes in the structure and organisation of The Agency’s aim is to facilitate the intro- the German numbering space are constantly duction of new technologies and services needed if the regulatory aims are to be through technical compatibility. It is impor- achieved. Separate measures are to be placed tant that current applications are given in context in the form of an overall concept. adequate protection and new applications This will secure quality regulation by taking can function properly. account of the economic implications of numbering for the market and stakeholders’ interests in respect of transparency, planning STRATEGIC PLAN 2006 143

certainty and meeting demand in the long approvals to ex post price controls can be ex- term, heeding the requirements for efficient pected. A prominent part is played in all these use of numbers. In drawing up this concept the developments by efficient service provision Agency intends to involve network operators, costing. The Agency will address these issues service providers and consumer representa- early on in readiness for the new situation. tives. Work on it is due to begin in 2006. Assessing quality of service in ELECTRONIC SIGNATURE a multi-provider environment One of the Agency’s tasks is to monitor com- Electronic signature is a key element of the pliance with quality criteria, including quality government’s entire BundOnline and eCard of service levels (section 11(2) of the Postal strategy. The Agency is pushing the develop- Act, or PostG). Currently, in light of the legal ment of the necessary infrastructure, partic- arrangements (DPAG’s exclusive licence and ularly in view of its long term nature (eg universal service obligation), the letter market archives) and ever more rigorous security is characterised by the existence of one uni- requirements. It also has a role in the govern- versal service provider (DPAG). In the parcels ment’s major projects, for instance the activi- market, the relevant services are delivered by ties in the Economics Ministry’s international a number of providers, DPAG included, who is strategy, and national and international currently under a legal obligation to provide projects. An important activity is preparing universal service. Once DPAG’s exclusive for the emerging mass market. licence has expired and the obligation lapsed on 31 December 2007, however, universal POST services are likely to be delivered by a number of providers. In view of this, the Agency will Basic rates regulation issues develop procedures with which to assess The Agency has set the criteria for the price quality of service levels in a multi-provider cap for the period 2003 to 2007. Subject to the environment. price cap are postal services that require a licence (= conveyance, on a profit-oriented Collecting market data in multi-stage basis, of letters up to 1,000g in weight); for this, downstream production processes the services are grouped into three baskets In the postal market – particularly the letter (basket M: monopoly services, basket W: ser- market – a growing number of multi-stage vices provided in competition, basket T: work- downstream production processes (eg sharing services). Rates for services requiring cooperation schemes, consolidation) can be a licence and not included in the baskets are noticed. The Agency regularly makes studies approved on a case by case basis. Rates that do of the development of competition in the not need to be approved – eg those for parcel postal services market (regulatory aim set out services – may be subject to ex post price con- in section 2(2) para 2 of the Postal Act) and of trols if the provider is dominant. the job situation. In doing so, it is increasingly encountering a typical problem, multiple data In rates regulation, a number of issues will need collection. At present, this statistical effect clarification. For the most part, these stem from can neither be avoided nor its effect on the expiry of the price cap on 31 December 2007 result estimated. Thus the Agency is looking and expiry at the same time of the statutory to develop a procedure that avoids, or at least exclusive licence. For the price cap, the baskets reduces, multiple data collection. The extent must be redesigned and new criteria set. Fur- to which jobs created, say, by a subcontractor ther individual approval procedures are likely for a postal service provider can be statistically to be necessary. Also, a shift from ex ante recorded will also be looked at. 144 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Analysis of adjacent markets With regard to abuse cases, current develop- In the letter market in particular, there is ments indicate that the Chamber will need increasing demand for one stop shopping to address the details of access conditions and created by integrating upstream or down- corporate and rates structures in respect of stream parts of the value added chain into access to worksharing services. the traditional conveyance service. One of the reasons for this is the repositioning of com- ENERGY REGULATION panies offering, more and more, services all along the value added chain; another is the Promoting the development of the EU trend towards full outsourcing. Thus there internal market through the introduction is a risk of market power being leveraged to of a new regulatory framework the upstream and downstream markets. It is The Second Energy Statutes Reorganisation therefore necessary to analyse the markets Act took effect on 13 July 2005. Section 1(3) of for upstream services (eg mail preparation) the Energy Act states as a further legislative and for downstream services (eg address purpose the transposition and implementation management) as well as the postal services of European Community law in the area of markets themselves. the line-bound supply of energy. Putting these new legal requirements into practice Ruling Chamber cases represents a new duty for the Agency, which The following important rates regulation it will continue to perform with vigour. cases are expected: EC Regulation on cross-border • access to change of address information exchanges in electricity for competitors as per section 29(2) of the Regulation (EC) No 1228/2003 on conditions Postal Act. This involves the efﬁciency of for access to the network for cross-border the black box method being checked and exchanges in electricity has been directly appli- the corresponding rates being approved, cable in the EU since 1 July 2004. It empowers the European Commission to issue guidelines • review of the conditions for access to P. O. on the main issues, ie on the principles for box facilities for competitors as per section harmonising the tariff systems, for conges- 29(1) of the Postal Act and approval of the tion management at cross-border intercon- corresponding rates, nectors and for a compensation mechanism for cross-border supplies. ERGEG (European • approving rates for service of documents, Regulators Group for Electricity and Gas), in particular approving new rates for with input from the Agency, has already DPAG. At the same time, there will be an prepared draft guidelines for congestion ongoing examination of the compatibility management and harmonisation of the tariff with the Postal Act of constantly changing systems. The guidelines are expected to take new service delivery rates models, effect in early 2006. The Agency will follow through and monitor their implementation. • review of compliance with the changed requirements arising from price cap regula- The guidelines on a compensation mechanism tion and carrying out approval procedures will be drawn up by ERGEG in 2006. The for the ﬁfth price cap period for 2007, Agency will have a part to play and will dis- charge the resulting functions. • approving rates for DPAG’s subsidiaries operating under their own licence in the The European Commission set up seven region- market for licensed postal activities. al Mini Fora on various aspects of congestion STRATEGIC PLAN 2006 145

management in late 2004/ early 2005 with and is highly involved in the activities of both. a view to coordinating congestion manage- Thus in 2005, it assumed the chair of the ment within the respective regions. The Efficiency Benchmarking working group. It Agency represents Germany in four of the also provides input for nearly all CEER’s and seven Mini Fora groups. At least one more ERGEG’s other working groups. For Germany round of the Mini Fora is to take place in 2006, as a major energy market at the heart of as there are still concrete tasks pending. The Europe, the creation of an internal market in establishment of cross-border intraday trad- gas and electricity means that diverse action ing markets and the harmonisation of the is needed. Thus the Agency’s work in these balancing markets will also be discussed at two organisations is of great importance. these meetings. As these issues are important steps in the creation of a European internal The Agency is also active in the Madrid Forum market in electricity and designed to intensify and the Florence Forum. Twice a year, national trading, the Agency is called upon here too to regulatory authorities, the Commission, represent Germany’s interests in the European government representatives and industry debate. Coordination of the national interests and consumer representatives meet to discuss takes place within the congestion manage- the problems arising in implementing the ment study group set up at the Agency, whose internal market, to exchange experiences members include, besides the Federal Econo- and to draw up standards. mics Ministry, the four TSOs, EEX, the German energy exchange, and the industry associa- Ensuring effective and genuine competition tions EFET, VIK, VDEW and VDN. In 2006 the Under section 1(2) of the Energy Act, regulation study group will continue its work on the of the electricity and gas supply systems serves congestion management methods developed the goals of ensuring effective and genuine so far, taking into account developments in competition in the supply of electricity and the other Member States and the requirements gas and ensuring efficient and reliable opera- set by the European Commission. Thus the tion of energy supply systems for the long EEX AG has drawn up a concept on Open term. The aim is to give all energy suppliers Market Coupling, to be concretised and taken non-discriminatory access to the network. forward by the study group. To this end, the Unbundling, efficiency-oriented cost controls Agency has invited tenders for two reports. and clear access arrangements constitute the These will address the legal issues for setting first set of tools provided by the legislation up the auction office assumed by the model, with which to achieve this. the economic assessment of different congestion management methods and economic Basic energy regulation issues aspects of establishing an auction office under Clarification of a number of basic issues will the open market coupling model. The EEX be needed, mainly as a result of implementing AG, for its part, is commissioning a report on the new Energy Act. These activities will the technical feasibility of the concept. One of include looking at the economic and business the Agency’s main tasks in 2006 will therefore management implications of regulatory be to push the development of the concept systems, advising on the energy industry within the study group, in accordance with aspects of current legislative procedures, the findings of the reports, and to encourage coordinating the subjects of research and its takeup in the neighbouring European states. advisory reports and generally coordinating positions on a whole range of energy regula- Cooperation in international bodies tion issues. The Agency is a member of both ERGEG and CEER (Council of European Energy Regulators) 146 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Unbundling must establish whether the TSO can be The Energy Act, in sections 6 ff, seeks to secure exempted from cost-oriented charging on non-discriminatory access to the networks account of the existence of competition. This through a variety of unbundling provisions. is an important examination the Agency Accordingly, there must be legal unbundling, must make. operational unbundling, unbundling in terms of use of information and accounts Here, the federal states can opt to delegate and internal bookkeeping between network their regulatory powers to the Agency. When operators and vertically integrated under- they do, the Agency takes a decision in its own takings’ sales and generation activities. The name but acts as a “body” of the federal state Agency plans to provide interpretation concerned. The details of such delegation of principles to give companies legal certainty powers are set out in an administrative agree- and the market planning certainty. ment between the federal government and the respective state, whereby another 300 net- Rates regulation works could be dealt with by the Agency. Rates regulation will make a vital contribution to securing competition. System charges make The Agency will carry out a benchmarking up roughly a third of the retail price. The exercise in 2006 for the first time to make sure Agency’s aim is to encourage efficient service that access charges are oriented by the costs provision among the operators through of operations management within the mean- regulating the charges and thus to lower ing of section 21(2) of the Energy Act. The them. Part and parcel of this is developments comparison will be based on system charges, in upstream and downstream activities such revenues or costs. Cost-oriented charging will as generation, wholesale business and sales. then accommodate the results. Operations management will not be considered efficient In early 2006, approval of the system charges when an operator’s charges, revenues or will feature prominently in the Agency’s costs are higher than the average figures work. The Agency will review all the charges identified in the benchmarking exercise. of companies falling under its national remit. Grid operators are required to submit their Access to the gas and electricity first application for approval of their charges supply networks no later than three months after enactment The aim of section 20(1 b) of the Energy Act of the Electricity Network Charges Ordinance. is the creation of a single, non-ownership- Gas network operators must do the same no related market area across the country. The later than six months after enactment of the provision states that before gas supply systems Gas Network Charges Ordinance. Even before can be accessed, a contract on feed-in capacity expiry of these time limits, any increase in is required with the operator into whose net- charges is subject to approval. Six months work gas is to be fed. In addition a contract after receipt of the application in full marks on output has to be signed with the operator expiry of the period for approval. Charges from whose network the output of gas is to approved are maximum prices; this means take place. All operators of gas supply systems that reductions are possible without further are required to cooperate with one another to approval. In these cases, however, the Agency the extent necessary for transport customers will examine whether the reductions are to need to sign only one feed-in and one out- sufficiently large. In addition, section 3(2) of put contract for handling transport through the Gas Network Charges Ordinance provides a number of interconnected networks, unless an intermediate step for supraregional TSOs, this cooperation is not technically possible or under which, upon application, the Agency is economically unreasonable. STRATEGIC PLAN 2006 147

The Gas Network Access Ordinance took effect itly codified in section 20(1 b) sentence 9 of on 29 July 2005. Its main focus is a flexible the Energy Act. Competition in the gas mar- entry-exit model. Gas supply network opera- ket will only unfold effectively, efficiently tors must therefore offer feed-in and output and transparently if switching supplier can capacity that can be used and traded sepa- be done in an uncomplicated and non- rately, without transport customers having to discriminatory manner. Here, the lawmakers restrict themselves to a particular, transaction- are following the “backpack” principle, under dependent transport path. which a new supplier, under certain conditions, can claim the feed-in and output So far, central questions of the implementation capacity reserved with the old supplier. of section 20(1 b) of the Energy Act and the Implementation of this principle at distribu- Gas Network Access Ordinance have not been tion upstream levels must be examined and finally settled. One of these is cooperation taken further. between the system operators, required under section 20(1 b) of the Act, and whether the The Energy Act and related ordinances largely time limit set out in section 118(1 a) of the Act take over the access procedures introduced by (1 February 2006) should also apply to parts the Associations’ Agreement II plus. New areas of the Ordinance. The Agency will hold a con- have to do with inviting tenders for control sultation with the stakeholders to make final energy, energy dissipation, and metering and implementation as broad based as possible. measuring liberalisation. For the first time, The consultation will, it is hoped, deliver a TSOs are obliged to invite tenders, not restrict- consensual solution to all the main points of ed to control areas, for the different types of drawing up the contracts and the cooperation control energy on a common Internet platform. obligations with regard to 1 February 2006 The Agency has extensive powers to make and will introduce implementation stages determinations, to enable it to secure the nec- until that time. Regulatory precautions must essary degree of efficiency and transparency be taken for the event of failure. in the control energy market in particular. Developing the necessary measures will be A special set of problems is categorising the high on the Agency’s agenda. Also planned is networks in line with the Energy Act and the to bring consistency to the access contracts – gas ordinances into transmission system and supplier framework contracts, use of system distribution system groups. There could be contracts and balance group contracts. Here, a third group in the form of a supraregional the Agency will initially make determinations transmission level, with up to six companies, on the most pressing issues and then consider depending on the criteria used. Discussions whether it is necessary to introduce standard on this within the Agency and with the contracts. It will be necessary at any rate to operators, in particular, have only just begun. introduce standards for the business processes Drawing up criteria that clearly distinguish between traders and operators as regards between transmission and distribution supplying customers with electricity, and the systems is fundamentally important, not just data formats to be used. The Agency will sup- in view of information requirements but also port the market’s ongoing attempts at agree- in view of the resulting access models and ment and push ahead with giving legal form use of system charges. to the results, which all the market players want. Also central are the tasks falling to the Attention should also be drawn, in connection operators as regards responsibility for their with the implementation of a new gas network systems and securing transparency for the access model for the German market, to the players. Compliance with these requirements problem of switching supplier. This is explic- will be monitored by the Agency. 148 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Devising a form of incentive regulation of the data received by the Agency, and the for the German market other on supporting the Agency in the The Agency is mandated to develop a form of development and execution of calculations incentive regulation that meets the specific and sensitivity analyses for the efficient bench- requirements of the German energy market. marking of German operators. A detailed To this end, the Agency will present a report study of international practice and the to the federal government by 1 July 2006, in extent to which it can be incorporated in the accordance with section 112 a of the Energy German system will feed into the concept. Act. An ordinance will settle the details of its concrete implementation. This will be drawn Market watch up by the federal government, with the Eco- Besides its regulatory tasks, the Agency con- nomics Ministry responsible for coordination, stantly monitors important aspects of market and issued by the federal government with activity as set out in section 35 of the Energy the consent of the German Bundesrat. Act. This also includes the implications for the final customer. To obtain the necessary infor- The Agency will draft the report with the mation, the Agency has the right of request participation of the federal states, academia under section 69 of the Energy Act. The moni- and the economic circles affected, and will toring results provide the basis for an annual also take account of international experience report (section 63(4) Energy Act), which the of incentive regulation systems. Agency will publish in 2006 for the first time.

A consultation process was launched to secure Consistent regulation: the participation of business and the federal cooperation with the federal states states in devising incentive regulation. One Under the Energy Act, regulatory responsibil- consultation group was set up comprising ity is split between federal and federal state representatives from six federal states (North- level. Active at federal level is the Agency, Rhine Westphalia, Bavaria, Hesse, Baden- and at federal state level, a regulatory author- Württemberg, Thuringia and Saxony-Anhalt). ity in each of the states. The form cooperation Another was established to which 15 energy between the Agency and the federal states associations were invited. These two bodies should take will therefore feature prominently will also meet monthly in 2006. in 2006 in the interest of consistency. A committee of federal state representatives has The participation of academia is secured already been set up. basically through the award by the Agency of advisory reports and projects. The Agency Safeguarding user and consumer interests has invited tenders on four issues: study of Advising consumers will be an important the practice and details of the international activity in 2006. A growing number of com- application of incentive regulation methods; plaints and queries from consumers shows analysis of the cost drivers in the electricity that the Agency is called upon in the energy and gas markets for the identiﬁcation of sector, too, and wishes to take special note of suitable benchmarking parameters from the the consumer as a market player through its technical and economic viewpoints; analytical consumer advice service. cost models in the energy industry, and consideration and assessment of network The Agency will be involved in the following reliability and quality of supply in incentive concrete projects: regulation. Two advisory projects were also • seeing through the ordinances set for commissioned, one for the development of 2006 on the general duty of connection methodological approaches on the plausibility (section 18 Energy Act) and the general STRATEGIC PLAN 2006 149

prices and conditions of supply (section 39 regulation, under tight time limits. This Energy Act) from the consumer’s point of “multidimensional” extension of tasks applies view, to access, the level and structure of infra- • widening the range of information pro- structure and other charges included, so that vided on the Agency’s website on topics questions of price regulation have become of relevance to the consumer, prominent. • liaising with the consumer advice centres on current issues and the limits of the Since 2005, a special group at the Agency has Agency’s remit with regard to network- been dealing with the extensive organisational, related questions. stafﬁng and thematic activities involved in preparing to meet this new challenge. The RAILWAY Agency will draw on its experience of regulating the telecoms and postal markets on On 1 January 2006 the Agency also assumed the one hand and regulating the energy sector responsibility for monitoring compliance with on the other in order to achieve lean and the legislation on access to rail infrastructure. practicable regulatory practices. This is done on the basis of the Third and Fourth Railway Legislation Amendment Acts, which became effective on 30 April and 11 August 2005. In this, the Agency is subject to the administrative supervision of the Federal Ministry of Transport, Building and Urban Development (BMVBS). Until 31 December 2005 the rail regulatory functions now transferred to the Agency were performed by the Federal Railway Authority (EBA).

These functions are currently performed by the “Network Access” section set up with the Federal Railway Authority. From 1 January 2006, the 12 members of staff will initially continue their work as the Rail Regulation startup team. In all, the Agency will take over 21 established posts which – as far as has not already happened – will be ﬁlled straightaway. Subject to the provision of further posts in the budget legislation, the startup team will then become part of the Agency’s new Department 7 “Rail Regulation” in the course of 2006.

The rail regulator’s powers were widened considerably during the legislative passage. Regulatory activity was extended to cover all the infrastructure companies, and competitors were given greater rights of access to all the service facilities. Preventative regulation is now also in place besides “repressive” 150 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

List of abbreviations

A BLM Bavarian Regulatory Authority ADSL for Commercial Broadcasting Asymmetric Digital Subscriber Line BMPT AEG Federal Post and Telecommunications General Railway Act Ministry

AGB BMWi General terms and conditions Federal Economics and Technology Ministry

B BVerwG Federal Administrative Court BAFA Federal Ofﬁce of Economics and Export Control BWA Broadband Wireless Access BAM Federal Institute for Materials BOS Research and Testing Emergency organisations

BAnerkV BZA Functions Assignment and Outbound mail sorting centre Recognition Ordinance BZE BAPT Inbound mail sorting centre Federal Post and Telecommunications Ofﬁce C BEMFV Ordinance concerning the Controls for the CAB Limitation of Electromagnetic Fields Conformity Assessment Body

BKartA CEN Federal Cartel Ofﬁce European Committee for Standardization LIST OF ABBREVIATIONS 151

CEER DRM Council of European Energy Regulators Digital Radio Mondiale

CEPT DSL European Conference of Postal and Digital Subscriber Line Telecommunications Administrations DTAG CERP Deutsche Telekom AG European Committee for Postal Regulation DVB-H COCOM Digital Video Broadcasting-Handheld Communications Committee DVB-T CPG Digital Video Broadcasting-Terrestrial Conference Preparatory Group E CRE Independent administrative body in charge e of regulating the French electricity and gas estimated markets EBA D Federal Railway Authority

DAB EBC Digital Audio Broadcasting Element-based charging

DG COMP ECC Directorate-General for Competition Electronic Communications Committee

DG TREN EEX Directorate-General for Energy and Transport European Energy Exchange

DMB EFET Digital Multimedia Broadcasting European Federation of Energy Traders

DMR EFIS Digital Mobile Radio ERO Frequency Information System

DPAG EIBV Deutsche Post AG Rail Infrastructure Usage Regulations 152 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

EMC GasNZV Electromagnetic compatibility Gas Network Access Ordinance

EMVG GIS Electromagnetic Compatibility Act Geographic Information System

EMVU GSDZ EMC and the environment Digital access ofﬁce

EnWG GSM Energy Act Global System for Mobile Communications

ERG GWB European Regulators Group Competition Act

ERGEG H European Regulators Group for Electricity and Gas HDTV High deﬁnition TV ETSI European Telecommunications HSDPA Standards Institute High-Speed Downlink Packet Access

EuGH I European Court of Justice ICAO F International Civil Aviation Organisation

FCC ICT Federal Communications Commission Information and communication technology

FM IEB TF Frequency Management Information Exchange und Benchmarking Task Force FreqBZPV Frequency Band Allocation Ordinance IPTV Internet Protocol Television FTEG Radio Equipment and Telecommunications IRG Terminal Equipment Act Independent Regulators Group

FTTH ISO/IEC Fibre to the home International Organization for Standardization G ISP GasNEV Internet service provider Gas Network Charges Ordinance LIST OF ABBREVIATIONS 153

ITE PMD Information technology equipment Radio monitoring and inspection service

ITU PMR International Telecommunication Union Professional mobile radio

ITU-R PostG ITU Radiocommunication Sector Postal Act

M PUDLV Postal Universal Service Ordinance MPEG Motion Pictures Experts Group PZA Formal delivery order MRA Mutual Recognition Agreement R

MWDG RegTP Premium Rate Services Act Regulatory Authority for Telecommunications and Post N RNB NGN Number block Next Generation Network RSPG NotrufV Radio Spectrum Policy Group Emergency Services Access Ordinance R & TTE NSPC Radio equipment and telecommunications National Signalling Point Code terminal equipment and the mutual recognition of their conformity NTR National number S

O SDR Software Deﬁned Radio OVG Higher administrative court SE Spectrum Engineering P SRD PAL Short Range Device Phase Alternate Line SRR PDLV Short Range Radar Postal Services Ordinance SSBn Interface speciﬁcations 154 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

StromNEV UWB Electricity Network Charges Ordinance Ultra-wide band

StromNZV UWG Electricity Network Access Ordinance Unfair Competition Act

T V

TCAM VDEW Telecommunication Conformity Assessment Electricity industry association and Market Surveillance Committee VDN TCB Association of German network operators Telecommunication Certiﬁcation Body VDSL T-DAB Very High Bitrate DSL Terrestrial Digital Audio Broadcasting VEA TDSV Federal Association of Energy Users Telecommunications Data Protection Ordinance VIK Electricity industry association TFTS Terrestrial Flight Telecommunications System VG Administrative court TKE Telecommunications equipment VO Funk Radio Regulations TKEE Telecommunications terminal equipment VoIP Voice over Internet Protocol TKG Telecommunications Act W

TKV WAPECS Telecommunications Customer Protection Wireless Access Policy for Electronic Ordinance Communication Systems

TR WAR Technical directive Specialist Group for Regulatory Issues

TSO WIK Transmission system operator Wissenschaftliches Institut für Kommunikationsdienste (consultancy) U WIMAX UMTS Worldwide Interoperability for Microwave Universal Mobile Telecommunications System Access LIST OF ABBREVIATIONS 155

WLAN Wireless Local Area Network

WMV Windows Media Video

WPV Universal Postal Union

ZPO Code of Civil Procedure

ZPOEG Code of Civil Procedure Introduction Act 156 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005

Contact points Practical information and help for those seeking advice

Please use the contact points below for Radio interference queries on the following: Tel +49(0)1803232323*

General questions on telecoms, post, Publications dispatch electricity and gas Tel +49(0)3617398272 Tel +49(0)3022480500 Fax +49(0)3617398184 Fax +49(0)3022480515 [email protected] [email protected]

Telephone spam Tel +49(0)2919955206 Fax +49(0)6321934111 [email protected]

Diallers Tel +49(0)2919955206 Fax +49(0)18057348709008* [email protected]

Number management Tel +49(0)1803686637* [email protected]

* Nationwide telephone/fax information service priced at local rates Published by Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway Press and Public Relations Tulpenfeld 4 53113 Bonn, Germany Tel +49 (0) 228 14 - 9921 Fax +49 (0) 228 14 - 8975 [email protected] www.bundesnetzagentur.de

Responsible within the meaning of press law Rudolf Boll

Edited by Renate Hichert Linda Sydow Ulrike Weller

Layout MetaDesign, Berlin

Printed by Druckteam Berlin

Date of going to press 7 February 2006

Agency’s Annual Report 2005 under section 122 of the Telecommunications Act Annual Report 2005

| Annual Report Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway

Tulpenfeld 4 53113 Bonn, Germany 2005 Tel +49 (0) 228 14 - 0

Fax +49 (0) 228 14 - 8872 Federal Network Agency