Annual Report 2007 Annual Report 2007 Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway 2 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

10 26

Ten years of competition Consumer protection and advice in network industries

Contents

President's message 4

Organisation chart 8

Ten years of competition in network industries 10

Consumer protection and advice 26 Consumer Advice service 28 Universal service 33 Special control of anti-competitive practices 35 Dispute resolution 45

International cooperation 48 Telecommunications 50 Post 54 Energy 56 Railway 59

Telecoms 62 Market watch 64 Ruling chamber decisions 88 Further decisions 96 Administrative court proceedings 115 CONTENTS 3

48 62 122 140 179

International Telecoms Post Electricity and gas Railway Cooperation

Post 122 Market watch 124 Ruling chamber decisions 135 Administrative court proceedings 138

Electricity and gas 140 Market development 142 Activities and proceedings 147 Court proceedings 171

Railway 176 Market watch 178 Activities and proceedings 183 Court proceedings 191

Agency’s functions, structure and core tasks 194

Mission statement 198

Strategic plan 2008 200

List of abbreviations 220

Contact points 232 4 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

President’s message

The Annual Report this year appears ten years after the regulatory authority, now the Federal Network Agency, was set up.

This is an occasion to look back not just on the past year but on the past ten years, and to take stock.

If the liberalisation outcomes in the five markets of telecommunications, post, electricity, gas and rail are different, this is, of course, not just or not primarily as a result of the Agency's work but because of the different times the markets were opened and the specific entry barriers for new competitors. Objective analyses and fair comparisons should thus illuminate the market structures and environments as a whole.

In the late 90s technological change, willingness to invest in infrastructure and an open market entry model in telecommunications created a favourable scenario that is now delivering – after ten years – significant success.

If, in the postal sector, the main part of the letter market was required by law to be operated as a monopoly until the end of 2007, similar success in achieving competition is simply not possible.

The energy market is also a good example of how a quasi two-stage market opening has had disadvantages; domestic customers have benefited little from the fruits of competition and the model of "negotiated" access was unsuitable and has wasted time. But the energy market also shows that it is not just network access and use of system charges that represent entry barriers. For instance, the situation as regards the procurement of electricity and gas, the building of power plants and the installation of transmission lines all contribute to making it more difficult to spur competition in the energy than in the telecommunications market. In the energy markets, opening the networks is indeed a basic, but not a sufficient, condition for achieving our goals. PRESIDENT’S MESSAGE 5

We also have light and shade in the rail market, where we see the extent to which the outcome of the current debate on the legal framework will ultimately determine competitive opportunity.

The Agency is fulfilling its mandate purposefully and with commitment. But it cannot achieve more than is allowed by the political consensus that finds expression in the law.

Ten years, however, have provided us with good experience of the benefits that open, competition-oriented markets deliver to consumers and customers. Also, the innovation dynamic that they trigger, the creativity that is mobilised on the periphery and the efficiency gains and lower prices that they make possible are not theoretical claims; they are demonstrated in the Report by facts and figures.

We would have to look hard to find a product that five million German households have additionally ordered within the space of just one year. But exactly this was the case last year with broadband access. A unique- ly competitive environment and steadily falling prices have enabled this unprecedented growth in Europe.

But it is not just the telecommunications networks and the changes they have undergone, but also the new offers and the content carried over them that are strong drivers of growth, investment and jobs. 6 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Online trading, search engines, the distribution of videos, films and music on the Internet are changing how we live and how we consume, and are also creating new production and work structures. All this requires open, low cost distribution channels in the networks.

Many believe that the situation is exactly the opposite with gas and electricity; here, consumption should fall rather than rise as we are all looking to save energy and there is little innovation dynamic.

Of course, given the scarcity of primary energy, given climate change and the promotion of renewable energy sources, we are faced with quite different challenges.

But who says that competition instruments cannot be as effective here as they are in other markets in achieving the goals?

It is precisely the diversity and decentralisation of energy production and consumption that calls for innovation and creativity. The grid is a determining factor in this.

The informed and discerning consumer, who is meanwhile switching supplier more and more often, is the yardstick for the Agency. Only when the grid is able to respond to the ever more complex challenges posed by wind energy, trading and fluctuating demand will it be possible to maintain stability and security of supply in the energy market. PRESIDENT’S MESSAGE 7

The Agency's role is becoming more, not less, important. It is the go- between in a market whose issues are politically and socially controversial. The list of aims – competition, consumer protection, job security, safeguarding employee interests, protection of the environment, climate protection and long term security of supply – is longer than in other markets. It is our job to see that one does not rule out another in practice. Conflict such as that experienced in installing lines and building power plants must therefore be acknowledged and not swept under the carpet. Yet solutions cannot be found by the Agency alone.

Transparency of facts, resolving issues by dialogue, credibility in relation to those in the political arena and the business community are important principles in our work, and must remain so.

This is the basis on which we want to shape the future. We cannot carry over everything from the past; however, all those who are familiar with the network and competition sets of instruments and who have analysed the technical and economic structures will also be able to develop consistent, long term strategies and to overcome existing problems.

Matthias Kurth President 8 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway

General Staff Council President Staff Council General Spokesperson for Disabled Persons Spokesperson for Disabled Persons Data Protection Commissioner Vice President Vice President

Ruling Chamber 1 Z IS 1 2 President`s Chamber Equal Business Support Information Technology Telecommunications Legal Market Definition and Opportunities and Regulatory Telecommunications Market Analysis Commission Security Economics Regulation Issues under Sections 10 ff TKG Frequency Regulation

Ruling Chamber 2

Regulation of Telecommunications Retail Markets (Markets 1 – 7*, Broadband Services, Mobile) Z 1 Z 2 Regulation of Wholesale Leased Lines (Markets 13, 14)* Subscriber Data, Organisation General Legal Affairs Collection Services, Porting Personnel Finances Controlling

Ruling Chamber 3

Regulation of Telecommunications, IS 11 111 211 220 Wholesale Markets, Z 11 Z 21 Fixed and Mobile Information Technology Telecommunications Legal Issues Technical and Regulatory Issues of Organisation General Legal Affairs Regulatory Sector-Specific Control of Efficient and Interference-free Use (Markets 8 – 12, 15 – 18)* Occupational Health and Safety Part 7 TKG Legal Issues Economic Policy Issues Anti-Competitive Practices of Frequencies Data Protection Telecoms Administrative Offences

Ruling Chamber 4 IS 12 112 212 221

Individual Use of System Z 12 Z 22 IT Solutions Development Market Watch Spectrum Management Radio Frequency Charges Electricity, Telecommunications Procedures, Market and Utilisation Concepts Pipe to Pipe Competition Gas Policy, Personnel Representation Tariff and Contribution Legislation, Senior and Upper Charges Legislation Competition Aspects International Affairs Grade Service Staff, Special Unit Collection Services Frequency Usage Planning Further Training Innovative Radio Applications

IS 13 113 213 222 Ruling Chamber 5 Z 13 Z 24 Workflow Structuring Business Management Frequency Award and Broadcasting Rates Regulation and Medium and Basic Grade Service Budget and Modelling and Accounting Issues Assignment Policy Special Control of Staff, Salaries, Remuneration, Budgeting Cost Accounting Telecoms Anti-Competitive Practices Tavel and Relocation Expenses Tax Matters Examination of Postal Markets Personnel Management Rate Proposals

IS 14 114 214 223 Z 14 Z 25 Ruling Chamber 6 Information Requests Internet Economy Determination of Satellite Services, Fixed Services Buildings, Purchasing Civil Defence Frequency Requirements below 30 MHZ, Short Term Usage, Frequency Usage Plan Civil/Military Frequency and Site Regulation Real Property Motor Vehicles Coordination Electricity Networks Accident Compensation Special Unit Sickness Allowances

IS 15 115 215 224 Z 15 Z 26 International Mobile Radio Frequency Qualified Electronic International Trunked Radio, Coordination, Digital Cellular Net- Signatures Telecommunications Affairs Special Award Proceedings, Ruling Chamber 7 Centralised Internal Controlling works, Public Paging Networks, Administration Transaction and Policy Issues Reporting Requirements Assignment-Related Aspects Railway and Public Safety Authorities Library Cost Accounts of Tariff and Contribution and Organisations, Aeronautical, Regulation Special Unit Translation Service Quality Management Charges Legislation Maritime Mobile and Inland Water- Gas Networks ways, Radionavigation and Radiodetermination Services IS 16 116 216 225

Provision Continuity Market Definition and Universal Service Non Public Radio Applications Telecommunications and Post, Market Analysis Public Affairs Amateur Radio Technical Implementation Section 12 TKG Procedures Consumer Issues Ruling Chamber 8 of Intercepts Dispute Resolution Panel

Use of System Charges Electricity IS 17 117 226

Compliance with Data Numbering Policy Radio Relay Protection and Postal and Telecommunications Privacy, Telecommunications Security, Securing Emergency Ruling Chamber 9 Calls, Internal IT Security

Use of System Charges Gas IS 18 118

Qualified Electronic Number Administration Signatures Technical Operation

Notes re BK 2 – BK 3 * Commission Recommendation (2003/311/EC) of 11 Feb 2003 nos 1 – 18

Description of the markets on the Agency`s website under Ruling Chambers ORGANISATION CHART OF THE FEDERAL NETWORK AGENCY 9

Management Office

01 02 03 04 05 06 07

Office of Litigation International Press Office Ruling Chambers Advisory Council / Internal Auditing the President Legal Disputes Coordination Public Relations Office Committee of Federal and Vice Presidents States Representatives Procedural Issues Office / Rail Infrastruc- ture Advisory Council

345 6 7

Postal Technical Regional Offices Energy Regulation Rail Regulation Regulation Telecommunications Misuse of Numbers Regulation

Electromagnetic Compatibility

Recognition of Conformity Assessment Bodies

311 411 421 511 601 607 701

Economic and Legal Market Surveillance Technical Regulation Coordination of Service Centres for Economic Policy Issues Distribution Network Access Legal and Policy Issues of Matters relating to the and Standardisation Frequency Assignments, Market (Gas) Economic Postal Markets Regulation EMC and the R&TTE Act Issues for Fixed and Surveillance and Protection against Policy Issues Special Radio Services Radio Frequency Fields, Radio Monitoring and Inspection Service (PMD) Special Unit PMD Equipment

312 412 422 512 602 608 702

Market Watch Radio Compatibility Technical Regulation Combating the Misuse of Incentive Regulation Transmission Network Access Business Management Aspects Quality of Service Measurement and Standardisation Issues for Value Added Services Benchmarking (Electricity) of Charging, Innovative Communications and Spam Cross Border Trade in Gas Electricity Monitoring, Services, Numbering, Telecoms Statistics Security Aspects, International Liaison and Coordination Office

313 413 423 513 603 609 703

Special Network Access Technical EMC Issues Technical Regulation Use of Public Ways Market Watch Transmission Network Access Access to and Interconnection, Standardisation and Standardisation Issues Notifications Monitoring Electricity / Gas (Gas) Rail Infrastructure and Compliance with in Broadcasting Cross Border Trade in Gas Services Universal Postal Union Acts, External and Internal Accounting, Examination of Rate Proposals

314 414 424 604 610 704 Regional Regional Licensing Policy, Protection against Technical Regulation offices offices Unbundling Use of System Charges Access to Licensing Grant, Reporting Radio Frequency Fields and Standardisation Issues with without Legal Issues (Electricity) Service Facilities Requirements, for Mobile Services and admin unit admin unit Consumer Advice and Services International Postal Affairs Universal Mobility (Coordination and Universal Postal Union) Augsburg Landshut, München, Regensburg, Rosenheim 315 415 425 605 611 705 Berlin Magdeburg, Market Definition Recognition of Technical Regulation and Kolberg Network Operation Policy Issues Use of System Charges Charges for Market Dominance Conformity Assessment Bodies Standardisation Issues for Quality of Supply (Gas) Networks, Universal Services and Open IT-based Data Processing Service Facilities Network Provision, Securing and Services Billing Accuracy under Dortmund Detmold, Kassel, the Telecoms Customer Meschede, Münster Protection Ordinance

316 416 606 612 Eschborn Neustadt, Saarbrücken, Universal Service Legal and Economic Distribution Network Access Cooperation with State Darmstadt, Leeheim Consumer Issues Policy Issues (Electricity) Regulatory Authorities Dispute Resolution Panel Dept 4 Legal Affairs EU Coordination Hamburg Kiel, Rostock, Schwerin, Itzehoe

Hannover Bremen, Leer, Göttingen Organisation chart Karlsruhe Konstanz, Reutlingen 12 September 2007

Köln Mühlheim, Krefeld Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway

Leipzig Dresden, Erfurt Tulpenfeld 4 53113 Bonn Nürnberg Fulda, Schwäbisch Hall, Würzburg Phone: +49 (0) 228 14-0 Fax: +49 (0) 228 14-8872 Email: [email protected] Internet: http://www.bundesnetzagentur.de

in Bonn at other locations (Berlin, Mainz, Saarbrücken) 10 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Ten years of competition in network industries TEN YEARS OF COMPETITION IN NETWORK INDUSTRIES 11 12 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

INTRODUCTION sharing the use of the network in order to be able to offer services to end users. Stringent The Federal Network Agency is required by ex ante regulation is therefore indispens- law to create competition, through regula- able to facilitate access to fundamental tory measures, in economically significant wholesale services such as the local loop network-based sectors. This development (TAL). This applies in particular, given the was preceded by a regulatory paradigm immanent economies of scale in networks shift in network industries. Regulators and the fact that it does not appear to make came to the conclusion that access regula- sense to establish alternative infrastructures tion would also spur competition in respect in many areas for economic, legal, tech- of services provided in network infrastruc- nical or other reasons. The prices prevail- tures. The change of the regulatory ing in a competitive market are simulated approach was due in particular to the by means of regulated network access rates increasing link-up of economic activities and thus also provide optimum incentives and the related growing importance of for investments. networks, the technical progress of network control and different economic The central aim of regulation is to determine assessments of the competitive perform- appropriate rates which also ensure net- ance in network industries. Today, the work quality and security. This applies both benefits of competition are the focus of de- to telecommunications and to all the other velopments; uncontested are the improved branches of the economy marked by a net- effects of incentives, the more efficient work structure. provision of services and higher innovation potential of competitive systems. This is It is to be assumed that competition-based impressively reflected in the telecommuni- regulation yields better economic results cations industry, given its developments in and also promotes efficient investments. the fields of productivity, prices, and the Exhausting the growth potential by com- diversity and quality of services offered. petitive processes for instance was already declared the aim of telecommunications Efficient market results can best be ensured liberalisation in the telecoms sector as in competitive markets. Here, the competi- early as 1996 in the legal comments sub- tive process secures that service charges stantiating the Telecommunications Act. are based on production costs (including There was agreement that a single under- an appropriate rate of return on equity). taking with special and exclusive rights The core function of regulation is to check would not, as a state monopoly undertak- prices and the scope for action of monopol- ing, be in a position to implement the ists or SMP undertakings. The relevant prob- innovation potential of technical commu- lems arising are apparent in particular in nication and information applications. As a network industries as the network owners result, other sectors of the economy relying are active at all levels of the value-added on such services were also supposed to fall chain and competitors have to rely on short of international competition require- TEN YEARS OF COMPETITION IN NETWORK INDUSTRIES 13

ments. This basic approach has not been alternative providers offering different changed in the last few years. This is also business models have entered the market. reflected in the fact that, according to the The competitors of Deutsche Telekom new 2004 Telecommunications Act, the (DTAG) first focused on service-specific offer- decisions of the Federal Network Agency ings such as call by call and preselection, continue to be based mainly on the promo- but infrastructure-based offerings followed tion of markets characterised by sustained soon. Overall, competitors have made high competition to allow efficiency gains to be investments in their own infrastructures; implemented. The aims of regulation have more recently, the volume of competitor been determined similarly in the Postal Act investments even exceeds that of DTAG. (PostG), Energy Act (EnWG) and General Nevertheless, competitive service offers are Railway Act (AEG). not provided nationwide. Consumers have increasingly used call by call and preselec- The market results, especially in the tele- tion offers, but remained customers of communications market, reflect impressively DTAG in most cases. Customers only began the regulation success achieved so far. A to switch providers more frequently with large number of providers have contrib- the growing tendency to use bundles of uted to ensuring substantial efficiency gains. narrow and broadband access services. Consumers benefit from low prices of tele- Alternative providers benefit from this communications services, a host of options trend and meanwhile have a share of some to be chosen from and many technical 45 percent in domestic calls and 18 percent innovations. Furthermore, the technical in telephone lines. progress in telecommunications, eg by digitisation, as well as in other industrial The sustained and vigorous competition in sectors partially leads to changes in the the access market is mainly due to the employment structure and to staff cuts. On dynamic broadband sector. In the broad- the other hand, new jobs are created for band access market, competitors are at pres- new telecommunications services. Also, ent offering nearly one third of all digital the technical progress supports the devel- subscriber lines (DSL) on the basis of their opment of an innovative and internation- own infrastructure or the unbundled local ally competitive telecommunications loop, one fifth of the total of nearly 20 mil- market, thus improving the competitive lion existing DSL lines is requested on a situation in Germany as a whole. resale basis. Dynamic growth is also seen in a large number of service-based markets. SUCCESS IN THE TELECOMMUNICATIONS With a penetration of nearly 50 percent of SECTOR all households Germany is meanwhile one of the leading countries offering broad- After ten years of regulation the telecom- band access nationwide (other countries munications sector is marked by a highly are for instance the United Kingdom, dynamic competitive environment in France and Italy). many areas. Since market opening many 14 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Since market opening private consumers SUCCESS ALSO IN THE POSTAL, ENERGY and commercial users have benefited from AND RAIL SECTORS clearly reduced prices covering the whole range of services offered. Also, a host of Regulation has also made substantial con- price offers and innovative services are tributions to the other network industries. available to users, eg video on demand, videotelephony, Internet Protocol The developments of the courier, express Television (IPTV) and more options. and parcel (KEP) services in the postal sector Customers are increasingly requesting which had been liberalised a long time ago bundled services (telephony, DSL) which were positive in line with the general eco- providers offer at cheap flat rates, trying to nomic situation. Competition is function- undercut each other. Here, customers pre- ing – in particular in the area of commer- fer one-stop shop offerings. cial senders where price competition is fierce. The Agency’s regulation has there- Furthermore, technical developments and fore been limited to the special control of innovations permit telecommunications anti-competitive practices. services to be offered at ever higher bandwidths for innovative applications – eg In the letter market which was fully liberal- IPTV. Accordingly, the service offers have ised in 2008 only, the influence of compe- multiplied, and many innovations and new tition has been limited so far. However, services are available in fixed and mobile despite the remaining monopoly of networks. At the same time, it is apparent Deutsche Post AG (DPAG), traces of market that service and quality will be gaining structures and tangible competition have prominence as important competitive developed in the last ten years. This was parameters. certainly also due to and fostered by market entry regulation (licensing). Last but not least, the promising competi- Competitors of DPAG have meanwhile tive developments in the telecommunica- achieved a market share of a good ten tions markets are due to regulatory activ- percent in respect of end-to-end letter ities. The decisions taken by the Federal services. Additionally, the Federal Network Network Agency during its regulatory Agency has sustainably promoted further work have created regulatory framework competitive potential by determining mar- conditions allowing both service- and ket-oriented access regulations and condi- infrastructure-based providers to offer tions of use. The regulatory decisions taken their services successfully and survive in by the Agency have granted competitors the market. This has certainly contributed and customers of the market-dominant to the fact that the efforts to open markets company DPAG access to its network, its can be considered a success story. work sharing services, PO box facilities and address information, which DPAG would TEN YEARS OF COMPETITION IN NETWORK INDUSTRIES 15

not have offered in the same way without also benefit from price cuts. The higher regulatory steps being taken. electricity prices noted at present are certainly not due to increased network costs. Furthermore, the letter market is an excel- On the contrary, the drop in system charges lent example of the positive contribution tends to slow down the development of that rates regulation may make to a more electricity prices and will thus benefit cus- competitive environment. With the rates tomers. Regulation in the energy sector regulation procedure applied in 2002 let- therefore aims to achieve a balance be- ter service charges were reduced for the tween network quality and the appropriate first time. At present, the prices of letter charges. The introduction of incentive services in Germany are by some five per- regulation on 1 January 2009 will provide a cent lower than in 2002. As opposed to this, range of instruments aiming to increase the price level has risen sharply in most the efficiency of the networks consider- European countries since 2002. The rates ably, giving due regard to quality aspects regulation procedure of 2007 then created at the same time. the basis for largely steady consumer prices for the period from 2008 to 2011. All this In addition, competitive mechanisms have may be considered the success of rates been established by means of supplier regulation from which both retail and busi- change options in the energy sector. In ness customers have derived benefits. 2007, a strong increase in the number of However, rates regulation has also made supplier changes is expected. Although the market entry easier for competitors offer- supplier change ratio related to the total ing services at competitive prices. take-off in 2006 only amounted to 1.3 percent in the gas sector, the implementation The regulation of the use-of-system charges of the new access model to gas supply net- in the electricity and gas sectors has works (the so-called two-contract model) also had positive effects on a number of and the regulation of the process of procedures. The beginning of 2008, for changing suppliers created the central instance, once again saw a pronounced cut basis for more competition. This will cer- in the system charges levied by the distri- tainly also lead to pronounced changes in bution system operators. However, these the gas sector in the years to come. cuts have neither impaired network quality and security nor have they adversely The effects of market opening are also tan- affected the future investment potential of gible in the rail sector even though they the system operators. Without any doubt, differ depending on the area concerned. As they will be able to refinance efficient new the Federal Network Agency has only been investments, thus allowing adequate responsible for the rail sector since 2006, profits to be made. Lower system charges the results of the optimised and intensified at the distribution network level will also competition regulation are not as measur- reduce the costs of the distribution net- able as desired yet. works. In this way private customers can 16 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

The developments so far show a clear rela- First studies, however, show that competitive tionship between growing competition, a bidding in regional passenger transport rising number of transport services and the services yields more cost-efficient results development of prices. In rail freight trans- and increases the quality of service (fre- port (SGV), for instance, the segment in quency of trains). In freight transport a which competitors of Deutsche Bahn AG competitive share of 16 percent has been (DBAG) already have a market share of achieved. This intramodal rail competition around 16 percent, transport services supports the intermodal competition in increased by some 41 percent from 2002 to favour of rail services and helps shift some 2007. At the same time, there was a drop in of the transport off the road and onto the the prices for consigners by some six per- rail. cent from 2003 to 2006. The market share of competitors in the regional passenger CHALLENGES OF REGULATION, TAKING rail services (SPNV) is some 7 percent by TELECOMMUNICATIONS AS AN EXAMPLE now. The growth of SPNV which amounted to 18 percent between 2002 and 2007 fell The example of telecommunications shows slightly short of the growth of freight trans- clearly that competitive effects resulting port. The specific SPNV prices , including from regulatory measures are not necessar- the need for public subsidies, dropped by ily conflicting with employment and four percent from 2003 to 2006. investment aims.

There is however no tangible competition Employment effects of liberalisation at present in the long-distance passenger It goes without saying that the liberalisa- rail services (SPFV) and the rail infrastruc- tion of the telecommunications market ture. Here, prices have increased overall; in has had pronounced effects on the labour the SPFV segment by a total of three per- market. In this respect it is important to cent between 2003 and 2006 and in the emphasise that the deployment of staff in rail infrastructure by ten percent from different jobs is one of the basic elements of 2002 to 2006. Also, in the SPFV segment, as modern economies. Thus, the flexibility to opposed to the two other segments, no deploy staff in areas where they can make significant growth of transport services the best contribution to meeting user was noted. requirements is certainly part of the desired effects of competition and promotes Thus the working intramodal competi- structural change and modernisation. tion forms the basis for improving the intermodal competitive situation in the rail As a rule, a distinction has to be made be- services. The Federal Network Agency has tween direct and indirect employment submitted proposals on how to strengthen effects in the liberalisation of the telecom- or at least simulate competition in particu- munications market. While direct effects lar in the SPFV segment and the rail infra- refer to the effects within the relevant sec- structure. TEN YEARS OF COMPETITION IN NETWORK INDUSTRIES 17

tor, indirect effects concern the economy telephony for new telecommunications as a whole. services, eg broadband Internet and mobile services. This has helped retain the (by far) Direct employment effects are marked in major part of the jobs in the telecoms particular by two aspects. Firstly, the pre- sector cut in the previous monopoly area. vious monopoly undertaking was forced, In the period from 1998 to 2007, the num- due to growing competition, to implement ber of employees in the telecoms sector its efficiency potentials. This included the only dropped from nearly 222,000 to near- process of optimising operational flows, ly 215,000. The competitors of DTAG have including new process innovations, on the created more than 56,000 jobs since 1998. one hand, and the establishment of future- oriented network infrastructures on the Apart from the direct employment effects other. Secondly, the past ten years were to be observed in the telecoms sector, there characterised by technology boosts imply- are also considerable indirect effects on ing innovation potentials which, due to other sectors of the economy. They basic- liberalisation, could be implemented far ally result from the reduced price level for better than before. Investments have pushed telecoms services noticeable due to the forward progress as well as increased the competitive situation. This reduced level capital stock and have thus allowed more leads to an increase in the real income of and improved telecommunications ser- private households and in the value-added vices to be provided with less staff. This benefits for the companies requiring tele- growth of productivity is typical in many communications services. Private house- branches - but especially pronounced in holds largely use the additional purchasing the telecommunications sector – and power consumptively, ie they buy more strengthens the competitiveness of the and different telecoms and other services. German economy as a whole. The higher value added for companies in turn flows to the disposable income of house- Admittedly, such productivity gains and holds by means of salaries and distributed the process of exhausting non-realised effi- profits. Additionally, domestic companies ciency reserves in monopoly periods have save costs and provide innovative telecoms also led DTAG to cut back on staff, but they products, improving their competitiveness have also substantially increased the per- overall. Ultimately, this will increase their formance of the company and ensure low- export opportunities on the one hand and priced and innovative products for its final reduce the number of jobs to be shifted customers. However, the positive effects of abroad on the other. the price reductions resulting from the competitive and regulatory environment In conclusion, this means that price cuts also affect the telecommunications market and innovations in the telecoms sector as a whole in a quite significant manner. which can only be achieved to this extent Obviously, private and business customers through competitive pressures in the mar- are now widely using the funds saved in ket will benefit the economy as a whole, 18 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

strengthen the competitive situation of alternative and new infrastructures and Germany throughout the world and make hence weakens inter-platform competition. a non-negligible contribution to securing The results of the studies should generally and creating domestic jobs. Specific busi- be considered with scepticism since they ness segments, eg as the online segment, have substantial methodical deficiencies would not have developed as they have and fail to take vital aspects into consid- without the relevant innovations in the eration. Nevertheless, some basic ideas of telecoms market. Particularly important in the studies are correct, they are however this respect are business models like eBay, mainly generally accepted ideas. One of Amazon, Skype or StudiVz. eBay, for instance, the premises is that competition fosters started its business with 30 employees ten investments. If good regulation promotes years ago and is meanwhile offering jobs competition, there is no conflict between to 15,000 employees worldwide (of these, regulation and investments. Other empiric- more than 1,000 jobs are in Germany). al studies stress that regulation affects the Furthermore, all e-commerce segments investment measures taken both by the have contributed to strengthening the market-dominant undertaking and its logistics sector. competitors. They go on to say that the Federal Network Agency is responsible in Regulation supports efficient particular for fixing the prices of wholesale investments products. Also of relevance is the result of a Another very important issue which has study arguing that investments of the regu- more recently been the subject of various lated companies, as opposed to those of empirical studies is the relationship be- competitive companies, are virtually not tween regulation and investments, more dependent upon the depth of access regu- specifically the question whether there is a lation. conflict of goals between regulation and investments. The studies for the telecoms Competitors without any or without a com- sector focus on different subjects and come plete network infrastructure of their own to different conclusions. They show for are granted access rights to the domin- instance that a large number of factors (eg ating, non-replicable network infrastructu- economic growth, labour productivity, re at adequate prices determined for this capital market costs, gross national pro- access. These prices will then decide whether duct per capita) are of significance to tele- or not the investment incentives are communications companies seeking to appropriate. The experience gained in the make investments; these factors also in- past has shown that notably the price of the clude regulatory aspects. Partially under local loop is a central parameter in the sup- study is also the relationship between port of intramodal and intermodal compe- access regulation and investments in new tition. Access regulation is typically governed and alternative infrastructures. From time by the criterion of costs of efficient service to time it is assumed that strong access provision (KeL). This approach promotes regulation adversely affects investments in efficient infrastructure investments and TEN YEARS OF COMPETITION IN NETWORK INDUSTRIES 19

is business model-neutral. In using the As a rule, obligations are only imposed on instrument of long-term efficient costs as a markets in which market entry is difficult benchmark for prices, a competitive price for new providers due to immanent econ- is simulated. In this way, efficiency pressures omies of scale of the market-dominant are created in a still monopolistic market, undertaking. With a growing dynamic with an increasing number of providers competition regulation should be reduced producing as efficiently as possible. The as efficient competitors are increasingly resulting diversity of services will create capable, possibly in parts of the network price competition, leading to lower retail infrastructure, of providing appropriate prices. This means that there are no basic services based on their own infrastructures. conflicts of goals between the aims of efficiency gains, more intensive competi- It is uncontested that the telecommunca- tion and safeguarding the interests of tions market is the most dynamic competi- consumers. tive market in the regulated network industries. The developments in this market Scope of regulation to be reviewed prove that a step-by-step decrease in regu- regularly lation is possible and appropriate. While Crucial in this respect is to regularly pose regulation covered the total value-added the central question of how much or how chain in this market at first, experience has little regulation is required to foster com- shown that, with today’s growing competi- petition and thus create new services, new tive pressures, it appears adequate to market entries and investments in network restrict regulation to the wholesale mar- industries. Choosing the correct scope of kets. In retail customer markets, ex post regulation is vital since both excessive and rates regulation and the sector-specific or insufficient regulatory measures have general control of anti-competitive prac- negative implications for the entrepreneur- tices meanwhile seem to be sufficient. ial freedom of the regulated undertaking Markets characterised by bottleneck infra- and its competitors and for the willingness structures can be found in the telecoms of market players to make investments. sector, in particular in access markets. Wrong regulation does not eliminate mar- However, termination markets also require ket failure, it leads to market distortions. regulation under certain conditions. We must look at each market and examine whether it should be subjected to ex ante Those critics conjuring up irreconcilable or ex post regulation or released from conflicts between regulation, entrepreneur- regulation. This applies in particular with ial freedom and investments seem to forget regard to the new section 9a TKG included that regulation is not effected arbitrarily or in the Act, which also requires extensive at the regulator’s discretion, but only for consultation with the Federal Cartel Office special reasons, ie where market entry (agreement) and the EU Commission (veto). without regulation is difficult and competitive structures will not develop without regulatory measures being taken. Cartel 20 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

legislation is frequently insufficient, espe- The following developments may serve as cially in network industries. Experience examples: firstly, a number of core network gained in the energy sector until 2005 operators have gradually established a has shown that abuse control under nationwide core network irrespective of cartel legislation is not enough to create far-reaching interconnection regulations. competition and that sector-specific This network corresponds to all 474 inter- regulation is required. connection points offered by DTAG. Secondly, after regulation of the unbun- The decisions on where and how to effect dled access to the local loop (including the regulation are formal and transparent pro- relevant charges to be paid), competitors cedures on the basis of the European legal have meanwhile access to some 3,300 loca- framework, which are carried on and com- tions of main distribution frames and in- pleted in consultation with the parties con- vested in their own core and concentrator cerned and the interested public and are networks. They are therefore in a position subject to review in courts. This applies to to make full alternative one-stop-shop all sectors regulated by the Federal offers to two-thirds of the population. Network Agency. Additionally, resellers may choose from wholesale offers of DTAG and its competi- Efficient access regulation and its tors. implications Rather than regulated access charges Deficits of investment studies based on efficient costs special economies In most cases, the econometric models of scale and the related difficulties to refi- investigating the correlations between nance the huge infrastructure investments regulation and investments in the telecom- prevent investments in network industries, munications sector only focus on intermodal eg the local loop in the telecoms sector, competition. It is uncontested that the from being made. Here, duplication of the prospect of a temporary monopoly situation networks would only be profitable in offers companies a major incentive for exceptions. On the other hand, access regu- investments and even innovations. In mar- lation in non-replicable areas has prompted kets without entry barriers, however, other competitors to make large investments competitors make sure that the monopoly in complementary markets. This is also of the forerunner will gradually disappear. confirmed by the experience gained in the In markets characterised by monopolistic past ten years which shows that, despite (or network infrastructures this will not hap- because of) the implementation of a host of pen. Here, only sector-specific regulation network access options, both new com- following access regulation will facilitate panies entering the market and DTAG have market entry. made large-scale investments. It is therefore not valid to assume that competitors As far as we know at present, there are no are only “free riders” in this area. empirical econometric studies furnishing scientific evidence that former monopol- TEN YEARS OF COMPETITION IN NETWORK INDUSTRIES 21

ists of the network sectors reduce or totally This is also likely to be the reason why avoid investments in innovative network investments in the telecoms sector were platforms as a result of access regulation, lower in Germany until 2006 – like in all thus failing to increase the potential for other countries with “telephone network innovative products. On the contrary, there monocultures“. As long as decisions on are some clear indications that access obli- charges in fixed networks are strictly based gations constitute a parameter stimulating on the criterion of costs of efficient service the market-dominant undertaking to en- provision, it can be excluded that such sure efficiency-increasing network moderni- charges will cause distortions in alternative sation measures and other process innova- infrastructures. Instead, they will also pro- tions more rapidly on the one hand, and duce efficiency pressures. Only excessive helping to exploit the established infra- charges would promote excessive cap- structure more quickly and profitably due acities, or charges lower than costs would to the growing competition-induced mar- prevent efficient investments, eg in the TV ket volume on the other. cable sector.

Access regulation in one transport plat- Clearly, the complex factors influencing form will always affect investments in alter- investment decisions make it difficult to native transport platforms. It cannot be establish only monocausal links between assumed that the lack of intermodal fixed regulatory and investment decisions. But network competition in Germany is regula- the fact that, despite decreasing local loop tion-induced. There are historical reasons charges in 2005 (the monthly leasing for the only limited significance of TV cable charge was reduced by nearly ten percent networks as a transport platform for broad- alone), fixed asset investments in TV cable band telecommunications services because networks increased by more than 50 per- cable network operators entered the com- cent in the following year, may serve as an petitive market for broadband customers indication that charges based on the costs with delay only. Furthermore, given the of efficient service provision do not affect historical separation between transport the investments in alternative platforms. network (network level 3) and access net- TV cable network operators have been suc- work (network level 4), it has been difficult cessful in doubling their market share in for them to access end users directly, with the strongly growing broadband access negative effects on the process of market- markets to some five percent by the end of ing new products. However, the increas- 2007. Furthermore, despite lower local ing competitive pressures between telcos loop charges, competitors continue to have urged cable operators also in this area invest in their own infrastructure in order to provide bidirectional networks and to save these charges. enter the competition for triple play products. There is no empirical proof for or economic plausibility in favour of the position that the regulatory aims to intensify competi- 22 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

tion and promote investments in infrastruc- possibly be subject to change in future. In tures in the telecoms sector are conflicting all network sectors it will be necessary to goals. Indices such as sector-specific infra- accompany innovative higher-risk invest- structure investments per capita which ments by using the appropriate regulatory seem plausible at first sight are not suitable instruments. Adequate incentive mechan- to prove correlations between regulation isms will have to be provided to promote and investments. It should also be taken innovations also in a regulatory environ- into account that, for welfare-economic ment. One of the instruments suited for reasons, investments can never be fostered this purpose is the risk-adjusted rate of per se. Crucial in this respect is the efficiency return on equity which allows higher-risk of investments, their quality and thus investments to be made. Irrespective of their contribution to improving capital this, it remains valid to say that appropriate productivity. Here, regulatory action is efficiency benchmarks in rates regulation helpful rather than obstructive. increase the efficiency pressures on investments and that competition helps to impro- Infrastructures of network industries will ve the process of refinancing investments also be of interest to investors in future at whole sale level. These are both effects The introduction of next generation net- which have a posi-tive impact on investors works (NGNs) and the concurrent conver- and their willingness to provide capital for gence of networks will entail extensive investments. changes in the telecoms sector. The migration of narrowband circuit-switched tele- Long-term regulatory approach and phone networks into IP-based NGNs will continuity of the framework conditions affect the telecoms sector at all levels of the Sector-specific regulation has been and is value-added chain, ranging from the still required in the interest of sector- and access level via core networks to the provi- overall-economic welfare considerations, sion of services. It is to be expected that but at the same time it is always necessary investments in next generation access to regularly raise the question about the (NGA) networks will increase the import- scope of regulation. Parallel to this, a debate ance of economies of scale and scope in about the framework conditions of regula- the access area, but the replicability of net- tion suited for this purpose is indispens- works will be reduced at the same time. able. Guidelines (eg to ascertain market Depending on the technology used, this dominance) and benchmarks (eg costs of may add to the bottleneck nature of access efficient service provision, ex post and ex networks and will possibly create perman- ante regulation) should be established on a ent natural monopolies. long-term basis to give companies in regulated network sectors a maximum of plan- Regulation will continue to be required ning security and continuity. Publication of wherever bottleneck infrastructures and the strategic plan and hearings will contrib- the danger of high sunk costs are prevail- ute to transparency and predictability. ing. The top priorities of regulation will TEN YEARS OF COMPETITION IN NETWORK INDUSTRIES 23

Balancing the interests of all market coms sector, first steps of deregulation (eg players reduction of rates regulation in the end The quality of regulatory decisions should user area) have already been made where- be such that the measures taken are effi- as, in the rail sector, regulation should in cient, leaving scope for flexibility and min- our view even be further strengthened. imising intervention in entrepreneurial decisions. To secure regulatory aims, the The core problem of regulation in the net- regulator must safeguard, and achieve an work sectors is network access regulation optimum balance between, the interests of and the review of and, if applicable, fixing all concerned. This means that the domin- of prices. As a rule, the right to network ant company’s capability to develop inno- access cannot be enforced by means of vative power should be considered in the abuse control under cartel legislation. same way as the increase in competitive- A proactive approach is indispensable in ness of alternative providers and the nearly all cases. demand of end users for network services provided at a balanced price-performance An important function in all sectors is to ratio. It is of particular significance in all shape the details of price-independent network-based branches of the economy access conditions. The decisions on net- that a balance between adequate charges work access often require a proportionality and good network quality is achieved. test to assess the extent to which the incumbent has to provide the capacities CHALLENGES OF REGULATION IN ALL available or take additional extension NETWORK INDUSTRIES measures to grant competitors access to the market. In the electricity network, for The Federal Network Agency has become a instance, non-discriminatory access is like- competence centre for competition in net- ly to lead to increased power plant invest- work industries. In all network sectors the ments, and in the rail sector, to investments network infrastructure of the incumbent is in rolling stock materials. a so-called essential facility. Functioning competition at the value-added chain In respect of rates regulation it is to be levels of service provision, establishment of noted that for instance the share of the cost one’s own infrastructure or production, of capital is very high in all sectors. Since it procurement, trade and sales will only will be crucial in future to apply appropri- develop in these line-based sectors if com- ate regulatory instruments to higher-risk petitors are granted access to the network innovative investments, a rate of return on infrastructure as the essential facility. equity in line with the risk incurred will more and more gain in importance. Progress has been varying according to Ultimately, the balance between the require- individual sectors so far – in particular due ments for quality and security of the net- to different legal regulations. Ultimately work on the one hand and appropriate this means that, for instance in the tele- charges for its use on the other will have to 24 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

be ensured in all sectors. Here, regulation Remarkable success has been achieved in has to make its contribution and resolve parts of this field in the last few years due the tensions between the regulatory aims – to cooperation of the European regulators. safeguarding the interests of competitors Whether the establishment of new agencies and consumers, promoting innovations or extended intervention rights of the and securing investments. Commission are justified is a question that is being discussed and rightly disputed at At international level, discussions are at present. Here, different approaches are present focusing on the crucial issue to likely to be necessary and appropriate in what extent we need European coordina- the individual sectors. The Federal Network tion and harmonisation and which measures Agency participates in these discussions, are necessary to ensure the required har- again favouring an approach applicable monisation most efficiently and with as few across all sectors which, from its perspec- bureaucratic hurdles as possible. tive, will contribute to straightening out matters. TEN YEARS OF COMPETITION IN NETWORK INDUSTRIES 25 26 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Consumer protection and advice

Consumer Advice service 28 Universal service 33 Special control of anti-competitive practices 35 Dispute resolution 45 CONSUMER PROTECTION AND ADVICE 27 28 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Consumer Advice service

The Consumer Advice service and the dispute resolution service of the Federal Network Agency have successfully continued their work in 2007, offering expert advice in the fields of telecommunications, energy, post and railway; they have thus firmly established themselves as a long-term central point of contact on the one hand and a conciliation body for consumers on the other.

With the entry into force of the Tele- Enquiries and complaints, broken down by different sectors: communications Legislation Amendment Act (TKÄndG) of 18 February 2007, the Gas Post 735 Energy Act (EnWG) and the amendment of 750 Railway the General Railway Act (AEG) the Federal Electricity 29 3,302 Network Agency has been offering an extended Consumer Advice service for telecommunications, electricity and gas customers as well as for railway users. Long-term Telecommunications experience in offering advice to consumers 35,931 in the core areas of telecommunications and post enabled the Agency to set up a Total number of enquiries and complaints: 40,747 Consumer Advice service in these areas within a very short period of time. In 2007, the Consumer Advice service re- The total of enquiries and complaints received a total of 40,747 enquiries and com- ceived by the Federal Network Agency in plaints. Of these, 25,212 were received by 2007 can be broken down as follows: telephone, 5,272 by letter or fax, and 10,263 by electronic means. CONSUMER PROTECTION AND ADVICE CONSUMER ADVICE SERVICE 29

TELECOMMUNICATIONS sons (non-receipt of bills, no access to online portals, default in payment, cancel- Most of the information requested by con- lation of direct debit arrangements, remind- sumers in enquiries and complaints on ers, collecting arrangements entailing telecommunications contracts concerned, additional costs, wrong tariffs, non-pay- besides notices of termination and contract- ment of refunds or delays in granting prom- ual violations, the terms and conditions of ised refunds, deficiencies in the provision contract. Complaints continued to focus on of services ordered, false customer data, etc). poor customer service and bad business conduct of telecommunications companies Unsolicited direct marketing and prize prom- in terms of rectifying problems, and in par- ises made in calls, text messages, faxes or ticular their failure to adhere to contractu- e-mails continued to account for a large ally agreed terms and conditions with proportion of consumer complaints. It was regard to charges billed, periods of notice noted that in particular unsolicited direct and provider switching problems. Many marketing by telephone calls increased complaints referred to order confirmations substantially as compared to previous of telecommunications companies, assum- years. This is a great nuisance for consum- ing contractual terms and conditions ers. In contrast to text message, fax and e- which were disputed by customers (slam- mail spamming it is much more difficult ming). for subscribers to furnish evidence of abuse as there is no written document available There is still a large number of enquiries for proof. If you wish to read more about and complaints about problems relating to the combat of spam, please see page 35. difficulties in obtaining digital subscriber lines (DSL). Consumers lament the fact that Frequently, providers also use unsolicited DSL is not available in certain regions and direct marketing calls to change tariff, complain about the long waiting time in preselection and contract arrangements switching a DSL provider, delays in the acti- against consumers’ will. vation of their DSL port as well as bundling with their telephone line. The Agency will Numbering enquiries increased and became continue to regulate the market and the more complex because customers were spectrum in such a way as to facilitate the more frequently willing to switch providers. provision of broadband services by market The main enquiries and complaints con- participants. cerned number allocation, portability and reallocation, accessibility or non-accessibili- The number of complaints about calls ty, network identification and porting fees charged in bills, but disputed by customers following provider switching. is declining. Most of these complaints concerned premium rate numbers (0900 and In respect of the new consumer protection 0137 numbers, premium text messages) regulations of the Telecommunications Act and data services. Bills were mainly (TKG) which entered into force on 1 Sep- disputed for contractual or civil law rea- tember 2007 the Agency answered in par- 30 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

ticular queries regarding entries in the Consumer interests at European level were black list for collect calls, the determin- safeguarded by the Federal Network ation of charges for 0180 shared-cost Agency’s cooperation in the Independent services and 0137 mass calling services, Regulators Group (IRG) and European price indication, display or announcement Regulators Group (ERG), the End Users obligations in the case of special service Working Group and the Tariff numbers and information requests (eg Transparency International Roaming name of the service provider behind the Working Group. The year 2007 saw the pro- number in the bill). vision of a report focusing in particular on the level of regulation in the fields of emer- Under section 45 TKG the legislator is gency calls, number portability, tariff required to safeguard the interests of the transparency, service quality and cross- disabled. For this purpose, a text and video border disputes in the use of Voice over IP relay service is to be supplied for deaf and (VoIP) services. hearing-impaired persons. The Federal Network Agency will determine the The EU Roaming Regulation entered into demand, in terms of extent and degree of force on 30 June 2007. Subject to regulation coverage, after having consulted the asso- are the wholesale and retail charges for ciations and companies concerned. It is international calls from mobile networks. also authorised to impose obligations on The Regulation also determines provisions companies to secure this service. governing the transparency of retail charges. The Agency’s Consumer Advice service The Agency has established contact with monitors compliance with the provisions, Deutsche Telekom AG (DTAG) and the for instance, by making formal requests for German Society for Deaf and Hearing- information. The information received is impaired Persons (DG) to prepare its deter- the basis for answering the question whether minations. DTAG and DG both work on the or not companies have implemented Tess GmbH pilot project (T-Sign & Script) the Regulation’s requirements for intro- aiming to establish such a text and video ducing a Eurotariff and for distinguishing relay service in Germany. The Agency has between existing roaming customers with continually monitored the progress of the or without special tariffs as provided for by project and, since early August 2007, law. provided information on the Tess project in informal talks with the provider Extensive market research (monitoring) associations BITKOM, BREKO, VATM, ANGA, was conducted in late July/early August Deutscher Kabelverband and eco. In 2007 to study the introduction of the EU addition, the legal considerations have Regulation Eurotariff in Germany. This been discussed and an ambitious timetable research covered a written request sent to presented. This optimum timetable provides 22 German providers of international roam- for a smooth transition of the project into ing services and the review of customer effective operation on 1 January 2009. data supplied by these providers online CONSUMER PROTECTION AND ADVICE CONSUMER ADVICE SERVICE 31

and in their sales centres. Finally, the Network Agency has used this occasion to Agency analysed the consumer enquiries extend its online information offer. Also, and complaints about this subject. The the Agency has published a leaflet giving number of consumer complaints about information on “Supplier switching in the international roaming received by the electricity and gas sector”. Consumer Advice service is insignificant. This is a further sign indicating that the In 2007, the Consumer Advice service re- Regulation has been implemented success- ceived more than 4,000 enquiries and com- fully so far. plaints from gas and electricity customers. The delays/deficiencies in supplier switch- ENERGY ing were the focus of the complaints received both in the electricity sector (17.4 July 1, 2007 was an important date for all percent) and in the gas sector (18.8 per- European consumers in the energy sector. cent). In this context the following ques- With a few exceptions only, the energy tions were frequently asked: why does the markets were opened to all energy con- supplier switching process take such a long sumers in all EU Member States. However, time, why is it impossible for the new the far-reaching liberalisation of the energy supplier to provide energy, and why is markets only marks the beginning of the supplier switching impossible if specific process of creating an overall competitive equipment is used (eg thermal heat pumps, energy market. The developments in storage heaters)? Also, the increase in retail Germany where the energy markets have prices for electricity (10.6 percent) and for been fully liberalised since 1998 clearly gas (14.1 percent) was of great interest to show that new suppliers of energy cannot final customers. enter and survive in the market before having established appropriate structures. POST

The year 2007 saw a number of changes in The customer protection tasks which the the German energy market. The approval Federal Network Agency is able to perform of the electricity prices, for instance, as pro- in the postal sector have been laid down in vided for by the Federal Tariff Code for the Postal Act (PostG), the Postal Universal Electricity (BTOEltV), has been abandoned. Service Ordinance (PUDLV) and the Postal The same applied to the transitional regu- Services Ordinance (PDLV). This is why they lations governing the implementation of are primarily addressed in the chapters the Basic Supply Ordinances for Electricity “Universal service” and “Dispute resolu- and Gas (StromGVV, GasGVV). Due to the tion”. legal amendments customers’ needs for information were as high as ever. In addition The number of citizen enquiries and com- to individually responding to the large plaints in the postal sector was slightly number of customer enquiries, the lower than in 2006. This is due to the fact Consumer Advice service of the Federal that, in 2007, as opposed to previous years 32 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

in which many customers complained And finally, with a view to safeguarding about the closure of postal facilities, the consumer interests, it is also urgently decrease in the number of postal agencies required to give due regard to the process operated either by DPAG or by other staff of changing from the monopoly to the virtually came to a stop. In 2007, the num- competitive environment. Within the ber of fixed-location facilities was in line scope of its remit the Federal Network with the requirements specified in the Agency has done preliminary work and PUDLV or even in excess of these require- included this subject in its 2008 Strategic ments. plan (cf pages 209/210).

Many queries addressed matters beyond RAILWAY the Agency’s regulatory functions, eg financial services provided by the Postbank The railway sector, which was newly incorp- or legal consumer protection regulations orated in the Customer Advice service in laid down in the Postal Act and the relevant 2006, received only a small number of ordinances, ie provisions determined by enquiries. Most of the enquiries addressed the legislator or the issuer of the ordin- the Agency’s responsibility in particular in ances. In such cases the Federal Network the fields of pricing and timetable issues, Agency could only make general com- customer service and handling of customer ments. complaints. The Federal Network Agency ensures under its remit that consumer Among the consumer protection issues information on deficiencies is passed on to dealt with by the Agency is most certainly the companies concerned and the subject- its function to comment on particular uni- matters of complaints are eliminated. versal service issues in its Activity Report presented to the legislative bodies every second year. As in previous years, the Agency recommended a number of PUDLV amendments to the legislative bodies in its 2006/2007 Activity Report. Part of these changes are mere clarifications and more detailed explanations of the ordinance text. Core elements are the details of the self-commitment voluntarily added by DPAG to the regulations of the PUDLV, which however expired at the end of 2007. CONSUMER PROTECTION AND ADVICE UNIVERSAL SERVICE 33

Universal service

Universal services are services which are generally deemed indispensable. In the telecommunications sector Deutsche Telekom (DTAG) is at present providing the universal services defined in the Telecommunications Act. In the postal sector they are provided by a number of market players and by Deutsche Post AG (DPAG) which has been required by law to do so.

TELECOMMUNICATIONS to what extent private companies can be required to pay for social obligations (cf In the year under review, the Federal COM(2006), 334 of 29 June 2006). Within Network Agency received numerous the scope of its review of directives the enquiries and complaints from customers European Commission suggested to separ- about their “right to access to the local ate the requirement for granting “access to loop”. Specific problems arising within the the local loop” from the requirement for framework of legal provisions were solved “access to telephone services”. This will in agreement with the parties concerned. make the future review of universal service obligations much easier (cf COM(2006), 334 In the process of reviewing the current of 29 June 2006; cf COM(2007), 697 final of package of directives the European 13 November 2007). The Federal Network Commission proposed that, with the publi- Agency actively participated in the cation of a Green Book on universal ser- announced discussions at European level vices in 2008, in-depth discussions should and will continue to do so in future. Of be initiated on the universal service direct- significance at national level in the period ive as a whole. In this context it is for in- under review was in particular the debate stance planned to discuss the balance be- about the scope of universal service and tween sector-specific and general horizontal the issue of possibly including access to consumer protection regulations. Another broadband services. issue of importance is the question whether a common European-wide universal service standard can be implemented and 34 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

POST self-commitment DPAG has undertaken to operate some 108,000 letter boxes nation- The Federal Network Agency confirmed wide until 31 December 2007. This figure again – in agreement with the Federal was even exceeded in 2007; there were Ministry of Economics and Technology 110,530 letter boxes at the end of the year. (BMWi) and the legislative bodies – that, in the year under review, universal postal ser- Once again, DPAG eliminated the vices were supplied appropriately and ad- deficiencies reported by the Agency in equately altogether. At the end of the 2007 without delay. It was therefore not period under review, the number of fixed- necessary to respond to deficiencies location facilities (12,617) was still in excess officially by imposing fines. Of particular of 12,000, the figure provided for by the importance is that DPAG dealt with PUDLV. The same applied to the number of consumer complaints resulting from its fixed-location facilities operated by DPAG’s self-commitment just as carefully as with own staff. They totalled 5,440 as compared complaints relating to the PUDLV. to 5,000 facilities specified by law. In its CONSUMER PROTECTION AND ADVICE SPECIAL CONTROL OF ANTI-COMPETITIVE PRACTICES 35

Special control of anti-competitive practices

Consumer protection in the telecommunications sector has once again been strengthened by improving the relevant provisions. Among other things, existing price indication and announcement obligations have been extended beyond premium services to include further categories of service.

COMBATING NUMBER ABUSE AND SPAM operator to deactivate the unlawfully used number. The Agency may further require Overview the bill-issuer not to bill and collect for par- In the period under review, the Federal ticular calls or may even prohibit certain Network Agency was tasked to combat business models. number abuse and spam under the TKG. The purpose is to strengthen consumer In the period under review, the Federal rights and not to give companies acting Network Agency dealt with 36,827 enquir- illegally a competitive edge through breach ies and complaints about number abuse of law. Section 67 TKG empowers the and spam submitted in writing or by tele- Federal Network Agency to intervene in phone. As compared to 2006, this was a cases where it has reliable information on reduction by 5,384 which, last but not least, unlawful number use, in particular in was due to the intensive combat of abuse order to prevent further abuse taking by the Agency. place. Under section 67(1) sentence 1 TKG the Agency may issue orders and take other appropriate measures to secure compliance with the legal provisions and with the conditions it has imposed in relation to the allocation of numbers. This can include issuing a warning, withdrawing the number in question or ordering the network 36 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Total of complaints about number abuse in 2007 as compared to 2006

2006 42,211 complaints

2007 36,827 complaints

With regard to the clearly enhanced con- The Federal Network Agency investigated sumer protection regulations laid down in the consumer complaints received and, in sections 66a ff TKG which entered into addition to the pending administrative force on 1 September 2007 it remains to be proceedings of previous years , instigated seen to what extent the regulations will be further 1,014 proceedings. Twelve of these complied with and how the volume of com- deal with business models of individual plaints will develop in 2008. The relevant providers deemed unlawful and prohibited enquiries and complaints received in by the Agency. The prohibitions regularly writing can be broken down as follows: refer to advertising business models violating section 7(2) of the Unfair Competition Act (UWG). The Agency has prohibited a total Enquiries and complaints about number abuse and spam received in 2007 of 32 business models of this type.

Prices Information In addition to combating abuse that is 1.9 % 1.6 % actually evident, the Agency always observes Other Diallers 13.9 % 0.1 % the market in order to become aware of possible new abuse scenarios. Some companies have challenged a number of steps taken to combat number abuse in court. However, in none of these cases has a decision of the Federal Network Agency been Spam 82.5 % reversed by a court. CONSUMER PROTECTION AND ADVICE SPECIAL CONTROL OF ANTI-COMPETITIVE PRACTICES 37

Enhanced consumer protection regula- mation. According to section 66g TKG the tions of the Telecommunications Act end user is not required to pay charges if The enhanced consumer protection regu- the specific consumer protection regula- lations of sections 66a ff TKG took effect on tions set forth in sections 66a to 66i TKG are 1 September 2007. The existing regulations violated. Section 66l TKG is another new which had largely referred to 0190 and and vital regulation stipulating that the 0900 numbers were supplemented and provisions of sections 66a to 66k TKG are extended to other categories of service. also applicable in case they are bypassed by This also created the legal framework in other measures. the TKG for quick and flexible responses to future changes in the telecommunications Upon the entry into force of sections 66a ff market and for improvements of the mar- TKG the Federal Network Agency issued a ket opportunities for new and innovative total of eight related ordinances and com- telecommunications services. For this pur- munications published in its Official pose the legislator has defined various Gazette. Amongst other things they categories of service for the first time. The address issues, such as exceeding price most important innovations can be sum- caps, cutting connections by means of marised as follows: identification procedures and deviating from the price indication obligation for In addition to the already existing price short code data services provided in the indication obligation for premium ser- public interest, and they give further vices, providers are required to inform cus- explanations interpreting the provisions tomers of the gross price to be paid for any on price indication, price announcement type of offer or advertisement in connec- and price display. tion with directory enquiry, mass calling, short code or innovative services. Now the Price indication/price announcement price announcement obligation applies Under section 66a TKG, numbers of pre- not only to premium services, but also to mium, directory enquiry, mass calling, voice directory enquiry and short code ser- shared cost, innovative and short code vices, and to innovative services costing services are subject to price indication more than €2 per minute or per call. Where obligations, and under section 66b TKG a directory enquiry service call is to be premium, directory enquiry, voice short reforwarded, the provider has to announce code and mass calling services are subject the price to the subscriber prior to re- to price announcement obligations. Any forwarding the call. Where short-code data infringement of these obligations constitutes services are used, eg one-time ring tone number abuse and prompts the Federal order by text message for a mobile phone, Network Agency to intervene. Complaints the gross price – if higher than €2 per use – of this nature were again received in the must be displayed before the chargeable period under review, in response to which message begins. Also, the end user has to the Agency issued a warning or deactivated acknowledge receipt of the price infor- the number in question. 38 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

It is interesting to note that the Agency transmitted as numbers of calling parties receives a relatively small number of com- with effect from 1 September 2007. plaints about price indication violations. In spite of this fact, other complaints, eg Total of complaints about spam in 2007 about spam, that are received and investi- as compared to 2006 gated frequently also reveal violations of 31,988 complaints 25,574 sections 66a ff TKG. All established violati- complaints ons of legal regulations are fined regularly in administrative proceedings, ie both violations of spamming regulations set forth in the UWG and violations of TKG regulations such as wrong pricing information. If, for instance, a text message containing unsolicited direct marketing supplies wrong pricing information, this was and is deemed a violation of section 66a TKG and is fined additionally to the violation of the UWG. 2006 2007 Also, price indication violations are the reason or additional reason for deactivation orders or other steps taken by the Agency. So-called “press button models” are a special form of illegal advertising for prize Combating spam promises. Subscribers find 0900 numbers on The volume of complaints about spam re- their telephone bill without having dialled lating to numbers decreased in 2007. In the them. The items appear on the bill after period under review, the Federal Network users have been called and pressed a specif- Agency received a total of 25,574 com- ic combination of buttons on their phone plaints concerning spam sent by fax, tele- during the call. Here, infringements of the phone and e-mail. Telephone spam in- UWG and sections 66a ff TKG have been cludes in particular spam sent by text mes- established among other things because sages, so-called prize promises and “one- number blocking measures taken by net- ring fraud” whereby calls are made to a work access operators at the request of cus- telephone number and broken off after just tomers are frequently bypassed. In 2007, one ring, prompting the called party to the Agency has already initiated and ring the caller by pressing the automatic carried on a number of administrative return call button and dialling the expen- proceedings against such providers. sive number displayed. Constituting an infringement of the UWG, spam is deemed In the period under review, the Agency unlawful number use in accordance with received 25,574 complaints about spam section 67(1) TKG. Additionally, numbers of which can be broken down as follows: directory enquiry, mass calling, innovative and premium services may no longer be CONSUMER PROTECTION AND ADVICE SPECIAL CONTROL OF ANTI-COMPETITIVE PRACTICES 39

Complaints about spam, broken down In respect of these short code services, both by telephone, e-mail and fax spam violations of the UWG and of price indica-

E-mail-spam tion obligations under the TKG were fined. 3 %

Details of the steps taken by the Agency to Fax spam 28.9 % combat spam-related abuse, including the Telephone spam bans on billing and collecting for particu- 68.1 % lar calls and a list of the numbers that have been deactivated, can be found on the Agency’s website. The list is available at www.bundesnetzagentur.de under Verbraucher>Rufnummernmissbrauch-

Total number: 25,574 Spam-Dialler.

Information In 2007, the Federal Network Agency has Even upon expiry of the 0190 numbers on further intensified its combat of telephone 31 December 2005, the Federal Network spam. In 2006, a whole bundle of measures, Agency answered 187 enquiries in the including bans on billing and collecting for period under review concerning the last unlawfully used numbers were imposed party responsible for a particular 0190 not only on the core network operator, but number in accordance with section 66h(1) also on 80 access network operators and TKG (previously section 43a(1) TKG). The service providers. This administrative number of responses to requests about practice was continued in 2007 on a large 0900 numbers given in accordance with scale. The reason for increasing these section 66h(2) (previously section 43a(2) measures was the massive rise in one-ring TKG) totalled 379. fraud calls and the resulting consumer complaints. The aim was and is to make Administrative fines proceedings and this form of number abuse less attractive charges in accordance with section economically and to reduce spam substan- 67(3) TKG tially. Last but not least, the decreasing In respect of diallers, spam, price indication number of complaints about spam in 2007 and price announcement obligations 39 was due to the large number of counter- administrative fines proceedings were initi- measures taken. ated in the period under review. A large number of these are still pending. Forty-five no- In the period under review, the Agency tices of administrative fines were issued, continued to fight the unlawful use of thirty-nine of which are final or, upon short code numbers for mobile phones, so- appeal and transfer to the competent called premium text message numbers, court, have become non-appealable due to which were the subject of unlawful adver- the court’s decision. The fines determined in tising sent in non-requested text messages. the non-appealable notices totalled €87,600. 40 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

The violations focused on missing or Interference investigations insufficient price indications in the provision Clearing up cases of electromagnetic and of or advertising for 0900 premium services. radio interference (interference investiga- In addition, a number of infringements on tions) was and is one of the core activities of account of missing or insufficient price the PMD. This includes in particular safety- announcements in the relevant services were related radio services and applications ascertained and fined. The Federal Network used in air travel, by emergency organisa- Agency identified only a very small number tions (BOS) or other public bodies. of violations due to the use of non-registered diallers. In accordance with section 67(3) TKG Depending on the interference case, fully all cases giving reasons to suspect a possible equipped measuring vehicles and many criminal offence were passed on to the different specialised vehicles are used competent public prosecutor assuming alongside stationary measuring facilities exclusive jurisdiction as from the date of and direction-finding systems in order to transfer. determine both domestic and foreign sources of interference. ACTIVITIES OF THE RADIO MONITORING AND INSPECTION SERVICE Nearly half of all interference cases processed concerned radio and TV broadcast Of great significance to consumer protec- receivers. All other cases mainly related to tion is the radio monitoring and inspection interference caused to transmitting and service (PMD) which, with its fixed and receiving stations of other radio services mobile measuring equipment, secures the and, to a smaller extent, to electrical or efficient and interference-free use of the electronic equipment and devices. spectrum nationwide. The work of the PMD is based on the Telecommunications Act More than 10 percent of all interference (TKG), the Electromagnetic Compatibility cases were reported in the aeronautical Act (EMVG), the Radio Equipment and service, the major part of which referred to Telecommunications Terminal Equipment frequencies used by emergency services. As Act (FTEG) as well as the Constitution and a rule, such cases have top priority in pro- Convention of the International Tele- cessing. Only a few instances of interfer- communication Union (ITU). Its scope of ence concerned the aeronautical radio- activities includes interference elimination, navigation service. frequency usage monitoring, measurements related to market surveillance, More frequently than ever, operators of measurements of electromagnetic fields UMTS networks in conurbations complained and the environment (EMVU), identification about interference to their base stations, of unauthorised spectrum usage and leading to non-compliance with the quality international cooperation. parameters of their networks. PMD investigations finally revealed that satellite receivers with partially insufficient attenu- CONSUMER PROTECTION AND ADVICE SPECIAL CONTROL OF ANTI-COMPETITIVE PRACTICES 41

ation of the interference radiation and, with CE marking regulations, the plausibil- increasingly, cordless telephones (DECT ity of the EC declarations of conformity phones) which, due to faulty equipment, issued by manufacturers, compliance with operate on UMTS frequencies for recep- EMC protection requirements, compliance tion, were the sources of interference. with the essential requirements under the Those causing the interference had to FTEG, instructions for the operation of eliminate the sources of interference. equipment for its intended use and possible restrictions on the operation of radio Interference processing and elimination at equipment and telecommunications ter- big events is a special PMD function. In line minal equipment (TKEE). with the public interest the PMD is present on spot for the whole duration of the event In 2007, a total of 12,700 market surveillance and can investigate the source of any inter- activities were carried out by the Federal ference immediately, ie prior to, during or Network Agency. 7,310 series/single devices after the event. Due to prompt processing were tested using measuring equipment or the PMD can clear up a high percentage of visually inspected. Of these devices, 5,984 interference cases. This contributes to came under the EMC Directive and 1,326 ensuring smooth radio and TV broadcasts under the RTTE Directive. Additionally, 57 of important events which millions of products were tested for compliance with people throughout the world can thus fol- the essential requirements for device and low and take a lively interest in. Equally product safety in 2007. A fault rate of 51 important is that the emergency and secur- percent was found. The focus was on radio ity organisations present can communicate sockets which had burnt after thermal without any problems. The service number heating and were thus a substantial danger 0180 3 23 23 23 (fixed network charge: 9ct to life and limb. With regard to CE marking per minute) which can be called nation- and the declarations of conformity, defects wide and was provided years ago solely for under the EMC Directive were found in 81 the purpose of reporting radio interference products (1.4 percent of the products is used very often. In 2007, 546,000 calls tested) and defects under the RTTE were recorded. Directive in 241 products (19 percent of the products tested). Furthermore, 1,475 series Market surveillance in Germany under and 90 single devices were tested using the EMVG and the FTEG measuring equipment. In these tests, 435 The Federal Network Agency conducts series devices and 36 single devices were tests on electrical products that are filtered faulty, ie 29.5 percent of the series tested out from the market and tested by the PMD and 40 percent of the single devices did not for compliance with the technical require- meet the prescribed requirements. The ments in specially equipped test laborator- high percentage of faulty products can be ies and in an accredited test laboratory. explained by the targeted samples taken, The legal basis for these tests are the EMVG which focused on those devices thought and the FTEG. The tests cover compliance most likely to fall short of the require- 42 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

ments. In the course of 2007, some 300 having an equivalent isotropically radiated sales bans were imposed in accordance power (EIRP) equal to or greater than 10 with the EMVG and the FTEG. However, this watts may only be taken into operation if breakdown does not permit conclusions to the limits for the protection of persons be drawn with regard to the market as a from electromagnetic fields are complied whole. In 2007, 88 providers offering 1,079 with. The Agency determines and includes non-compliant products were ascertained in the site certificates the safety distances by online search and their online offers ter- to be generally observed throughout the minated. country in accordance with the relevant standards. Site certification is the core part The national authorities of the Member of the Agency’s modular EMF monitoring States that are responsible for frequency procedure. management must be notified, in accordance with the FTEG, of radio equipment Password-protected portal allowing site operated at frequencies which have not certificates to be transmitted to munici- been harmonised Community-wide, at palities and authorities of the German least four weeks before it is to be placed on federal states the market. The Federal Network Agency Municipalities and federal state authorities provides the parties seeking to place equip- may retrieve from the Internet site certifi- ment of this kind on the market with infor- cates issued within their remit, using a mation about the type of frequency password-protected portal of the EMF data- assignment required for the operation of base. There is a total of 2,379 registered the radio equipment (general or individual users for this access. Since introduction of assignment) and, where applicable, noti- this service, 66,960 site certificates have fies them of any restrictions that may be in been viewed so far. place on the use of particular frequencies in Germany. The Federal Network Agency EMF database received 2,027 communications in 2007. The interested public makes intensive use of the data platform. After entering post Electromagnetic compatibility (EMC) and codes and/or towns or cities, users may the environment view map sections containing both the The Federal Network Agency monitors local radio equipment requiring site certifi- compliance with the limits for the protection cates and locations where EMF measure- of persons from electromagnetic fields ments are taken. Since the EMF database of radio equipment by carrying out repeated which is accessible to anyone went into measurements. For this purpose the PMD operation, more than 10 million searches measures the high frequency spectrum at have been registered. points selected throughout the country and evaluates the results. In accordance Automatic measurement system with the legal telecommunications The Federal Network Agency’s automatic regulations a fixed radio transmitter measurement system was taken into oper- CONSUMER PROTECTION AND ADVICE SPECIAL CONTROL OF ANTI-COMPETITIVE PRACTICES 43

ation on 19 March 2007. A total of 12 mobile were tested by the Federal Network monitoring stations record the local field Agency. strengths round the clock, transmitting them to the EMF database fully automatic- Shared use of mobile equipment ally. The evaluated measuring results can locations be retrieved from the database. The time needed between measurements and dis- With five mobile With six mobile stations stations play of the measuring results is very short. 3 % 2 % With four mobile With more than People interested can retrieve local radio stations six mobile 7 % stations equipment immissions on a quasi-real time 2 % basis. Since the system went into operation, With three the mobile monitoring stations took meas- mobile stations 11 % urements at 33 different locations. More than 353,000 measurement cycles were carried out and the relevant data files With two mobile With one mobile stations station transmitted to the EMF database for 31 % 44 % evaluation and display of the measuring results (as of January 2008).

Series of EMF measurements Space services In accordance with the Ordinance concern- Also available to the PMD is a special earth ing the Controls for the Limitation of station for space service measurements at Electromagnetic Fields (BEMFV) the Leeheim (between Darmstadt and Mainz) Agency is required to review the function- to monitor frequency usage and process ality of site certification by carrying out radio interference. A source on earth caus- regular series of measurements. The deter- ing interference to the satellite uplink also minations are made in cooperation with causes interference to the downlink, ie the the Environment Ministries of the German satellite-earth link. Such cases of interfer- federal states. Within the scope of the ence are localised and clarified by the series of EMF measurements, local immis- Federal Network Agency. sion measurements have been taken at 9,514 measuring locations nationwide so DATA PROTECTION IN TELECOMMUNICA- far. The evaluated results are available in TIONS AND POST the EMF database. The privacy of telecommunications and post Number of site certificates issued as well as the relevant other data protection In the period from 1 October 2006 to regulations are significant aspects of con- 30 September 2007 the Federal Network sumer protection. It is the Federal Network Agency issued a total of 14,299 site certifi- Agency’s task to secure compliance with the cates. In the same period 3,026 devices of relevant standards. The strict TKG and PostG radio equipment requiring site certificates provisions are intended for commercial 44 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

service providers and give in-depth details In the postal sector checks relating to the about the customers’ right to secrecy of secrecy of post and postal data protection the communication itself, but also of the regulations were regularly carried out framework within which communications throughout the country without any specific take place. In spite of the far-reaching cause in the year under review. In 2007, 130 market liberalisation providers of telecom- test reports were provided. It was finally es- munications and postal services have not tablished that, in most cases, great import- been relieved from the obligation to ensure ance was attached to the legal and technical the privacy of telecommunications and requirements of data protection. All the defi- post. Against this background the Federal ciencies established were eliminated. In 2007, Network Agency informs service providers the good cooperation between the Federal and citizens of legal data protection re- Network Agency and the Data Protection gulations and secures compliance with Commissioner was continued, the aspect the standards to the benefit of customers. of freedom of information ensured, and in particular the measures taken in all impor- In 2007, a number of providers of telecom- tant individual instances were harmonised munications services even established con- with a view to achieving effective data pro- tact with the Federal Network Agency prior tection. to the introduction of new services in order to offer their services in accordance with data protection regulations right from the beginning. Added to the legal control measures (notably information and advice) was the technical control of companies to increase security in telecommunications. In this context the Agency examined 107 security concepts and carried out 54 on-spot checks in the period under review. CONSUMER PROTECTION AND ADVICE DISPUTE RESOLUTION 45

Dispute resolution

End users may ask the dispute resolution service of the Federal Network Agency for conciliation in telecommunications and postal disputes. Customers are making increasing use of the online procedure introduced in March 2006.

Under section 47a TKG subscribers may ask As a rule, dispute resolution is carried out in the Federal Network Agency for conciliation writing. It is also voluntary for both parties. in a dispute with a provider of publicly avail- Hence follows that the procedure is to be able telecommunications services. Under regarded as closed as soon as one of the section 10 PDLV the same applies to postal parties refuses to cooperate. The parties are customers if rights ensuing from the PDLV heard with the aim of reaching amicable have been violated. For this purpose the agreement. Based on the statements made Agency has set up a dispute resolution ser- by the two parties on the case, the Agency vice for each of these two sectors. may make a proposal aiming at the settlement of the dispute. The outcome of the pro- Applications for dispute resolution will cedure will to a large extent depend on the however only be admitted if applicants can parties’ willingness to clarify the facts and to claim violation of their own statutory rights compromise in order to reach a solution. under the TKG or the PDLV, if no judicial pro- Dispute resolution is always subject to fees. ceedings or other dispute resolution pro- The level of the fee is determined in accord- cedures concerning the same matter in ance with section 145 sentence 2 TKG, as dispute are pending, and attempts to reach provided for by section 34(1) of the Court agreement with the defendants have been Costs Act (GKG), or pursuant to section 18(2) made beforehand. The telecommunciations PostG, the minimum fee is €25 and increases dispute resolution service of the Agency in line with the value of the matter in dispu- carries out these procedures in accordance te. The fee is payable once the defendant has with the amended rules of procedure agreed to take part in the dispute resolution (VFOSchli2006) published in the Agency’s procedure. Official Gazette of 22 February 2006 as Communication No 77/2006, in conjunction with section 47a TKG. 46 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

TELECOMMUNICATIONS without any direct monetary values. Two hundred thirty-nine further petitions were With the entry into force of the submitted to the dispute resolution service, Telecommunications Legislation to which the Agency responded by giving Amendment Act on 18 February 2007 the advice on and assistance in the possible regulations which had been part of the next steps to be taken or by giving support, Telecommunications Customer Protection in direct contact with the providers, in Ordinance (TKV) so far, were integrated in reaching solutions. Since introduction in the TKG. Since the Amendment Act became March 2006, the online procedure allow- effective, dispute resolution is subject to ing applications, correspondence and section 47a TKG. enquiries about the state of the case to be handled online, has been increasingly Under section 47a TKG a subscriber may used. As much as 40 % of the applications apply for a dispute resolution procedure to were submitted online in 2007. However, the Agency if he argues with a provider of companies (defendants) are at present only publicly available telecommunications ser- making little use of the possibility to carry vices as set forth in section 47a(1) TKG about out the whole procedure online. The the question whether or not the provider Agency’s aim is to promote further accept- has fulfilled an obligation as provided for ance in this respect. by sections 43a, 45 to 46(2) and section 84 TKG. With the amendment of the Act, con- Twenty-seven percent of the applications sumer protection has been optimised and filed complied with the admission criteria, extended by customer rights which are leading to the instigation of dispute resolu- now subject to dispute resolution (eg section procedures. Fifteen percent of the tion 43a TKG referring to the constituent applications were withdrawn by the appli- parts of contracts). The aim of the procedure cants following comments made by the is to reach amicable agreement. Based on Agency’s dispute resolution service on the the parties’ statements, the Agency makes legal requirements and rules of procedure a proposal aiming to reach a compromise (under the TKV, TKG, VfOSchli) and on the between the parties concerned. The result circumstances of the case. In more than 50 of dispute resolution will basically depend percent of the cases the Agency’s service on both sides’ willingness to reach a solu- was forced to reject the applications after tion. determining that rights under the TKV and TKG had not been infringed (increasing In 2007, the dispute resolution service was tendency). Most of these cases concerned called in to conciliate on 604 occasions. disputes relating to the conclusion, amend- The volume of applications thus tripled in ment or termination (notice of termina- the last two years. The values of the matters tion) of contracts. Such cases are subject to in dispute amounted to some €81,930. In general civil law regulations and therefore addition, applicants instigated 386 pro- cannot be settled by the Federal Network cedures referring to matters in dispute Agency. From consumer perspective, the CONSUMER PROTECTION AND ADVICE DISPUTE RESOLUTION 47

Agency is increasingly required in this Outcome of the admissible procedures respect to take unrestricted action such as an ombudsman. However, section 47a TKG Withdrawals from procedure, applicants defines in detail the violations of end user Withdrawals Current procedures 2 % 12 % from procedure, rights ensuing from the TKG which are to defendants’ refusal to participate be settled by the dispute resolution service. 44 % In a large number of these cases it was after all possible to clarify the matters in dispute in favour of end users by passing the cases on to the relevant telecoms companies. Settlement proposal, amicable preagreement Processing of applications for dispute 42 % resolution Procedures in the process of examination 6 %

Applications withdrawn (applicants) 15 % POST Non-admissible applications 52 % Customers in the postal sector only made little use of the Agency’s dispute resolution service in the period under review, ie there

Dispute resolution were only 15 cases. Of these, six were com- procedures instigated pleted successfully. No agreement was 27 % reached between the parties in two cases, and three cases are still pending. Four applications were rejected as the require- Defendants refused to participate in the ments for instigating a procedure were dispute resolution procedure in more than not met. 40 percent of the procedures instigated. Amicable agreement during the procedure In most cases the modest consumer accept- or agreement to the Agency’s settlement ance of the dispute resolution procedure is proposal was reached in 42 percent of the due to the low value of the matter in dis- cases corresponding to 84 percent of the pute as compared to the fee of €25 which procedures carried out. There were only has to be paid as a minimum for the isolated cases of procedures which had to procedure. be terminated due to applications or the defendants’ agreement to the procedure being withdrawn. Therefore, the success rate of the dispute resolution procedures completed in 2007 was most promising. 48 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

International cooperation

Telecommunications 50 Post 54 Energy 56 Railway 59 INTERNATIONAL COOPERATION 49 50 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Telecommunications

From a global perspective, 2007 was dominated by the further revision of the EU regulatory framework for electronic communication networks. The further development of the Independent Regulators Group (IRG) into an institution with its permanent secretariat in Brussels and the implementation of the roaming regulation of cross-border mobile phone calls were also focus issues.

Since its foundation in 1997 the Independ- Group" (ERG) was founded by the EU ent Regulators Group (IRG) has been co- Commission. The aim of this body is to ordinating regulatory practice in European enhance coordination between national countries on a voluntary basis. The benefit regulatory practices by applying the of voluntary coordination is that its mem- European regulatory framework as uni- bers feel committed to an unanimously formly as possible. For this reason, the inde- agreed approach rather than to harmon- pendent national regulatory authorities for isation imposed by regulation. electronic communication are members of this group in addition to the (non-voting) Following the increased demands on the representatives of the Commission. The organisation at European level, the IRG ERG’s main task is to intensify cooperation decided at the end of 2006 to set up a per- between the regulatory authorities. manent secretariat in Brussels. To act au- tonomously and more effectively as a stand- The ERG prepares non-legally binding alone organisation, the statutes for found- "Common Positions" (CP) in which it ing the IRG as a non-profit association expresses a common stance or fundamen- under Belgian law with its seat in Brussels tal conviction, and "Opinions" in which it were signed at the IRG plenary session on states its opinion on specific regulatory 06/07 December 2007 in Rome by the join- issues. The latter are requested by the ing regulatory authorities, among them Commission, for example when preparing the Federal Network Agency. In 2002 the new legal provisions such as recommenda- consulting board "European Regulators tions. To increase transparency, documents INTERNATIONAL COOPERATION TELECOMMUNICATIONS 51

such as "Common Positions" or the work institution. The EECMA’s mandate is to programme are published for public con- make statements to the EU Commission, as sultation prior to their adoption. in the case of procedures according to Article 7, standardization according to In 2007 IRG/ERG activities focused on the Article 17 of the framework regulation, statements made on the legislative pro- analysis of specific national markets, num- posals by the EU Commission for revising the bering (including number portability), existing regulatory framework for electronic access conditions for digital radio services communication networks and services. and frequency regulation. On 13 November 2007 the Commission published both the new market recom- Another major change compared to the mendation and proposals for a new pack- existing regulatory framework would be age of regulations. the suggested extension of the European Commission’s right of veto on remedies The market recommendation that came that is already in place for market defin- into force on 28 December 2007 only covers i-tions and analyses. While, according to 7 markets, a clear reduction from the 18 the EU Commission, the decisions of the markets that were covered by the old ver- national regulatory authorities have largely sion. Cuts have been made particularly in resulted in an alignment in the member retail markets but several wholesale mar- states as far as market definition and markets have also been removed. In view of the ket analyses are concerned – last but not fact that the deleted markets are still sub- least due to the EU Commission’s veto right ject to regulation in some countries, the and its application – major divergences IRG/ERG called for flexibility in considering allegedly exist that could not be explained national conditions in its statement pub- by national peculiarities. As the publication lished on 13 November 2007. of the new proposals was approaching, the ERG dealt intensively with the issue of a Most of the draft directives submitted by the functional separation in 2007 and called European Commission include proposals for the integration of corresponding rem- that started evolving in advance of the edies into the package of directives. In an publication (such as extended Commission ERG opinion that was submitted to the EU competencies; possibility of national regu- and published in October 2007, the ERG latory authorities imposing a functional first defined the term "functional separ- separation). The demand for introducing a ation“ and described the objective as well as European regulatory authority ("European the components of such an obligation. The Electronic Communications Market ERG makes it clear that functional separ- Authority", EECMA) made by commissioner ation is intended to implement an existing Viviane Reding is also one of the proposals. obligation of equal treatment and shall only apply if this target cannot be reached The existing ERG is to be replaced by the otherwise. In addition, a cost-benefit analy- EECMA as the EU Commission’s consulting sis must be performed prior to being im- 52 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

posed by a national regulatory authority to ciples in order to achieve a "harmonisation ensure compliance with the principle of of effectiveness" but not "uniform mea- proportionality. sures for the sake of harmonisation".

Follow-up work was performed in the field The ERG responded accordingly to a letter of "Harmonisation" after updating the from commissioner Reding dated 30 Common Positions on the "Remedies" November 2006 that calls for an ERG that – ("Remedies Handbook") because frequent together with the EU Commission – would criticism by stakeholders in the hearing on make binding decisions in particular when the revised Remedies CP revealed that this imposing remedies (as part of a new proced- manual was too abstract or too general ure according to Article 7 of the framework with the result that its application and regulation). This was rejected by the ERG compliance could not be reviewed by regu- in its reply to the commissioner dated 27 lators. To take this criticism into account, February 2007 because it does not consider the ERG adopted two additional Remedies the included "Veto on remedies" necessary. CP for "ERG Common Position on Best Due to the obligation described above that Practice in Bitstream Access Remedies" and has been accepted on a voluntary basis, the "ERG Common Position on Best Practice in regulators have already been following the Wholesale Unbundled Access (incl. Shared same principles when imposing remedies Access) Remedies" in which the general so that the measures are consistent. Hence, principles of the remedies paper were a "Veto on remedies" is not required. As broken down according to specific markets long as national markets exist, it is better – (market nos. 11 and 12 of the recommenda- due to the national regulatory authorities’ tion) and the measures imposed there. more detailed knowledge – to maintain the current model of "decentralised imple- These two common positions are based mentation" of regulatory measures because upon the understanding of all ERG mem- the most suitable measures are imposed for bers stipulated in the so-called "Madeira national market situations by the inde- Declaration" that total harmonisation in pendent national authorities. Stronger the sense of “uniformity” cannot be the regulatory coordination could only be feas- measure of all things because it disregards ible in the future in the case of increased any existing differences due to national pan-European and cross-border services; peculiarities. If all regulators did exactly in this case the ERG (in its extended form) the same, this would result in over-regulation would be the appropriate body. This pos- in some countries and under-regulation in ition was emphasized by the ERG in a others; measures would be imposed too second letter to commissioner Reding early in some countries, in others too late; dated 06 November 2007 in which it the measures would in no way be optimal reiterated its readiness for an immediate in terms of reasonable expenditure for solv- inten-sification of the cooperation, in ing problems. Therefore, it is only feasible particular during the procedure according to decide on the basis of the same prin- to Article 7. INTERNATIONAL COOPERATION TELECOMMUNICATIONS 53

Another issue that the IRG/ERG has dealt relevant projects that were handled by a with in the period under review is the project team headed by the Federal monitoring of compliance with the Network Agency. The "Report on IP- International Roaming Regulations that Interconnection" was published in March came into force on 30 June 2007 by mobile 2007 as a first result. Because of the signifi- network providers and other providers of cance attributed to laying new fibre-optic roaming services. The national regulatory networks in the access area, a common authorities will be responsible for their position on regulatory principles for Next implementation, ie in particular reviewing Generation Access (NGA) networks was the compliance of transparency and infor- prepared by the ERG that could also be sub- mation obligations towards retail custom- mitted to the Commission after public con- ers and price caps at upstream and retail sultation in response to the corresponding customer level. After the directive came request as "ERG Opinion on Regulatory into effect, several guidelines on interpret- Principles of NGA" and was published on ation and application by the national the ERG website on 03 October 2007. regulatory authorities have been prepared and submitted for public consultation by Finally, the Federal Network Agency the ERG. continued its activity on the Electronic Communications Committee (ECC) and In the field of "Innovation", the third pillar Contact Network of Spam Authorities of the work programme for 2007, the (CNSA) during the period under review and IRG/ERG had already responded to develop- hence intensified the cooperation particu- ments with regard to investment in so-called larly with the regulatory authorities in "Next Generation" networks and launched Austria and the Netherlands. 54 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Post

The Federal Network Agency contributes its lengthy experience in regulating postal affairs to international governing bodies and thus actively supports reform processes and the establishment of relevant framework conditions.

UNIVERSAL POSTAL UNION line with the liberalisation processes that have already been completed in some of In coordination with the Federal Ministry the member states. of Economics and Technology (BMWi) the Federal Network Agency cooperates on the EUROPEAN COMMITTEE FOR POSTAL Universal Postal Union (WPV/UPU), on the REGULATION Council of Administration (sovereign and regulatory issues) and on the Postal The European Committee for Postal Operations Council (operational imple- Regulation (CERP) works on comparing the mentation of the Universal Postal regulatory framework conditions for the Contract). One major issue that is currently postal sector in the 48 member states and on subject of discussion is a basic reform of the elaborating proposals for harmonisation, if Universal Postal Union. Commission 1 of this appears to be appropriate and reason- the Council of Administration (chaired by: able. The vice chairman is from the Federal Germany) has performed several studies Network Agency. There are three working and surveys following the Universal Postal groups with several project groups each. Union Congress of Bucharest in 2004 with The working group "Politics" discusses the the aim of improving all aspects of work implementation and application of the within the Universal Postal Union, includ- European postal regulation, definition, ing its structure and composition as well as scope and objective of the Universal Service the decision processes within the individual as well as the sector-specific regulation and bodies. The studies were mainly intended opening of postal markets in cooperation to adjust the existing organisational with the Agency. The project group "Cost structure, particularly in terms of the separ- Accounting and Price Control" of the work- ation and distribution of governmental, ing group "Economics" is chaired by the regulatory and operational functions in Federal Network Agency. It has drafted a INTERNATIONAL COOPERATION POST 55

recommendation on cost accounting that TEMPORARY PARTNERSHIPS IN THE is currently being revised with the object- POSTAL SECTOR (TWINNING PROJECTS) ive of meeting the modified framework conditions in future liberalised postal mar- In 2007 the Federal Network Agency kets. A project group "Statistics" was estab- carried out a twinning project. Based on lished upon request from the European cooperation between the administrations Commission in the working group of an "old" member state of the European "Monitoring Group / Market Data" to per- Union and the corresponding administra- form statistical surveys in the postal sector. tions of a "new" member state, specific The Federal Network Agency played a de- knowledge and experience shall be passed cisive role in drawing up the framework on to the latter through personal contact conditions for these surveys. The Agency and exchange. These measures are for a also cooperates on the project group "Con- limited period of time and financed with sumer Issues" that documents various funds from the European Union. regulatory approaches in terms of consumer protection as well as general rights Project partner was the regulatory author- of the regulatory authorities with regard ity of Poland. The project took place during to postal user relations. September 2006 and March 2007 with the objective of advising and supporting the EUROPEAN COMMITTEE FOR Polish regulatory authority in terms of pro- STANDARDISATION moting competition and market supervision, making it familiar with methods and The Technical Committee on Postal broadening existing knowledge applied in Services (CEN/TC331) of the European other EU member states. Particular focus Committee for Standardisation (CEN) de- was placed on the mechanisms of price velops standards in the postal sector that, in control, market entry promotion and mar- addition to purely operationally/logistical- ket monitoring. In addition, it was a matter ly oriented projects, also include the fields of enhancing the administrative capacities of quality measurement. The working of the Polish project partner for implement- group CEN/TC331/WG1 for the field of de- ing the appropriate measures. In addition veloping quality measurement procedures to the extensive transfer of knowledge and relevant for regulation is headed by the experience, the learning effects achieved Federal Network Agency. The work in this during the preparation of recommenda- working groups includes the revision of the tions for any future changes in the law standard for measuring the transit time for contributed in particular to the success of single piece priority mail and first class the project. mail (EN13850) as well as the revision of the standard which governs the handling of claims and inquiries (EN 14012). 56 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Energy

In 2007 the Federal Network Agency intensified its cooperation with European energy regulators and cooperated in the development of regional electricity and gas markets as an intermediate step towards a European single market. One focal point of its work was executing the competencies of the existing energy regulatory framework. In addition, it supported the co-decision procedure on the so-called "Third Energy Package" with the core issues unbundling and European Regulatory Agency.

In 2007 the Federal Network Agency con- In 2007 the activities of CEER and ERGEG tinued its cooperation with the regulatory were dominated by the energy policy authorities of other EU member states. It initiatives and law proposals made by the has been a member of the European gov- European Commission. In April 2007 the erning bodies "Council of European Energy ERGEG submitted its comment to the Regulators" (CEER) and "European Commission on the Commission communi- Regulators Group for Electricity and Gas" qué dated 10 January 2007 on "An Energy (ERGEG) since 2004. As an association Policy for Europe". The commentary deals under Belgium law, the CEER is a platform with the following six issues: Unbundling, founded by the regulatory authorities for legal and regulatory framework for a the exchange of all issues that are relevant European system of energy regulation, net- to all of its members. Following work regulation, further development of Commission Decision 2003/796/EG of 11 network provider associations to "ETSO November 2003 the ERGEG was established plus" or "GIE plus", competencies and inde- as a formal advisory committee of the pendence of the national regulatory author- Commission. Both committees support the ities as well as transparency requirements. Commission in consolidating a European single market for electricity and gas and On 19 September 2007 the Commission contribute to a uniform application of adopted a package of five legislative pro- directives 2003/54/EU and 2003/55/EU as posals ("3rd energy package") for changing well as regulations 1228/2003 and the above directives and regulations as well 1775/2005 in all member states. as for a regulation on the establishment of an agency for cooperation between the INTERNATIONAL COOPERATION ENERGY 57

energy regulating authorities (ACER). In a The Federal Network Agency was repre- press release the ERGEG emphasized its sented in nine electricity-specific working general support for the proposals of the groups of the CEER and ERGEG. The work of Commission and its readiness to contribute the regional initiatives was evaluated in the regulators’ expertise by way of concrete the Electricity Regional Initiative Task suggestions for improvement. This con- Force to ensure the development of com- cerns the structure and competencies of patible solutions. This is particularly in Ger- the agency, which is intended as a pure many’s interests as the electricity exchange advisory committee. On the other hand, in hub in Europe. The Electricity Market Task its detailed commentary "Key comments Force dealt with compliance with regula- on the European Commission’s Third tions in the bottleneck management guide- Package" dated 20 December 2007, the line and the content of future studies on the CEER calls for the agency’s independence general energy and retail market. Other to be strengthened vis-à-vis the Commis- issues were lost energy and financial trans- sion and the network provider committees mission rights. The Electricity Transmission and direct decision powers to be given to it. Network Task Force looked at approval pro- The regulatory authorities agree on the cesses for the construction of new lines in aim of effectively unbundling the network various countries as well as incentives for and sales interests of integrated energy investment in cross-border infrastructures. supply companies in both the electricity In addition, it worked on the definition of and gas sector. an "EU grid" included in the legislative proposals of the Commission. The Security of The Federal Network Agency executes the Electricity Supply Task Force analyzed competencies in regulation No. 1228/2003/ various methods to ensure "Generation EG on network access conditions for cross- Adequacy" in order to develop recommen- border electricity trade. See page 162 for a dations for a uniform method in 2008. detailed description of the Federal Net- work Agency's activities in this respect. In the gas sector, the Federal Network Agency was represented in twelve working The aspired development of regional elec- groups and headed one working group in tricity and gas markets as an intermediate 2007. Here, the work focused on the devel- step towards a European single market has opment of guidelines for applying the been intensified by the ERGEG since 2006 regulations of Article 22 of the Natural Gas as part of so-called "regional initiatives". In Energy Directive 2003/55/EG. The question 2007 the Agency continued its cooperation here was how network providers can apply in four of the seven regional initiatives in for exceptions to the regulation. the electricity sector. As part of the North- West regional initiative, the Federal Net- Further working groups dealt with trans- work Agency supported easing cross-bor- parency, access to storage facilities, the der gas trade, in particular between the secondary market, capacity calculation Netherlands and Germany (see page 169). and open season procedures for demand- 58 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

oriented determination of requirements By cooperating in the consumer-related and allocation of capacities. ERGEG working groups (Customer Focus Group, Customer Protection Task Force, The Federal Network Agency will be repre- Retail Market Functioning Task Force) the sented in all gas-specific working groups of Federal Network Agency has actively sup- the ERGEG and CEER and will chair a Euro- ported the interests of the consumers at pean working group together with the European level in the year under review. Belgium regulatory authority in 2008 that The working groups dealt with issues such is intended to ensure more efficient cap- as regulating retail prices, formulating a acity management in European gas European Charta of energy consumer networks. The Agency will be responsible rights and identifying obstacles when for the issues "capacity allocation" and changing suppliers. The Federal Network "bottleneck management". In addition, Agency was also involved in the European it will continue to head the working group Commission’s information campaign on Article 22 - Exemptions. about the consumer rights on the single European market for energy. In the cross-sector CEER and ERGEG working groups, the Federal Network Agency supported the interests of consumers on European level. As part of the Unbundling, Reporting & Benchmarking Task Force, an international project concerning efficiency benchmarking of transmission network providers was prepared with the Federal Network Agency in the chair. The results of this project will be used by the Agency as part of the incentive regulation. Following a public consultation the Task Force adopted the "Guidelines of Good Practice on Regulatory Accounts Unbundling". Having published its 2007 monitoring report, the Federal Network Agency met its reporting obligations towards the Commission under the Directives 2003/54/EU and 2003/55/EU. INTERNATIONAL COOPERATION RAILWAY 59

Railway

The increase in cross-border rail traffic was another clear indication of the merging of national markets. The Federal Network Agency supports this development in technical committees to enable non-discriminatory access to networks and availability of capacities with modern systems.

WORKING GROUP RAIL REGULATORY railway companies. Meeting topics in- BODIES cluded the design of a European incentive system by the International Union of The Federal Network Agency also took part Railways (UIC) as well as agreements con- in the quarterly meetings of the Working cerning cross-border railway traffic. Group Rail Regulatory Bodies to discuss Following the working meeting, a forum cross-border issues of railways regulation about "Equal Opportunities for All – How to in 2007. The work of this group, which Regulate Free Access to the Network?" was comprised representatives from the held to which the participants of the work- European regulatory authorities and the ing group were also invited. European Commission, focused particularly this year on the revised version of the RAIL NET EUROPE Europe's First Railway Package as well as on the introduction of incentive systems for International activities also focused on reducing failures and increasing the effi- Rail Net Europe (RNE), an organisation ciency of the railway network by operators that brings together Rail Infrastructure of the railway systems. Managers from across Europe and is based in Vienna. Its mandate is to promote com- In November 2007 one of these meetings petitiveness and enhance the quality and was held by the Federal Network Agency. efficiency of cross-border railway traffic by The meeting was held alongside the intensifying cooperation between mem- international congress fair #railtec in bers, coordinating procedures and activ- Dortmund to enable contact between the ities in international sales and simplifying representatives of the authorities and the the allocation of railway capacities for 60 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

international railway traffic. In cooper- of workshops planned was organised in ation with other regulatory authorities, the September 2007 by the Federal Network Federal Network Agency is currently par- Agency alongside the Eisenbahnrechtliche ticularly interested in the software "Path- Forschungstage (railway law research days) finder" provided by the RNE for path in Tübingen on the issue of "Discrimin- requests on the Internet. It is particularly ation". At the meeting the scope of the important to make sure that this communi- term "discrimination" was discussed with cation tool is applied and the required path experts on the basis of several cases of information made available in a non-dis- discrimination when accessing the infra- criminatory manner. The regulatory author- structure and associated services along ities and European Commission found out with the uniform application and enforce- about this system at the end of 2007 at a ment of the requirement of a non-discrimin- meeting of a RNE meeting in Vienna. atory access. There was agreement that the term discrimination requires a wide inter- INTERNATIONAL GROUP FOR IMPROVING pretation to ensure effective and genuine THE QUALITY OF RAIL TRANSPORT IN THE competition and an attractive railway NORTH-SOUTH CORRIDOR traffic offer.

The Federal Network Agency attends regu- BILATERAL MEETINGS AND INTERNATIONAL lar meetings of the ”International Group WORKSHOP "CAPACITY OF RAILWAY for Improving the Quality of Rail Transport PATHS" in the North-South-Corridor" (IQ-C). The working group comprising representatives The Federal Network Agency held bilateral from the regulatory authorities of the meetings with other regulatory authorities Netherlands, Italy, Switzerland and Ger- during the course of the year. Both the many observes cross-border railway traffic meeting with the British Office of Rail on the corridor between Rotterdam and Regulation and the Polish Urzàd Milan to identify any barriers to competi- Transportu Kolejowego were initial events tion. The tasks of the IQ-C working group leading to further meetings in the coming include observing the RNE’s activities year during which the exchange of opin- when allocating international paths via the ions on specific issues is intended by be so-called "One-Stop Shop" for this corridor, stepped up. The working meeting held in informing each other of cases of discrimin- the 4th quarter with the Swiss arbitration ation and exchanging opinions about the commission for railway traffic and Trasse next steps to be taken. Schweiz AG, an independent path allocation agency, was also intended to serve as In addition, the work involves defining the an exchange of experience and opportunity as yet undefined legal terms "discrimin- to discuss common regulatory issues. In ation", "overloaded railway routes" and particular, possible approaches for avoiding "railway route capacity". The first of a series discrimination during all phases of path INTERNATIONAL COOPERATION RAILWAY 61

allocation were discussed, ie from the contractual basis and planning to implementation of the network timetable.

A key discussion point in 2007 was the definition of the term "Capacity". For this purpose, the Federal Network Agency organised an international workshop on the issue of "Capacity of Railway Paths" in October. Experts from Austria, Switzerland, the Netherlands and Germany presented the latest approaches and gave ideas for activities in the field of railway regulation. The event resulted in a lively exchange of opinions between researchers, regulatory authorities, ministries and the European Commission. 62 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Telecoms

Market watch 64 Ruling chamber decisions 88 Further decisions 96 Administrative court proceedings 115 TELECOMS 63 64 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Market watch

VoIP and mobile telephony compete with conventional fixed network services – Prices for fixed network and mobile communication services are declining drastically, unfailing dynamic of the broadband growth market, Germany gains ground in international comparison, competitors increase their market shares – Customer growth in the field of cable Internet – Mobile data traffic on the advance – Increasing real investment.

COMPETITION SITUATION 10 YEARS AFTER that have not been liberalised so far. A variety MARKET OPENING of new services has emerged in the decade from early 1998 till the end of 2007. The situ- While mobile telephony was already subject ation of Deutsche Telekom AG’s (DT AG) com- to competition in the early nineties, this petitors by the end of 2007 is as follows in the generally started in early 1998 for the areas key areas.

Selected figures on competitor shares in 2007

Total revenues in the telecommunications market 52 % Investment (2006) 58 % Employees (31 Mar 2007) 26 %

Telephone connections 19 % Telephone channels 24 % Broadband connections 54 %

Fixed network turnover 39 % Domestic call minutes 45 % International call minutes 78 %

Fibre optic route kilometres 36 %

Cable TV connections 100 %

Mobile telephony (revenues) 71 %

Mobile telephony (subscribers 63 % according to network membership)

Mobile telephony (subscribers 73 % according to customer care) TELECOMS MARKET WATCH 65

TOTAL MARKET FOR TELECOMS SERVICES cations service market2 in 2007. Having decreased for the first time in 2006, this Revenues trend has continued in 2007. The Federal Network Agency expects rev- enues1 of €63.8 billion on the telecommuni-

Revenues on the German market for telecoms services

€ (bn) 67.3 70 66.9 66.3 63.9 62.0 63.8 60.5

60 56.2

50 48.1 44.2

40 35.1 35.3 34.4 34.7 33.2 34.2 33.8 33.1 32.8 31.4 33.1 30 32.2 32.5 29.5 30.7 26.7 25.4 20 23.0

16.7

10 11.4

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007e

Total market DT AG

Competitors

Competitor data for the overall market can deviate from the total of the individual values due to rounding up.

The revenues of competitors continuously positive growth rates could not be main- showed positive growth rates up to 2006. tained in 2007. The competitors reached a At a total of €33.8 billion they exceeded the market share of 52 percent compared to volume of DT AG (€32.5 billion) for the first 26 percent in 1998. time in 2006. Due to declining prices in the fixed network and mobile telephony, the

1 Cumulative revenues comprising revenues of DT AG and its competitors in Germany. 2 Definitive figures for 2007 are not yet available. The 2007 figures cited here are estimates (shown in tables with "e"). 66 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Percentage of DT AG and competitor turnover out of overall turnover on the telecommunications service market

74 % DT AG

52 %

48 %

26 % Competitors

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007e

Real investment after moderate growth in both preceding Real investment volume in the field of fixed years, capital spending showed a marked network and mobile telephony has risen by upward trend. Whether this has continued 12 percent to €6.5 billion in 2006. Thus, in 2007 cannot be defined in numbers yet.

Real investment on the German telecommunications market

€ (bn) 12 11.5

10 9.9

7.8 8 7.2 7.1

6.3 6.5

6 5.7 5.5 5.7 5.8

5.2 4.2 4.0 4.2 3.8 4 3.6 3.4 3.8 3.1 3.5 2.9 3.0 2.6 2.6 2.7 2 2.4

0 1998 1999 2000 2001 2002 2003 2004 2005 2006

Total DT AG Competitors TELECOMS MARKET WATCH 67

The competitors have continuously in- Employment creased their capital spending since 2004 214,700 people were employed with tele- to €3.8 billion in 2006. They exceeded communication companies in Germany at those of DT AG by €1.1 billion which in- the end of 2006. This constitutes a decline creased its expenses for the first time in of 4 percent compared with the preceding 2006. In 2006 the competitors’ share year (224,100). By the end of the first quar- amounted to 58 percent. ter of 2007, the number of employees had continued to decline to 214,600. The increase in investment volume was supported by the positive development in The number of employees working for fixed networks. In 2006 investment in the competitors increased by approx. 3 percent fixed network increased by 14 percent to to 56,300 by the end of the first quarter in €3.8 billion, whereas investment in mobile 2007. 2.5 percent of the jobs were cut the telephony rose by 9 percent to €2.7 billion. previous year. In the first quarter of 2007 DT AG reduced its workforce by 1,700 employees and in 2006 by 8,000 employees. While the number of employees has clearly declined at DT AG, it has remained relatively constant at its competitors since 2004.

Jobs on the telecommunications service market

240,700 240,700 231,500 230,600 221,900 225,300 224,100 221,900 214,700 214,600

179,200 179,200 178,300 177,800 172,700 173,300 171,000 168,000 160,000 158,300

61,500 62,400 53,700 57,300 54,300 56,100 54,700 56,300 49,200 42,700 Jobs 31.12.1998 31.12.1999 31.12.2000 31.12.2001 31.12.2002 31.12.2003 31.12.2004 31.12.2005 31.12.2006 31.03.2007

Telecommunications service market

Competitors

DT AG (including Vivento) 68 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

FIXED-NETWORK SERVICES munication over the conventional fixed network has now been joined by access via Voice communication cable TV networks, not to mention VoIP A comparison of the various means of services provided via DSL lines. At year's access possibilities to voice communication end 2007, the number of cable connections offered by mobile and fixed networks used for telephone calls had risen to ap- shows that increasingly more voice options proximately 1.2 million, while the number have emerged in mobile than in fixed net- of DSL lines used for VoIP had climbed to works since 2001 due to the rapid growth in some 3.9 million. the number of mobile phones. Voice com-

Development of means of access for voice communication

Telephone channels (million)

160

156.1

140 143.5 135.5

126.2 120 119.1 112.9 108.6 100 97.3

98.4 85.7 79.3 80 71.3 64.8 59.1 60 56.1 50.2 52.5 53.8 54.3 54.6 54.9 54.5 53.7 48.2 40

2.8 3.9 0.25 1.2 0.15 0.49 1.23 0 0.05 2000 2001 2002 2003 2004 2005 2006 2007e

Total

Mobile network

Fixed network (PSTN/ISDN)

VoIP customers via DSL

Voice channels via TV cable TELECOMS MARKET WATCH 69

While the number of channels3 in the con- this figure, ie 790,000 lines. The number of ventional fixed network (PSTN) has de- coin and card telephones in 2007 amount- clined since 2006, the number of mobile ed to approx. 110,000 as in the previous voice channels4 has grown continuously. year. There has recently been a renewed This clearly shows that wireless technology upturn in the use of public telephones, is in a position to mount a serious challenge notably by travellers from within the euro to fixed networks and also highlights the zone who use payphones. This trend is substitution of mobile phones for fixed opposed by the roaming charges for pan- lines. European mobile communication calls that were reduced in 2007. The various types of conventional fixed network access and cable connections The total number of telephone connections together accounted for a total of 54.91 mil- provided by alternative fixed network lion telephone channels at the end of 20075 operators including cable TV networks compared to 54.96 million in the preced- rose from just under 1 million to more than ing year. This shows a slightly declining 7 million between 2002 and 2007. By the tendency in the number of telephone end of 2007, 65 percent of these connec- channels since 2006. tions were basic rate ISDN lines. The share of cable telephony was already more than Competitors increased their number of 11 percent. telephone channels in the fixed network in 2007 to 13.02 million, achieving 23.7 per- At the end of 2007, there were 86 com- cent of the total number of channels.6 panies, besides DT AG, that offered analogue lines, ISDN lines or cable telephony on the By the end of 2007 the total number of basis of either local loop access agreements fixed network connections provided by DT with DT AG or their own facilities. AG and its competitors was 38.12 million. This reflects a drop in both the number of They have enjoyed various degrees of suc- telephone lines and the number of tele- cess in increasing their share of regional phone channels. The total number of lines markets in recent years. In some parts of comprised 24.04 million analogue lines, Germany, the national average in 2007 of 13.07 million basic rate ISDN lines and 18.6 percent for telephone lines and 23.7 113,000 primary rate ISDN lines.7 Cable tele- percent for telephone channels was signifi- phony accounted for a growing share of cantly exceeded.

3 Telephone channel: Parameter that represents the totally available voice channels via the different access types such as analogue accesses, ISDN basic accesses and ISDN primary rate accesses. The calculation of the parameter includes an analogue access with one telephone channel, an ISDN basic access with two telephone channels and an ISDN primate rate access with 30 telephone channels. Public telephone systems (öTel) are included with one telephone channel. With reference to the voice channel via VoIP, a voice channel was assigned to each registered customer with a network access into the PSTN/ISDN Network as part of the VoIP offer. Approximately 1.5 channels per access were determined on average for cable TV telephony. The number of channels and accesses include a small share of personal need both for competitors and for DT AG. 4 One voice channel is counted for any registered mobile phone. 5 53.68 million channels in the traditional telephone network (PSTN) and 1.23 million channels in cable networks. 6 See also figure 6 of the activity report Telecommunication 2006/2007 of the Federal Network Agency. 7 See also figure 7 of the activity report Telecommunication 2006/2007 of the Federal Network Agency. 70 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Development of telephone connections of alternative subscriber network providers

Telephone connections (million) 8

7.11 7

5 4.97 4.62

4 3.38 3.49

3 2.49

2 1.99 1.67 1.47 1.39 1.14

0.98 1.01 1 0.75 0.70 0.79 0.33 0.44 0.25 0.31 0.11 0.05 0.03 0.03 0 0.03 0.03

2002 2003 2004 2005 2006 2007e

Total Analogue connections (incl. public telephone systems) Voice accesses via cable TV networks

ISDN basic access points ISDN-PMX connections

Development of the ratio of alternative subscriber network providers at the telephone connections

20 %

15 %

10 % 18.6 %

12.9 %

5 % 8.7 %

5.1 % 3.5 %

0 % 2003 2004 2005 2006 2007e TELECOMS MARKET WATCH 71

Broadband access technologies lite-delivered. These figures clearly show The high demand for broadband connec- that DSL remains the dominant access tech- tions continued unabated. In Germany, nology in Germany, followed by cable TV broadband access is usually provided via connections. The clear year-on-year gains digital subscriber lines (DSL), cable TV made by companies providing broadband (cable modem), satellite or powerline. At access via cable TV networks mean that the end of 2007, the total number of broad- alternative access technologies have slight- band connections in Germany amounted ly increased their market share at the to approx. 19.6 million. Thus, almost expense of DSL. This figure was approx. 5 million new broadband connections 1 million at the end of 2007. It would still be were provided within 1 year. inaccurate, however, to talk of vigorous competition between different access tech- At the end of 2007, approx. 18.5 million nologies. (some 95 percent) of all broadband connections were DSL lines, around 985,000 relied Broadband growth in Germany is impres- on cable modems, 9,500 used powerline sive by international comparison. technology and around 36,500 were satel-

Total broadband access

19.6 1.1

15.0 0.6

10.8 0.3

7.0 0.2

4.5 0.1 3.3 0.08 1.9 0.03

1.9 3.2 4.4 6.8 10.5 14.4 18.5 Million

2001 2002 2003 2004 2005 2006 2007

Other access technologies

DSL 72 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Growth in fixed network broadband connections in Europe (EU 25)

6,000,000

5,000,000 4,793,103

4,000,000

3,000,000 2,848,550 2,819,693

2,000,000 1,711,677 1,695,480 1,101,684 1,000,000 667,142 506,015 463,768 419,007 411,796 391,761 337,210 280,060 214,758 209,969 206,125 157,030 145,390 107,864 79,023 45,599 35,694 32,822 0 4,457

UK Italy Malta Latvia Spain CyprusEstonia FinlandAustriaIreland GreeceSweden Poland France Slovenia LithuaniaSlovakiaPortugal Belgium HungaryDenmark Germany Luxembourg Netherlands Czech Republic

Source: European Commission, Broadband access in the EU (COCOM 07-50)

The illustration shows that Germany, as the DSL lines biggest European economy, reported the High levels of competition continued in the highest absolute increase in the number of field of DSL in 2007. More than 4 million broadband lines between July 2006 and July new DSL connections were put into oper- 2007 with just under 4.8 million new broad- ation in 2007, resulting in approx. 18.5 band lines. Other big European countries million operational DSL lines in Germany such as the UK, France and Italy were signifi- by the end of 2007. This corresponds to a cantly behind. growth rate of approx. 28 percent over the previous year. It also shows that Germany is more successful in terms of relative growth (relating to the End customer of DT AG directly accounted number of inhabitants) than the big coun- for approximately 9 million DSL lines at the tries. It is only outperformed by smaller end of 2007, representing a market share of countries such as Denmark, Luxembourg around 49 percent. and Ireland. TELECOMS MARKET WATCH 73

DSL lines in operation

18,5 6.0

14.4 4.1

10.5 2.5 3.5

3.2

6.8 1.6 0.9

0.3 4.4 0.4

3.2 0.2

1.9 0.1

4.0 6.4 7.1 9.0 Million 1.8 3.0 5.6

2001 2002 2003 2004 2005 2006 2007

Competitors (own implementation, local loop)

T-DSL resale

DT AG

Development of share of DSL lines sold

100 %

97.0 % 90 % 94.0 % 90.9 %

80 % 82.7 %

70 %

60 % 61.0 % 50.8 % 51.4 % 50 % 49.2 % 48.6 % 39.0 % 40 %

30 %

20 % 17.3 %

9.1 % 10 % 6.0 % 3.0 % 0 % 2001 2002 2003 2004 2005 2006 2007

DT AG

Competitors incl. DSL resale 74 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Resellers of DT AG’s DSL lines recorded paras a percentage of households). An esti- ticularly strong growth in the past few mated 46 percent of German households years. They do not operate their DSL busi- were equipped with a DSL line at the end ness using their own network, but sell of 2007. DT AG’s DSL lines under their own name. While DT AG is mostly responsible for the Approx. 70 percent of German customers technical implementation of these connec- use DSL lines with bandwidths starting tions, competitors can offer the entire ser- from 2 Mbit/s. Germany thus leads the field vice consisting of broadband connection in comparison with other European coun- and rate as a one-stop solution in those tries. areas in which they do not have their own network up to the main distributors of Cable access DT AG. These so-called T-DSL resale offers In the regions where they are available, fast require a contractual agreement with DT AG. Internet connections over cable TV net- By the end of December 2007, 31 undertak- works with return channel capability now ings had signed such agreements. They represent a real alternative to the conven- accounted for approx. 19 percent of DSL tional fixed network. Competitive offers subscriber business at the end of 2007. The with data rates of more than 30 Mbit/s growth rates of DSL resellers were clearly meant that approx. 1 million cable custom- lower than in previous years. Reseller ers had opted for this means of access, pro- growth declined during 2007 in favour of vided by 50 operators by the end of 20078. the infrastructure-based growth of DSL More than 80 percent of these customers connections and the related demand for selected rates offering bandwidths of 2 local loops. Competitors that had a concen- Mbit/s and higher. The rapid infrastructure trating access network in addition to an IP rollout allowed 21 million households to be backbone achieved a significant increase connected in theory by the end of 2007. with approx. 6 million activated DSL connections at the end of 2007 or approx. 32 percent of all DSL connections sold. These products rely primarily on local loops leased from DT AG that allow high bit rates.

Germany remained the European leader in terms of the number of DSL lines in operation in 2007. No other EU country achieved such high growth with DSL lines. At the same time, there was a significant increase in national market penetration (measured

8 This figure includes all individual companies, regardless of whether they belong to the same group. TELECOMS MARKET WATCH 75

Development of Internet access via cable modem

1.2

1.0 0.985

0.8

0.6

0.490

0.4

0.240 0.2 0.145

0.070 0.030 0.045 0.0 Internet customer in million Internet 2001 2002 2003 2004 2005 2006 2007

Powerline required to do so was substantially reduced Powerline technology is another means of from €1,500 to approx. €300 due to the providing high-speed Internet access. This technical progress made in recent years. procedure transmits data to the retail cus- Combined with new rates they are no long- tomer via the power network. At year’s end er interesting for business applications 2007, this technology was the preferred only. This type of data transmission was choice of approximately 9,500 households, used by approx. 9,000 customer at the end while 300,000 could be connected with a of 2007. Hybrid services, which only route minimum of delay. Powerline use has thus the forward channel via satellite and the remained unchanged over the past few reverse channel via the telephone line, years. have reached user numbers of approx. 27,500. Satellite Data transmission by satellite technology Wholesale products offers Internet access at almost any location, In addition to local loops laid by themselves irrespective of the local infrastructure. and wireless connections, competitors This technology – available in two variants mainly use DT AG’s existing local loops as – can therefore be used in regions where a wholesale service. DSL is not available and where there are no TV cable networks offering return channel Using this service requires a contractual capability. Bi-directional systems use satel- agreement with DT AG. At the end of 2007 a lites to carry both the up and downlink. total of 109 undertakings had concluded The costs of the relatively expensive system such agreements with DT AG. 76 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Development of local loop traffic volumes

7.0 6.4 6.5

6.0

5.5

5.0 4.7

4.5

4.0

3.5 3.3 Million 3.0

2.5

2.0 2.0

1.5 1.3

1.0 0.9 0.6 0.5 0.3 0.1 0.03 0.3 0.3 0.4 0.7 1.3 1.4 1.7 0.2 0.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Volume of subscriber lines

Absolute growth in millions

DT AG’s wholesale service offer includes TRAFFIC DEVELOPMENT various local loop options. In 2007 all product variants sold amounted to a total of The downward trend in traffic volume via approx. 6.4 million and Germany still analogue and ISDN lines is continuing. The maintains the top position in the European volume of domestic and international calls Commission statistics9. has experienced a marked decline and reached about 175 billion minutes in 2006 This rapid growth is due primarily to the compared to about 182 billion minutes in strong demand for high-speed local loops the year before. Traffic volume in 2007 was on the part of competitors, which are used estimated to be 169 billion minutes. in particular to provide DSL lines. With about 1.7 million new leases of local loops in 2007, the highest growth rate ever was recorded.

9 European Commission, Broadband access in the EU (COCOM 07-50). TELECOMS MARKET WATCH 77

Development of domestic and international calls in the fixed network10

250

195 200 192 194 182 175 169

150

145 134

116 100 104 Billion (rounded off) 96 89 80 78 78 79

61 50 47

0 2002 2003 2004 2005 2006 2007e

Total

DT AG

Competitors

The impact of VoIP and mobile telephony DT AGs share of domestic and international substitution has increased significantly calls continued to decline. over the past two years, leading to a drop in call minutes in the fixed network. Reduced The increased number of competitors is rates in mobile networks have reinforced based upon a significant increase in traffic the shift in call minutes away from the volume via direct lines and the correspond- fixed network towards mobile networks. In ing increase in flatrate offers. Accordingly, addition, the rapid growth in the number the dynamic growth in direct connections of broadband lines resulted in many cus- resulted in a decline in traffic volumes via tomers demanding VoIP services and call-by-call and preselection. approx. 9 billion minutes handled via IP- based networks in 2006. In 2007, traffic More than 40 percent of all traffic trans- volume via VoIP increased to approx. ported by competitors of DT AG accounted 16 billion minutes or about 10 percent of for direct connections in 2006. This corres- overall traffic. ponds to an increase of 13 per cent compared to the previous year.

10 According to new findings, it can be assumed that information from DT AG competitors about the traffic originated via provider (pre)selection also included transit services in the past. This is why data has been adjusted retrospectively. 78 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Competitor share in the fixed network

100 %

90 %

80 % 78 % 75 % 72 %

70 % 67 %

60 % 60 % 52 %

50 % 45 % 43 % 41 % 40 % 39 %

30 % 30 % 23 %

20 %

10 %

0 % 2002 2003 2004 2005 2006 2007e

Abroad At home

Provider (pre-)selection traffic declined, call-by-call traffic was below preselection particularly in the case of call-by-call. Total traffic for the first time in 2006.

Traffic shares of competitor access variants

80 % 72 % 70 %

59 % 60 %

50 %

41 % 40 %

30 % 28 %

20 %

10 %

0 % 2005 2006

Provider (pre-)selection Direct traffic TELECOMS MARKET WATCH 79

Subscriber trend and penetration in German mobile communication networks

Subscribers in thousands 118.1 % 97,151 100.000 103.9 % 85,652 96.1 % 90.000 79,271 Penetration 86.4 % 71,322 Number of subscribers* 80.000 78.6 % 64,839 71.6 % 70.000 59,128 68.1 % 56,126 60.000 58.7 % 48,247

50.000

40.000

28.6 % 30.000 23,470

17.0 % 20.000 13,913 10.1 % 6.8 % 8,286 4.6 % 5,554 10.000 2.2 % 3.0 % 0.7% 1.2 % 3,764 0.3 % 1,768 2,482 273 532 953

0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

* Contract conditions. One user can have several contractual relationships. Data up to 2000 incl. C-network, from 2005 incl. UMTS.

MOBILE SERVICES phone line and approximately 65 percent had both a fixed and mobile line at the end Subscribers of 2006. At the end of 2007, mobile networks had about 97.2 million subscribers. This consti- Continuous strong growth has been re- tuted a penetration rate of 118 percent with corded in the mobile discounter segment, the result that – according to the statistical where independent discounters compete average – each inhabitant in Germany had with mobile service providers and sales more than one mobile phone contract. brands owned by the network operators. Following their first appearance on the mar- Numerous households do without a fixed ket in 2005, discount services had attracted network telephone and use mobile phones approx. 8.9 million users by the end of 2007. only. Figures for 2007 have not been available yet, but according to E-Communications The share of prepaid customers out of the Household Survey11 about 10 percent of all total number of subscribers was around 55 households in Germany only had one mobile percent in 2007.

11 Special Eurobarometer 249 “E-Communications Household Survey” conducted between November and December 2006, published April 2007. 80 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Development of voice traffic in mobile radio networks

Million minutes

70,000 68,337

60,000 57,112 60,308

50,000

43,003 52,761

38,469 40,000 43,123 35,089

31,930 36,312 30,130

30,000 33,329 31,177 25,004 28,558

20,000 23,794 17,401

14,795

10,000

0 1999 2000 2001 2002 2003 2004 2005 2006 2007e

Outgoing traffic from mobile telephone networks

Incoming traffic to mobile telephone networks

Mobile calls calls. The extensive range of flat rate offers Discount offers, flat rates and the rise in has, on the other hand, resulted in a dra- demand for Homezone rates have resulted matic increase in outgoing mobile phone in a increase in mobile traffic. traffic.

By year's end 2007, an estimated traffic Mobile data transmission volume of 68.3 billion minutes was achieved With reference to the population, network compared with 57.1 billion in 2006. coverage of the Universal Mobile Tele- Incoming traffic amounted to 60.3 billion communications Systems (UMTS) in 2007 – minutes. Growth was driven, on the one depending on the network provider – was hand, by the falling price of mobile phone between 56 and over 80 percent. The num- TELECOMS MARKET WATCH 81

Rise of UMTS usage (number of regular users)

8.7 Mio.

+ 263 %

2.4 Mio.

2005 2007

ber of regular UMTS users has more than of services that now require high-speed tripled from 2005 to 200712. data transmission, the significant drop in the price of network operators’ data plans There is now a large number of UMTS has also contributed to growing customer mobile phones available, as well as laptop acceptance. Furthermore, the UMTS net- cards and surf boxes that permit the use of work is gradually being upgraded with UMTS-based services. In addition to UMTS, HSDPA (High Speed Downlink Packet mobile data transmission is also possible Access) broadband technology. The max- via GPRS using the modulation procedure imum transmission rate for receiving data is EDGE (Enhanced Data Rates for GSM currently around 3.6 Mbit/s. Transmission Evolution). This technology is mainly rates of 7.2 Mbit/s are even possible in employed in areas without full UMTS cov- conurbation areas and, in the later stages erage, or by users without the right UMTS of rollout, transmission speeds will be hardware. At some busy locations, network boosted to as much as 14.4 Mbit/s. In view of operators have installed WLAN hotspots the speed comparable to DSL 6000 and the that permit mobile data communication. pricing, this technology offers an alterna- The number of WLAN hotspots of various tive to fixed network lines. In addition, providers allowing wireless data transmis- HSUPA (High Speed Uplink Packet Access) sion was more than 10,000 at the end of opened up the possibility of uploading 2007. data at rates of up to 1.4 Mbit/s in 2007.

As well as the wide range of UMTS mobile These developments have resulted in a phones currently available and the number growth in data traffic. It can be assumed

12 This figure is made up of subscribers who are directly registered for UMTS services plus users with fixed data plans/options who are assumed to use UMTS-based services on the basis of their regular usage pattern. 82 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

that the volume of data transmitted via These figures do not include premium text GPRS and UMTS has doubled to 1.7 million messages. Gbyte in 2007 compared to 2006. Comparisons with previous years indicate Text and multimedia messaging that the market is reaching the saturation (SMS/MMS) point. Declining prices for call minutes An estimated 20.4 billion text messages mean that text messages are often replaced were sent via the short message service by a phone call. centres of the four German mobile network providers in 2007. Another 2 billion short There were 147.7 million multimedia mes- messages were sent via short message ser- sages sent in 2005, rising by about 4 per- vice centres belonging to mobile service cent to 153.4 million in 2006. This growth providers.13 The total number of text mes- rate continued in 2007. sages sent in 2007 is estimated at 22.4 billion.

13 For the first time, data was collected regarding text messages sent via SMSCs belonging to mobile service providers in 2005. This data was not included in the past.

Development of text messages sent

2007e 20.4 2.0

2006 20.1 2.1

2005 20.3 2.0

2004 19.7

2003 19.0

2002 18.4

2001 17.1

2000 11.4

1999 3.6

0 5 10 15 20 25 Text messages (billion)

Network provider

Service provider TELECOMS MARKET WATCH 83

INTERNET “Digitale Chancen” identified around 9,000 of such locations across the country. Internet use The (N)ONLINER Atlas 2007 reveals that in Internet traffic 2007 some 39.2 million users used the As expected, the volume of narrowband Internet regularly. For the first time, more traffic to the Internet generated via ana- than 60 percent of the population over the logue or ISDN lines continued to fall. The age of 14 was online. Internet use continued volume of dial-up connections to the to rise, but at a slightly slower pace than Internet was approximately 43 billion the previous year at just two percent. minutes at the end of 2007 compared to According to Allensbacher Computer- und about 60 billion minutes at the end of Technikanalyse (ACTA), private Internet use 2006. This trend reflects the shifting of is now realized in 63 percent of cases via Internet minutes towards DSL and other DSL lines or similarly fast types of Internet broadband access technologies. In con- access. trast, the volume of broadband Internet traffic (measured in Gbytes) grew strongly, In addition to Internet use at home, work, a testament to the unremitting demand for school and university, the Internet can also broadband services. By the end of 2007, a be used at various commercial or non-com- data volume of more than 1.7 billion Gbytes mercial venues such as Internet cafés or was estimated. libraries. The Berlin-based foundation

Internet connection minutes narrowband

Minutes (bn) 140

127 124 121 120 113

100

82 84 80

60 60

43 40 32

0 1999 2000 2001 2002 2003 2004 2005 2006 2007e 84 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Broadband traffic volume

Gbytes (million)

1,800 1,710

1,600

1,400

1,200 1,110

1,000

800 680

600 500 400 400

200 200

30 0 2001 2002 2003 2004 2005 2006 2007e

VOICE OVER IP While in 2006 2.8 million customers were registered with these providers for VoIP Voice over IP (VoIP) is a service allowing services, this figure rose to about 3.9 mil- voice transmission via a packet-switched lion in 2007. These are mostly customers of data network based upon Internet proto- DSL line providers that generally offer VoIP, col. The use of VoIP services generally DSL access and access to the Internet as a requires broadband access to the Internet. product bundle.

VoIP has been widely used in corporate Registered VoIP users generated a call networks for some time now. The first com- volume of some 9 billion minutes via IP- mercial offers for use at home have been based networks. By year's end 2007, an esti- available on the market since the end of mated 16 billion call minutes were handled 2003. In 2007 VoIP services were offered for via VoIP. the mass market by about 80 providers. TELECOMS MARKET WATCH 85

BROADCASTING/CABLE TV PRICE TRENDS

According to figures from the Société The price trend in the fixed network was Européenne des Satellites (SES), at year’s dominated by package offers comprising end 2006 49.8 percent of the approximate- flatrate narrowband and broadband con- ly 37 million German households with tele- nections and services. Pricing competition vision received their signal via cable (this continued unabated. Offers consisting of a figure includes those households that telephone and DSL access including flat receive signals via a satellite master an- rate telephony and Internet access were tenna yet do not have their own satellite re- available from individual providers for as ceiver). 45.0 percent had their own satellite little as €30 depending on the DSL band- dish, while 5.2 percent received terrestrial width selected at the end of 2007. The qual- television. Compared to the reception pos- ity of the offers – for example higher band- sibilities of the previous years, cable con- widths – increased at the same. tinued to lose ground to satellite reception. A very small number of users received TV Calls to the German fixed network through via DSL line. a call network operator via call-by-call revealed an asymptotic development, with charges of approximately 1 cent per minute. Infrastructural connection of TV households at the end of 2006 Domestic calls were available during the day at the beginning of 2008 for just a thir- tieth of what they were before liberalisation in 1997.

Terrestrial 5,2 % At the start of 2008, time-based charges for international calls continued to fall com- Satellite 45,0 % pared to the previous year. They often only cost a fraction of a cent. Prices have fallen by as much as 98 percent compared to 1997 Cable 49,8 % depending on the destination.

Source: SES/ASTRA 86 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Minimum rates for national trunk calls Standard rates without discounts; prices in cents per minute, on workdays, call-by-call

Cents 31.0 30.7

26.0

21.0 18.4

16.0 12.3 11.0 9.7 9.7 7.2 7.7

6.0 4.6 4.6 3.6 3.5 3.2 2.0 2.1 1.9 2.0 2.2 1.7 1.9 1.8 1.8 1.8 1.8 1.7 1.5 1.5 1.1 0.9 0.9 1.0 1.0 0.8 0.8 0.8 0.8 0.5 0.6

1997 January January January March January January January January January January January 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Year of rate change

After 9 p.m. After 6 p.m.

During day

Development of foreign rates to the ten most important destination countries

Standard rates without discounts – prime time on workdays

0.81 France 49.08

0.74 UK 49.08

0.84 Italy 49.08

0.74 Netherlands 49.08

0.89 Austria 49.08

0.97 Poland 49.08

1.19 Switzerland 49.08

0.89 Spain 49.08

Turkey 1.79 67.49

0.85 USA 73.63

0 10 20 30 40 50 60 70 80 Cents per minute Competition 4 January 2008 DT AG 31 December 1997 TELECOMS MARKET WATCH 87

Under the influence of the competition, offering unlimited calls to fixed lines or to the standard rates of DT AG have mean- other subscribers in the same network are while reached a level that can be considered available for as little as €10. There were also one of the lowest by comparison with inter- special call plans allowing customers to national incumbents. The costs in Germany make cheap calls from a Homezone. In are lower than, for example, Finland, addition, there were a large number of France, UK, Italy, Netherlands, Austria and price plans whereby customers pay a fixed Spain. price for a certain number of call minutes. Entry into force of the EU roaming regula- By the end of 2007/start of 2008 calls could tion on 30 June 2007 made mobile cross- be made to the fixed network at rates start- border communication substantially ing from €0.08 per minute in the area of cheaper for citizens travelling in some discount mobile telephony. Flat rates areas of the EU.

Costs of fixed network telephony in €*

19.0 25.9 31.7 25.4 18.6 20.4 24.6 26.3 28.3 23.7 22.9 24.1 13.7 17.0 17.6 17.4 22.8 18.0 33.1 8.3 16.2 24.0 20.3 23.6 17.2

15.2 6.7 8.1 12.2 6.7 8.4 14.7 19.4 16.7 17.7 17.9 13.2 19.0 18.1 5.7 15.3 16.4 16.0 16.7 15.9 16.8 14.1 25.5 18.8 15.8 UK Italy Spain Malta Latvia France Poland Cyprus Austria Ireland Greece Estonia Finland Sweden Slovakia Belgium Slovenia Portugal Hungary Germany Denmark Lithuania Netherlands Luxembourg Czech Republic

Average monthly fixed costs (access) Average monthly variable costs (calls)

* Standard telephone rates of incumbents for private users incl. VAT, determined according to the “2000 composite OECD basket”. Data basis: 2006 Sources: EU price barometer 2008, 12th implementation report of the EU Commission, Directorate-General for the Information Society 88 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Ruling chamber decisions

In 2007, a variety of decisions were issued on local loops. Opening cable conduits enabled competitors to offer their own VDSL products – local loop rates were newly approved – a local loop standard offer was issued. For the first time, it was possible to determine mobile communication termination charges on the basis of cost documents submitted.

REASSIGNMENT OF RESPONSIBILITIES mer responsibility for regulating upstream BETWEEN THE TELECOMMUNICATIONS service markets in the field of mobile tele- RULING CHAMBERS phony, broadband services and broadcasting, ruling chamber 3 had been entrusted In September 2006 the responsibilities for with the responsibility for the interconnec- market regulation in the telecommunication points and the local loop for which tions sector were newly regulated and div- ruling chamber 4 had been responsible for ided between ruling chamber 2 and ruling so far. Ruling chamber 4 is now responsible chamber 314. Following this, ruling cham- for the tasks in the field of energy regulation. ber 2 is responsible for regulating retail markets and retail lines in the fixed and RULING CHAMBER 1 mobile network areas, in the field of leased lines and broadband services as well as in Allocation of DVB-H frequencies connection with porting. As far as upstream On 08 October 2007, ruling chamber 1 services are concerned, ruling chamber 2 awarded T-Systems Media&Broadcast is additionally responsible for regulating GmbH the contract for performing tech- leased lines, access to subscriber data, nical radio and television operations of a collection and decisions about disputes nationwide Digital Video Broadcasting- having arisen in connection with the obli- Handheld (DVB-H ) transmission network. gations of providers in the case of mobile In the preceding tender process, the com- telephone licenses. In addition to its for- pany proved that it is best suited to meet

14 See publication in the Official Gazette 19/2007 dated 26 September 2007, Communication No. 780/2007, page 3800. TELECOMS RULING CHAMBER DECISIONS 89

the legal and technical requirements of the introduced and an option granted to GSM terms of tender. Extending the transmitter network providers to extend the contract network for the nationwide provision of period until 31 December 2016 (see page mobile broadcasting services in DVB-H 104). standard is scheduled to start in 2008 and be completed by 2015. Broadband Wireless Access Following the auctioning of frequencies in Digital cellular mobile radio in the range the field of Broadband Wireless Access 1.8 GHz, 2 GHz and 2.6 GHz (BWA) based upon the President's Chamber In Germany the entire spectrum available decision dated 26 September 2006, it was in the ranges of 1.8 GHz, 2 GHz and 2.6 GHz published regarding the frequency pack- is to be allocated simultaneously for digital ages C and D not allocated in this range cellular mobile telephony. The drafts of the that the President's Chamber intended to President's Chamber decisions on the court allocate these frequencies in line with order and assignment procedure selection demand according to the determinations were published for this purpose on 04 April made in the President's Chamber decision 2007. After evaluation of the comments, of 26 September 2006. Comments were the Chamber made the decisions about the invited on the intended procedure. court order and assignment procedure selection for allocating these frequencies in RULING CHAMBER 2 the ranges 1.8 GHz, 2 GHz and 2.6 GHz for digital cellular mobile telephony in its Issue of regulatory orders publication on 19 June 2007. Due to the Ruling Chamber 2 is responsible for rates expected shortage on account of excess regulation and the special control of anti- demand, the assignment of frequencies is competitive practices on the markets for to be preceded by an auctioning procedure. voice telephone services and public pay- A draft of the President’s Chamber decision phones, as well as resale and preselection. on the individual determinations and rules In 2007, one focus of its activities was the prior to performing an assignment proced- execution of the proceedings on the pos- ure was published on 26 September 2007 sible issue of obligations on the markets for for comments to be made (see also page "connection from the fixed network to 103). domestic mobile networks". The starting point for these proceedings was the deter- Global System for Mobile Communications mination issued by the President’s By publishing activity complex II of the Chamber, according to which DT AG and its Global System for Mobile Communications affiliated companies – at present particu- (GSM) concept in the Official Gazette of the larly T-Systems – possess significant market Federal Network Agency dated 28 Novem- power on relevant national markets for ber 2007, a uniform contract period for the "connections from the fixed network to GSM mobile communication service was domestic mobile networks". 90 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Following a wide-ranging consultation and All tariffs were reviewed by the Federal consolidation procedure, during which, Network Agency to ascertain whether they apart from the companies concerned, were clearly compatible with the require- numerous competitors, the Federal Cartel ments of section 28 TKG. In 2007, it was not Office, the European Commission and necessary to prohibit any tariff measures. national regulatory authorities in other EU However, in some cases reference was Member States were also given the oppor- made to potential competition conflicts tunity to state their views on the regulatory and ongoing reports on the development obligations being envisaged, the Ruling of usage statistics demanded. Chamber issued a ruling on 14 December 2007, placing an obligation on DT AG and In addition to this, since the issue of the its subsidiaries, in particular T-Systems regulatory order, all new individual con- International GmbH, to inform the Federal tracts concluded to date by T-Systems, i.e. Network Agency about its rates measures individually agreed services that are not and the rates measures of its affiliated com- easily transferable to a large number of panies in the field of rates for connections other end users, have been submitted to from the fixed network to national mobile the Federal Network Agency for informa- networks two months prior to the date when tion upon conclusion and reviewed by they are to enter into force. Calls via VoIP means of a clearly anti-competitive test to services are exempt from this obligation. ascertain whether there are any reasons to suspect a breach of section 28 TKG. By the As in the rates approval procedure, the notifi- end of 2007 a total of 72 contracts had been cation procedure also allows rates measures submitted and reviewed by the ruling to be prohibited before they come into force, chamber. provided they are found not to be compatible with the criteria set out in section 28 TKG For the first time, an administrative proceed- in a well founded anti-competitive test. Even ing was initiated last year as part of these if no clear breach can be identified, the ex individual contracts due to the follow-up post regulation of the Federal Network regulation of rates for retail services (muni- Agency makes it possible to carry out a com- cipalities of Rhineland-Palatinate). prehensive ex post examination of the rates in question at any time in case of suspicion Arbitration proceedings and to prohibit such rates where there is a Ruling chamber 2 had to deal with three breach of section 28 TKG. arbitration proceedings in the year under review. One proceeding dealt with the provi- Measures in the field of rates regulation sion of subscriber data according to section In the course of 2007, the Ruling Chamber 47 TKG. Two other proceedings were initi- received advance notification of twelve ated in 2007 following disputes between tariff measures planned by DT AG (T-Com), mobile communications service providers. including its T-Online, T-Systems and Congstar divisions. TELECOMS RULING CHAMBER DECISIONS 91

RULING CHAMBER 3 lation in cases of price abuse are imposed on the undertakings. The regulatory order Issue of regulatory orders issued to T-Systems Business Services GmbH On 7 March 2007 DT AG was informed concerns signal provision in the VHF radio about the regulatory order for Asynchron- broadcasting range and also calls for ex- ous Transfer Mode (ATM) bitstream post rates regulation. access. The ATM bitstream access is an upstream service allowing competitors to On 23 May 2007 DT AG was informed about offer high-grade DSL connection on regulatory order on market no. 7 “Mini- downstream retail markets that are mainly mum offer for leased lines up to 2 Mbit/s for required by business customers. An obliga- retail customers“. With this decision an tion to grant access to the ATM bitstream obligation was imposed on DT AG to pro- access at non-discriminatory conditions, vide a minimum offer of leased lines. The provide separate accounting and publish a rates charged for this were subject to standard offer was imposed on DT AG follow-up rates control without any no- under this regulatory order. As far as rates tification obligation. were concerned, the ruling chamber considered a follow-up rates control as adequate. After detailed discussions with all market participants and the EU Commission as In the field of the markets for broadcasting part of the national consultation proceed- services separate regulatory orders were ings and the notification procedure, the issued on 25 April 2007 to the cable net- ruling chamber imposed a new regulatory work providers Iesy Hessen GmbH & Co. KG order for access to the subscriber line on (now Unitymedia Hessen GmbH & Co KG), DT AG on 27 June 2007. As a consequence Ish NRW GmbH (now Unitymedia NRW of the determination by the President's GmbH), Kabel Baden-Württemberg GmbH Chamber on the market definition and & Co. KG (KabelBW) and Kabel Deutschland market analysis made simultaneously for Vertrieb und Service GmbH & Co. KG the first time, obligations had to be im- (KDVS) as well as to T-Systems Business posed on DT AG in the regulatory order to Services GmbH. The decisions issued to effectively and adequately counteract any cable network providers define both the market failure due to substantial market conditions for feeding broadcasting signals power. Accordingly, all obligations already by broadcasting organisers in the cable imposed on DT AG in the last regulatory networks as well as for transmitting such order of April 2005, namely to grant com- signals by cable network providers to the petitors unbundled access to its subscriber operators of smaller cable distribution net- lines under non-discriminatory conditions works (of the so-called network level 4). and at rates that had been approved by the Transparency obligations with regard to ruling chamber in advance according to feeding and signal provision conditions, the cost standard of efficient service provi- discrimination bans and access obligations sion. In addition, DT AG was required to for signal provision as well as ex-post regu- grant its competitors access to its cable 92 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

conduits and, if no conduit capacities are prices for access services on the market for available, to unconnected fibre-optic cables regional broadband supply and its internal to grant access to the "last mile". Moreover, accounting prices and to submit its sales it was clarified in the regulatory order that figures and revenues for externally offered DT AG must also grant its competitors and internally used upstream services on access to the local loop in cable distribu- the market for regional broadband supply. tors. This is to allow competitors to expand Rates must be approved in advance and are their own high-speed networks as DT AG is subject to the cost standard of efficient currently doing with its VDSL rollout. An service provision. expedited application filed by DT AG to the Cologne administrative court against these The issue of a regulatory order on the mar- measures remained largely without success. ket for IP broadband supply not mentioned in the market recommendation of the EU On 31 October 2007 the ruling chamber Commission was required on account of announced another regulatory order to DT a phenomenon in Germany that retail AG. Obligations in the field of upstream customers generally purchased the line leased lines were imposed on the group in and (DSL) broadband service under two the field of termination segments (market contracts (so-called 2-contract model). 13) in the form of an access obligation, a collocation obligation, a ban on discrimin- Decisions in the field of rates regulation ation, a rate approval obligation, an obli- On 30 March 2007 the Federal Network gation to publish a standard offer as well as Agency approved the rates to be paid by special regulations for leased lines with less competitors to DT AG on a monthly basis than 2 Mbit/s. This updated the regulation for the lease of local loops. The rate for the that had been in place so far. Substantial most frequent basic variants “CuDA 2 Dr” market power was not, however, detected and “CuDA 2 Dr high bit rate” was reduced in the area of TV transmission segments from €10.65 to €10.50. The determination (market no. 14). Any regulating obligations of the cost of efficient service provision was that had existed in this area were revoked based on the “Analytical Cost Model – Local accordingly. Loop 2.0” by the Scientific Institute for Communication Services (Wissenschaft- On 28 November, the ruling chamber final- liches Institut für Kommunikationsdienste, ly placed a regulatory order on DT AG on or WIK) to determine the value of invest- the market for regional IP broadband sup- ment as in preceding local loop procedures ply under which the undertaking was as well as, for the first time, on the industry obliged to enable interconnection for the process model of the “International Per- purpose of regional IP broadband supply formance Research Institute” (IPRI) to and grant collocation. In addition, the quantify overhead costs. While the invest- group was imposed with a ban on discrim- ment value declined slightly despite an ination, a transparency obligation and an increase in copper prices, the calculatory obligation to disclose its upstream service interest rate rose due to higher interest TELECOMS RULING CHAMBER DECISIONS 93

levels on national and international capital E-Plus Mobilfunk GmbH & Co KG und O2 markets and a higher percentage of equity (Germany) GmbH & Co OHG. The termin- capital at DT AG. Regarding overhead ation rates that have to be paid by other net- costs, the IPRI industry process model used work providers to the mobile network pro- for the first time showed a lower value viders for delivering calls in their mobile compared to the aggregate used before. networks amount to 7.92 cent/minute for the two D networks and 8.8 cent/minute With its decision announced on 29 June for the two E networks. Hence, the new 2007 the ruling chamber approved new rates for T-Mobile and Vodafone D2 are just rates that have to be paid by competitors 10 percent lower and for E-Plus and O2 once when leasing local loops or returning more than 11 percent lower than the pre- them to DT AG. An installation fee of €36.19 viously applicable rates of 8.78 and 9.94 was approved for the most frequent cent/ minute. While these rates had to be variant, a simple takeover of a copper twin established solely on the basis of an inter- wire without any switching work having to national rate comparison when determined be performed at the end customer site. The for the first time in 2006 because none of termination charges that have to be paid the 4 undertakings had submitted any by competitors when returning local loops feasible cost statements, the new rates to DT AG was set at €5.21 if the retail cus- could be determined for the first time tomer returns to DT AG or switches to an- based upon the cost documents submitted other provider and €20.93 if the local loop or derived on the basis of these. Apart from is returned without the customer switching the network costs, the costs of the UMTS to DT AG or to another competitor. In another license have been taken into account on decision on 29 June 2007 the installation the basis of a current valuation to calculate and termination charges as well as the termination rates. UMTS license cost were monthly rates for shared access to the local also taken into account to determine mo- loop, known as line sharing were approved. bile termination rates in other European A monthly rental price of €1.87 was de- countries in which high auctioning prices termined for granting access to the high bit were reached, such as in the UK. On the rate part of the local loop from 01 July 2007. whole, this enabled the specific cost situ- The rate for the most frequently used pro- ation of German mobile network providers vision variant, the new connection without to be taken into account in terms of network at the cable distributor and without work, personnel and license costs, frequency any work at the retail customer site was equipment, network topology, geographic approved at €60.82. conditions and usage behaviour better than is possible with an international rate By its decision dated 30 November 2007, comparison. The new decisions show that the ruling chamber allowed new termin- former rate reductions were justified and ation rates starting on 01 December 2007 for can now be backed up by a calculatory the German network providers T-Mobile approach. Deutschland GmbH, Vodafone D2 GmbH, 94 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

There was a slightly smaller difference be- TKG. These decisions show that the TKG tween termination rates in the D and E net- includes adequate legal provisions to en- works compared to last year's decisions. able any reasonably justified additional The ruling chamber thus acknowledged costs for personnel restructuring measures that the economies of scale of the E net- that exceed the costs for efficient service work providers are still less favourable due provision to be factored accordingly in the to their original equipment with 1,800 MHz rates to be approved. mobile radio frequencies and their later market entry as well as the lower market Review of standard offers shares compared to both D network pro- Against the background that DT AG was viders, but also took the fact that these required to publish a standard offer for disadvantages will gradually diminish in the interconnection services in connection future into account. The European Com- with the regulatory order dated 05 October mission also stated on several occasions in 2005 for which there is general demand, the past that it expects an adjustment of the contract draft was reviewed by the termination rates of network providers ruling chamber in the period under review with different original frequency equip- according to the provisions stipulated in ment in the forthcoming years. The rates section 23 TKG. For this purpose it made a approval period until 31 March 2009 pro- first partial decision on 04 April 2007 in vides a reliable planning basis for all which it required DT AG to revise its con- market participants. tract draft in some respects. The group responded by submitting its revised stand- On 30 November 2007, the ruling chamber ard offer including most of the require- announced three resolutions on the rates ments of the ruling chamber. The second applications submitted by DT AG for inter- phase of the review of the standard offer connection accesses (ICAs) and collocations for DT AG’s interconnection services was in connection with ICAs and access to local completed with the decision dated 20 July loops As part of these three rates approval 2007. The minimum period was limited procedures, the severance payments and until 31 July 2008. This short validation provisions for premature retirement as period is mainly to enable any required part of DT AG’s current personnel restruc- changes to be made to the electronic order- turing programme that were asserted for ing and accounting procedure included in the first time by DT AG as neutral expenses the standard offer in a timely manner and under section 31(3) TKG are in part ac- to review the functionality of the selected knowledged and factored into the calculation regulations to protect the existing status of the approved rates. While acceptance during DT AG’s transition to Next of these expenses had not been possible in Generation Networks. the past due to inadequate cost statements, DT AG improved its documentation of In another decision of 28 August 2007 the these expenses sufficiently for them to ruling chamber specified the conditions meet the legal requirements stipulated by under which competitors can be granted TELECOMS RULING CHAMBER DECISIONS 95

access to DT AG’s "IP bitstream". Following Finally, the ruling chamber accounted its the review of conditions, the ruling cham- decision on DT AG’s standard contract for ber required DT AG to change or correct its access to the local loop on 21 December standard contract offer for IP bitstream in 2007. Apart from the usual general con- some respects and submit a revised contract terms such as payment, liability and tract text by the end of September factor- termination conditions, this contract also ing in the requirements stipulated in the includes provisions stipulating how com- decision. Major aspects to be taken into petitors can order local loops from DT AG account by DT AG were the offer of "stand- and according to which DT AG must switch alone bitstream" by April 2008 and the over the local loops ordered. The review of offer of IP bitstream for symmetric access the sample contract paid particular atten- variants as well. In addition, DT AG had to tion to the regulations therein on ordering include improved fault clearance condi- and installing local loops. By introducing tions and ensure minimum quality allowing financial sanctions, incentives have been voice services to be offered via the IP bit- provided for local loop orders to be sched- stream. Moreover, DT AG had to modify, uled in an improved and more precise add or even delete completely some gen- manner by competitors and DT AG to make eral contractual terms. In December a the ordered numbers of local loops avail- public negotiation was held about the able to competitors on time. DT AG’s new revised contract text. standard contract and consistent implementation of the new regulations therein has With its decisions on 31 October 2007 the good chances of ensuring that the prob- ruling chamber determined the standard lems that arose at the end of 2007 with the offers for the four German mobile network provision of local loops will no longer providers T-Mobile, Vodafone, E-Plus and occur in the future. O2 on call termination on individual mobile telephone networks (market no. 16). After specifically requiring network providers to revise their standard offers in a first partial decision on 06 July 2007, the offers were again reviewed by the ruling chamber in its second partial decision based on criteria such as equal opportunities, fair- ness and timeliness, and corrected where necessary. Regulations on safety services and the provision of network access points were particularly controversial in this respect. The standard offers of the four mobile telephone network providers were given a minimum term of 2 years. 96 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Further decisions

Database established as blacklist for reverse charge calls – Number 115 allocated as public service number – World radio conference success for Germany – Nationwide frequency coverage allocated for DVB-H standard.

NUMBERING ers. Given the constant dynamic development of technologies and business models Various number resources are required for on the telecommunications market, the the operation of telecommunications net- Federal Network Agency repeatedly works and the provision of telecommunica- reviews whether existing arrangements tions services. The Federal Network need to be adapted or new number re- Agency ensures that all resources required sources created in order to promote on the liberalised telecommunications competition, consumer interests and market are available on a non-discrimin- technological development. atory basis, in good time and in sufficient quantities. It also determines the purposes Assignments in 2007 for which and the framework conditions In the range of local numbers and national under which each type of number is to be subscriber numbers (numbering range 32) used and allocates numbers in blocks or assignments have developed as follows up individually to providers and retail custom- to 2007. TELECOMS FURTHER DECISIONS 97

Year Blocks of 1,000 local numbers Blocks of 1,000 local numbers assigned Number of assignees assigned – total (as of 31 December 2007)

1997/1998 3,088 3,088 53

1999 3,662 6,750 72

2000 44,111 50,861 89

2001 8,511 59,372 86

2002 4,281 63,653 81

2003 5,190 68,843 76

2004 11,440 80,283 74

2005 14,000 94,283 85

2006 31,571 125,854 94

2007 22,349 148,203 96

In terms of the most important service call numbers, assignments have developed as follows in the past two years:

Services Numbering range Numbers allocated in Numbers allocated in Total telephone 2006 2007 numbers allocated

Freephone services (0)800 11,500 9,216 182,650

Shared cost services (0)180 11,005 9,620 140,059

Premium rate services (0)900 7,378 10,497 87,635

Personal numbers (0)700 3,166 2,177 100,605

Assignment conditions and conditions of uals via a freephone number, which is use for "harmonised services of social potentially of value to visitors from other value" countries and which answers a specific Due to a decision of the EU Commission social need, in particular which contributes dated 15 February 2007 (Official Gazette of to the well-being or safety of citizens, or the European Union L 49 dated 17 February particular groups of citizens, or helps citi- 2007, page 30), national numbering ranges zens in difficulty. beginning with 116 are only allowed to be used for harmonised services of social The Commission based its decision on the value in Member States of the European Federal Network Agency’s experience Union (EU). A harmonised service of social because, by assigning call number 116 for value is defined in the decision of the EU the reserved emergency call, Germany has Commission as a service meeting a com- been playing a pioneering role in Europe mon description to be accessed by individ- since 2004. 98 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Proposals can be submitted to the EU Telecommunications numbering Commission on which services a number is regulations to be reserved for. In a continuously The telecommunications numbering regu- updated list, the EU Commission bindingly lations entered into force on 15 February determined which numbers are reserved 2008. Based upon section 66(4) TKG, the for which services; assigning the numbers, regulatory framework on numbering with however, is the task of the Member States. regard to the Federal Network Agency’s Once a number has been included in the powers, on the one hand, and the rights list, it can be assigned at national level. In and obligations of market participants on order to be able to assign numbers, the the other is specified in these regulations. Federal Network Agency published It is based mainly on the Federal Network assignment conditions and conditions of Agency’s proven practices to date. In add- use at the end of August 2007. ition, a numbering concept on developments on the telecommunications market Universal public service number “115” and effect of these on numbering is to be The Federal Ministry of the Interior (BMI) published annually. When the numbering applied to the Federal Network Agency for concept is prepared for the first time based assignment of the telephone number 115. upon the telecommunications numbering This universal number ("public service regulations, part of the work on a number- number") will enable citizens, undertaking concept that was already started as part ings and institutions to contact all public of the project plan by the Federal Network service authorities. After a public hearing, Agency can be used. the telephone number 115 was included in the national numbering plan and assigned Enquiries about number management to the Federal Ministry of the Interior (BMI) This year, the number management call by the Federal Network Agency as a public centre at the regional office in Fulda dealt service number in December 2007. with 21,490 enquiries. These mainly concerned the allocation of telephone num- Database solution for blacklisting bers. In particular, the number manage- reverse charge call services ment office answered questions about the Under section 66i TKG, the Federal Network value added service ranges (0)700, (0)800, Agency has created a database solution for (0)900, (0)180) and (0)137 and local num- blacklisting numbers to be blocked by reverse bers. Furthermore, information was given charge call services for incoming reverse on decisions about charges and the pro- charge calls. Since 01 September 2007 all cedures to be followed when applying for providers of reverse charge call services are and setting up telephone numbers. In required to call up this list on a daily basis. addition to telephone enquiries, 5,989 Telecommunications service providers emails were answered by the number inform the Federal Network Agency every management call centre. day about all applications they have received for numbers to be blocked or unblocked. TELECOMS FURTHER DECISIONS 99

Enquiries answered by the number World Radio Conference 2007 was to find a administration balance between radio broadcasting requirements and the rapidly rising demand for mo- 1,074 Other enquiries = 5 % bile frequencies. Agreements were reached

1,887 Enquiries to allow faster and enhanced communica- about charges = 10 % tion in times of crisis, early recognition of damage to the environment and climatic changes by satellites and the unhindered development of the European aviation

18,529 Enquiries industry. The outcome of the conference about telephone numbers was therefore a great success for Germany. = 85 %

Total: 21,490 The Federal Network Agency was also actively involved in shaping the framework FREQUENCY REGULATION conditions for the use of frequencies as part of the European Conference of Postal The purpose of frequency regulation is to and Telecommunications Administrations manage the provision of frequencies (CEPT), the Radio Spectrum Committee appropriately as a resource and ensure that (RSC) and the Radio Spectrum Policy Group demand is met and the requirements of the (RSPG) of the European Union. The decisions market are satisfied. Since fewer frequencies on BWA wireless broadband distribution are available in specific frequency ranges systems, use of GSM mobile communica- than demanded by the market partici- tions in airplanes, ultra wide band (UWB) pants, they have to be allocated by the applications and intelligent transport Federal Network Agency in a non-discrimin- systems (ITS). atory manner on the basis of transparent and objective procedures. As part of this, Updating of the frequency usage plan the focus is not just on existing frequency The Frequency Usage Plan (as of May 2006) usage, but also future technological and must be updated again on account of the market developments. Comprehensive first regulation on the modification of the planning is required at both national and Frequency Band Allocation Ordinance of international level to facilitate efficient 23 August 2006, which transposed the and interference-free frequency usage for a results and decisions of the 2003 World wide range of purposes and technologies Radio Conference of the International Tele- and ensure fair and functioning competi- communication Union into national law. tion on telecommunications markets. The Frequency Usage Plan was updated in several stages with the participation of the World Radio Conference 2007 and advisory council, federal government and European harmonisation states, as well as interested public groups. In view of the limited number of appropri- The fully updated Frequency Usage Plan is ate frequencies, one of the topics at the scheduled to be published in the first quarter 100 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

of 2008. Print copies of the Frequency Usage As part of a more flexible type of frequency Plan can be ordered after its publication on regulation, the frequency ranges 1.8 GHz, the Federal Network Agency's website. 2 GHz and 2.6 GHz shall be dedicated to digital cellular mobile telephone without General assignments limitation to specific standards and According to section 55 (2) TKG, general technologies. The procedure for changing assignment is the norm. Frequencies are the Frequency Usage Plans was initiated. only allocated individually if general assignment is not possible (e.g. risk of harmful In a first step, the drafts of the President's interference). In 2007 numerous general Chamber decisions on the court order and assignments were adjusted or re-issued, e.g. the selection of the assignment procedure for broadband fixed wireless access (BFWA), were published on 04 April 2007. After the radio applications of railways for automatic evaluation of the comments, the Chamber vehicle identification for rail vehicles and decided on the court order and the selec- train control systems, radio-controlled motion of the assignment procedure to assign tion detectors of small capacity and tank these frequencies in the ranges 1.8 GHz, 2 radar, remote surveying and tracking, GHz and 2.6 GHz for digital cellular mobile tracking down and locating objects, radio telephony on 19 June 2007. frequency identification applications (RFID) and medical radio applications. The hearings and interests expressed revealed that insufficient frequencies are All general assignments and the guidelines avail-able for frequency assignments for on the preparation of general assignments digital cellular mobile telephony. Since can be downloaded from the Federal frequencies are not adequately available, Network Agency’s website . the assignment of frequencies shall be preceded by an auctioning procedure. Digital cellular mobile communications in the range 1.8 GHz, 2 GHz and 2.6 GHz Individual regulations (assignment condi- After frequencies were returned in the tions) shall be determined prior to the execu- so-called UMTS core band following a pan- tion of an assignment procedure. Com- European harmonisation of frequency ments were invited on the appropriate ranges for UMTS/IMT-2000 mobile commu- draft on 26 September 2007. A decision of nications in the so-called UMTS extension the President's Chamber will be passed in band, additional frequencies for digital agreement with the advisory board (see cellular mobile communications are being also page 91) after evaluation of the com- provided in the ranges at 2 GHz and 2.6 ments. GHz. In addition, opening up the so-called E-GSM frequencies in the 900 MHz fre- In the next step, a decision will be prepared quency range for civil use means that fre- by the President's Chamber on the auction quencies are available in the 1.8 GHz range regulations and comments invited on this. for digital cellular mobile communications. The auction regulations will be based upon TELECOMS FURTHER DECISIONS 101

the determinations of the decision about countries. The general regulations of inter- the assignment conditions, so that the auc- national frequency coordination for land tion regulations can be prepared at a later mobile radio are bindingly stipulated in point in time. the so-called HCM agreement.

Auctioning will be preceded by a certifica- Approximately 3,300 coordination re- tion process that will be opened after publi- quests from abroad were answered in 2007. cation. Auctioning will therefore not take During the same period, approximately place until 2009. 11,000 coordination requests were sent abroad. GSM concept While the first action complex of the GSM Point-to-point radio relay, in particular concept was mainly intended to allocate frequencies for broadband wireless the so-called EGSM frequencies to E net- access work operators as part of the transfer of Following the decision by the President's part of the frequency usage rights from the Chamber of the Federal Network Agency of 1,800 MHz to the 900 MHz range, action 26 September 2006 on the procedure for complex II brings the limited frequency the assignment of frequencies in the 3,400 usage rights of GSM network operators into to 3,600 MHz range for broadband wireless line with a uniform point in time. As part of access (BWA), the frequencies were auc- this, the GSM network operators T-Mobile tioned in December 2006. By assigning the Deutschland GmbH (D 1 network), Voda- frequencies, the Federal Network Agency fone D2 GmbH (D2 network) and E-Plus hopes to improve broadband coverage for Mobilfunk GmbH & Co. KG (E1 network) the population, particularly in rural regions. have been given the option of extending Three companies have been awarded the their licences until 31 December 2016. contract for nationwide coverage. Two companies have been successful in parts The GSM network operators mentioned of Bavaria. exercised their option in the middle of the year and are obliged to pay the appropriate It was not possible to assign all the available charge. As a consequence, the frequency frequencies in the auction. Comments ranges concerned are not available for from the public were invited early in 2007 another individual assignment until the on the intended new assignment of these end of the year. frequencies. Eight comments were received. Apart from the demand for rapid International frequency coordination for assignment of this spectrum, many of the mobile radio comments expressed requirements and Efficient and interference-free frequency interest. The Federal Network Agency use in the border areas of the Federal plans to assign the frequencies in a two- Republic of Germany requires the coordin- phase procedure. The frequencies are to be ation of frequencies with neighbouring assigned on request as far as possible. If 102 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

more applications are filed in one region Agency had to adjust its procedures to mar- than frequencies are available, the assign- ket requirements, in particular due to the ment shall be preceded by an auction pro- emergence of new companies in the radio cedure. The draft of the assignment deci- and television market that has been domin- sion is scheduled to be published in the first ated by monopolies so far. New assignment quarter of 2008. regulations were prepared for broadcasting service frequencies that are likely to be used The frequency range from 3,600 to 3,800 in 2008. MHz was intensively scrutinized in 2007 in order to be able to make additional fre- Frequency assignments for digital quencies for wireless broadband network trunked radio of authorities and access points available. organisations with safety tasks On 01 March 2007 a frequency assignment Broadcasting for a nationwide uniform digital voice and As a result of the Regional Radio Conference data radio network for the Federal Agency 2006 (RRC06) the 2006 Geneva Agreement for Digital Radio of Authorities and Orga- entered into force on 17 June 2007. This ITU nisations with Safety Tasks (BOS) in the fre- conference had the goal of comprehensively quency range from 380 to 385 MHz / 390 to revising the plans and guidelines that had 395 MHz was issued to BOS. been in place since 1961 and, in this way, driving ahead the digitalisation of radio and Wideband trunked radio, assignment of television broadcasting internationally. remaining spectrum via application Wide-ranging negotiations about the con- procedure crete implementation were held on national In mid-2005 a second application procedure and international level even after the effect- for wideband trunked radio was opened. ive date of the agreement. The Federal Net- Due to the application situation it was clear work Agency paid particular attention to the that the remaining frequency range would identification of possibilities for innovative no longer be adequate for all applicants and multimedia services apart from the clas- and the frequencies would have to be as- sical broadcasting assignments. It was pos- signed by auction. The assignment proced- sible to allocate nationwide frequency cover- ure was suspended due to an action brought age for mobile and multimedia applications against the President's Chamber decision using the DVB-H standard (see page 90). of 17 February 2004 on the assignment of frequencies for wideband trunked radio. By the end of 2007, another 224 DVB-T fre- Once the action brought forward was quencies had been allocated for regular legally rejected and the decision of the operation. At the same time, 796 analogue President's Chamber confirmed, two of the frequencies for radio and television broad- original three applicants withdrew their casting were not assigned during this period. applications. Contrary to the original appli- Analogue VHF radio broadcasting is grow- cation situation, sufficient frequency was ing rapidly again. The Federal Network thus available that could then be assigned TELECOMS FURTHER DECISIONS 103

through the application procedure. This ations on account of the considerable per- was completed in September 2007. sonnel and material resources required for the projects. It is hard to imagine current Narrowband trunked radio on-site reporting by broadcasting com- In 2007 the demand for narrowband trunked panies without the use of satellite-supported radio frequencies has continued to rise. transmission paths. Interest is focused on digital trunked radio frequencies, mostly in TETRA standard. Amateur radio Interest is shown by special user groups In 2007 around 1,100 amateur radio certifi- such as airports, harbours, company fire cates and some 1,700 amateur radio admis- brigades, energy companies, chemical sions and call signs were issued. In parks, municipal utilities and transport ser- February 2007 the Federal Network Agency vices. The number of applications has risen published the revised catalogue of ques- extremely due to the marketable TETRA tions that includes examination questions technology, the obsolescence of tradition for the "Technical Knowledge" subject for private mobile radio and in particular the class A. The catalogue of questions con- decision to extend the nationwide radio tains examples of harmonised examination network for BOS also using TETRA technol- content and requirements that can be used ogy. In order to avoid a special assignment for examinations for amateur radio certifi- procedure in the medium and long run, cates. such as the auction procedure, the allocation practice was changed in 2007. The 2007 saw two hearings and orders in the previous two-stage procedure for a public Official Gazette regulating details for ama- trunked radio network was adjusted to the teur radio examinations and publishing single-stage allocation procedure for non- guide values for unwanted emissions. By public networks. Applications for public another order in the Official Gazette, the trunked radio networks will therefore no protected zones around TV broadcasting longer be considered according to their stations in the frequency range between region, but to their location. Accordingly, 50.08 and 51.00 MHz were abolished. a difference is no longer made between public and non-public trunked radio net- Private mobile radio works. Private mobile radio (PMR) consists of various radio applications and other fields Satellite radio of application. It is thus tailored to users’ Satellite radio includes all facilities that are individual requirements. Users include required for technical communication via industrial enterprises, transport and logis- or with satellite ands via satellite-sup- tics companies and energy supply, trade ported networks. In 2007 four new satellite and crafts companies, business enterprises, systems were registered with the ITU by the authorities, public bodies, sports clubs and Federal Network Agency. Satellite trans- service companies. BOS radio is extremely mission often requires large-scale cooper- important. In the field of private mobile 104 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

radio, analogue applications have been were processed by the Federal Network increasingly replaced by digital applica- Agency in 2007 for point-to-point radio tions. Approx. 9,000 operations were pro- relay. As such, the number of orders has cessed in 2007 in the field of PMR. doubled in recent years.

Short-term assignments In addition, the Federal Network Agency Short-term assignments are issued by the was involved in planning and licensing Federal Network Agency when sporting procedures as part of the Building and and cultural events, state visits and other Emission Control Act, incl. representing occasions that attract significant media public requirements. As part of its involve- coverage are held. In 2007, the Federal ment, statements were prepared on the Network Agency issued 1,953 short-term issue of the impairment of radio relay links assignments. These provided for a total of in connection with the scheduled erection 13,072 frequency uses in extremely varied of wind power stations and other higher frequency ranges between 40 MHz and building structures (antenna masts and 22 GHz for 1,108 events. The majority of towers, chimneys, high-rise buildings). In short-term assignments were issued for 2007 a total of some 500 participation pro- motor sports events (such as Formula 1 and cedures and requests for mutual assistance DTM), cycle races, music events and winter and information were processed by the sports events. To ensure the interference- Federal Network Agency. free and efficient use of these frequencies, the Federal Network Agency was present RADIO COMPATIBILITY OF RADIO with personnel and measuring vehicles on EQUIPMENT the ground at 98 events. The Federal Network Agency carries out its Point-to-point radio relay tasks to determine radio compatibility Digital exchange of messages and data via prior to the introduction of new radio ser- radio relay communications provides a vices in close cooperation with other inter- low-cost and flexible alternative for pro- national administrations, developers of viders (such as mobile communications new technologies and potential operators. companies and industrial park operators in- Numerous technical compatibility studies stead of leased lines or providing their own undertaken in 2007 by ITU and CEPT inter- cable connections. Because of this decisive national bodies were actively supported by advantage and the increasing number of the Federal Network Agency, among them options available for using high band- detailed investigations of short-range de- widths, radio relay continues to have high vices (SRD) such as at ITS. The report on growth rates. compatibility issues between ITS and other radio systems was in the public comment Approximately 20,000 requests for new phase when it was accepted finally by the assignments of frequencies, changes to Electronic Communications Committee existing frequencies and legal successions (CEPT ECC). In addition, the Federal TELECOMS FURTHER DECISIONS 105

Network Agency was involved in the devel- associated costs for the benefit of industry opment of new procedures for compatible and consumers. technology and service neutral frequency uses in the same frequency bands, the so- PROVISION OF STANDARDS, IN called WAPECS bands (Wireless Access PARTICULAR HARMONISED Policy for Electronic Communications STANDARDS FOR RADIO EQUIPMENT Services). The investigations for Ultra Wide Band (UWB) applications such as wall The development of standards for radio penetration sensors or floor radars were equipment ensures efficient use of the avail- continued in various frequency bands. able frequency range. In addition, particu- Numerous compatibility tests and reports lar importance is attached to determining had to be completed in advance of the 2007 an adequate level of electromagnetic inter- World Radio Conference for the various ference to protect public telecommunica- topics discussed there. In addition, both the tions networks and transmitting and re- organisational and technical preparations ceiving radio systems that are operated in for introducing a new regulation on the defined frequency ranges. Numerous new protection of public telecommunications editions of the relevant standards are networks and transmitting and receiving evidence of the Federal Network Agency’s radio systems (SchuTSEV) that are operated successful cooperation . in defined frequency ranges for security reasons were made. EUROPEAN-WIDE CORDINATION OF CONFORMITY CERTIFICATES AND MARKET ELECTROMAGNETIC COMPATIBILITY AND SUPERVISORY ACTIVITIES (TELECOMMUNI- ITS STANDARDISATION CATIONS CONFORMITY ASSESSMENT AND MARKET SUPERVISORY COMMITTEE – Standardising electromagnetic compati- TCAM) bility (EMV) focused on cooperation on and control of developing EMV standards for The Commission is very interested in get- unwanted emission of units in the special ting a better idea of the devices launched committee for radio interference of the on the European market and its distribu- International Electrotechnical Commission tors, and fostering European-wide market (IEC CISPR). Numerous technical papers supervision. The market supervisory author- were submitted successfully and factored ities of the Member States have performed into the definition of the content of stan- a market supervisory campaign in recent dards. Thanks to the committees’ painstak- months to check the extent to which the ing technical work, the Federal Network basic requirements of the R&TTE directive Agency was able to make a substantial con- are met. This review includes both admin- tribution to safeguarding consumer inter- istrative requirements (such a technical ests and increasing the reliability of deci- documentation, labelling requirements) sions performing conformity assessment and technical requirements (such as com- procedures and thus also reducing the pliance with harmonised standards). The 106 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

results were discussed after evaluation Network Agency contributes to European- with interested parties (such as industry wide harmonisation. and EU Commission) at TCAM. The Commission is planning an information RADIO FREQUENCY IDENTIFICATION workshop for the target group, firstly, to give information and, secondly, to discuss During Germany's Presidency of the EU industry issues. The Federal Network Council, the government pushed the issue Agency is involved in the working group of Radio Frequency Identification (RFID). established by the Commission for the As part of preparations for the EU RFID preparation of an R&TTE guide. symposium held in Berlin in June 2007, the Federal Network Agency prepared, on EUROPEAN INFORMATION PROCEDURE behalf of the Federal Ministry for Econom- ics and Technology (BMWi), an analysis A European-wide information process was grouping standardisation activities of RFID defined for the field of standards and tech- systems strategically in view of any action nical regulations to ensure smooth func- required by industry and politics. The tech- tioning of the European single market that nology for recording objects wirelessly is intended to give maximum transparency using radio chips, which has been used in on national regulations. Under this process, closed applications so far, is increasingly all Member States of the EU must notify the gaining importance in the telecommunica- EU Commission of any drafts of national tions sector, because its key benefit is high- (technical) regulations such as technical lighted through networking – network provisions and interface specifications. aspects of identification systems (NID) – for These can then be reviewed and commented example by connecting readers to data- on by the Commission and the other bases and application programmes via Member States. In 2007 the Federal Net- telecommunications networks. The idea of work Agency submitted a total of 29 draft a far-reaching networking of objects (Inter- regulations from the telecommunications net of Things) was developed by the indus- sector – in particular radio– for notification. try with large business potential and a Most of these regulations concern German huge impact on society. This has therefore interface specifications. They include infor- become a key issue for the Federal Network mation and technical parameters for the Agency and is supported at ETSI and EU different types of radio equipment and pro- level. vide guidance for manufacturers. One of these basic requirements is the efficient TECHNICAL STATEMENTS AND and interference-free use of frequencies. ASSESSMENT On the other hand, more than 380 drafts submitted by other Member States were The increasing variety and complexity of reviewed by the technical departments of new telecommunications technologies the Federal Network Agency and changes requires the relevant technical framework suggested, if necessary. Thus, the Federal conditions to be increasingly considered in TELECOMS FURTHER DECISIONS 107

detail and factored in to decisions made (prCISPR 32). The Federal Network during regulatory procedures. This is why Agency’s demands in terms of non-inter- the technical departments are involved ference when using the same frequencies with technical statements and consulta- were also represented in the non-stand- tions in many procedures of the ruling ardisation committees, e.g. in the "Broad- chambers. Major issues were the examin- casting reception equipment" working ation of the applicability of ATM bit stream group, which deals with the technical con- regulation on Ethernet-based networks, ditions of further transmission of broad- because ATM technology is increasingly casting and comprises representatives of replaced by Ethernet technology, such as industry, housing companies and associ- standard “IP Bit Stream Access” offers. a-tions from all over Germany. In 2007 issues were discussed that dealt with the INTERFERENCE-FREE BROADCASTING technical demands for cable TV networks, COVERAGE in particular extension with return channel capability for double and triply-play applica- The Federal Network Agency was involved tions on network layer 4. in preparing regular operation of DVB-H by preparing technical specifications for STANDARDISATION WORK IN THE FIELD small gap fillers. These devices are in- OF NEW TECHNOLOGIES AND RECON- tended to compensate attenuation within FIGURABLE RADIO SYSTEMS / SOFTWARE a house so that DVB-H can be received in a DEFINED RADIO (SDR) AND COGNITIVE flat or floor of a house. They are allowed to RADIO (CR) have a maximum transmitting capacity of 1 mW to avoid interference with other The Federal Network Agency is actively radio services. This includes stringent involved in the standardisation and further requirements in terms of unwanted emis- development of new technologies and sions, prevention of oscillations and select- reconfigurable radio systems. It is involved ivity. The Federal Network Agency sub- in national research projects such as WIG- mitted its experience and results gathered WAM (high bit rate data transmission of to the ATRT working group DVB-T-Repeater. 1 GB per second via radio) and EASY-C, a High shielding demands must be placed research project for pushing key technol- upon cable TV networks, and in particular ogies for the next generation of mobile any connected equipment such as radio radio networks as well as in international and TV sets to avoid unwanted user signals research projects such as EÇR (End-to-End being transmitted in the equipment. On Reconfigurability). One of its main aims – the Federal Network Agency’s initiative, in cooperation with the industry – is to pre- limit values and measuring procedures for pare regulatory requirements early to ensure evaluating the screening of sound and TV timely introduction of new concepts based broadcasting receivers were included in on new technologies and allow rapid innov- the draft of the international standard for ation. At the same time, the aim is to establish the emission of multimedia equipment a global process for the introduction of new 108 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

technologies. A substantial improvement (5.875 to 5.905 GHz). In addition, the pre- in the use of frequency range can be ex- ferred frequency band is proposed for the pected with reconfigurable radio systems. control channel in the range between Several committees (EC, ETSI, CEPT, ITU) 5.885 and 5.895 in order to enable techni- have now started preparing specifications. cal solutions on as global a basis as possible. Corresponding research projects are currently being planned by the EU in- EMERGENCY CALL volving the Federal Network Agency. The increased use of VoIP and the technical TRAFFIC TELEMATICS – INTELLIGENT problems making it hard to reach the local TRANSPORT SYSTEMS (ITS) emergency call control station, in particular in the case of nomadic use of VoIP, Applications dealing with communication means that the cooperation necessary be- between vehicles (“vehicle-to-vehicle”) and tween infrastructure provider and service between vehicles and roads (“vehicle-to- provider has gained importance. This road” / “road-to-vehicle”) were in the focus applies particularly if the current location of the accelerated activities during the of an emergency caller is to be transmitted reporting period of both industry and to the control station as intended. Section standardisation committees. The required 108 TKG and the current draft of the direct- spectrum compatibility tests at CEPT have ive on emergency call connections already been completed for 5.9 GHz ITS (NotrufV) provide for the preparation of a systems. Technical Directive by the Federal Network Agency with the help of associations, repre- These systems are provided by major car sentatives of emergency call control centres manufacturers (car-to-car consortium, designated by BMI, network providers and C2C) for so-called “Multi-Hop” systems that manufacturers. As part of the preparatory are intended to generate major infrastruc- work for the Technical Directive to be tural improvements for increased traffic prepared, the Federal Network Agency was security and improved traffic flow on involved in the draft directive on emer- roads/motorways with a positive impact on gency calls. This mainly applied to the the economy (for example by avoiding traf- technical specifications that must be fic congestions and waiting periods). To considered in IP networks and for emer- take the requirements of the European gency calls from VoIP terminal equipment. Commission e-Safety initiative into A European Commission initiative that account, a protected/secure frequency promotes the automatic transmission of band is required for future highly reliable locational information for vehicles having services to increase traffic safety. The core had an accident to the emergency call feature of the future pan-European stand- control centres (eCall) must also be taken ard is the definition of 3x10 MHz for pro- into account. International standards and tected services and applications in the fre- approaches were examined as part of this. quency band above the 5.8 GHz ISM band TELECOMS FURTHER DECISIONS 109

QUALITY AND REPORTING OBLIGATIONS Technical research into the introduction FOR TELECOMMUNICATIONS PROVIDERS of new transmission procedures in VHF FOR THE CALCULATION OF CALL CHARGES sound broadcasting In connection with testing new transmission Customers expect the invoice amount for procedures in VHF sound broadcasting, telecommunications services they have four different transmission procedures used to be accurate and correct. For this were tested in practice as part of test radio purpose, the data on the individual tele- assignments. communications services used must be recorded correctly and then calculated The transmission procedures are based according to the contractually agreed upon purely digital and analogue/digital rates. All telecommunications providers transmissions in the VHF sound broadcast- that offer services to the public and calcu- ing band II (87.50 MHz to 108.00 MHz) and late their call prices according to time and/ are identified as follows: or distance-based rates have so far been required to furnish proof that their account- • HD radio (analogue/digital) ing systems work accurately and correctly. • FMeXtra radio (analogue/digital) Section 45g TKG now stipulates that the • DRM+ (University Hanover) digital review must also include call services with (COFDM) volume-based accounting. In preparation • DRM 120 (Technical College Kaisers- of the publication of execution conditions, lautern) digital (COFDM) the Federal Network Agency has gathered ideas from all market participants: retail In connection with the test radio assign- customers, network and equipment pro- ment for new transmission procedures, the viders. The aim is to give customers faith in PMD of the Federal Network Agency per- the correctness of rate determination, give formed wide-ranging technical compatibil- providers planning security when develop- ity tests with safety-related radio services of ing their accounting system and provide the BOS and aircraft radio service with the experts and legal bodies with a standard participation of the institutions concerned. for assessing accounting systems. These were urgently required to ensure interference-free operation of safety- RADIO MONITORING AND INSPECTION related radio services when launching the SERVICE broadcasting stations planned for the new VHF audio broadcasting transmission Decision-making in the telecommunica- procedures. Based upon the results of the tions sector is supported by measurements compatibility tests performed by the made by the Federal Network Agency’s Federal Network Agency, the test radio radio monitoring and inspection service. assignment was carried out within a limited period of time. 110 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

In addition, extensive laboratory measure- The results of this kind of “noise research” ments were taken at a variety of radio have provided crucial parameters for plan- receivers to determine the required protec- ning radio networks and are required for tion ratios in the VHF range. It was essen- the considerations of international work- tial to determine the protection ratios re- ing groups within the ITU. The research has quired between the new analogue/digital also thrown light on the effectiveness of radio signals and the analogue FM sound existing EMC standards and any adjust- radio signals to ensure interference-free ments that may be required. VHF audio radio reception in the coverage area. Compatibility of inductive automatic train control facilities with radio broad- The PMD of the Federal Network Agency casting in the medium-wave band continued to be involved in the field meas- Wide-ranging measures were taken during urements taken in the radio field of these the reporting period in cooperation with a transmitters to be able to draw conclusions manufacturer of automatic train control on the laboratory measurements from the facilities regarding the interference range findings made there. The evaluations and of facilities in the frequency range between findings derived will ensure interference- 800 and 900 kHz. During the extensive free audio broadcasting reception. compatibility tests, it was checked whether it was possible to receive digital broadcast- Technical research into UWB applications ing DRM (digital radio mondial) close to The applications to be examined were soil the track system with automatic train con- and wall penetration radars as used in build- trol in an interference-free manner in the ing and road construction. The measure- commonly used frequency range. ments were of special interest because they occupy a large bandwidth due to their UMTS coverage measurements modulation. The examinations were per- The licenses for operating third-generation formed both in the Federal Network mobile radio networks (UMTS/IMT-2000) Agency’s laboratory at Kolberg and on site. include a coverage obligation (part B, sec- They not only serve to verify current limit tion 4) under which licensees are required values and measuring methods as part of to provide a specific coverage rate for the EU standardisation, but also the national population. Proof is furnished by compar- frequency assignment planned. ing the mobile coverage determined by the PMD with the data submitted by the Research into levels of radio noise licensee. In 2007, the research into “man-made noise” in the frequency spectrum which The results measured show the actual began in 2006 was continued with measure- coverage for the population living in the ments in the frequency range below 30 MHz. coverage area. TELECOMS FURTHER DECISIONS 111

Research into frequency usage in prep- A statistical procedure used to determine aration for WRC-07 test values is applied when monitoring the In May 2007, the Federal Network Agency areas of private mobile radio and radio again coordinated an international project relay services. The calculation of test values designed to measure frequency usage in includes total stock and the failure rates of the range from 4 to 10 MHz that involved the previous random samples This statis- more than a dozen administrations through- tical procedure represents an efficient and out Europe and a measuring station in the economic way of monitoring frequency Caribbean. The results of measurements uses. With this procedure, only as much taken at over 20 monitoring stations with a testing is carried out as necessary, i.e. as considerable volume of data were required little as possible. There are plans to include as a basis for evaluating the current use of other radio services in this procedure. the short wave range as well as for the new assignment of frequencies in this range PUBLIC SECURITY during WRC-07. Automatic information procedure under Monitoring of frequency uses section 112 TKG In the course of its work monitoring fre- Following the liberalisation of the telecom- quency uses, the radio monitoring and munications markets, customer data are inspection service (PMD) checked some no longer held by a monopolistic state- thousand frequency assignments for a owned enterprise, but are gathered by a range of radio applications to ascertain large number of telecommunications com- whether operators complied with the pro- panies. To assist the security authorities in visions on the assignment of frequencies the performance of their statutory duties, last year. The review of frequency usage these telecommunications companies sup- makes it easier to form a clear idea of the ply information from their customer files current situation and control compliance about the names and addresses of individ- with regulatory standards in the field of uals with telephone numbers to the au- frequency management. The review pro- thorities via the Federal Network Agency. vides essential information about the ac- The number of authorities and telecommu- tual situation and therefore supplements nications companies involved in this the administrative elements of frequency system is still on the increase due to new regulation (National Table of Frequency legal requirements. At present, about 1,000 Allocations, Frequency Usage Plan, fre- authorities registered with the Federal quency allocations), integrating them into Network Agency are able to retrieve rele- a self-regulating system. The intention is to vant customer data from a total of 110 tele- identify negative effects on frequency communications companies. usage at an early stage and minimise the amount of interference caused as a result. 112 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Development of information requests from security authorities and inquiries made with telecommunications service providers

Millions

25.0

22.2

20.0 18.6

15.0 13.9

10.1 10.0 8.1

5.5 5.0 3.4 3.6 3.9 3.2 2.7 2.9 2.0 1.5

0.0 2001 2002 2003 2004 2005 2006 2007

Requests by security authorities Inquiries made with telecommunications service providers

Security authorities Federal Network Agency Telecommunications service providers

Qualified electronic signature qualified electronic signatures and the pro- The Federal Network Agency is the “com- vision of support for legislative procedures. petent authority” under the Act Governing Framework Conditions for Electronic The tasks involved in the operation of the Signatures (SigG). The duties associated Trust Centre as a root authority include the with its role in this capacity include, in par- generation of signature keys for accredited ticular, the accreditation of certification certification service providers, the issuing service providers, the supervision of certifi- of certificates for certification service pro- cation service providers, the operation of viders and the provision of a directory of the state Trust Centre as the supreme certi- certificates that can be used at any time by fication authority (root authority), the any party to check which certificates have administration of a directory of certificates been issued and revoked by the Federal issued and revoked, the recognition of evalu- Network Agency. In 2007, the systems ation and certification bodies, the deter- deployed in the root authority were ad- mination of appropriate algorithms for justed to take account of the requirements TELECOMS FURTHER DECISIONS 113

of the current algorithm catalogue. The of public security in Germany. In particu- qualified certificates issued by the Federal lar, the Technical Directive provided for Network Agency were oversigned for the by section 110(3) TKG is essential to the first time (oversignature as defined by sec- development of interception technology tion 17 Ordinance Governing Framework by telecommunications companies, manu- Conditions for Electronic Signatures (SigV): facturers and the security authorities in- Since qualified electronic signatures become volved. The Directive is amended to take outdated due to the limited validity of account of new telecommunications tech- algorithms they are based upon, signed nologies whenever this becomes necessary. documents must be provided with a new To this end, the Federal Network Agency – qualified electronic signature prior to the as required by the legislation – contributes expiry of the suitability of algorithms or to the discussions about new topics, initial- the associated parameters. This ensures the ly in the bodies responsible for standardisa- conclusiveness of documents and signa- tion. In the year under review, industry tures on a long-term basis). associations, authorised bodies and manufacturers were all involved in the elaboration The amount of advisory work done on the of version 5.1 of the Technical Directive that topic of qualified electronic signatures has came into force in February 2008 and was increased at national and international extended, in particular, to cover the field of level. In 2007, the Agency has continued to IP-based multimedia services (such as cooperate with CAST e.V., a competence VoIP). It was put into force by its publica- centre for IT security in Darmstadt. tion in the Official Gazette of the Federal Network Agency. In 2007, the Federal Network Agency complied with its statutory obligations to Annual statistics of intercept orders publish the following information: Prod- under the Code of Criminal Procedure ucts for qualified electronic signatures According to section 110(8) TKG, the oper- that have received certification, manufac- ators of telecommunications systems have turers’ declarations that comply with the to prepare annual statistics on intercept requirements of the SigG and the Ordin- orders under the Code of Criminal ance on Electronic Signatures as well as Procedure and make these available to the suitable algorithms and the associated Federal Network Agency. The accumulated parameters for qualified electronic signa- data is published on an annual basis in the tures. Federal Network Agency’s Official Gazette. With the entry into force of the revised Act Technical implementation of intercepts on telecommunications surveillance and under section 110 TKG other undercover investigation measures In carrying out its duties in relation to the along with implementation of Directive technical implementation of intercepts, 2006/24/EU, these annual statistics will no the Federal Network Agency makes an longer need to be prepared by the Federal important contribution to the maintenance Network Agency from 1 January 2009. In 114 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

the future, the statistics will be prepared by in the fixed network area (analogue and the Federal Office for Justice on ordered ISDN) and 35,816 IDs in the mobile phone measures under its responsibility on an area. Despite the ever increasing number annual basis by 30 June of the year after the of mobile phone connections in 2006, reporting year in accordance with section there is only a minor increase in the num- 100a of the Code of Criminal Procedure and ber of connections monitored in this area. published on the Internet. A slight decline in the number of surveillance measures was identified in the fixed Based upon the surveillance measures network area. ordered in 2006, 5,099 IDs were monitored

Statistics of intercept orders under the Code of Criminal Procedure

Telephone numbers affected without extension

40,000

35,816 35,000 34,855

30,000 29,490

25,000 24,347

20,902 20,000 18,110

15,000 13,028

10,000 8,862 6,391 5,398 5,000 4,636 4,798 5,047 5,099 4,437 4,503 4,112 4,551

1998 1999 2000 2001 2002 2003 2004 2005 2006

Orders – mobile telephones Orders – fixed lines TELECOMS ADMINISTRATIVE COURT PROCEEDINGS 115

Administrative court proceedings

The proceedings decided by the courts in 2007 ranged from basic market regulatory issues to legal disputes about frequency matters.

A total of 122 main proceedings and sum- local loop market (market 11) dated 20 April mary proceedings were initiated against 2005 in five appeal proceedings. In their decisions of the Federal Network Agency actions they demanded additional obliga- before Cologne administrative court in the tions to be imposed on DT AG in addition to telecommunications sector in 2007. those already included in the regulatory order. They called for an obligation to 94 main proceedings and 33 summary pro- expand capacity, the approval of cooper- ceedings were decided in 2007. 74 main a-tion possibilities between companies proceedings and 23 summary proceedings with authorized access, the imposition of ended positively for the Federal Network a transparency obligation and a separate Agency 6 main proceedings and 5 sum- accounting system; they also wanted the mary proceedings ended in a draw. access obligations to be extended to pure optical fibre local loops. In its rulings on In 2007 the focus of legal disputes was on 28 November 2007 (reference number 6 C reviewing the legitimacy of regulatory 42.06, 6 C 43.06, 6 C 44.06, 6 C 45.06 and orders according to section 13 TKG. Both 6 C 46.06), the Court worked on the basis decisions by Cologne administrative court that a competitive undertaking has gener- as the court of first instance, and first ally a right to take action with the aim of supreme court decisions by the Federal imposing additional regulatory obligations Administrative Court were passed. on a regulated undertaking with substantial market power. Obligations to grant The Federal Administrative court had to access (section 21 TKG), to provide transpar- fight actions taken by a number of city car- ency (section 20 TKG) and for separate riers against the regulatory order on the accounting (section 24 TKG) would also be 116 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

in the interests of consumer protection. see any legal grounds for the revocation, However, an obligation action intended to but re-interpreted the revocation into a impose additional regulatory obligations permitted finding of the voiding of an would only be permitted if the undertak- access and rate approval obligation. ing bringing action has already filed applications relevant to the principal With these supreme court decisions by the object of the action during the administra- Federal Administrative Court, the first tive procedure against the Federal Net- regulatory order on market no. 11 is now work Agency. In its decisions, the Federal final and conclusive. Administrative Court pointed out that the Federal Network Agency does not have The subject of the decisions by Cologne decision powers as part of its regulatory administrative court was the legitimacy of activity, but that it is entitled to an exten- the regulatory order by the Federal Net- sive scope in terms of the selection and work Agency concerning market nos. 1 to 6 design of the measures it implements for (voice telephony service) of 23 June 2006. markets in need of regulation. In view of In its ruling of 05 September 2007 (refer- the request for access to the local loop in ence number 21 K 3395/06) Cologne ad- the form of pure optical fibre, the Federal ministrative court largely rejected DT AG’s Administrative Court does not consider the action aimed at suspending the entire plaintiffs’ rights violated. The definition of regulatory order. The court acknowledges the relevant market does not affect any of room for the Federal Network Agency’s the plaintiffs’ subjective rights. On the con- judgement both in the case of market de- trary, it is in the public interest. The Federal limitation and in assessing the demand for Administrative Court does not consider the regulation. The decision also confirms that competitors’ legal protection options com- system solutions can provide access to the patible with European law at this level. As a public telephone network, private and result, the Administrative Court thus con- business customers can be grouped in an firmed the rulings of Cologne administra- access market and provider selection and tive court rejecting the action. provider pre-selection can be provided for all call services. Only the imposed notifica- The first regulatory order on market no. 11 tion and submittal obligation for national dated 20 April 2005 was also the subject of VoIP connections was cancelled. The a former appeal decision by the Federal appeal lodged by the plaintiffs against the Administrative Court. In this case, a com- decision is currently pending before the petitor of DT AG appealed against the revo- Federal Administrative Court under refer- cation of the access and rate approval obli- ence 6 C 38.07. gation for the pure optical fibre local loop that was included in the regulatory order. The action brought by DT AG against the In its ruling of 14 February 2007 (reference regulatory order (market no. 9) aimed at an number 6 C 28.05), the Court confirmed alternative subscriber network provider the legitimacy of this regulation. It did not with the aim of establishing an approval TELECOMS ADMINISTRATIVE COURT PROCEEDINGS 117

obligation for access and collocation rates mobile network providers for an amend- at the expense of the subscriber network ment of the summary proceedings deci- provider in addition to the imposed obliga- sions with the objective to suspend enforce- tions was unsuccessful. According to ability of the Federal Network Agency's Cologne administrative court, such a claim regulatory orders (decisions of 13 June would be rejected alone on the basis that 2006, reference 6 VR 2.07, 6 VR 3.07 and 6 no protective effect for third parties is attri- VR 5.07), the applicable rates of the mobile buted to section 30(1) sentence 1 TKG (judge- telephone companies still have to be ment of 01 August 2007, reference 21 K approved in advance despite the decisions 4013/06). of Cologne administrative court. The Federal Administrative Court will have oral With its judgement of 05 September 2007 proceedings in spring 2008 on the appeals (reference number 21 K 4193/06), Cologne of the Federal Network Agency and the administrative court also rejected an mobile network providers. action brought by DT AG against the regulatory order on market 12 (IP bit stream). In the meantime, Cologne administrative The appeal has not yet been decided on by court has made a decision about the urgent the Federal Administrative Court. In this applications by the four mobile network case, the Cologne administrative court also providers according to section 123 Code of confirmed room for judgement by the Administrative Court Procedure (VwGO) in Federal Network Agency on the market connection with section 35 (5) TKG on a definition and analysis. temporary approval of higher termination rates than those approved by the rates With its judgements of 01 March 2007 (re- approval decisions of 08 November 2007 ference number 1 K 3928/06, 1 K 4148/06) and 16 November 2006. These applications and 08 March 2007 (reference number 1 K were rejected (decisions of 23 April 2007 – 3928/06, 1 K 4314/06), Cologne administra- reference 1 L 1997/06 –, 18 June 2007 – refer- tive court allowed the actions brought by ence 21 L 1845/06 –, 20 June 2007 – refer- the four mobile network providers against ence 21 L 170/07 – and 08 August 2007 – the regulatory orders of 29 August 2006 on reference 1 L 289/07 –). market 16 after having rejected the urgent applications earlier to the extent that a DT AG’s applications under section 123 cancellation of the obligation on ex-ante Code of Administrative Court Procedure approval of the access and collocation rates (VwGO) in connection with section 35 (5) was demanded. Contrary to the Federal TKG for a temporary approval of higher Network Agency, Cologne administrative rental, provisioning and termination rates court assumed that the rates are only al- for the local loop were also rejected by lowed to be subjected to ex-post control. Cologne administrative court (decisions of Since these rulings are legally still not bind- 21 August 2007 – reference 1 L 911/07 – and ing and the Federal Administrative Court of 17 December 2007 – reference 21 L rejected the applications brought by the 1425/07 –). The rates approval decisions of 118 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

30 July 2007 and 29 June 2007 that were Reference must also be made to the deci- subject to proceedings by the Federal sions taken in preliminary proceedings Network Agency were based upon a cost according to section 99 Code of Adminis- model to determine the overhead costs. trative Court Procedure by the Administra- tive Court of 09 January 2007 (reference On 19 April 2007 (reference number 6 C number 20 F 1.06) and 22 March 2007 (re- 21.06) the Federal Administrative Court ference number 20 F 2.06, 20 F 3.06 and 20 F decided that telecommunications markets 4.06) on the protection of operating and are only subject to special abuse control by business secrets in administrative court the Federal Network Agency under section proceedings. Based on European legal pro- 42 TKG if they are markets defined and ana- visions, in particular Art. 4 of the frame- lysed by the Federal Network Agency for work regulation and the relevant judiciary which the application of general competi- of the European Court of Justice (ECJ), the tion law is inadequate. The subject of the Federal Administrative Court concluded proceedings was an action brought by a that withholding file components and sub- public directory assistance provider, who mitting blacked-out pages of official files considered the fact that a DT AG subsidiary was not permitted. To protect the operat- only refers to DT AG’s directory assistance ing and business secrets submitted along service in its telephone directories and not with the files, so-called "in-camera" pro- to alternative providers to be abusive. The ceedings can be performed by the court action for official intervention according to during the preliminary and main proceed- section 42 TKG was unsuccessful because a ings. This prevents any operating and busi- market definition and analysis for this mar- ness secrets included in the administrative ket was not available. files being disclosed to all parties involved in the court proceedings. This ruling was also confirmed by the Federal Administrative Court in its addition- A decision of 22 November 2997 taken by al decisions of 19 September 2007 (refer- the European Court of Justice in legal case ence number 6 C 34.06, 6 C 35.06, 6 C C-262/07 must also be mentioned on the 36.06, 6 C 37.06, 6 C 38.06). The subject of interpretation of the transitional provisions the proceedings was a decision by the included in the European regulations that Federal Network Agency based on section have been transposed to German law with 42 TKG of 11 November 2005 under which section 150 TKG. Grounds for this decision DT AG was required to provide analogue by the European Court of Justice was a telephone and ISDN connections to com- preliminary ruling by the Federal Adminis- petitors at its General Terms and Conditions. trative Court in an appeal on the obligation Since a final market definition and analysis to obtain approval for specific retail offers. was not available when the abuse order The European Court of Justice responded was issued, the decision of the Federal to the question submitted to it that, accord- Network Agency was found to be illegal by ing to Community Law, a statutory require- the Federal Administrative Court. ment provided for in earlier domestic law TELECOMS ADMINISTRATIVE COURT PROCEEDINGS 119

on the approval of rates for the provision of Following this, the actions lodged with voice telephony services to end users by a Bonn regional court against the Federal company with a dominant position on this Republic of Germany on issuing an invoice market are to be maintained provisionally. entitling to input tax deduction (1 O 586 / As such, the question of whether only 04), and against Bonn-Innenstadt tax office those obligations resulting from concrete with the Cologne finance court on whether administrative decisions are valid in the the UMTS license auction (11 K 6395 / 04; transitional period after the effective date 11 K 6443 / 04) can be and is subject to in- of TKG 2004 or also any abstract legal obli- come taxes, were revoked by the com- gations was clearly decided by the ECJ in panies filing the actions. the latter sense and thus in concordance with the Federal Network’s opinion. With its judgements of 15 June 2007 (reference number 11 K 572/06 and 11 K 573/06), With its judgement of 25 April 2007 (re- Cologne administrative court ruled in ference number 21 K 3675/05), Cologne favour of two actions by a competitor on administrative court confirmed the legit- extending frequency usage until 2016 in imacy of the revocation of Quam GmbH’s the 2.6 GHz band for a total of 36 frequency UMTS license. By notice of 15 December assignments that are limited until 31 2004, the Federal Network Agency revoked December 2007. According to the court, the license due to a breach of the coverage the reason for the original limitation of the obligation required with the license. Quam assignment – to legally protect the reserva- GmbH appealed against this decision with tion of the 2.6 GHz band for UMTS/ITM- the Münster higher administrative court 2000 applications intended at that time – (reference number 13 A 2069/07). In con- was no longer valid. The expected demand nection with the UMTS auction, two deci- for UMTS/IMT-2000 applications in the sions by the ECJ of 26 June 2007 are also 2.6 GHz band did not arise. Following the important with regard to legal cases in successful complaints against denial of Austria and the UK (C 284/04 and C 369/04). leave to appeal by the Federal Network In its ruling, the ECJ decided that the Agency, the appeals were allowed in both assignment of frequency usage rights by action proceedings under decisions by the responsible national regulatory author- Münster higher administrative court on ity by way of auctioning does not represent 19 October 2007 (reference number 13 A an economic activity as defined by the 6th 2394/07 and 13 A 2395/07). Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the In its rulings of 23 November 2007, Co- Member States on turnover taxes. logne administrative court rejected actions Moreover, the national regulatory author- against the Federal Network Agency on fre- ity only exercises the control and regulatory quency translation in the 900 GHz and/or function given to it regarding use of elec- 1,800 GHz band (reference number 11 K tromagnetic spectrum. 3270/06 und 11 K 5392/06). With its administrative decisions on frequency translation 120 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

of 03 February 2005, the Federal Network ators have to leave specific frequencies of Agency had assigned radio frequencies to the range assigned to them to be used by two mobile network operators in 900 GHz third parties to fulfil any legally required band, requiring them in return to terminate radio applications. In its rulings on 23 use of previously assigned radio frequencies November 2007 (reference number 11 K in the 1,800 GHz band by 31 January 2007. 4798/06 and 11 K 4653/06), however, Two undertakings lodged actions against Cologne administrative court confirmed this by asserting their own claim to the legitimacy of this collateral clause. assignment of the frequencies. Such a claim was rejected by the court, however, In another decision (decision of 29 Novem- stating that the plaintiffs could not plead a ber 2007, reference number 11 L 1214/07), breach of their right to frequency assign- Cologne administrative court rejected an ment according to section 55 (5) sentence 1 undertaking’s expedited application TKG, because they do not belong to the per- against the court order on the frequency sons protected by this regulation. assignment procedure for the 2.6 GHz band. The court based its decision on a The actions filed by two mobile network reconciliation of interests and assumed operators against a collateral clause of the that a uniform assignment procedure decision on frequency translation also would be in the general interest of efficient remained unsuccessful. This collateral frequency usage and rapid assignment clause stipulates that mobile network oper- where required. TELECOMS ADMINISTRATIVE COURT PROCEEDINGS 121 122 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Post

Market watch 124 Ruling chamber decisions 135 Administrative court proceedings 138 POST 123 124 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Market watch

Full liberalisation holds more opportunities for new market players.

TEN YEARS OF REGULATION/ DEUTSCHE end services. In particular, the Postal Act POST AG’S LETTER MONOPOLY HAS allowed for full liberalisation in value- EXPIRED added (“higher quality”) services, paving the way for profitable business models in As in other infrastructure sectors, the the end-to-end sector. DP AG as the incum- development of postal markets depends bent had to grant its competitors access to heavily on the statutory framework. After its mail sorting facilities – a crucial com- the postal reforms of the 1990s, the 1997 petitive factor – but only did so as late as in Postal Act was the first regulatory frame- early 2005. work that aimed to create competition in the postal services market. It made one Meanwhile hundreds of competitors have remarkable exception, granting Deutsche entered the letter market and are more or Post AG (DP AG) a monopoly on letter less well established throughout the nation, services initially until 2002 and then until especially in rural areas. For commercial 2007. The effect this monopoly has had in users, in particular, they have become a terms of hampering postal market devel- genuine alternative to DP AG. Their wide opment is obvious. service range is helping to diversify the letter services market. In addition, they are The expiry of DP AG’s monopoly at the end instrumental in ensuring the continued of 2007 marked the end of monopoly rights basic provision of postal services. in the letter market. Despite its existence, in the ten years of letter market regulation DP AG has responded to the competition for considerable competition has been allowed instance by lowering prices for the service to develop. To date, however, the partial of documents (Postzustellungsauftrag, or liberalisation of Germany’s letter market PZA) and for parcels for private consumers has primarily led to competition in end-to- and small customers. In other words, com- POST MARKET WATCH 125

petition has already produced visible bene- INTERNATIONAL MARKET COMPARISON fits for consumers. Considering that a monopoly was in force Altogether, however, after a decade of until the end of 2007, thanks to a decade of “restrained” market liberalisation the level regulation in the German letter market of competition in the letter market is still competition has developed relatively well not satisfactory. Yet it must be borne in compared to other countries. Even Sweden, mind that a competitive framework is in Finland, New Zealand and the UK, which place that could fully come to bear now the are generally perceived as the pioneers of market is completely liberalised. liberalisation, have not succeeded in performing any better even though their mar- CHANGES IN THE REGULATORY kets began to open far earlier. FRAMEWORK

The expiry of the monopoly –DP AG’s statu- Liberalisation of letter markets in selected countries tory exclusive licence – will in itself not directly lead to more competition. Pro- Competitors’ market shares moting fair and well-functioning competi- Market opened (year) in 2006 (by volume, end-to- end services) tion in the market, as intended by the Sweden 1993 ~ 8%

Postal Act, requires support in the shape of Finland 1995 < 1% a suitable statutory framework. For one, New Zealand 1998 ~ 8.5% competition in Germany is affected by the UK 2006 < 1% fact that some of DP AG’s services are VAT- Germany 2008 ~ 8.7% exempt, a situation that at the end of 2007 Netherlands 2008 ~ 12% was still distorting competition. The in- Spain 2011 ~ 10% crease in standard VAT to 19 percent on Source: National postal companies, regulatory agencies, own estimates 1 January 2007 led to even greater distortions. For another, the Regulation on mandatory working conditions for the mail services industry, which was enacted by the German Federal Ministry of Labour and Social Affairs on 28 December 2007, is anticipated to have an effect. However, the actual impact will only become apparent at a later point in time. 126 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

DEVELOPMENT OF GERMAN MARKET By contrast, instead of creating their own COMPARED TO UK delivery infrastructure almost all of Royal Mail’s competitors in the UK make use of Of all European markets the UK market is the incumbent’s mail sorting facilities. In most suited to a comparison with Germany. 2006 competitors handled just 35 million Its size and geographic and population letter items end-to-end, compared to the structure is similar to that of Germany. almost 22 billion items that were handled Based on existing market data alone, so far overall. One major reason why competitors the gradual liberalisation of the letter prefer to use Royal Mail’s infrastructure market has resulted in more competition rather than offer end-to-end services them- in Germany than it has in the UK. selves is that access fees are low. Discounts of up to over 50 percent are granted on This is due to the fact that both countries injected items, making this a more attract- pursued different market opening strat- ive option for competitors without their egies. In Germany, competition developed own delivery networks. because DP AG’s competitors created their own parallel delivery networks, some of LICENSING which now have nationwide coverage. The competitors offer the full range of mail To date, the Federal Network Agency has delivery operations, from collection to de- granted 2,372 providers a licence for the livery, from a single source (also referred to conveyance of letter items. 963 have since as end-to-end services) and are hence able withdrawn from the market. Initially, these to meet most of the demand for alternative market exits were due to insolvency and postal services. In addition, in their cap- business wind-ups; for the last two years, acity as consolidators they inject around however, takeovers and mergers (market 700 million letter items into DP AG’s consolidation) have been the main reason delivery networks. However, this alternative for the decline. has only been available since mid 2005.

Licensing statistics 1998 to 2007

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Total

Licence applications 384 291 210 238 181 236 2591 2711 2291 131 2,430

Licences granted 164 455 241 221 179 239 255 281 2111 126 2,372

Licences denied 3 10 003301 0 11

Market exits 0 17 70 134 181 68 81 105 119 188 963

1 Figures later adjusted to reflect delays in processing and the withdrawal of licence applications. POST MARKET WATCH 127

Licences and market exits 1998 to 2007

2,500

2,000

1,500

1,000

500

– 500

– 1,000 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Licences granted Licensees Market exits

At the end of 2007, 845 licensees were active came down in 2003 and 2006, competitors in the letter market, most of them small were not able to benefit fully from economies and medium sized enterprises providing of scale and scope. mainly niche services due to statutory restrictions. Nevertheless, these licensees offer a wide range of services. With over 1.8 billion letter items and more than €1.3 billion in revenues their market share currently far exceeds ten percent.

Most licensees are small enterprises with annual revenues of less than €10 million. In 2007 only 22 providers generated revenues of over €10 million; four had revenues of over €50 million. This is also due to the fact that while DP AG’s exclusive licence was still in force, competitors did not have access to the required volumes. Even after the monopoly weight and price limits 128 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Number of providers by revenue size 1998 to 2007 1

€ 10,001 up to € 100,001 up to € 500,001 up to > € 1 m up to up to € 10,000 € 100,000 € 500,000 € 1 m € 10 m > € 10 m 1998 30 51 26 3 7 3

2000 91 178 129 23 15 4

2002 96 186 149 32 41 7

2004 181 263 175 53 77 10

2005 127 209 152 47 91 12

2006 122 199 120 43 109 20

2007e 112 204 112 46 130 222

1 The number of providers departs significantly from the number of granted licences and active licensees as revenues generated by corporations have been consolidated. 2 including four providers with revenues of over €50 million e = expected

Market consolidation continued in 2007, 250,000 km2. Another 42 providers have with further takeovers and investments. joined forces to serve areas of more than Providers have recognised that to survive 250,000 km2. in the competition particularly for the “last mile” before the consumer’s doorstep, they Developments in the various Länder also have to extend their reach and improve confirm that a number of competitors be- capacity utilisation of their delivery net- sides DP AG are working to offer sustainable, works by cooperating with their peers. full-coverage letter services. In this context, Small, regional providers operating in a remarkable number of licensees are active regional niche markets are also seizing the in the new Länder. The licence density in opportunities of liberalisation. As competi- these regions confirms that alternative pro- tion increases in the wake of full market viders are instrumental in ensuring that opening, the industry is anticipated to con- structurally disadvantaged regions, too, tinue consolidating. receive postal services.

A significant number of licensees are chal- WORKING CONDITIONS lenging the trend towards consolidation and continue to work independently and In the wake of market changes and the without cooperation partners, with most of expiry of DP AG’s exclusive licence, the them covering areas of up to 1,000 or even Federal Network Agency took the oppor- 10,000 km2. Cooperation among licensees tunity to perform a detailed examination of can allow them to extend their operating the working conditions offered by licen- reach quite considerably, with some pro- sees. In addition to consulting with legal viders covering the entire country. For and economics experts, the Agency con- instance, of the 262 providers that previ- ducted a full survey of working conditions ously each covered up to 10,000 km2, 113 among 1,509 licensees. The reference date entered into a partnership to extend their of the survey was 31 March 2007, and the operating range to between 10,000 and response rate was 94 per cent. The survey POST MARKET WATCH 129

and response evaluation process was On average, full-time employees worked de-layed by objections and lawsuits, with 39.5 hours a week, while part-time staff some main actions still pending before the worked 23.9 hours a week. The average competent administrative courts. working week for persons in insignificant employment was 12.4 hours. All licensees The survey revealed that at the above refer- complied with the statutory requirements ence date, 845 licensees were active in the governing leave entitlements. Special market. Of these, 250 operated either inde- allowances, such as holiday or Christmas pendently, or with family members or bonuses, were only paid by a small number equal business partners, or exclusively with of providers. agents. The survey reflects the situation among 595 licensees employed contracted staff. licensees as at March 2007. On 28 Decem- Altogether, these 595 licensees employed ber 2007 the Federal Ministry of Labour 48,411 staff, 8,620 of whom worked on full- and Social Affairs enacted the Regulation time and 11,625 on part-time contracts. on mandatory working conditions for the 26,966 employees worked on what is mail services industry. Under this Regula- known as an insignificant basis. 960 were tion, the legal standards established by the on short-term“minijob” contracts. 240 collective agreement on minimum wages were trainees or interns. Almost 92 percent for the mail services industry, which was of employees (44,394) were operational negotiated between Arbeitgeberverband staff (sorters, drivers, delivery staff). Postdienste e. V. (an employers’ association) and ver.di, the United Services Union, The weighted average hourly wage of all extend to cover all eligible employees who employees working for licensees was €7.79. are not covered by said collective agree- On average, delivery staff earned €7.28, sor- ment. Since 1 January 2008 the employees ters earned €7.68 and drivers earned €7.63. in the old Länder including Berlin who are As is often the case, hourly wages in eastern now covered by the Regulation have been Germany were lower than those paid in paid a minimum hourly wage of at least western regions. The average hourly wage €9.80 for delivery staff and €8.40 for those for operational staff (sorters, drivers and in other jobs. The minimum hourly wage delivery staff) was €6.17 in the east and for employees in all other Länder is now €7.84 in the west. €9.00 for delivery work and €8.00 for other functions. The Federal Network Agency’s Around 40 percent of licensees’ employees previous licensing rules (governing the – most of them in insignificant employ- granting and review of licences) were ment – were not paid by the month or hour, amended to reflect these changes. but on a per-item basis. Half of these employees provided services in the licensed area in conjunction with non-licensed or unrelated (non-postal) services. 130 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

LETTER MARKET INDICATORS For 2007, revenues in the letter market are anticipated to remain stable at around €10 Revenues in the licensed area (commercial billion. By contrast, volumes have con- conveyance of letter items up to 1,000 g) tinued to rise. The increase has been totalled around €10 billion in 2006. The let- sufficient to compensate for the drop in ter market accounts for a substantial part prices. Despite the growing popularity of of the postal market, which also includes electronic communication (e-mail and CEP (courier, express and parcel) services text mes-saging) business mail volumes and press products. Overall, revenues continue to grow, which is stabilising underwent a slight increase to just under overall letter volume growth. €24 billion.

Development of revenues and mail volumes in the licensed area

20,000

17,576 17,295 17,500 17,005 16,892 16,585 16,505 16,533 16,641 15,452 15,020 15,000

12,500

10,266 10,237 10,164 10,047 9,900 9,994 9,863 10,092 10,090 10,000 9,827

7,500

5,000

2,500

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007e

Volumes e = expected Revenues POST MARKET WATCH 131

Market shares in the licensed area in terms of revenue

2002 2003 2004 2005 2006 2007e

Market shares Competitors 3.0% 3.9% 5.3% 7.6% 10.7% 12.9%

Market shares DP AG 97.0% 96.1% 94.7% 92.4% 89.3% 87.1% e expected (forecasts by competitors and Federal Network Agency)

five percent lower than in 2002. The major- Competitors’ revenues in the licensed area ity of competitors’ prices (including VAT) currently exceed €1.3 billion. Measured in were lower than those of DP AG. terms of revenue, licensees’ market shares in 2007 increased to approximately 12.9 Unlike in Germany, price levels in most percent. European countries have increased substantially since 2002. Compared to the rest LETTER PRICE LEVELS of Europe, Germany is now in the mid- range. In November 2007 the average price level for individual letter items in Germany was

Letter price levels (in €) in 2002 and 2007 As at November 2007 (Consumer price parity)

0.90

0.80

0.70

0.60

0.50

0.40

0.30

0.20

0.10

0.00 UK Italy Spain France Greece Ireland Austria Finland Sweden Norway Belgium Portugal Germany Denmark Netherlands Luxembourg

2002 2007 132 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

WORKSHARING SERVICES (ACCESS TO In 2007 DP AG also submitted to the INCUMBENT’S NETWORK) Agency 42 agreements concerning access to PO box facilities and 22 agreements con- Under the Postal Act the incumbent, DP cerning access to change-of-address infor- AG, is obliged to offer its customers and mation. competitors worksharing services and/or grant them access to its network. DP AG A 2005 resolution by the Federal Cartel offers access to worksharing services in its Office paved the way for consolidation. outbound mail sorting centres (BZA), DP AG was obliged to grant access to its where outbound mail is consolidated, and mail sorting centres also to those providers the inbound mail sorting centres (BZE), who – in the exclusive area – consolidate which handle the delivery of incoming mail items from several senders and prepare mail. DP AG is also obliged to grant access them for injection into the network via DP to its PO box facilities and to its database AG’s mail sorting centres (so-called con- of change-of-address information. solidators). The Federal Network Agency has issued all licences required for this ser- All worksharing agreements negotiated by vice. DP AG must be submitted to the Federal Network Agency. Agreements were con- Consolidation is generally perceived as an cluded in the following areas: alternative to market opening as a result of end-to-end services. Its introduction in

Worksharing agreements in 2007

Type of item

Individual items Infopost Total

Point of access BZA BZE BZE BZA/BZE

Contracting party 70 165 53 288 End customers 13 14 10 37 Consolidators 83 179 63 325 Total

As at 31 December 2007 POST MARKET WATCH 133

2005 raised great expectations. However, Between 1999 and 2006 DP AG cut its full- consolidation has not yet had a substantial time workforce by more than 21,000. The impact on competition. Despite extended number of part-time jobs dropped by over access for competitors to DP AG’s mail sort- 12,000. By contrast, since 1999 competitors ing centres, after a promising start the have created over 6,000 full-time and number of providers is currently stagnat- around 7,500 part-time jobs. These jobs ing. In its annual market survey the Federal were not transferred from DP AG and there Network Agency identified volumes of is no connection to DP AG's workforce around 500 million items for 2006. The reduction programmes. figure is expected to rise to around 700 million in 2007. UNIVERSAL SERVICE

WORKFORCE DEVELOPMENT IN THE DP AG’s statutory obligation to provide uni- LICENSED AREA versal service expired together with its exclusive licence at the end of 2007. In Since 1999 DP AG has shed almost 30,000 accordance with Article 87f of Germany’s jobs in the licensed area alone. However, in Basic Law, since 1 January 2008 universal the same period competitors created more services have been provided by both DP AG than 30,000 new jobs. and the competitors. While universal service coverage is not expected to suffer as a

Workforce development (DP AG and competitors) (Full- and part-time and insignificant employment contracts)

197,006 200,000 194,838 195,015 187,328 185,590 183,957 181,874 177,188 178,630 166,773 162,165 154,903 153,546 151,180 148,840 148,595 150,000

100,000

48,411 50,000 46,175 34.410 28,328 21,792 23,727 17,650 20,555

0 1999 2000 2001 2002 2003 2004 2005 2006

Total DP AG Competitors 134 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Workforce figures by type of contract – Annual averages in 1999 and 2006

Insignificant Insignificant contracts / contracts / short-term Full time Part time “minijobs” “minijobs” Total

DPAG no separate 1999 114,343 62,507 338 figures available 177,188

20061 92,913 50,116 3,543 2,023 148,595

no separate Competitors 1999 2,300 4,160 11,190 figures available 17.650

2006 8,620 11,625 26,966 960 48,4112

1 To ensure comparability with the previous year’s figures DP AG’s figures exclude the 21,500 administrative employees shown pro rata for the first time in 2006. 2 including 240 trainees and interns

result, should market mechanisms fail even in a competitive environment. In Articles 12 to 17 of the Postal Act can be other words, the basic provision of postal invoked. The Federal Network Agency can services remains certain. hence ensure full universal service coverage POST RULING CHAMBER DECISIONS 135

Ruling chamber decisions

In 2007 the Ruling chamber took a decision on the new price cap formula. DP AG’s prices for private customer letters remain stable also after the market has opened. Fees for the service of documents have dropped again.

RATES REGULATION sector. This decision refutes the frequent assumption that opening postal markets would mean higher prices and lower qual- In price cap proceedings Ruling chamber 5 ity for private consumers and that the approved the average change parameters benefits of liberalisation would be felt for DP AG’s prices for the next four years. only by large-scale customers.

Contrary to the previous proceeding, the The Ruling chamber has carefully exam- products and services still subject to price ined baseline price levels to ensure that no capping are now assigned to one single excessive prices, which could be used by basket containing the types of service most DP AG for cross-subsidisation, will be ap- frequently used by private and small busi- proved. Besides the costs of efficient service ness customers. From 1 January 2008 charges provision, when determining baseline for bulk items, which apply to posting prices and setting the productivity increase volumes of 50 or more letter items, are only rate account must also be taken of neutral subject to ex post rates regulation or the costs. These consist of various items includ- special control of anti-competitive prac- ing wages, salaries and social security tices by the Federal Network Agency. contributions above the market average, and other financial burdens that DP AG’s Setting the annual productivity increase competitors do not have to bear. rate (the “X” factor) at 1.8 percent has sta- bilised letter prices for 2008 to 2011, even After the publication of the final price cap though this is a highly personnel-intensive parameters DP AG submitted its prices for 136 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

individual products (such as standard offers these services in competition with letters and postcards) to the Ruling other providers is itself not objectionable. chamber for approval. As the submitted The examination focused on whether prices remained within the range set in the DPIHS’s prices were cost-covering or, as price cap proceedings, the Ruling chamber competitors claimed, were in fact dumping gave its approval. prices. It was also examined whether there was an anti-competitive connection be- SPECIAL CONTROL OF ANTI-COMPETITIVE tween the standard worksharing agreement PRACTICES and DPIHS’s service.

The abuse proceeding against DP AG and its The Chamber found that DPIHS was offer- wholly-owned subsidiary Deutsche Post In ing its services at cost-covering prices. The Haus Service GmbH (DPIHS) concerning its examination was conducted using DP AG package offer of worksharing services by and DPIHS’s detailed cost documentation DP AG and preparatory services (franking, and price calculations concerning their pre- sorting and numbering of items) by DPIHS paratory services. In particular, the Ruling was closed in April 2007. The package offer chamber verified whether, and if so to what had raised public attention when com- extent, the charges covered actual non-per- plaints were made suggesting that the offer sonnel, personnel and overhead costs. The represented an attempt to circumvent exist- Federal Network Agency also audited four ing price regulation, with dumping prices DPIHS service centres to verify that they hampering competition for consolidators. were not using DP AG’s production infra- The agreement had been negotiated by structure. The Ruling chamber was satis- DP AG and DPIHS with various Bavarian state fied that DPIHS has its own sales organisa- ministries and their subordinate agencies tion and own sales staff. Neither were allega- and concerned the conveyance of their tions substantiated that DP AG would only postal items. Similar agreements had also grant access to worksharing services if cus- been signed with state agencies in Hesse tomers also used DPIHS’s services. Altogether, and Lower Saxony. no evidence was found of dumping prices nor of inadmissible service packages. The Chamber examined whether the structure of these agreements constituted an APPROVAL OF RATES FOR THE SERVICE OF anti-competitive practice. DP AG’s frame- DOCUMENTS work agreement is in fact a standardised, Ruling chamber-approved worksharing Several provisions of the German Code of agreement for large-scale customers that Civil Procedure and other administrative grants discounts for items that have been procedural laws stipulate that there has to prepared for posting in a certain way. These be a system to serve documents formally, preparatory services can either be performed together with proof of delivery and time of by the customers themselves or by pro- delivery. To this end, postal service providers such as DPIHS. The fact that DPIHS viders are served with what is known as a POST RULING CHAMBER DECISIONS 137

Postzustellungsauftrag, or PZA. Proof of Overall, absolute price levels have con- delivery is furnished by means of a certifi- tin-ued to drop, whether at DP AG or its cate of service issued by the provider that is competitors. DP AG recently responded to returned to the sender. the changing market situation by gaining approval to cut its rates considerably. The rates approval procedure for the service of documents is a special form of rates regulation, as the need for rates approval and the requirement that rates may not include unjustified surcharges or discounts and may not be discriminatory are extended to cover all providers of this type of service, even though they are normally only applicable to incumbents.

Due to the non-discrimination rule, no customer-specific rates may be offered. How- ever, providers may offer regional rates provided these are justified by regional cost differences. Scaling rates according to volume is also acceptable, provided applicants can provide evidence of lower costs thanks to economies of scale and scope.

In 2007, 118 providers applied for and were granted rates approval. More than ten percent of these rates were rates scaled according to volume. Besides the emergence of scaled rates, over the last two years the prod-uct itself has begun to change, with more providers now offering electronic recording and return of certificates. Pro- viders are also offering rates that differ by region. In 2007, almost 54 percent of competitors offered the service nationwide, while the remainder were regional operators. 138 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Administrative court proceedings

The Federal Network Agency successfully argued its cases before the administrative courts. All of the Agency’s decisions were confirmed.

In the period under review, again several 1998 and the end of 2007 concerning the cases were pending against decisions of the issue of D licences by the Agency had the Federal Network Agency concerning postal plaintiff succeeded in gaining a favourable matters. Most of these had been brought by ruling on its contrary interpretation. In DP AG concerning the issue of D licences interpreting the relevant statutory pro- (higher quality services). However, as the visions the Federal Network Agency has exclusive licence expired in 2007 most of demonstrated strong legal compliance and the cases are anticipated to no longer be in responsibility in considering the interests dispute. This is particularly true for the of the involved providers. suits brought by DP AG against the Agency’s issue of licences for “shipment tracking” Of the other rulings pronounced in 2007, and “integrated mail and logistics ser- special mention should be made of the vices”. Upon expiry of the exclusive licence, legal dispute concerning the disclosure of since 2008 licensees have been entirely free information on working conditions in the to structure their services as they wish. area of licensed letter services, the dispute concerning the approval of DP AG’s rates One notable decision is that of the Federal for the service of documents, and com- Administrative Court dated 27 June 2007 plaints brought by an association against which confirms the higher quality nature rates approvals in price cap proceedings. of “overnight delivery” services. The Court fully concurred with the Agency's inter- In the first of these cases, which gained pretation of the legal provisions governing considerable public attention as it was higher quality services (Article 51, para. 1, closely related to the setting of a minimum sentence 2, no. 4 of the Postal Act). In none wage for the mail service industry, in June of the suits DPAG had brought between 2007 the Federal Network Agency had con- POST ADMINISTRATIVE COURT PROCEEDINGS 139

ducted a full-scale survey requesting licen- Administrative Court on 11 July and the sees to disclose information on their work- Münster Higher Administrative Court on ing conditions. Licensees were asked to 8 November 2007 rejected the competitors’ provide information on, inter alia, work- urgency motions against the approval of force structure, wages and salaries, types of DP AG’s new rates. The Higher Administra- employment contract, leave entitlements, tive Court examined various points of the number of facilities and number of con- approval, including the lawfulness of com- veyed items. 47 of the licensees surveyed petitors’ involvement in administrative appealed to the Cologne Administrative proceedings (third party protection in the Court to give suspensive effect to their Postal Act’s pricing rules), the lack of infor- objections. The Court allowed the appeals. mation on non-compliance with calcula- However, the Münster Higher Adminis- tion methods and the effect of DP AG’s VAT- trative Court overturned the decision and exempt status on pricing. The Court ruled rejected the appeals for suspensive effect. that it currently saw no obligation on the Following a summary examination the part of the Agency to take into account DP Higher Administrative Court had no objec- AG’s VAT exemption (whose applicability tions to the questions in the Agency’s sur- to the service of documents is disputed) vey, particularly those relating to volumes, when approving rates, and to increase number of facilities, and types of delivery - DPAG’s rates owing to its exempt status. issues that the Cologne Administrative However, a final decision on this and other Court had considered objectionable. This matters, said the Court, would go beyond information, the Higher Administrative the scope of an urgency motion. The main Court ruled, was necessary for the Agency proceedings continue. to fulfil its regulatory functions, particularly against the backdrop of the continued In the third case referred to above, an asso- liberalisation of postal markets. ciation (acting here as a customer) had objected to the approval of rates for DP AG’s In the second case referred to above, com- postal services in price cap proceedings, petitors of DP AG that engaged in the ser- claiming that the rates in question were vice of documents in early 2007 had filed based on unauthorised discounts. The emergency motions against the decision of Cologne Administrative Court ruled that the Ruling Chamber 5 concerning the approv- relevant provision, namely Article 20, paras. al of DP AG’s new rates for the same 1 and 2, of the Postal Act had no third party service. The plaintiffs believed the Ruling protection component in relation to the Chamber’s decision to be unlawful as DP plaintiff and therefore did not assign him AG’s new and approved rates were based subjective rights. Rather, the Court con- on anti-competitive discounts. They also tinued, the prohibition on surcharges and objected to a change in calculation discriminatory rates served the common methods for various reasons, one being interest in that it safeguarded and promoted that DP AG’s VAT-exempt status had not competition. The suit was hence dismissed been taken into account. The Cologne (decisions dated 27 November 2007). 140 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Electricity and gas

Market watch 142 Activities and proceedings 147 Court proceedings 171 ELECTRICITY AND GAS 141 142 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Market watch

In 2007 the Federal Network Agency once again conducted a comprehensive survey of the German energy market. This survey serves primarily as the basis for creating market transparency, but also as an indicator of the efficiency of legal rules and regulation.

Under section 35 of the German Energy Act However, a number of questions, in particu- (EnWG) the Agency is obliged to perform lar regarding operational unbundling and monitoring tasks in order to fulfil its regula- unbundling of the use of information as well tory tasks in the areas of electricity and gas. as access to gas supply networks, still require For this purpose the Federal Network clarification. On 20 August 2007 the Agency Agency is tasked under section 63 (4) of the set out standardised processes for switching Energy Act to publish an annual report. The gas supplier (GeLiGas), which apply across Federal Network Agency's monitoring Germany. The undertakings are required report 2007 was presented to the public in to create and implement the framework November 2007. The monitoring report conditions by 1 August 2008. Another focuses in particular on a review of whether achievement in the year 2007 was the or not key requirements of the Energy Act reduction of the number of gas market were implemented by the market players. areas from originally 19 to eight by 1 October The monitoring report 2007 present the pro- 2008. gress achieved. Aspects to be emphasized are the reduction of network costs in the CHANGE OF SUPPLIER FOR ELECTRICITY electricity and gas sector, which were AND GAS achieved due to the review and approval of network charges by the Federal Network According to information from the distri- Agency or the state regulatory authorities. bution system operators (DSOs) for electri- In addition the introduction of the new city, the total volume of change of supplier model for access to the gas network has by final consumers in 2006 amounted to created the sine qua non for the develop- 35.09 TWh. This equates to a supplier ment of an effective, competitive market. change ratio of 7.90 percent (in 2005: 7.79 ELECTRICITY AND GAS MARKET WATCH 143

percent) of the total amount final custom- format. However, these statutory require- ers withdrew from gas system operators, ments have not yet been implemented amounting to 444.32 TWh. The change everywhere. Once again, the supplier ratio of 13.52 percent and 11.42 percent in changes processed in 2006 were primarily both categories, "medium-sized industry company-specific processes, which simply and trade sector" and "large and very large tie in with the principles of section 37 of the industrial customers", in 2006 as well as GasNZV. 2005 were significantly higher than the change ratio of 2.55 percent in the cat- Despite the obligation for all gas network egory "households and small trade". In the operators to allow for a change of supplier, course of the 2007 monitoring round, the only a little over 90 percent of the network transmission system operators (TSOs) were, operators had defined appropriate hand- for the first time, asked for data on the ling procedures for this in 2006. However, amounts withdrawn by final customers due to anti-competitive framework condi- and on changes of suppliers. The overall tions the opportunity to freely select gas supplier change ratio for TSOs and DSO in suppliers was barely used. This is particularly the electricity sector amounted to 9.41 per- obvious when looking at the change ratio cent in 2006. for household customers in the gas sector. Compared with 2005 this equates to an Change of supplier by final customers of increase of ten percentage points. Accord- 1 electricity ing to information from the gas network

Change of supplier in TWh operators the share of the overall volume of 40 supplier changes as a percentage of the 35 overall take-off capacity is only 1.25 per- 30 cent, after 0.4 percent in 2005. The highest 25

20 7.90 % change ratio in 2006, in relation to the 7.79 % 15 take-off capacity, was found in the catego-

10 ry "large industrial customers" (>10,000 5 MWh/year ≤ MWh/year), standing at 3.3 0 percent. The change ratios of the cate- 2005 2006 gories "medium-sized industry and trade Share of amount withdrawn (in %) sector" and "households and small trade" 1 according to information by DSOs for electricity Source: Federal Network Agency monitoring report 2007 were at a very low level overall, with 0.41 percent (0.12 percent in 2005) and Under section 37 of the Gas Network Access 0.04 percent (0.001 percent in 2005) Ordinance (GasNZV) gas network operators respectively. have been obliged since 2006 to use standardised procedures in order make a change of supplier easier and to make provisions for an electronic exchange of data with transport customers in a standardised 144 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Change of supplier by final customers of gas1 Composition of the electricity retail price levels 2007 (Ig) Change of supplier in TWh 13.80 % 40 27.15 % 1.51 ct/kWh 2.97 ct/kWh 35

15 50 % 5.47 ct/kWh 10 1.25 % 9.05 % 5 0.99 ct/kWh 0.40 % 0 2005 2006

Share of amount withdrawn (in %) Composition of the electricity retail 1 according to information by transmission system operators (TSO) price levels 2007 (Dc) gas and DSOs gas 31.48 % Source: Federal Network Agency monitoring report 2007 26.17 % 6.28 ct/kWh 5.22 ct/kWh COMPOSITION OF THE ELECTRICITY AND GAS PRICES

Electricity 29.02 % The data collection for the monitoring 5.79 ct/kWh 13.33 % report served to gather data from whole- 2.66 ct/kWh salers and suppliers for electricity to reveal the current average retail price level (as at Network costs 1 April 2007) for the Eurostat customer Levies categories Ig (industrial customers, con- Electricity supply costs plus supply margin Taxes sumption of 24 GWh/year), Ib (industrial As of 1 April 2007 Ig: Industrial customers customers, consumption of 50 MWh/year) Dc: Household customers outside of universal supply According to Eurostat customer category and Dc (households). Furthermore an esti- Source: Federal Network Agency monitoring report 2007 mated breakdown into network costs (net system charges incl. charges for metering, account statement and collection), electricity supply costs plus supply margin (costs lated customer category, were 10.94 for obtaining energy plus margin and pro- ct/kWh for industrial customers (producing rata overheads), levies (licence charge, RE sector), applying a reduced electricity tax, and CHP surcharge) and taxes (electricity and 19.95 ct/kWh for household customers tax and VAT) was requested. The mean (outside universal supply). averages weighted by volume, and taking into account the sales volume 2007 of each company to the final consumers in the re- ELECTRICITY AND GAS MARKET WATCH 145

Share of network costs in the electricity retail price

% % 40 40 lg Dc 35 35

30 30

25 25

20 20 38.64 % 7.30 ct/kWh 31.48 % 15 15 6.28 ct/kWh 10 10 14.84 % 13.80 % 5 1.65 5 ct/kWh 1.51 ct/kWh 0 0 2006 2007 2006 2007

As of 1 April 2007 Ig: Industrial customers Dc: Household customers outside of universal supply According to Eurostat customer category Source: Federal Network Agency monitoring report 2007

Gas The Federal Office of Economics and Export customers). Furthermore an estimated Control (BAFA) determines the cross-border breakdown into network costs (system price of gas (statistical average price of all charges incl. charges for metering, account imports by gas supply companies for the statement and collection), gas supply costs national supply, excluding natural gas tax). plus supply margin (costs for obtaining Following price increases of 36.22 percent energy plus margin and pro-rata over- in 2005 the cross-border price rose once heads), levies (licence charge) and taxes again by 32.31 percent. (natural gas tax incl. discounts and VAT) was requested. The mean averages The Federal Network Agency collected weighted by volume, and taking into data from wholesalers and suppliers of gas account the sales volume 2007 of each during the reporting period, with the pur- company to the final consumers in the re- pose of revealing, inter alia, the average lated customer category, were 4.23 ct/kWh retail price level (prices as at 1 April 2007) in for industrial customers and 6.24 ct/kWh ct/kWh for Eurostat customer categories I4- for household customers outside universal 1 (industrial customers) and D3 (household supply. 146 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Composition of the gas retail Composition of the gas retail price levels 2007 (I4-1) price levels 2007 (D3) 3.90 % 19.10 % 27.26 % 0.17 ct/kWh 23.90 % 1.19 ct/kWh 1.15 ct/kWh 1.49 ct/kWh

1.14 % 0.07 ct/kWh

68.83 % 55.87 % 2.91 ct/kWh 3.49 ct/kWh

Network costs Levies

Gas supply costs plus supply margin Taxes

As of 1 April 2007 I4-1: Industrial customers D3: Household customers outside of universal supply According to Eurostat customer category Source: Federal Network Agency monitoring report 2007

Share of network costs in the gas retail price

% % 40 40 l4-1 D3 35 35

30 30

25 25

20 20

15 15 22.09 % 19.10 % 10 10 1.35 ct/kWh 1.19 ct/kWh 5 7 % 3.90 % 5 0.30 ct/kWh 0.17 ct/kWh 0 0 2006 2007 2006 2007

As of 1 April 2007 I4-1: Industrial customers D3: Household customers outside of universal supply According to Eurostat customer category Source: Federal Network Agency monitoring report 2007 ELECTRICITY AND GAS ACTIVITIES AND PROCEEDINGS 147

Activities and proceedings

In 2007 the work of the Federal Network Agency in the energy sector was largely characterised by three major areas: preparations for the introduction of incentive regulation, proceedings for approving gas and electricity charges, and further improvements in the areas of network access and unbundling.

INCENTIVE REGULATION this was adopted by the Federal Cabinet on 13 June 2007. On 21 September 2007 the The Federal Network Agency's presentation Bundesrat dealt with the draft ordinance. on 30 June 2006 of its report on the intro- After the Federal Cabinet had agreed to duction of incentive regulation pursuant changes by the Bundesrat on 10 October to section 21a of the Energy Act (EnWG) 2007, the ARegV entered into force on 6 formed the basis for a draft ordinance by November 2007. the German government as stipulated in section 118 (5) EnWG as well as for the Concept of incentive-based regulation prompt passing of an ordinance by the The ARegV stipulates the definition of German government with the consent of revenue caps for strict 5-year regulation the Bundesrat as per section 21a (6) of the periods1 from 1 January 2009. The concept EnWG. of incentive regulation supersedes the cost- based approval of charges operated to date On 16 November 2006 the Federal Ministry with a type of regulation that offers incen- for Economics and Technology (BMWi) tives for an efficient operation of electricity published a benchmark paper on the and gas supply networks. Incentive Regulation Ordinance (ARegV), which was based on the concept present in The starting point for a determination of the Federal Network Agency's report. This the revenue cap are always those costs was followed on 4 April 2007 by the presen- which have been reviewed in the second tation of a draft bill of the ARegV. After the subsequent inter-ministerial consultation, 1 In derogation of this the first regulation period for the gas sector will which resulted in a change of the draft bill, be four years. 148 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

round of approvals and which are adjusted Gas network operators with fewer than by the permanently non-controllable cost 15,000 connected customers and grid oper- elements. ators with fewer than 30,000 connected customers may choose to participate in a The revenue caps to be determined contain simplified procedure for determining effi- company-specific efficiency targets that ciency values, instead of undergoing the are calculated on the basis of efficiency efficiency comparison. In this case the effi- comparison methods. The efficiency tar- ciency value after the first regulation gets are guided by the most efficient com- period is 87.5 percent. In addition 45 per- panies (frontier companies) and are based cent of the overall costs are estimated to be on the requirement that less efficient net- permanently non-controllable. In the con- work operators will receive ten years from text of this simplified procedure these net- the beginning of incentive regulation to work operators can also dispense with the overcome the established inefficiencies. second round of a cost-based approval of charges, scheduled for 2007/2008, if they When determining the efficiency values of do not intend to claim an increase in costs. DSOs by means of the efficiency comparison methods Data Development Analysis The efficiency targets for the TSOs will be (DEA) and Stochastic Frontier Analysis determined as part of a European efficiency (SFA), the capital costs of the network oper- comparison. Where the reliability of this ators, which were made comparable, and comparison cannot be guaranteed, a refer- their actual capital costs were applied. ence system analysis will be applied. The That resulted in four efficiency compari- efficiency targets for the TSOs (gas) will be sons; in line with the stipulated best billing determined as part of a national efficiency solution the results most favourable to the comparison. Where the existing data is network operator will be used. Further- insufficient for this, a European efficiency more a minimum efficiency limit of 60 per- comparison or a reference system analysis cent was set. will be performed.

The Federal Network Agency performs The figure used for the general develop- these efficiency comparisons across Ger- ment of monetary value is the overall con- many and transmits to the state regulatory sumer price index of the Federal Statistical authorities the efficiency values of the net- Office; if this changes the revenue cap is work operators within their remit. If the adjusted once a year. The overall consumer state regulatory authorities do not use the price index is adjusted by the general prod- results of the efficiency comparison pro- uctivity factor in that sector, which takes vided by the Federal Network Agency, they into account the different developments of may perform their own efficiency compari- productivity and the input prices in the son for which they can also draw upon data network economy and general economy. of network operators not within their own This general productivity factor in the sec- remit. tor is 1.25 percent per annum in the first ELECTRICITY AND GAS ACTIVITIES AND PROCEEDINGS 149

regulation period and 1.5 percent per Implementation of incentive regulation annum in the second regulation period. The Federal Network Agency had already made preparations for the launch of incen- An annual adjustment is made to the rev- tive regulation before the ARegV entered enue cap if the permanently non-control- into force. In addition to the tender and/or lable cost elements change or, upon applica- award of consultation projects for the tion, in case of an unacceptable hardship application of analytical cost models used caused by unforeseeable events. in conjunction with the approval of TSO's investment budgets, and for the monetary To ensure supply quality the ordinance evaluation of network reliability as well as stipulates annual quality-dependant for national and international efficiency increases of or reductions from the revenue comparisons, the Agency in particular laid cap starting with the second regulation the foundations for the necessary data col- period – or in case of sufficient data in the lection among network operators. electricity sector already from the first regulation period. Customer surveys or The data collection among DSOs (electri- methods such as analytic cost models can city) was launched on 10 December 2007. be used to determine the increases or The data collection among DSOs (gas) and reductions. the TSOs (gas and electricity) will follow immediately. Furthermore the DSO has, upon request, the chance to receive a lump-sum invest- International cooperation ment supplement to the revenue cap, The information exchange with other amounting to an annual maximum of one European regulatory authorities was con- percent of the capital costs. A longer-term tinued by means of regular meetings of the change of the supply function of DSOs will CEER Workstreams Incentive-based Regu- be taken into account by means of an lation and Efficiency Benchmarking, where expansion factor in the regulation formula, current developments in the different coun- through which the revenue cap can also be tries were presented and discussed. This task adjusted annually in line with the required force is headed up by the Federal Network expansion investments. In case of TSOs an Agency and part of the superordinate approval of investment budgets is inten- Unbundling Reporting and Benchmarking ded for required expansion and restruc- Task Force (URB TF), of which the Agency is turing investments. vice chairman. In addition the Agency is involved in the Electricity Quality of Supply And finally the ARegV stipulates that the Task Force (EQS TF), which focuses on regu- Federal Network Agency shall observe the lating quality. investment behaviour of the network operators and draw up a report by 30 June 2013, which contains an assessment of the need for further measures. 150 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

ACCESS TO ELECTRICITY SUPPLY The company had failed to provide the NETWORKS Agency with proof, as required under section 5 sentence 3 of the EnWG, of its tech- Network concept nical and economic ability to perform. During the reporting year the Federal Furthermore the Agency also had consider- Network Agency had to specifically deal with able doubts about the reliability of the the question when to assume that an electri- company's management. The Higher city network exists, which is subject to regu- Regional Court Düsseldorf rejected the lation in the sense of the Energy Act (EnWG). company's appeal in a judgement dated During the course of this it was established 30 January 2008 and fully concurred with that the network concept contains no de- the Agency's decision. minimis rule in terms of customer numbers, peak loads or power capacity, which would Power plant connection have to be met in order to meet the criterion In the context of proceedings initiated by a of being an electricity network. Neither can petitioner for a power plant connection, the concept of a customer installation be the Federal Network Agency had to deal used, which originates from times before with the issue of a suitable network con- market liberalisation, because a customer nection point for the connection of a power installation in itself could also be a network. plant; this matter lasted until mid 2007. An evaluation of an installation as a network Closely related to this issue is the question always requires an overall assessment of indi- of how to distribute the costs of the boost- vidual factors (such as cross-border installa- ing efficiency required for such a connection, objective behaviour of network oper- tion – costs which can arise both from ators, and collection of network charges). changes to the connection point itself and from expansions to or changes in the net- Reliability and performance of supply work. companies In order to protect consumers the Federal The Federal Network Agency used both the Network Agency has, during this reporting issue of suitability of the network connection period, for the first time prohibited the point requested by the party requesting business activities of an energy supply connection of a power plant and the distri- company under section 5 of the Energy Act bution of costs related to the connection of (EnWG) in terms of the acquisition and sup- the power plant in this individual case to ply of household customers with electricity. develop principles that were adopted by the issuer of the Electricity Production A company had published an extensive Facilities Connection Ordinance (KraftNAV), internet offer for supplying household which entered into force on 13 July 2007. customers with electricity (electricity The parties involved in the specific proceed- supply contracts with a duration of twelve ings were able to come to a mutual agree- months, two years, four years, eight years ment, applying these principles. and ten years). ELECTRICITY AND GAS ACTIVITIES AND PROCEEDINGS 151

Selection of network level Contributions to the infrastructure Two landmark decisions regarding section Since contributions to the infrastructure, 17 of the Energy Act (EnWG) forced the requested repeatedly by grid operators, are Federal Network Agency in 2007 to consider network connection terms of an economic to what extent a user can surrender his nature, they were by their nature subject to connection in the subordinate network a review by the Federal Network Agency. level and instead demand that the facilities These contributions are charges imposed owned by him be directly connected to the upon the network users in order to control upstream network level. In both cases the the use of network connection capacity in network operator had refused such a line with demand. Numerous complaints reconnection of the applicant's facilities about contributions to the infrastructure, at substation level. received by the Agency, criticise that the basis of the amounts calculated by grid In consideration of the origins of section 17 operators is not transparent to the user. EnWG and taking into account section 17 During special abusive practice proceed- (1) of the Electricity Network Charges ings the Agency has therefore decided Ordinance (StromNEV), according to which that the simple statement of an amount in the charges payable by the user depend on €/kW connection power is in any case not the connection level of the take-off point, sufficient, if the grid operator aligns the the Federal Network Agency affirms a formation of its contributions to the infra- general right to choose the connection structure in the low voltage network with level, both for new customers and for exist- the costs actually incurred for a supply ing ones. The Agency is of the opinion that area. In this case the calculation must be the free choice of a buyer which offer from explained by revealing the basis of the cal- a provider he wishes to accept or not, is one culations, if requested by the user. Further- of the basic conditions and functions of a more the Federal Network Agency con- competitive market. sid-ered it abusive if a grid operator rejects a user's conditional payment of contribu- However, this right to choose is not unre- tions to the infrastructure, made subject to stricted but only extends to the point a later review, and grants connection only where the connection in the network level after unconditional payment. This was requested by the user is reasonable for the ruled by the Agency' relevant ruling cham- network operator under section 17 (2) of ber on 11 December 2007. the Energy Act (EnWG). In this respect these decisions also define the require- Even for voltage levels outside the scope of ments for the burden of proof and explan- the Low Voltage Connection Ordinance ation, which are imposed upon the network (NAV) there is in principle no doubt that operator under section 17 (2) of the EnWG. the grid operators are entitled to claim contributions to the infrastructure. With regards to the numerous and repeated enquiries and complaints received by the 152 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

authority in relation to the claim of contri- long term by means of intensifying compe- butions to the infrastructure, the Federal tition. The determinations contained expli- Network Agency would welcome a move cit targets for the tender periods and times, whereby, in the medium term, such contri- the minimum volume offered, the method butions were to be collected as fixed flat of allocation and making requests as well rates; the effort involved in their calcula- as for transparency. tion and control should also be appropriate to the revenue generated by the contribu- Control energy is required to balance the tions to the infrastructure. continuous fluctuations between feed-in and take-off and is vital for maintaining the Control energy security of the system. Unlike minute reserves After an initial determination for the con- the primary and secondary reserves are trol energy product "minute reserve" in automatically produced by the installations 2006 the Federal Network Agency in 207 producing control energy (eg power also made fundamental decisions about plants). According to the principle of soli- the tender conditions for the two other darity the primary reserve acts for the en- types of control energy – primary reserve tire European UCTE group; the secondary and secondary reserve – effective 31 August reserve serves to maintain the balance of 2007. The subjects of these determinations power in each control area and is applied were the conditions and modalities of pro- by each TSO on its own authority. 1 De- curing the two types of control energy by cember 2007 saw the first tenders carried means of a joint tender via the internet out under the new regulations. platform www.regelleistung.net. In addition the Federal Network Agency Until now the primary and secondary kept a close eye during 2007 on the devel- reserves were tendered by each TSO opment of prices and costs of the minute responsible for their control area on their reserve, after the new terms and conditions own authority, independent of the pro- for their tender entered into force on curement procedures of all other TSOs. This 1 December 2006. Initial fears, caused by way the demand by TSOs meets an offer price peaks in December 2006/January 2007, characterised by an oligopolistic structure that the new terms and conditions of with very moderate competitive traits. The tender might have led to significant cost providers are currently mainly the power increases, turned out to be unfounded. The plant associates of the four TSOs. Therefore initial price peak, caused by a temporary the objective of the determinations was in shortage of offered capacity, coupled with particular to open up the market for con- some providers experimenting with the trol energy to new providers through stand- scope for setting their prices, was followed ardised and simplified tendering proced- by a phase of low prices for minute reserve, ures on the one hand and increased trans- which lasted until autumn 2007. Since the parency on the other hand, as well as to price peak of December 2006/January 2007 minimise the costs of control energy in the the prices of the minute reserve have been ELECTRICITY AND GAS ACTIVITIES AND PROCEEDINGS 153

guided primarily by the general price individual reasons for the delay, the exist- trends of the OTC markets or the spot mar- ing acceleration potential as well as any ket of the energy exchange EEX. Since then obvious effort of the affected parties to possible price increases in the minute implement the determinations as closely as reserve, like the last one during the price possible to the due date, and has taken all peak in the late autumn of 2007, simply of these into account for their individual reflect the current trend of generally higher decisions of whether or not compulsory electricity prices and are not a feature measures might be necessary. In three specific to control energy. cases the Agency had to employ administrative coercion. Business procedures for changing electricity suppliers Overall the changeover process was With effect from 1 August 2007 the Federal smooth. A number of issues did not become Network Agency's determination regard- apparent until practical application began; ing Standardised Business Procedures and however all market players were very con- Data Formats for Changing Electricity structive in resolving these problems. Grid Suppliers (GPKE) entered into force, followed operators in particular have used many of on 1 October 2007 by a determination their staff and have been very involved in about an electronic billing system for the relevant expert panels in order to system usage, to be used upon request make the new procedures work in the best between network operators and network interest of their customers. users. This has now set mandatory communication standards for grid operators and The appeals lodged in 2006 against the suppliers, which will ensure an efficient Agency's determination were, in the mean electronic data exchange. time, heard in several test cases before the Higher Regional Court (OLG) Düsseldorf. In In the run-up to these stipulations entering all cases concluded to date the court de- into force the Federal Network Agency was cided in favour of the Federal Network involved in clarifying numerous detailed Agency. Two of these cases are now con- questions that had arisen between market tinued before the Federal Court of Justice players. Talks with the IT specialists of the (BGH) due to an appeal on a point of law, grid operators as well as suppliers resulted lodged by the defeated grid operator. The in satisfactory solutions, which were com- complainants claim in this case that due to municated in order to create implementa- the alleged uncertainty of the circle of tion certainty in all major areas. addressees and the abstract content, the Federal Network Agency had not been Around eight percent of grid operators entitled to pass the present decision as an have indicated to the Agency that they will administrative act, despite its underlying not be able to conclude the necessary authorisation based on the Electricity changeover in time for 1 August 2007. The Network Access Ordinance (StromNZV). Agency has, in these cases, assessed the Furthermore they state that it was not per- 154 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

missible to limit the opportunity provided whether or not the tenants of an apart- by section 6 of the decision's operative ment building can demand in their entir- part, under which the grid operator can ety to be billed solely via a joint adding allow different forms of communication counter, while at the same time dispensing for associated distributors, until 1 October with the meters in the individual apart- 2009. ments. The background to this was a plan by the tenants to operate a combined heat The BGH will hear the appeal on the points and power system in their building; when of law in this matter in April 2008. generating any excess they would feed into the public grid through the adding counter, Management of balancing groups while at times of a temporary shortage In 2007 the Federal Network Agency they would take additional power off the worked intensely on a new concept for the public grid. During the decision-making management of balancing groups. This procedure the Agency decided in favour of includes clarification of important matters the tenants. The demand by the grid oper- regarding the permissible content of ator to have meters in each individual apart- balancing group contracts; the result will ment would have made the consumption be a first ever joint standard balancing model, which was combined with decen- group contract by all TSOs. Key points of tralised power generation, uneconomic discussion are, in addition to a variety of and would therefore have contradicted the operative topics, issues such as a demand principle of efficient grid access. Objections for security and the forecast duties of the by the grid operator on the grounds of balancing group managers. Furthermore unreasonableness – based on the general the Agency is working on fundamental fear of loosing large amounts of network questions of balancing group settlement. charges – were not deemed sufficient. With To do so the Agency is closely cooperating this decision the Federal Network Agency with the market players to draw up a con- has also made an important contribution cept which defines for the first time which to the promotion of decentralised and en- party has to provide which data by when vironmentally friendly power generation. and in which format, thus providing the basis for a balancing group settlement Direct marketing of power from within the period of two months stipulated renewable energy in the ordinance. In a benchmark paper the Federal Network Agency has drawn up and consulted rules Meter configuration for the direct marketing of power from In the matter of the number or location of renewable energy (RE). The objective of meters, which is important for a realisation these rules is to shape the direct marketing of the right to network access under sec- of power from renewable energy sources in tion 20 of the Energy Act (EnWG), the a way that allows for its integration into the Federal Network Agency decided during trading and scheduling system as well as special abusive practice proceedings, the currently existing nationwide equalisa- ELECTRICITY AND GAS ACTIVITIES AND PROCEEDINGS 155

tion scheme for renewable energy. From projects is explained. The Agency has pro- the Agency's perspective it is important to vided details for the contents of these quar- avoid risks to the system security as well as terly reports. These details include par- further cost increases for the nationwide ticular information on the current state of equalisation scheme for RE through un- implementation, any problems that will regulated forms of direct marketing. cause delays as well as implementation measures for the next six months relating The nationwide equalisation scheme for to the network expansion planned in the RE, i.e. the physical transmission of the period between 2006 and 2010. electricity fed in and remunerated by electricity supply companies supplying The Federal Network Agency uses these the final customer in accordance with the reports to regularly review the state of Renewable Energy Sources Act (EEG), was expansion of the German transmission the subject of complex proceedings by the system and keeps an eye on reasons for Agency. It was not just a question of how delays. In 2007 the Agency analysed the the TSOs, who have an obligation of trans- report content, taking into account its own mission and conversion into a previously insights. This analysis is due every two fixed monthly band, can be motivated to years and was first published on 9 January organise this so-called wind enhancement 2008. A key statement of the current analy- more efficiently and transparently. During sis is that the predictable development of the reform of the Renewable Energy the German power generating market over Sources Act (EEG) proposals were devel- the next few years, which is likely to see oped on how the overall process of integr- both the additional construction of new ating renewable energy into the market conventional power plants and the erection could be organised more efficiently overall. of onshore and offshore wind parks, will result in new requirements for an expan- Network expansion sion of the transmission system and related The expansion of the German transmission planning. Due to the increase in the feed-in system continued to be an important issue of wind energy and the cross-border transit for the Federal Network Agency in 2007. it is no longer possible to exclude the The TSO's reports on the expansion and occurrence of temporary or longer-term condition of their networks in 2006 revealed congestion in the transmission system. a significant need for an expansion of Another key result of the analysis is the fact the German transmission system. Since that the construction of new power lines is delays in the implementation of various subject to numerous delays, which inter line construction projects have already alia affect all projects included in the EU become apparent, the Federal Network Commission's "Priority Interconnection Agency has been requesting quarterly Plan". The commissioning dates outlined in reports from the TSOs since the end of this plan cannot be adhered to. The reasons 2006, in which the current state of the for the delays in implementing the net- implementation of network expansion work expansion measures are primarily 156 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

related to the long authorisation proced- cisely and the energy exchanges are in- ures. cluded in the allocation of capacity. The workshop allowed for a first ever supra- For the reports on the condition and regional discussion involving all relevant expansion of their networks, which the market players. TSOs had to draw up by 1 February 2008, the Federal Network Agency strives to On 6 June 2007 the ministries, regulatory achieve a further harmonisation and provi- authorities, TSOs, market players and en- sion of additional information through ergy exchanges in Belgium, France, the more specific requests in terms of content, Netherlands, Luxemburg and Germany structure and the temporal context of the signed a Memorandum of Understanding reports. (MoU) in which they undertook to establish flow-based market coupling by January Cross-border trade in electricity 2009. The introduction of a system for mar- The tasks of the Federal Network Agency in ket coupling is also planned for the the cross-border trade of electricity are German-Danish border. For this another defined primarily by Regulation (EC) No MoU was signed between the exchanges 1228/2003 on conditions for access to the and the TSOs at the end of 2006. In this case network for cross-border exchanges in the introduction is planned for 3 June 2008. electricity. The objective of the legal stipulations is to create a real internal electricity In the region CEE the introduction of a market by intensifying the trade in electri- flow-based capacity allocation model was city. Germany is active in four of the seven the main focus of attention. Its introduc- regions: Central Western Europe (CWE), tion is planned for the year 2009. From this Central Eastern Europe (CEE), Northern point on capacity from short-term and Europe (NE) and Central Southern Europe long-term auctions is to be allocated on a (CSE). The issues primarily dealt with in flow-base. Another key focus of the discus- 2007 were the further development of the sion was the improvement and harmonisa- mechanisms for the allocation of capacity tion of the auction rules. In this case a first at the cross-border coupling points and the success was achieved in the region CWE in increase in transparency. With its work- the area of harmonisation. shop on market coupling, held by the Federal Network Agency on 1 February Major progress was made during the 2007 for the region Central Western Regional Initiatives in 2007 in terms of the Europe, the Agency made an important improvement of market transparency. contribution to the European discussion More specifically the information basis, in about the introduction of a more efficient particular in terms of the publication of congestion management system. Within generation data, must be improved. At the the scope of flow-based market coupling same time a comparison of data from indi- the flow generated at the border of all vidual member states shall be made easier countries involved is calculated more pre- for market players. Starting with the trans- ELECTRICITY AND GAS ACTIVITIES AND PROCEEDINGS 157

parency report that was drawn up by the studies on the market for control energy region NE, under the chairmanship of the (Study on interaction and dependencies of Federal Network Agency, an approach of Balancing Markets, Intraday Trade and standardised definitions and publication Automatically Activated Reserves) and the details in all regions in which the Agency is retail market was defined. Further topics involved was adopted. In 2007 the trans- were energy loss and financial transfer parency reports for the regions NE and CWE rights. were therefore published. In the region CSE initial discussions about the transpar- The Electricity Transmission Network Task ency report have begun, in CEE the trans- Force (ETN TF) has, inter alia, completed parency report for this region was pub- the paper "Cross Border Framework for lished at the beginning of February 2008. Electricity Transmission Network Infra- structure – An ERGEG Conclusions Paper", European activities in the electricity which deals with authorisations and per- sector missions for the construction of new lines In 2007 the Federal Network Agency con- in different countries, and the differences tinued its work in various work groups therein. Based on this paper the ETN TF within the European Regulators Group for drew up terms of reference for a study. The Electricity and Gas (ERGEG) and the Council study, which deals with investments in of European Energy Regulators (CEER). infrastructure and possible incentives for Within the Security of Supply Task Force increasing investments in cross-border various methods were investigated for infrastructures, was tendered by the ensuring sufficient power generation cap- Commission. In connection with the dis- acity. The objective for 2008 is to draw up cussion about the third package of direc- recommendations for a standardised tives, the ETN TF dealt with the definition of method across Europe. the EU grid and in particular the structure, the organisation, the role of different Within the Electricity Regional Initiative market players and their responsibilities. Task Force a "Convergence and Coherence Furthermore work began in 2007 on the Report" was drawn up and submitted for "Guidelines on Good Practise on Oper- public consultation; the report investigates ational Security". how a compatible development of regional initiatives can be ensured. Furthermore the The Regional Initiatives established by progress of the Regional Initiatives is pre- ERGEG in February 2006 dealt primarily sented in regular reports. with the further development of congestion management procedures in 2007 The Electricity Market Task Force drew up a (cf. page 58) report on compliance with the rules of congestion management guidelines in 2007. In addition, and in cooperation with the European Commission, the content for 158 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Quality of supply and taken into account in the compilation Based on the reporting obligation under of the guidelines. section 52 of the Energy Act (EnWG), 2007 saw the first collection of data on interrup- Energy loss tions of supply for a full calendar year. The The Federal Network Agency has drawn up analysis of 781 power grid operators revealed a concept for transparent, fair and market- that in 2006 a final customer in Germany oriented procedures for procuring and had an average of 21.53 minutes without determining energy loss. In preparation for power. However, this still means an avail- a possible determination the conceptual ability of 99.996 percent. Compared to the work was completed in 2007 and published rest of Europe the German power grid for consultation in the form of a position therefore has the best quality of supply. paper. Based on the insights thus gained a procedure will be developed which is to In February 2007 the Federal Network result in sinking costs for the procurement Agency published a report on the interrup- of energy loss, thereby positively affecting tion of supply on 4 November 2006. On this the network charges and the liquidity of day high voltage lines had been switched the market for electricity trade. off due to the planned transportation of a ship. As a consequence other lines had Liberalisation in the area of metering become overloaded, which resulted in a and measuring power failure across Europe. The liberalisation of metering and its implementation was driven ahead in three Transparency requirements directions. Within the existing framework In 2007 the Federal Network Agency drew conditions, framework agreements and up guidelines to assist with the standard- minimum technical requirements for oper- ised, complete and appropriate implemen- ators of metering points were requested tation as well as the textual presentation of and reviewed in terms of their compliance the grid operators' obligation to publish with the statutory requirements. At the data. The analysis of numerous websites of same time the Federal Network Agency grid operators had revealed that many accompanied the further liberalisation in companies meet the transparency require- the areas of metering and measuring, ments addressed at them only in part or which had been initiated primarily because not at all. Furthermore the details stated of the German government's evaluation are difficult to find and compare for poten- report and the so-called 'Meseberg paper' tial network users due to different ways of (key elements of an integrated energy and arranging text, different data formats, dif- climate programme). This resulted in a ferent units and varying degrees of preci- draft bill by the German government on a sion. In the autumn of 2007 the affected "Gesetz zur Öffnung des Messwesens bei business and consumer protection Strom und Gas für den Wettbewerb" [Law associations were asked to comment on the on the market opening of electricity and guidelines. Their comments were analysed gas meters for the purpose of competition] ELECTRICITY AND GAS ACTIVITIES AND PROCEEDINGS 159

(BR-Drs 14/08). In this context the issuer of nection and usage, including the associated the ordinance is planning a Metering network expansion. In addition questions Access Ordinance (MessZV). regarding the acceptance and allocation of costs were clarified, which are related to Register according to the ordinance on investments arising in connection with the grid connection of power plants integration of OWPs. This allowed the When the Electricity Production Facilities Federal Network Agency to create legal Connection Ordinance entered into force certainty, so the investments due in 2007 on 30 June 2007, regulations were passed could be made. that aim to achieve a connection of large power plants (≥ 100 MW) to the grid in a ACCESS TO GAS SUPPLY NETWORKS fair way, with appropriate and transparent connection terms. In addition the ordinance Model for access to the gas network stipulates a certain time frame for both The year 2007 saw the introduction of the grid operators of high and extra high extensive new regulations for access to the voltage grids and the party requesting con- gas network. Even the year before the nection, to ensure the connection and the Federal Network Agency had obliged the construction of the power plant can be network operators in the context of a accomplished in a timely manner. For the ground-breaking decision to jointly organ- purpose of transparency grid operators are ise network access in close cooperation. obliged to draw up a joint power plant This so-called two-contract model provides register for plants ≥ 100 MW. For this pur- for much simpler network usage by gas pose the Federal Network Agency has con- traders, because it allows for the possibility ducted a survey in which all affected grid of organising the network access on the operators were recorded. Furthermore the basis of only two contracts. In the spring of content of the register, which is to be 2007 the network operators presented an drawn up for the first time in early 2008, appropriately updated version of the cooper- was agreed upon with the grid operators ation agreement, which contains concrete and the Federal Association of German details of these simplified terms and condi- Energy and Water Industries (BDEW). tions. All network access agreements had to be changed over to these new rules by 1 Grid connection of offshore wind farms October 2007, which means only the new In 2007 varied questions arose in connec- regulations have been valid since then. The tion with the integration of offshore wind Federal Network Agency accompanied the parks (OWP). After an amendment of the discussions about the new model for access Energy Act (EnWG), which now obliges the to the gas network closely and insisted TSOs to connect the OWP, numerous talks upon the introduction of regulations that were held with OWP investors, the offshore were fair and comply with statutory require- forum on wind energy, TSOs and licensing ments. The new regulations manifest a authorities. The objective of the talks was major progress in the liberalisation of the to clarify technical issues of network con- gas market; many details present the net- 160 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

work operators with new challenges. For the key points of the Federal Network traders even just the introduction of the Agency's work in 2007. The existing regula- new model opened up new major oppor- tions require substantiation. The related tunities for participation in the gas trade. balancing rules also require detailed sub- Since then transactions have been signifi- stantiation. When defining the new access cantly on the increase. rules this subject has deliberately been left for a later point in time. Consequently Market zones more pro-competitive regulations are Further progress was recorded in the required, which will result in an appre- endeavoured reduction of gas market ciable reduction of transaction complexity zones in Germany. The objective of re- for network users. In 2006 a comprehensive ducing the gas market zone to fewer than expert opinion of the basic principles ten has been achieved. Compared with 19 was commissioned, which supported a zones beforehand, only eight will remain realignment of the system for balancing by 1 October 2008. In doing so the gas net- and control energy in the gas sector. On work operators follow a basic concern of the basis of this expert opinion a workshop the Energy Act (EnWG) for as few market was held on 1 October 2007, in which the zones as possible. The Federal Network development of new, binding regulations Agency has emphasised this demand in began in co-operation with network oper- order to increase the liquidity of the gas ators and associations of network users. The markets, to simplify the procedures for gas response to this impulse was very positive. transports and to organise the handling of The associations of the gas industry had control and balancing energy more ration- already begun their work in the run-up to ally. At the start of the new gas industry the workshop and had converged towards business year on 1 October 2008 only six one another in many fundamental questions market zones will remain for H-gas and by the end of the year. In 2008 it will be two for L-gas. The reduction of market important to continue the process of con- zones in 2007 was performed on the basis cil-iation, which has already begun, and to of voluntary mergers, which were initially develop practical and binding regulations. largely intra-corporately. The mergers declared for 2008 are more inter-corpor- Business processes for switching gas ately. This work must be continued; the supplier implementation and realisation of the mer- Section 20 (1) of the Energy Act (EnWG) in gers will require some time, though. The conjunction with section 37 of the Gas Federal Network Agency attaches import- Network Access Ordinance (GasNZV) defines ance to additional mergers within the next the processes for switching gas supplier on two to three years. the basis of efficient ways suitable for bulk business. On 20 August 2007 the Federal Control and balancing energy Network Agency set out standardised busi- The definition of an effective system for ness processes for switching gas supplier control and balancing energy was one of (GeLiGas), which apply across Germany. The ELECTRICITY AND GAS ACTIVITIES AND PROCEEDINGS 161

decision provides legally binding procedures for competition and emphasised the need which must be enacted in case of a change of for clarifying the framework conditions for gas supplier. Furthermore it regulates the the feed-in of biogas as quickly as possible. exchange of the required information. For Both subject areas were also part of the this exchange of data the determination "Key elements of an integrated energy and stipulates a largely automatic procedure and climate programme", which were adopted a standardised electronic format. by the German government in Meseberg in the summer of 2007. With regard to the The determination creates framework condi- feed-in of biogas to the natural gas network tions for a change of supplier, which are suit- the Federal Ministry of Economics and Tech- able for bulk business. The varying change- nology (BMWi), supported by the Federal over processes in each network area were Network Agency and in co-operation with superseded when the GeLiGas was passed, the Federal Ministry for the Environment, which must be used across the board by all Nature Conservation and Nuclear Safety market players in Germany. In this context (BMU), has drawn up a new part 11a as well the exchange of data on the basis of the EDI- as revisions in the Gas Network Charges FACT format allows for a significantly accel- Ordinance (GasNEV) and the Incentive erated and simplified change of supplier. Regulation Ordinance (ARegV). In order to implement the liberalisation plans for the One of the Federal Network Agency's key metering and measuring sector the BMWi ideas in the structure of the procedure was to has initiated a change of section 21b of the open up to those companies which are active Energy Act (EnWG) and the enactment of in both the electricity and the gas sector, the an ordinance (MessZV). The Federal Net- highest possible degree of synergy potential work Agency offered assistance in out- when introducing the procedures. The lining the corresponding drafts. The Agency has therefore followed the Business government draft of section 21b EnWG Processes for supplying customers with and the changes to the ordinance in terms electricity (GPKE), defined in 2006, when of biogas were adopted by the cabinet in defining the procedures of the GeLi Gas. The a meeting on 5 December 2007. transaction rules for both sectors are therefore largely identical. European activities in the gas sector In the gas sector the Federal Network Revision of the Gas Network Access Agency was represented in around twelve Ordinance (GasNZV) and release of a task forces in 2007 and assumed leadership Metering Access Ordinance responsibilities in one of them. In this case The evaluation report under section 112 of the focus of the work was to draw up guide- the Energy Act (EnWG), decided upon by lines for the application of the regulations the German government on 26 September contained in article 22 of the acceleration 2007, supported the immediate and com- directive 2003/55/EC. The issue at hand was plete opening of the market for metering how network operators could apply for and measuring under section 21b EnWG exemption from regulation. 162 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Further task forces dealt with issues such as According to article 6 (4) of this regulation transparency, access to storage systems, the competent authority decides on the the secondary market, the calculation of relevant points of a transmission system on capacity and the open-season procedure. which information must be made public. Furthermore the Federal Network Agency Article 6 (5) of the regulation stipulates has proactively worked on achieving pro- that the transmission system operators gress in the cross-border gas trade within may seek the authorisation of the compe- the scope of the gas regional initiative tent authorities to limit publication if the North-West and endeavoured in particular TSO considers that it is not entitled for con- to improve the usability of border coupling fidentiality reasons to make public all the capacity in Bunde/Oude Statenzijl between data required, because the network user Germany and the Netherlands. has a legitimate interest in the confiden- ti-ality of this data. Transparency requirements According to the EnWG, GasNZV, GasNEV In July 2007 the Federal Network Agency and the Low Pressure Connection Ordi- published for consultation the principles nance (NDAV) the network operators are for the assessments of applications under legally obliged to publish certain data on section 6 of the EC transmission system the internet. Since many companies have regulation. The Agency received com- so far only met this obligation in an unsat- ments from network operators and net- isfactory manner or not at all, a compre- work users. After analysis of the comments hensive review was initiated in 2007. For the principles for decisions were reviewed this purpose network operators were first and their finalised version published on the contacted in writing and reminded of their internet in December 2007. This is the basis statutory obligation. In a second step indi- on which applicants are heard and re- vidual companies were systematically quested to submit any potentially missing checked by means of internet research in documents. The Agency intends to decide terms of completeness and quality of the on applications in I/2008. data requiring publication. If the published data proves to be unsatisfactory, the New infrastructures Federal Network Agency points out exist- Under the rules of section 28a of the Energy ing flaws to the company and demands Act (EnWG) new interconnections, LNG and that these be rectified. storage systems can temporarily be exempt from the regulations for access and charges Transparency in the transmission system if all the requirements stated in the standard The Federal Network Agency has received are met. For this purpose the application applications from transmission system must, inter alia, provide proof of an improve- operators under article 6 of regulation (EC) ment of competition und security of supply no 1775/2005 on conditions for access to as well as a particularly high investment the natural gas transmission networks risk. (Transmission System Regulation). ELECTRICITY AND GAS ACTIVITIES AND PROCEEDINGS 163

In January 2007 the Federal Network SYSTEM CHARGES (ELECTRICITY) Agency received two applications for exemption from this regulation under sec- Approval of general charges tion 28a EnWG; both were related to new Under section 23a (1) of the Energy Act pipeline projects for an extension of the (EnWG) the charges for access to the planned North Stream Pipeline (Baltic Sea system require approval. Operators of elec- pipeline) on German territory. One of the tricity supply networks had to submit a first applications was rejected on 27 August 2007 application by 31 October 2006 (section 118 for formal reasons, since the company was (1b) of the Energy Act). The competent not intending to operate the planned infra- ruling chambers received 256 applications structure itself. Only the operators are for an approval of use of system charges "affected gas supply companies" in terms of (electricity) under section 23a of the Energy the exemption rules and therefore entitled Act. By the end of 2006 the ruling chamber to submit an application. This decision is had issued 75 approvals of charges; the final. The other application has not yet been remaining applications were decided upon decided upon by the Agency. The company in 2007. Costs were on average reduced by had suspended the application in October 13 percent compared with the costs on 2007 until further notice. which the applications were based; this equates to a reduction of approximately Object networks €2.4 billion or up to 20 percent. Most of For the first time the Federal Network these charges were approved until 31 Agency had to decide about an application December 2007. for an object network in the gas sector under section 110 (4) of the Energy Act. The With regard to the expiry of the first round subject of the proceedings was a gas supply of approvals the companies had to submit network located on the premises of the air- new applications for approval of use of port Hannover-Langenhagen. The positive system charges (electricity) under section decision is based on the fact that the net- 23a of the Energy Act (EnWG) by 30 June work, which serves primarily to supply the 2007. In the case of 124 smaller network take-off points of the network operator operators the cost block to be approved has itself, fulfils the requirements for a com- not changed significantly. For these oper- pany network under section 110 (1) sentence 1 ators the final decisions of the first round of no. 1 of the Energy Act (EnWG). In making approved charges were extended until 31 this decision the Agency applied the key December 2008, as per application. In add- points that had been agreed in 2006, when ition to the main aspects reviewed during an explanatory note on section 110 EnWG the first round of approvals (calculated had been drawn up with the state regula- evaluation of fixed assets, calculated returns tory authorities. on equity and calculated corporation tax) the second round of approvals also pays particular attention to the network history, in order to better evaluate the value of the 164 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

fixed assets as well as to the operative costs sentence 2 no. 3, 4 ARegV set targets on and the prices for measuring and billing. 22 November 2007 for the collection of data in order to calculate efficiency values Determinations among DSOs (electricity) for the first regu- In order to prepare the applications for the lation period and for establishing the qual- second round of approved charges the ity element. With this decision a first formal Federal Network Agency made a determin- decision was made in preparation for the ation under section 29 (2) EnWG on 2 May launch of incentive regulation in 2009. 2007 for companies under federal authority. This determination included stipu- On 19 December 2007 an appropriate draft lations for the requirements concerning determination for the collection of data the new application for charges as well as from TSOs (electricity) was made available the structure and content of the report for consultation. under section 28 of the Electricity Network Charges Ordinance (Strom NEV) and its Simplified procedure for incentive appendix, the extent and form of transmis- regulation sion of information, the appropriate level Grid operators with less than 30,000 cus- of interest rates under section 11 StromNEV tomers connected directly or indirectly to and the guarantee of sound charges in their electricity distribution system could derogation of section 17 (8) StromNEV. apply for participation in the simplified Relevant determinations were also made procedure under section 24 of the Incen- for those companies for whom the Agency tive Regulation Ordinance (ARegV) by 15 is responsible through an official delega- December 2007. In December 2007/January tion of powers. 2008 143 such applications under section 24 ARegV were decided upon, with nine In order to prepare for the second round of rejections due to fact that the number of approved charges the Federal Network critical customers had been exceeded. Agency made a determination under section 29 (1) of the Energy Act (EnWG) on Approval of individual network charges 17 October 2007 for the companies under In 2007 the competent ruling chamber federal responsibility – a determination of approved two applications for the approval price indices that are to be applied in order of individual charges under section 19 (2) to determine the actual replacement value sentence 2 of the Electricity Network under section 6 ( 3) StromNEV. Relevant Charges Ordinance (StromNEV). Under this determinations were also made for those section grid operators are obliged to offer companies for whom the Agency is respon- wholesale customers an individually calcu- sible through an official delegation of lated network charge in derogation of the powers. Finally the Agency, in proceedings general principles of calculation, if their under section 29 (1) EnWG in conjunction consumption data is characterised by a with section 32 (1) no. 11 Incentive Regula- legally defined, particularly even and con- tion Ordinance (ARegV) and section 27 (1) siderable consumption of electricity. The ELECTRICITY AND GAS ACTIVITIES AND PROCEEDINGS 165

intention here is to achieve a fairer alloca- other network users were connected to the tion of the system charges in accordance busbar. Whether or not the customer was with the principle of causation. At the same entitled to have third-party lines discon- time this leads to a cost reduction for the nected did not have to be decided upon, preferential users and improves their local since there was a reason for refusing dis- conditions. Agreeing the application of connection of the line under section 17 (2) individual system charges is subject to of the Energy Act (EnWG). Connection to a approval by the Federal Network Agency. network can be refused if granting such a connection request is not possible or rea- In case of the applications with a positive sonable for either operational or other decision, the approved individual charges technical or economic reasons, taking into lie between 76.2 and 50.9 percent of the account the objectives set out in section 1 charges levied by the respective operator. EnWG. These different reductions result from the varying connections of the network cus- Section 1 (2) EnWG stipulates that the regu- tomers. Major criteria for delineation were lation of the electricity supply network the distance between the customer and the serves inter alia to "ensure the effective and nearest base load power plant and the cus- reliable operation of energy supply net- tomer's integration into the network. works in the long term." The reliable operation of energy supply networks is ensured Numerous proceedings were discontinued by means of the principle of "n-1" security. after withdrawal of the applications, since This states that the failure of a facility will the companies did not meet the require- be compensated for by other facilities. For ments for approval. technical reasons this reliable operation of the general medium voltage power grid Special anti-competitive proceedings would no longer be ensured if the lines at On 15 October 2007 the Federal Network the 20 kV busbar, which does not serve to Agency further developed its decision pol- supply the final consumer, were to be dis- icy on the principles of section 19 (3) of the connected. Furthermore the ruling cham- Electricity Network Charges Ordinance ber pointed out that as a rule it is unreason- (StromNEV) within the scope of a decision able to subject a grid operator to anti- in special anti-competitive proceedings competitive proceedings without giving under section 31 of the Energy Act (EnWG). him the opportunity to consider the request of the network user prior to such The Federal Network Agency decided that formal and possibly cost incurring pro- it is not anti-competitive to refuse a net- ceedings. work user the status of sole user of all facilities at a particular connection level. In the case in question the end customer was using the lines, via which he was connected to the busbar, exclusively for himself. However, 166 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

SYSTEM CHARGES (GAS) network operators were then notified, which data had to be submitted for their Approval of general charges applications for approval. This was based Under section 23a (1) of the Energy Act the on the questionnaire known from the first charges for access to the system require round of approvals of charges, which was approval. Operators of gas supply networks further developed for the second round, had to submit a first application by 30 Ja- and on the report under section 28 of the nuary 2006. The Federal Network Agency Gas Network Charges Ordinance (GasNEV). had already decided upon the majority of In addition data was requested about cross- applications for charges by the end of 2006 period netting and network history. By 1 and was therefore able to decide upon the October 2007 the Agency had received a remainder during 2007. Overall 217 gas total of around 230 applications. Of these system operators had applied for approval around 120 smaller network operators with of their system charges. largely unchanged cost blocks had their final approvals of charges from the first The costs on which the applications were round extended until 31 December 2008, as based were reduced by up to 32.4 percent. per application. These extended decisions The volume of cost reductions amounts to form the basis of incentive regulation. approximately €450 million, which equates With regard to the remaining 110 applica- to an average cost reduction of around tions (approx.) the cost review has already 12 percent. progressed considerably. The key points of the review were expanded compared to the Due to special circumstances, such as the first round of approvals. While the review establishment of a new network, four in the first round focused primarily on the applications were submitted at a later capital costs (review of depreciation, stage and have been decided upon by now. method of calculating interest etc), this The approvals granted during these pro- round also examines the operative costs ceedings are limited until 31 December (eg charges for operational management) 2008 and will therefore form the basis of much more closely. incentive regulation for these companies. Simplified procedure for incentive Since the approvals from the first round regulation proceedings were limited until 31 March 145 companies applied for participation in 2008, the gas network operators had to the simplified procedure under section 24 submit a new application for approval of of the Incentive Regulation Ordinance their charges by 1 October 2007, as set out (ARegV) by 15 December 2007. The issue in section 23a (3) sentence 1 of the Energy under review was whether or not less than Act (EnWG). 15,000 customers were connected to the gas transmission system of the respective Following determinations by the Federal network operator. Overall 134 approvals for Network Agency dated 2 May 2007 the gas participation in the simplified procedure ELECTRICITY AND GAS ACTIVITIES AND PROCEEDINGS 167

have already been issued within the four- ers/final consumers, municipal authorities week-limit stipulated by the issuer of the and associated distributors of supra- ordinance. Six companies have withdrawn regional or regional network operators) their applications, one application was during October 2007 about their practical refused and four further applications are experiences of competition at the supra- currently being heard. regional transmission system level.

Proceedings regarding gas pipeline Based on the results of this review the competition Federal Network Agency notified one The Federal Network Agency is currently applicant in December 2007 by means of a reviewing the notifications of twelve gas written warning that it does not consider network operators that claim under sec- the requirements of section 3 (3,2) GasNEV tion 3 (3, 2) of the Gas Network Charges to be met and therefore intends to use its Ordinance (GasNEV) not to be subject to authority under section 65 of the Energy cost-oriented charging. Under this regula- Act and oblige the company to calculate its tion operators of supra-regional transmis- tariffs on a cost-oriented basis. In addition sion systems can calculate their charges for an oral hearing was conducted in these use of the system in accordance with sec- proceedings. The proceedings are to be tion 19 of the Gas Network Charges Ordin- concluded in 2008. ance if their transmission system is, for the most part, exposed to effective existing or UNBUNDLING potential pipeline competition. The Federal Network Agency has continued The documents submitted by the appli- to accompany the unbundling process in cants were, in the opinion of the Agency, energy supply companies during 2007. Its not suitable for proving effective existing work focused on the following activities: or potential pipeline competition. In particular they were not based on a sustainable • active accompaniment of the unbund- and testable concept for verifying effective ling process by 1 July 2007 through con- pipeline competition. The Agency has sultation with companies and associ- therefore developed a test concept which is ations as well as talks about unbundling suitable for verifying the existence of effect- requirements at trade events; ive pipeline competition. This concept was • detailing the statutory unbundling represented to all applicants in June 2007 quirements through publication of a during an oral hearing. In order to imple- joint directive of the federal and the state ment the concept comprehensive market regulatory authorities for implemen- data was collected from the applicants and tation of the unbundling of the use of further gas network operators. Further- information under section 9 of the more the Federal Network Agency ques- Energy Act (EnWG); tioned a total of 90 market players (independ- • review of equal treatment reports of the ent retailers/suppliers, industrial custom- energy supply companies for the report- 168 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

ing period 2006 and presentation of the LAW ON RENEWABLE ENERGIES results of this review and future key points of reviews for the reporting period After the amended Renewable Energy 2007 at an information event of the Sources Act (EEG) entered into force on Federal Network Agency organised for 1 December 2006 and provided the Federal the compliance officers of companies in Network Agency with powers of imple- October 2007; mentation, the Agency performed its • review of annual accounts and the at- monitoring duties in 2007, as set out in sec- tached internal activity reports for the tion 19a (1) EEG. The Agency monitors, inter business year 2006; alia, the passing on of costs caused by the • collection of market data on the imple- EEG by checking that the electricity supply mentation of unbundling; companies only receive remunerations • participation in the implementation of pursuant to section 5 (2) EEG, minus the the legal framework at European level network charges that were avoided. (ERGEG/ CEER). Around 900 DSOs and approximately 1,000 The review of the equal treatment reports electricity supply companies were obliged for the reporting period 2006 resulted in under section 14a (8) EEG to submit their many enquiries from the respective energy final accounts for the year 2006 to the supply companies, in particular on the Federal Network Agency in electronic for- organisation and management of the net- mat by the end of April 2007. For the data work operation. In several cases prelimin- transmission the Agency's website pro- ary investigations were launched which in vided questionnaires with explanations. some cases led to formal supervisory meas- The filled-in questionnaires were encrypted ures. by the companies and transmitted electronically to the Agency via the system operator Furthermore the Federal Network Agency portal. The TSOs had to transmit their data has initiated a number of formal supervis- to the Agency by 30 September 2007. All ory measures in this area. The interpretation data was checked and compared with of the term 'customer', for example, is con- each other. Where implausbilities were troversial – a term that is crucial for a deci- identified the affected market player was sion about whether or not the number of requested to justify these and if necessary 100,000 connections, which brings with it correct individual data about the amount the obligation for unbundling, has been of energy and their payment flow. reached. In addition proceedings were initiated against network operators in THE FEDERAL NETWORK AGENCY'S order to clarify the issue of when the SYSTEM OPERATOR PORTAL management of network operations can be considered independent and on the oper- Many data collections in the area of energy ator's own authority. regulations are performed via the "Federal ELECTRICITY AND GAS ACTIVITIES AND PROCEEDINGS 169

Network Agency's system operator portal". The committee of federal state representa- This is a protected individual area on the tives set up at the Agency under section Agency's website where companies can 60a of the Energy Act, is tasked with ensur- electronically transmit data to the Agency, ing unified and standardised regulation track the status and history of their data processes and proceedings across Ger- transmission and systematically contact many. In 2007 this committee convened the Agency. The system operator portal for a total of eight sessions. Issues addressed was set up in the autumn of 2005 for the were both matters of the current pro- Agency's first data collections; since then ceedings for approving charges as well as its functionality has been continuously methods and procedures for implement- increased. This is the only way to perform ing incentive regulation. To complement data collection on a large scale in a timely the meetings by the committee of federal manner. At present approximately 1,700 state representatives there is a continuous operators of gas and electricity networks and intense contact at working level, can use this application to electronically which is supported by working groups on transmit their data. In 2007 this application issues such as network charges, unbund- was also opened up to approximately 1,000 ling and incentive regulation as well as energy supply companies. legal matters. Furthermore the Federal Network Agency and the state regulatory In 2007 the system operator portal was authorities regularly exchange informa- used, inter alia, to collect data on the pro- tion on pending proceedings of both the ceedings for the approval of gas and elec- state regulatory authorities and the tricity charges and to review the nation- Federal Network Agency. wide equalisation scheme under the Renewable Sources Energy Act (EEG). In COOPERATION WITH THE FEDERAL December 2007 the collection of data on CARTEL OFFICE loads, structure and sales was launched in order to implement incentive regulation The Federal Network Agency works very for the TSOs (electricity). closely with the Federal Cartel Office in all areas of energy regulation. In accordance COOPERATION WITH THE STATE with statutory provisions set out in section REGULATORY AUTHORITIES 58 (1) of the Energy Act there is a steady mutual exchange of information and con- Responsibility for the regulation of energy sultation processes regarding pending pro- supply networks (gas and electricity) in the ceedings; where intended by the legislator, Federal Republic of Germany is included in agreement is brought about. Under section the remit of the Federal Network Agency 58 (3) of the Energy Act both authorities and/or the respective state regulatory au- strive for a standardised interpretation of thority, depending on the number of cus- the terms for the gas and electricity net- tomers and the supply area of the operator. work operators in line with the Law against 170 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Restraints of Competition (GWB). The benchmark report, which the Federal Network Agency must draw up annually until 2009 and thereafter every two years for presentation to the European Commission, was discussed and agreed with the Federal Cartel Office as required by the Energy Act. ELECTRICITY AND GAS COURT PROCEEDINGS 171

Court proceedings

In 2007 the Higher Regional Court in Düsseldorf passed a number of first instance decisions. The positions of the Federal Network Agency regarding the approval of charges for the electricity and gas sector under section 23 (a) of the Energy Act (EnWG) were largely confirmed.

In the year 2007 over 400 main proceed- (BGH). Three of these concern a determina- ings and two summary proceedings were tion by the Agency regarding business pro- initiated against decisions by the Federal cesses and data formats in the electricity Network Agency in matters of energy regu- sector, while one appeal on a point of law lation. Of the 400+ appeal proceedings in concerns an abusive practices order. the main matter approximately 80 pro- Furthermore one appeal on a point of law ceedings were directed against determina- deals with the issue of the local jurisdiction tions regarding the charges set for the of the Higher Regional Court (OLG) in the electricity and gas sector. Throughout Ger- case of decisions made by the Federal many a total of approximately 100 appeals Network Agency through an official dele- were filed in this regard. All appeals are gation of powers; seven appeals focus on largely identical in their subject matter. Some rate approvals for the electricity and gas of them were even filed by companies that sector, made by the Agency under section had received notices of extension for the 23 (a) of the Energy Act (EnWG). second round of approved charges and were therefore not even required to submit A total of 133 appeals were filed in 2007 applications for approval of their rates. against rate approvals under section 23 (a) Approximately 200 appeals were directed of the Energy Act (EnWG). Meanwhile 65 of against determinations regarding the price these appeals have been settled. 53 settle- indices for the electricity and gas sector. ments were due to withdrawal of the appeal. Twelve appeals have, in the mean At present twelve appeals against decisions time, been decided in the matter by the by the Federal Network Agency have been competent Higher Regional Court (OLG) referred to the Federal Court of Justice Düsseldorf. 172 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

In its first instance decisions passed to date, • limitation of equity ratio to 40 percent, the OLG Düsseldorf largely confirmed the • determination of interest rate, positions represented by the Federal Network • interest rate of the proprietary interest in Agency regarding the approval of charges. excess of the equity ratio – no consider- Details of these positions were as follows: ation of a risk mark-up;

• budget costs • estimated theoretical corporation tax • base year to be applied, • corporation tax is estimated on a theor- • existence of safe findings based on rea- etical basis, son and amount at the time of applic- • deductibility of corporation tax in own ation (VI-3 Kart 16/07 (V)) – (findings accounts must be taken into account, affirmed); • no consideration of apparent profits or apparent losses, • estimated theoretical depreciation • no consideration of cutbacks and supple- • no short-term depreciation, ments for the calculation of estimated • indexation in connection with the cal- theoretical corporation tax. culation of actual replacement values, • determination of residual value: applica- The Federal Network Agency's position on bility of section 32 (3) of the Electricity skimming off additional receipts, on the Network Charges Ordinance (StromNEV) valuation of plots of land at purchasing (VI-3 Kart 3/07 (V), VI-3 Kart 39/07 (V), costs and on non-consideration of the last VI-3 Kart 27/07 (V)), annual segment for estimated theoretical • no admissibility of costs to offset infla- depreciation was not confirmed. tion, because of a violation of the prohibition of below zero depreciation; The Federal Court of Justice (BGH) will make final decisions on the issues raised by • return on equity the appeals on points of law (KVR 39/07, • non-chargeability of deposits paid or KVR 68/07, KVR 71/07, EnVR 76/07, EnVR investments in construction, 77/07, EnVR 81/07, EnVR 79/07). The first • non-consideration of accrued and de- hearings before the BGH will take place in ferred items, the summer of 2008. • reduction of current assets (not from the perspective of being required for oper- In connection with the revision of the ations but on the basis of an efficiency Electricity Network Charges Ordinance comparison, which has so far resulted in (StromNEV) and the Gas Network Charges confirmation of the lawfulness of the Ordinance (GasNEV) (BR-Drs. 417/1/07) the Agency's decisions), issuer of the ordinance has in the mean • reduction of the capital items deducted time clarified a number of issues that were from total (no consideration of market- subject to controversy in the court proceeding grants for lack of affiliation with net- ings. One such clarification is that, for the work operations), purpose of cost calculation, plots of land ELECTRICITY AND GAS COURT PROCEEDINGS 173

must be valued at the purchasing price. In mination in dispute was passed as an addition sections 7 (1) sentence 2 no. 4 of administrative act in the form of a general the StromNEV and GasNEV were amended order. Furthermore it corroborates that the to now include the constituent fact of Federal Network Agency is entitled to regu- being required for operations. late the internal exchange of data and in this context also to prevent potential dis- COURT PROCEEDINGS AGAINST crimination. The Higher Regional Court DETERMINATIONS FOR THE SECOND denied any lack of commensurability or ROUND OF APPROVING CHARGES the violation of procedural law.

The first hearings before the Higher Gas Regional Court (OLG) Düsseldorf took place Four appeals have been filed at the OLG in February 2008. As a result the appeals Düsseldorf against a determination of were rejected. This had already been pre- standardised business processes and data ceded by first decisions of the Higher formats for a change of gas supplier. The Regional Court Naumburg. The latter had Federal Network Agency has so far been also confirmed the lawfulness of a largely advised of the reasons for appeal in one of identical determination by the national these proceedings. regulatory authority of Saxony-Anhalt regarding stipulations for the applications COURT PROCEEDINGS AGAINST ABUSIVE for network charges (1 W 23/07 (EnWG), PRACTICES ORDERS 1 W 27/07 (EnWG), 1 W 28/07 (EnWG)). In connection with the court's review of a BUSINESS PROCESSES AND DATA FORMATS decision in abusive practice proceedings the Higher Regional Court (OLG) Electricity Düsseldorf reviewed, for the first time, the The Higher Regional Court (OLG) criteria for the existence of a supra-regional Düsseldorf has so far rejected three appeals transmission system under section 2 sen- against the Federal Network Agency's de- tence 1 no. 3 of the Gas Network Charges termination regarding business processes Ordinance (GasNEV). The competent senate and data formats in the electricity sector decided on 28 November 2007 that the (VI-3 Kart 294/06 (V), VI-3 Kart 358/06 (V), term "supra-regional transmission system" VI-3 Kart 408/06 (V)). It confirmed the was conclusively defined in section 2 sen- Agency's legal opinion in all points. In all tence 2 no. 3 of the Gas NEV. In this case the three proceedings, appeals on a point of complainant was unable to set its charges law were filed at the Federal Court of for use of the transmission system in ac- Justice (BGH). The BGH will decide about cordance with section 19 of the Gas Network these appeals at the end of April 2008. Charges Ordinance (GasNEV). The lawfulness of the Agency's abusive practices deci- The OLG Düsseldorf bases its decisions pri- sion was upheld by the Higher Regional marily on the assumption that the deter- Court (OLG) Düsseldorf (VI-3 Kart441/06 174 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

(V)). This decision was appealed on a point Holstein. The Federal Court of Justice will of law at the Federal Court of Justice (BGH). be hearing the matter of local jurisdiction in early March 2008. At present two further appeal proceedings against the Agency's abusive practices INVOLVEMENT OF THE FEDERAL NET- orders for refusal to grant network access WORK AGENCY IN COURT PROCEEDINGS are pending at the OLG Düsseldorf. AGAINST THE NATIONAL REGULATORY AUTHORITIES UNDER SECTION 79 (2) OF JURISDICTION OF THE LOCAL HIGHER THE ENERGY ACT (EnWG) REGIONAL COURT IN CASE OF DECISIONS MADE BY THE FEDERAL NETWORK The Federal Court of Justice held a hearing AGENCY THROUGH AN OFFICIAL about this legal issue in November 2007. DELEGATION OF POWERS The Federal Network Agency had filed an appeal on a point of law against two deci- In a decision dated 28 March 2007 the OLG sions by the Higher Regional Court (OLG) Düsseldorf decided that according to the Naumburg, in which the Agency had solely division of jurisdiction under section 75 ( 4) reprimanded its non-involvement in the sentence 1 of the Energy Act (EnWG) the appeal proceedings there. Consequently OLG Düsseldorf has jurisdiction for deci- the BGH set aside the decisions of the OLG sions of the Federal Network Agency, which Naumburg and referred them back for a the Agency makes through an official dele- new hearing. gation of powers (VI-3 Kart 2/07 (V)). In order to determine which local court has The BGH confirmed that the Energy Act jurisdiction, the registered office of the (EnWG) stipulates the creation of compar- Federal Network Agency is authoritative. able rights of involvement for the Federal The regulatory authority's registered office Network Agency as the ones in existence is therefore also in Bonn when decisions for the Federal Cartel Office in the Law made by the Agency through an official against Restraints of Competition (GWB). delegation of powers are concerned. This The Agency is therefore involved in admin- decision by the OLG Düsseldorf was istrative proceedings before the national appealed and referred to the Federal regulatory authorities (section 66 (3) Court of Justice (BGH) (KVR 30/07). The EnWG) as well as the court appeal proceed- opinion of the Higher Regional Court (OLG) ings (section 79 (2) EnWG) by act of law. In Düsseldorf was confirmed by the decision consequence this means that the Agency of the OLG Celle dated 18 October 2007. can also have the decisions of a national Another appeal procedure at the OLG regulatory authority reviewed by a court Rostock is currently suspended until the (section 88 (1) of the Energy Act. This right issue of local jurisdiction can finally be of involvement allows the Federal Network settled by the BGH. Further proceedings, Agency to have decisions of the national which also relate to the issue of local juris- regulatory authorities, which are not in diction, are pending at the OLG Schleswig- line with its own opinion, reviewed by a ELECTRICITY AND GAS COURT PROCEEDINGS 175

court in order to work towards a standard- All OLGs are therefore called to make provi- ised enforcement of the law. In this context sions for the Federal Network Agency's the BGH grants the Federal Network Agency right to involvement in appeal proceedings the right to decide on an individual basis filed with them. This promotes the standard- whether or not to make use of its right to ised application of the Energy Act (EnWG) be actively involved. The Agency has full and its ordinances. discretion to decide if and when to become involved in proceedings of the national The Land Baden-Württemberg has proposed regulatory authorities. This also makes it to the Bundesrat an amendment to the possible (rather than excluding the possi- draft bill for the promotion of combined bility by having forfeited it) for the Federal heat and power production (BR-Drs 12/08). Network Agency to get involved as late as With this proposal Baden-Württemberg at the appeal on a point of law, in order to seeks to have section 79 (2) EnWG deleted have decisions by a Higher Regional Court in order to counteract the ruling by the (OLG), which might be diverging or wrong, Federal Court of Justice . reviewed by the Federal Court of Justice (BGH). 176 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Railway

Market watch 178 Activities and proceedings 183 Court proceedings 191 RAILWAY 177 178 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Market watch

Growing competition has generated record figures in rail freight transport. Nonetheless, Deutsche Bahn AG continues to dominate the railway transport market.

MAIN MARKET TRENDS almost 100 percent and the lack of intramodal competition partially explains why In rail freight transport, the Federal the collective bargaining has had such a Statistical Office expects to see a growth in major impact on the operating results of transport services of 6.5 percent for 2007. the railway sector. This means rail freight transport will expect to generate a new record result in Growing Europeanisation of the railway transport services with rail freight trans- market and demand led to growing travel port accounting for around 114 billion and transport distances and to sharp tonne kilometres. growth rates in cross-border transport. Railway undertakings responded to this The Federal Statistical Office predicts a trend in 2007, inter alia, by launching new slight growth of 6.5 percent for 2007 in cross-border high-speed rail services and local rail passenger transport. By contrast, by undertaking transnational acquisitions. transport performance in the area of long- distance rail passenger transport in 2007 is DEVELOPMENT OF COMPETITION IN THE expected to fall behind last year’s perform- RAILWAY TRANSPORT MARKET ance by 0.5 percent. This decline results exclusively from the results achieved in the The market share of railway transport ser- fourth quarter of 2007 which were charac- vices provided by DBAG’s competitors rose terised by collective bargaining between again in 2006 in both rail freight transport the Gewerkschaft Deutscher Lokomotiv- and in long-distance rail passenger trans- führer (GDL) (Trade Union of German port – following the trends of the previous Railroad Engineers) and Deutsche Bahn AG years. A large number of competitors (DBAG). In long-distance rail passenger managed to gain a firm foothold in these transport, DBAG has a market share of markets. In long-distance rail passenger RAILWAY MARKET WATCH 179

Development of competition transport, service is provided almost exclu- in the rail transport markets sively by DBAG.

Freight transport In rail freight transport, it is mainly the Total in billion tkm increase in transport services provided by

bn DBAG’s competitors that has led to record 100% = 81 85 92 95 107 tkm 5 figures in recent years. Despite this dy- 7 10 14 16 % namic trend, the rail freight transport

95 93 market is still heavily dominated by Railion 90 86 84 % (DBAG). In 2006, competitors only accounted for a market share of 16 percent.

2002 2003 2004 2005 2006 In the long-distance rail passenger transport there continues to be a lack of competition Long-distance passenger transport in Germany. This result is all the more Total in billion pkm regrettable because other European coun- bn tries have a far better track record in terms 100% = 33 32 32 34 35 pkm > 1 > 1 > 1 > 1 > 1 % of competition (eg Great Britain and Sweden). It is hoped that the opening up of cross-border rail passenger transport to 99 99 99 99 99 % competition in the EU envisaged for 2010 will give the much-needed impetus.

2002 2003 2004 2005 2006 Competition in local rail passenger transport is dependent on the ordering patterns of federal authorities (who order local Local passenger transport trains). They have just begun to open up Total in billion pkm frequently used routes to competition. The bn 100% = 38 40 40 41 43 pkm share of DBAG’s competitors in transport 4 4 5 6 7 % services accounted for just under 7 percent in terms of person kilometres in 2006. If the 96 96 95 94 93 % competitors’ market share is measured in train kilometres, it rises to around 15 percent as the competitors are usually awarded 2002 2003 2004 2005 2006 contracts for less frequented routes, i.e.

Competitors’ share routes not usually catered for by rail trans- DBAG’s share port. pkm – passenger kilometres tkm – tonne kilometres

Source: DBAG, Federal Ministry of Transport, Building and Urban Development Federal Network Agency 180 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

MARKET STRUCTURE IN THE RAILWAY There is a considerable need among railway INFRASTRUCTURE MARKET undertakings to use infrastructure they do not operate themselves. 80 percent of the DBAG is by far the largest operator in the railway networks used by railway undertak- railway infrastructure sector in Germany. DB ings that do not belong to DBAG, for in- Netz AG operates tracks covering a total of stance, use rail networks they do not operate over 64,000 km (with a route length of themselves. Likewise, these companies use 34,100 km), whereas the track network of mainly passenger railway stations that do the next biggest company is far smaller, not belong to their own corporate group. covering under 700 km. DBAG’s railway This demonstrates that non-discriminatory infrastructure companies operate over and smooth access to railway infrastructures 5,700 passenger railway stations (over 5,400 plays a key role in promoting competition in of which are run by DB Station & Service AG), the rail transport market. whereas the largest company that is not part of DBAG operates fewer than 100 railway sta- By contrast, DBAG itself almost completely tions. In both market segments, more than covers the needs of its own railway undertak- 95 percent of the infrastructure is operated ings for rail and station infrastructure (with by the ten largest service providers (top 10 a share of 99 percent respectively). railway infrastructure companies, including Approximately one third of railroads not DBAG). operated by DBAG are used by external companies whereas the share of external com- Despite this high market concentration, panies using DBAG’s railroad is less than there are several hundred railway infra- 15 percent. structure companies in Germany, most of which are very small, that have to grant access to their rail network.

Concentration of railway infrastructure providers – tracks and passenger railway stations, 2006 Figures in percent

Share of the 92 3 5 track network

Share of passenger railway stations and 94 4 2 stops

100%

DBAG railway infrastructure provider Top ten railway infrastructure All other railway infrastructure providers providers, excluding DBAG RAILWAY MARKET WATCH 181

USER FEES FOR THE INFRASTRUCTURE Charges for infrastructure use as a percentage of the total costs incurred by railway undertakings in 2006 The fees charged for usage of the railway Percentage of total costs infrastructure represent a significant cost factor for railway undertakings. Expend- Usage charges for passenger stations, Other costs iture for use of railroads (route charges) freight and shunting (eg personnel yards, terminals costs, depreciation, account on average for approx. 25 percent ≈ 5 % energy costs) ≈ 70 % of railway undertakings’ total expenditure.

On average, railway undertakings were Route charges required to pay around €3.60 per train kilo- ≈ 25 % metre in 2006. Yet the level of fees charged for use of railroads in some cases clearly deviates from the average depending on what mode of transport is used (eg rail freight transport, long-distance rail passenger transport, local rail passenger trans- (freight and shunting yards or terminals) port). Passenger transport generally incurs play a less important role. No separate fees additional costs for use of passenger rail- are charged for use of the infrastructure for way stations and railway stops. The aver- some service facilities (eg fuelling facilities age fee charged here was €4.20 per stop. or service facilities) but are included in the Rates for the use of other service facilities service.

Trends in respect of route charges levied by DB Netz AG Indexed, 2002 = 100

115

112 111 110 110

108 106 105 105 103

101

100

2002 2003 2004 2005 2006

Route charges Inflation rate 182 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Due to the significance of railroad fees, in By the same token, not all of the railway particular, the level of development in fees infrastructure companies that are obliged charged for use of the infrastructure are of to grant access have published a list of their paramount importance to railway undertak- rates. In many cases, the companies are not ings and the public transport authorities explicitly aware of their own infrastructure for local rail passenger transport. At DB costs that are needed to calculate rates in Netz AG, the largest railroad operator, the accordance with the law. Railway infra- average railroad fee (calculated as a quo- structure companies tend not to levy rates tient of total railroad revenue and train separately, but integrate their rates into kilometres travelled on the railroad) rose overall packages. In individual cases, only sharply comparing the years 2002 to 2004. certain railway undertakings are charged All in all, railroad prices rose by 10 percent rates. between 2002 and 2006, and the rate of inflation for this period was around ten Another reason for this inconsistent situation percent. The specific railroad fees which in the market is, inter alia, the fact that railroad companies pay to DB Netz AG are many of the railway infrastructure com- expected to rise sharply once again in 2007. panies that are obliged by law to grant access have not registered any demand IMPLEMENTATION OF NEW RAILWAY from other railway undertakings up to now. REGULATIONS Since 2005, public transport authorities in The Third Act Amending Railway Regula- the local rail passenger transport sector tions (drittes Gesetz zur Änderung eisen- and companies domiciled in Germany that bahnrechtlicher Vorschriften) of mid-2005 wish to have goods transported by railway imposed new obligations on market play- undertakings have also had a right to ers in Germany, but also offered new op- access railroad infrastructure. Up to now, tions for using external railway infrastruc- this right has not been availed of, with very tures. The latest market monitoring evalu- few exceptions. ation shows that even after two years the new regulations have only been partially implemented in some areas. The railway infrastructure companies, for instance, which are obliged by virtue of Section 14 of the General Railway Act (Allgemeines Eisen- bahngesetz) (AEG) to grant access, are normally required to publish terms and conditions of use for the routes and facilities they operate. Up to now, a large number of railway infrastructure companies, which tend to be small infrastructure operators, have failed to meet this requirement. RAILWAY ACTIVITIES AND PROCEEDINGS 183

Activities and proceedings

The key task of the Federal Network Agency in the railway sector is to regulate access to railroads and service facilities, including rates. To this end, companies are required to draw up terms and conditions of use and lists of rates that may be examined by the Federal Network Agency both ex post and ex ante – in addition to its supervisory tasks in individual cases.

ACCESS TO RAILROAD NETWORKS AND tions from entering into force. In individual SERVICE FACILITIES cases, the Federal Network Agency may issue a revised version of the regulation in Railway infrastructure companies are order to prevent terms of use from being obliged to publish the terms and condi- incomplete and non-transparent. It is also tions of use of their infrastructure. The possible for the Federal Network Agency to Federal Network Agency examines these examine the terms of use at any time after terms and conditions of use to ensure they they have entered into force. are compatible with railway regulations, particularly in relation to non-discrimin- In addition to examining the terms of use, atory access. According to the provisions set the Federal Network Agency can also take forth in the General Railway Act and in the action if there are specific grounds for Ordinance on the Use of the Rail Infrastruc- suspicion and if parties entitled to access ture (Eisenbahninfrastruktur-Benutzungs- file a complaint in order to prevent or rule verordnung) (EIBV), the operators of rail- out abuse and discrimination in respect of roads and service facilities are obliged to access to the railway infrastructure. notify the Federal Network Agency of any intended revision or amendments to the In 2007, the Federal Network Agency not terms of use for service facilities. The Fed- only audited the companies belonging to eral Network Agency is entitled to object to DBAG, it also audited a large number of the intended revision or amendments to non-state-owned railway infrastructure the terms of use for service facilities within companies in accordance with its mandate four weeks, thereby preventing the regula- of symmetrical regulation. 184 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

EXAMINING THE TERMS OF USE rejecting route orders. It is obliged to notify FOR THE RAILWAY NETWORK the Federal Network Agency of all envisaged route rejections. If the Federal Network In 2007, the Federal Network Agency filed Agency comes to the conclusion that the an objection to the envisaged amendments route rejections represent a breach of the to the Terms of Use for the Railway Net- General Railway Act, the railway under- work (Schienennetz-Benutzungsbedin- taking must take a decision on the route gungen) (SNB) of DB Bahn AG. This year, order in accordance with conditions im- following a proposal made by the Federal posed by the Federal Network Agency. Network Agency, DB Netz AG for the first time submitted not only comprehensive A hearing was also held this year to which amendments to its terms of use but also all parties with a right of access were in- parts of its operational-technical regula- vited. Many parties with a right of access tions. The latter describe in detail the inter- contributed their ideas and provided faces between railway infrastructure com- important impetus to the opinion-forming panies and railway undertakings and pro- process at the Federal Network Agency. vide an important basis for smooth and non-discriminatory cooperation in railway If the Federal Network Agency decides operations. during the preliminary review process to object to the envisaged amendments to the The Federal Network Agency objected Terms of Use for the Railway Network, they mainly to breaches of the transparency will not enter into force. In addition to requirement under the General Railway filing an objection, the Federal Network Act. Many of the amendments to the Terms Agency stipulated for clauses that were of Use for the Railway Network submitted indispensable for the corpus of legislation as part of the preliminary review process submitted that the regulations be enhanced were not worded clearly enough. They in accordance with its requirements. were unclear, ambiguous and incomplete. Furthermore, it stated that DB Netz AG is For instance, there was no detailed descrip- obliged to publish its complete Terms of tion of the new ETCS (European Train Use for the Railway Network within a Control System) despite the fact that it is of specific timeframe. paramount importance for railway undertakings to have early and detailed informa- Some parts of the above-mentioned deci- tion about the introduction of new tech- sions by the Federal Network Agency, con- nology. taining objections to a number of amendments to the Terms of Use for the Railway Arrangements associated with the drawing Network of DB Netz AG, are in dispute (cf. up of the network schedule were also flawed. page 200 “Deutsche Bahn AG – fast-track DB Netz AG, for instance, failed to provide proceedings in relation to the Terms of Use the Federal Network Agency with details for Railway Facilities and the Terms of Use in relation to notification obligations in for the Railway Network 2008/2009). RAILWAY ACTIVITIES AND PROCEEDINGS 185

REVIEW OF THE TERMS OF USE FOR Deutsche Umschlaggesellschaft Schiene – RAILWAY FACILITIES Straße mbH (DUSS), for the first time in 2007. DUSS operates combined transport 2007 was the first time DB Netz AG did not terminals and transhipment centres in issue a completely new version of its Terms Germany and DBAG has a majority stake in of Use for Railway Facilities but submitted the company. According to statutory provi- comprehensive amendments instead. The sions, the terminals and transhipment Federal Network Agency criticised the fact centres are service facilities of railways that they were unclear and that numerous which are obliged to issue terms of use in envisaged regulations were contradictory accordance with the General Railway Act. and requested DB Netz AG to rephrase and In 2007, the Federal Network Agency ob- to publish the regulations it had objected jected to the envisaged new version of the to, bearing its legal opinion in mind. DB Terms of Use for Service Facilities issued by Netz AG responded to this, in particular, by DUSS as a large number of individual terms considerably enhancing its description of did not comply with provisions set forth in the introduction of the digital radio stand- the General Railway Act concerning non- ard in service facilities. It has begun con- discriminatory access to the railway infra- verting its service facilities gradually to the structure. digital radio standard. As the railway undertakings concerned have to convert Both of the above-mentioned decisions (DB their vehicles to this radio standard at huge Netz AG, DUSS) are still in dispute (cf. page expense and these vehicles cannot be used 200 “Deutsche Bahn AG – fast-track proceed- while they are being converted, it is of ings in relation to the Terms of Use for paramount importance for the railway Service Facilities and the Terms of Use for undertakings to be able to rely on a bind- the Railway Network 2008/2009”). ing and clear sequence of deadlines. The Federal Network Agency also objected Furthermore, DB Netz AG followed instruc- to parts of the envisaged Terms of Use for tions given by the Federal Network Agency Service Facilities of Stadtwerke Essen AG for to publish the opening times of all railway Essen Port Authority in 2007. Essen Port control centres which the use of service Authority is also a service facility within facilities depends on. This is very important the meaning of the General Railway Act. for railway undertakings regarding the use The Federal Network Agency determined of service facilities as it is the only way they that the envisaged new version of the can detect whether this use is associated Terms of Use for Service Facilities con- with the additional burden of having to tained, in particular, clauses granting the employ and pay staff outside these open- infrastructure operator unconditional ing hours. decision-making scope. However, this type of unconditional decision-making scope The Federal Network Agency examined the harbours considerable potential for dis- terms of use of a major terminal operator, crimination because parties with the right 186 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

of access can neither foresee nor check its ments submitted with the relevant railway subsequent application. Stadtwerke Essen undertakings until due notification had AG was instructed to amend the clauses to been given. The Administrative Court of which the Federal Network Agency had Cologne dismissed the fast-track petition objected, accordingly. filed by DB Netz AG in objection to the notification. The appeal brought before the The Federal Network Agency also examined Higher Administrative Court of Münster was the envisaged Terms of Use of Passenger cancelled before a ruling was handed down Railway Stations of Usedomer Bäderbahn as DB Netz AG had provided the Federal GmbH (UBB) and objected to a number of Network Agency with the missing docu- the provisions. On the basis of these objec- ments and information in the meantime. tions, the provisions were amended, par- The three general agreements between DB ticularly in terms of transparency. Netz AG and the railway undertakings were concluded after the proceedings instituted In two decisions, the Federal Network by the Federal Network Agency had been Agency instructed Rurtalbahn GmbH to concluded. publish immediately the Terms of Use for Service Facilities and the Terms of Use for Capacity the Railway Network which they had sub- The capacity of the railway network is cru- mitted and to apply them equally to all cial for the future role railways will play on parties with the right of access. As a result competitive markets. The Federal Network of previous discussions, Rurtalbahn adapted Agency is hence focusing on the current the Terms of Use to regulatory require- capacity that is being influenced by con- ments and made their pricing principles struction measures and on the long-term more transparent. The Federal Network development of capacity that frequently Agency also examined the Terms of Use for develops in a negative way due to dismant- Service Facilities of other operators of ser- ling measures. Owing to complex oper- vice facilities. ational processes, railway capacity is very hard to define in terms of absolute figures, FURTHER PROCEEDINGS a fact that was confirmed by experts at an international workshop. It is easier to define Conclusion of general agreements the term of railroad congestion when the In accordance with the statutory duty of capacity available is unable to meet market notification, DB Netz AG notified the Federal requirements. This has prompted the Network Agency in 2007 of its plans to con- Federal Network Agency to define criteria clude three general agreements. As the noti- in cooperation with the Federal Railway fications did not contain all the important Authority (Eisenbahn-Bundesamt), indicat- features and information about the general ing at what point DB Netz AG, in particu- agreements to be concluded, the Federal lar, must meet its statutory obligation to Network Agency prohibited DB Netz AG declare congestion of railways so that from concluding the three general agree- concrete capacity analyses and schedules RAILWAY ACTIVITIES AND PROCEEDINGS 187

aimed at increasing railway capacities can regarding the time and way in which con- be drawn up. The bottlenecks that obvious- struction measures are to be carried out ly exist in the railway network, which tend can be taken into consideration. In the pro- to manifest themselves mainly in freight ceedings, it was also established that the and occasional transport, have not yet scheduling procedure would have to be prompted DBAG, which combines infra- amended for routes on which construction structure and transport under one um- work was being carried out. At present, brella, to declare that its railways are con- only the section up to the end of the congested. The effects manifest themselves in struction site is covered by scheduling and changes in routes and rejections of route the rest of the trip can be freely scheduled. applications without notifying the Federal Parties with a right of access therefore do Network Agency and are causing specific not know when they will reach their des- capacity problems, particularly in relation tination. An appeal has been filed against to construction measures. To make matters this decision and a ruling on this appeal is worse, construction sites incur excessive due to be made in 2008. The Federal Net- costs for energy, transport and personnel work Agency has suspended execution of for market players if they are not notified of the decision until then. route closures for construction purposes in time and unless alternatives can be coordin- Bad Schandau Railway Station ated to the satisfaction of all parties. As part of the modernisation of Bad Schandau Railway Station, DB Netz AG was Construction measures planning to dismantle nearly all of the The Federal Network Agency also handed sidings even though they had leased them down a decision in which it objected to DB to a railway undertaking on a long-term Netz AG’s conduct in connection with the contract. The Federal Network Agency planning and implementation of construc- instituted proceedings when an objection tion measures. The decision stemmed from was filed by this railway undertaking, es- a particular case in which the Federal tablishing that the envisaged dismantling Network Agency ascertained that the pro- constituted a violation of the provisions set visions in the Terms of Use for the Railway forth in the General Railway Act governing Network relating to the description of access to the railway infrastructure. The information about construction measures Federal Network Agency instructed DB and the associated coordination procedure Netz AG to grant the relevant railway with parties that have a right of access undertaking access to this track or to were insufficient. For this reason, the arrange the use of alternative sidings. Federal Network Agency instructed DB Netz AG to amend these clauses. In this OTHER ACTIVITIES regard, it is a matter of ensuring that the railway companies are notified far enough In 2007, the Federal Network Agency in advance of envisaged construction launched a procedure to review the rules measures so that any objections they raise for scheduling of trains on DB Netz AG’s 188 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

network. The rules currently included in The process of reviewing the charges levied the Terms of Use for the Railway Network for loading areas has been successfully are unclear and give the competent staff at completed. DB Netz AG’s announcement DB Netz AG the greatest possible decision- that it would be significantly increasing the making scope for eliminating disruptions. rates charged for the use of this service fa- The aim of planning when faults occur is, cility in connection with a reorganisation inter alia, to restore the normal schedule as of the pricing system was met with incredu- soon as possible and to ensure all trains lity on the part of various railway undertak- arrive and depart on time. In 2008, it will ings. The latter feared, for instance, that be the Federal Network Agency’s job to the transportation of timber by rail, which strike a balance between the need to pro- made commercial and environmental vide maximum decision-making scope in sense, might be put at risk. The Federal terms of planning and the ability to trace Network Agency’s intervention enabled and review those decisions. In 2007, the the envisaged rate increase to be averted. Federal Network Agency requested DB The services provided by DB Netz AG are Netz AG to post a clear description of the now being offered at rates that have been service facilities it operates on the Internet. reduced by approximately 50 percent. In DB Netz AG refined this list over the course addition, DB Netz AG has distanced itself of the year as part of an ongoing dialogue from its original plan to demand a high with the Federal Network Agency. On the cleaning fee after every use. basis of a number of proposals and random checks carried out by the Federal Network Passenger railway stations are regarded as Agency, the list has been further improved one of the most important service facilities both in terms of its completeness and in for the transportation of passengers. terms of details of opening hours, the Within the DBAG Group, the subsidiary DB length of tracks that can be used and other Station & Service AG operates approximate- service features. Parties with a right of ly 5,400 railway stations, which are used by access can now obtain the information both Group-owned and private railway they need at any time in a user-friendly undertakings. The Federal Network presentation. Agency has, since August 2007, been sub- jecting the charges levied for this service to RATES AND FEES a comprehensive review, which is still ongoing at the present time. The first step Review of rates in this process is to take a look at the com- The Federal Network Agency has pressed pany’s cost situation with a view, inter alia, ahead with its endeavours in the area of to examining the distribution of its over- the regulation of rates. The prime goal is to head costs. The price differences between meet the need that all users with a right of the Federal Länder will also be the subject access to the railway infrastructure in of review. In this regard, the Federal Net- Germany have in terms of fair and trans- work Agency is liaising closely with the parent pricing. public transport authorities in the local rail RAILWAY ACTIVITIES AND PROCEEDINGS 189

passenger transport sector that indirectly infrastructure. For instance, additional bear the railway station charges for local charges for exceeding wagon standing trains as they handle the organisation and times now offer an incentive to vacate the financing of local rail passenger transport tracks in a timely manner and make them in line with the relevant Federal Länder available to other users. The new system of legislation. The price increases of the past charges came into effect on 1 January 2008. few years have brought a critical response A further exchange of experience between and led to complaints from public trans- the Federal Network Agency and the HPA is port authorities and railway undertakings planned for 2008. alike. Incentive regulation in the railway sector The system of charges used by the Ham- Since the spring of 2007, the Federal Net- burg Port Authority (HPA), which operates work Agency has been looking into the the port railway in Hamburg, has also been possible introduction of incentive regula- in the spotlight. At the beginning of the tion for the railway infrastructure sector. year, the HPA announced that it intended Applying the principle of incentive regula- to radically overhaul its system of charges. tion could lead to a regulatory cap on the Owing to the major importance that the prices charged by an infrastructure oper- port of Hamburg and the associated rail- ator with a view to setting incentives for way infrastructure have in terms of trans- more efficient management of infrastruc- port, the HPA and the Federal Network tural monopolies. The basis for the Federal Agency initially agreed that the Federal Network Agency’s activities is a joint state- Network Agency would play an advisory ment to the minutes issued by the Federal role in developing the new system of charges. Ministry of Transport, Building and Urban As part of this agreed process, the first Development, the Federal Ministry of drafts of the pricing system were reviewed Economics and Technology and the Federal in terms of their compatibility with the pro- Ministry of Finance. According to this state- visions of railway legislation relating to ment, there is agreement at ministerial access to the railway infrastructure. The level that the tariff provisions in the breaches and discrimination which the General Railway Act need to be amended Federal Network Agency identified in its in favour of an economic performance- review were able to be resolved by the end based tariff benchmark. At the initiative of of the year in consultation with the HPA. the Federal Ministry of Transport, Building For instance, unlawful provisions relating and Urban Development, the Federal to discounts were deleted after the Federal Network Agency set up a Working Group Network Agency had raised an objection. for the purpose of developing tariffs, which For the steadily increasing rail traffic on met a total of seven times between June the port railway lines, which are already and October 2007. The Working Group congested as it is, the HPA has, for the first comprised representatives of the Federal time, found a fee structure which can con- Ministry of Transport, Building and Urban tribute to increasing the efficiency of the Development, the Federal Ministry of 190 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Economics and Technology, the Federal OTHER ACTIVITIES Ministry of Finance, the Federal Cartel Office, the Ministries of Transport of the In 2007, there was also an ongoing, open dia- Federal Länder, DBAG, Netzwerk Privat- logue with market participants, associations bahnen (Railway Associations and Agen- and other interested parties. The Federal cies), the Association of German Transport Network Agency was represented at major Companies and other institutions. national and international events last year.

Based on the discussions held by the The symposium entitled “Current Problems Working Group, and with the scientific in Railway Law”, a joint event organised by assistance of the Technical University of Eberhard Karls University, Tübingen, the Berlin and the IGES Institute (research and Federal Railway Authority and the Federal consultancy institute), the Federal Network Network Agency, deserves special mention. It Agency produced an initial, in-depth was the thirteenth time that the symposium report on the introduction of incentive was held. This year, the organisers were again regulation in the railway sector, including able to find topical issues relating to railway a proposal that price cap-oriented tariff regulation and offered the participants an regulation be introduced. Unlike profit cap excellent forum for exchanging views. The regulation, setting price caps is, in particu- Federal Network Agency contributed to an lar, intended to create incentives for in- overview of current trends in railway law creasing the utilisation of railway infra- with presentations on the development of structure capacity, thereby boosting com- tariff regulation, on the incentive system, petition in the railway sector. This implicit- planning permission and self-commitment ly also supports the Federal Government’s through access agreements and on the inter- goal of switching more traffic to rail. A pretation of the grey legal concepts of cap- price cap, compliance with which will be acity and congestion of the railway infrastruc- mandatory, will be calculated for each ture. These were rounded off with a presenta- product basket and for each company. It tion on the year’s regulatory decisions. Once will be necessary to amend the General again, the response among experts was so Railway Act and the Ordinance on the Use great that the event will definitely be re- of the Rail Infrastructure in order to peated in the coming year. implement the Federal Network Agency’s concept. Details on incentive regulation would need to be set out in an ordinance, in respect of which the General Railway Act would require an enabling provision. RAILWAY COURT PROCEEDINGS 191

Court proceedings

The Federal Network Agency looks back on positive main and fast-track administrative court proceedings.

DEUTSCHE BAHN AG – Terms of Use for made the required adjustments “without the Railway Network 2007/2008 acknowledging a legal obligation”. DB Netz AG instituted fast-track proceedings DB Netz AG submitted its Terms of Use against two contentious clauses in the deci- for the Railway Network for 2008 to the sion, and it lodged an objection with the Federal Network Agency for review in Federal Network Agency against the deci- October 2006. The Federal Network sion as a whole. In its objection, DB Netz AG Agency objected to numerous clauses in criticised the interpretation of the concept the Terms of Use for the Railway Network, of discrimination as being too broad and deeming them to be incompatible with the Federal Network Agency’s review cri- railway law. At the heart of the objections teria as being too high. The authority dis- were breaches of the rule of non-discrimin- missed the objection in its entirety, where- atory access to the network as well as upon DB Netz AG filed legal proceedings. breaches of transparency. Subsequent to The Administrative Court of Cologne will the administrative decision which the now be ruling on the legality of the deci- Federal Network Agency then handed sion rendered by the Federal Network down in November 2006, DB Netz AG Agency in November 2006 and on the asso- requested joint discussions. The content ciated legal issues. The ruling is of major that was elaborated during the latter lead importance to the Federal Network Agency to the vast majority of the clauses to which and to competitors as the court is expected, objections had initially been raised being in these proceedings, to make pronounce- amended to comply with the Federal ments on important fundamental points of Network Agency’s specifications, with the railway law, such as the scope of non-dis- result that the set of rules was able to enter crimination and of the requirement of non- into force in good time and in accordance discriminatory access to the network in with the law. However, DB Netz AG initially railway law. 192 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

DEUTSCHE BAHN AG – SURCHARGE FOR timetable year. The Regulatory Authority SPECIAL ROUTES viewed this as unlawful discrimination and obliged DB Netz AG to desist from levying In its ruling of 31 August 2007, the Higher these special surcharges. DB Netz AG did Administrative Court of Münster confirmed not accept this decision and brought an the Federal Network Agency’s view on the action against it before the Administrative so-called “surcharge for special routes” Court of Cologne and subsequently before levied by DB Netz AG. DB Netz AG’s prac- the Higher Administrative Court of tices during the period 2004 to 2005 were Münster. Both courts effectively confirmed held to be illegal. With its ruling, the the illegality of this special surcharge and Higher Administrative Court of Münster is dismissed DB Netz AG’s applications. following a ruling made by the Administra- tive Court of Cologne, which, in October DEUTSCHE BAHN AG – FAST-TRACK 2006, found that DB Netz AG must desist PROCEEDINGS IN RELATION TO THE from levying a 10 percent surcharge for TERMS OF USE FOR RAILWAY FACILITIES special routes. AND THE TERMS OF USE FOR THE RAILWAY NETWORK 2008/2009 The Higher Administrative Court of Münster held that levying the special sur- DB Netz AG, DUSS and UBB have each filed charge constituted unlawful discrimination an objection against the administrative against the railway undertakings affected decisions requiring them to adjust their by the surcharge, which restricts competi- intended versions of their terms and condition. It found that levying the surcharge for tions of use. With a view to seeking suspen- special routes was anti-competitive ex- sive effect for their objections, the com- ploitation of existing market strength. The panies each filed applications with the Higher Administrative Court of Münster Administrative Court of Cologne in tem- stated that DB Netz AG, as a company with porary relief proceedings shortly before a strong market position, had taken advan- the expiry of the deadline for compliance. tage of its competitors’ predicament without any substantive or justifying reason for The Administrative Court of Cologne did doing so. not grant any of the applications. On the one hand, the applications were rejected The basis for the ruling was DB Netz AG’s because the court cast doubt on the urgen- practice, ever since the timetable change cy of the decision as the companies did not on 12 December 2004, of levying a 10 per- apply for court protection until shortly cent higher charge for special routes on before the expiry of the deadline for com- some railway undertakings. The parties pliance that had been granted, even affected were those who ordered routes though there had been sufficient lead-up which it was not possible to register for the time. On the other hand, the court ac- annual timetable and which were to be knowledged, following a summary examin- used no more than thirty times during the ation, that the requirement of transpar- RAILWAY COURT PROCEEDINGS 193

ency was an essential component of non- discriminatory access to the railway infrastructure. In the view of the Administrative Court of Cologne, there were significant reasons that also supported the legality of the administrative decision regarding DB Netz AG’s Terms of Use for the Railway Network. In particular, the obligation expressed therein to give a proper account of the point in time at which the Federal Network Agency was notified of the intention to refuse route orders was appropriate.

In each case, an appeal was lodged with the Higher Administrative Court of Münster against the ruling handed down by the Administrative Court of Cologne. Rulings have already been handed down in respect of the appeals lodged by DB Netz AG and DUSS. The Higher Administrative Court of Münster granted suspensive effect to the appeal lodged by DUSS. The appeals lodged by DB Netz AG, on the other hand, were only partially successful. In this case, suspensive effect was only granted in respect of some of the clauses which the Federal Network Agency had objected to. In all other respects, the appeals lodged by DB Netz AG were dismissed. The rulings essentially relate to issues regarding the scope of the Federal Network Agency’s investigations. The respective principal proceedings remain subject to final clarification. 194 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Agency’s functions, structure and core tasks

Functions and structure discriminatory network access, to provide The Federal Network Agency, originally frequency regulation and numbering called the Regulatory Authority for Tele- arrangements. These responsibilities are communications and Post, or RegTP, was detailed in the Telecommunications Act set up on 1 January 1998 as a higher federal (TKG), the Postal Act (PostG), the Energy Act authority within the scope of business of (EnWG) and the General Railway Act (AEG), the Federal Ministry of Economics and and are regulated additionally in ordinances Technology (BMWi). It took over the res- and other implementing provisions. ponsibilities of the former Federal Ministry of Post and Telecommunications (BMPT) Further tasks of the Federal Network and the Federal Office for Post and Tele- Agency flow from various other specialist communications (BAPT). When it was as- laws such as the Radio Equipment and signed functions from the new Energy Act Telecommunications Terminal Equipment and the amended General Railway Act it Act (FTEG), the Amateur Radio Act (AFuG) was renamed Federal Network Agency for and the Electromagnetic Compatibility Act Electricity, Gas, Telecommunications, Post (EMVG). The Agency is the competent au- and Railway (Federal Network Agency) in thority under the Electronic Signatures Act 2005. (SigG) and as such is tasked with setting up and monitoring a secure and reliable elec- First and foremost, the Agency’s remit is, tronic signatures infrastructure. through regulation, to promote competition in the telecoms, postal and energy The Agency’s tasks and workflows are com- markets and in the rail sector, to ensure the plex and wide in scope. They range from provision of appropriate and adequate ser- cases addressed in quasi-judicial proceed- vices across the country, to guarantee non- ings in economic regulation areas right AGENCY’S FUNCTIONS, STRUCTURE AND CORE TASKS 195

down to its nationwide presence for techni- generation networks and radio systems. cal trouble-shooting. A major departmental function is to give Ruling Chambers specialist assistance in Its task-oriented organisation, enabling the their decision-making. Agency to deal with these tasks efficiently, is described in the following. Combating abuse of premium rate services continues to be a great challenge. Another In the telecoms sector the Ruling Cham- field of tasks is connected with the database bers deal with ex ante and ex post rates of transmitter sites. Of particular import- regulation, the control of anti-competitive ance as direct services for the public is the practices and special network access, includ- dispute resolution procedure under section ing interconnection issues. In the postal 47a of the Telecommunications Act and sector the Ruling Chamber responsible also section 10 of the Postal Services Ordinance focuses on ex ante and ex post rates regula- (PDLV), and consumer protection. tion and the sector-specific control of anti- competitive practices, including the regu- The Energy Act provides for the gas and lation of access to the postal network. In electricity markets to be organised in a way the energy sector the Ruling Chambers that has a regulatory effect. The Agency’s are responsible for all decisions which legal function under the Act is to create, the Agency is required to take in the gas through unbundling and regulation of the and electricity sectors under the Energy networks, the basis for well-functioning Act and the implementing ordinances, competition in the upstream and down- including checking the use of system stream markets. The aim is to secure non- charges. The President’s Chamber takes discriminatory network access and to set decisions on, in particular, award procee- the use of system charges levied by the dings for scarce radio spectrum resources companies. The Agency can draw on its and the imposition of universal services. experience of regulating the telecoms and postal markets to achieve lean and practic- The departments perform specialised and able regulatory practices. The year under central administrative functions. These review was also notable for the prepar- include economic and legal policy issues of ations to introduce incentive regulation telecoms and postal regulation and tech- and for greater engagement at European nical aspects of frequencies, standardisation level. and numbering. The Agency is active in international bodies, cooperating on draft- Since the First Act Amending the Renew- ing standards for the development of new able Energy Sources Act took effect on 196 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

1 December 2006, the Agency has been systems. Another important area is the pro- discharging executive functions. These cessing and resolution of radio interfer- include monitoring the distribution, across ence using state of the art measuring the country, of renewable energy volumes equipment, monitoring compliance with and compensation payments. Also moni- regulations generally and carrying out tored is the notification of differential costs radio monitoring and inspection orders. and compliance with statutory duties. The regional offices’ responsibilities also cover monitoring compliance with the On 1 January 2006 the Agency also assumed terms and conditions of licences, eg postal responsibility for monitoring compliance licences. As a result of certain tasks (such as with the legislation on access to rail infra- processing travel expenses for some of the structure. Its activities were extended, in staff, processing medical allowances for all essence, to cover all infrastructure man- the staff, call centres) being transferred to agers (symmetric regulation). A principal the regional offices, the headquarters can task is to secure the non-discriminatory use focus on its core tasks and local staff of the of rail infrastructure for the infrastructure regional offices are meaningfully employed. managers and other access beneficiaries. Rail infrastructure covers both the infra- Human resources structure itself and services connected with A modern staff management system is a tracks and service facilities (eg stations, top priority at the Agency. Amid ever freight terminals). Preventive, or ex ante, greater constraints on staffing levels, it is regulation is also in place besides ex post essential to deploy existing staff optimally regulation, under tight time limits. Access as well as to recruit qualified new staff. This regulation also encompasses the level and is only possible when human resources structure of infrastructure and other charges, planning takes account of work require- so that price regulation is also prominent. ments and staff skills and preferences equally. Only with a combination of pro- To emphasise more strongly the uniform active staff deployment planning and mo- structure of the Agency, there is a special tivated staff can the Agency perform its department for the regional offices, the tasks efficiently and cost-effectively at contact point with consumers and the times of tight budgets. industry across the country. The Agency has succeeded in recruiting The regional offices are responsible mainly outstanding staff from a large number of for technical matters. They provide advice, candidates at all levels in the new energy for instance, on compliance with the and rail regulation areas. In doing so, it has Telecommunications Act, on electromag- continued its practice of requiring not only netic compatibility provisions and the excellent specialist knowledge but also electromagnetic compatibility of appar- conceptual ability and team skills, backed atus. They are also responsible for frequency up by a feel for the practical requirements assignment, eg for mobile radio and PMR of the markets and their mechanisms. AGENCY’S FUNCTIONS, STRUCTURE AND CORE TASKS 197

The Agency employs a total of 2,500 special- The discrepancy between target and perfor- ists from a wide range of backgrounds for mance income for 2007 is attributable to the its highly interdisciplinary fields of activity. reimbursement of contributions for the pro- These include law, economics, engineer- tection of interference-free frequency usage ing, mathematics, information technology, for the years 1999 to 2005 and the suspended administration, etc. collection of these contributions for 2006 and 2007 as a result of court rulings. The contribu- The Agency has provided training since tions will be collected subsequently – if legal- 1999. In 2007, a total of 10 young people ly permissible – following an amendment of began as office communication trainees at the legal basis in 2008. the headquarters in Bonn and Mainz. Under the traineeships in electronic equip- The chart below shows the expenditure for ment and systems offered since 2003, 16 2007 (target and performance) and 2008 places for trainees have been created, avail- (budget). able at Göttingen, Bremen and Magde- burg. Thus in 2007 (as of 31 December 2007 target 2007 2008 target 2007), a total of 81 young men and women €'000 performance €'000 Type of expenditure €'000 received training in these two occupations. Staff costs 102,679 100,703 103,518

Budget General administrative expenditure and The Agency’s income and expenditure is appropriations 35,084 34,688 34,578 budgeted for in section 09, chapter 0910 of Investments 9,787 12,027 10,879 the federal budget. Total expenditure 147,550 147,418 148,975

The table below shows the income for the years 2007 (target and performance) and 2008 (budget).

2007 target 2007 performance 2008 target Type of income €'000 €'000 €'000

Telecoms fees, contributions and other charges 172,635 53,896 66,457

Fees and other charges under the Postal Act 111 79 109

Fees and expenses under the Federal Rail Transport Administration Act 254 93 576

Charges and contributions under the Energy Act 500 351 6,218

Other administrative income, rents, disposals 1,106 2,148 1,164

Administrative income 174,606 56,567 74,524

Other income 42 1

Total income 174,610 56,569 74,525 198 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Mission statement

Operating successfully for ten years now, The mission statement is a reliable guide to the Federal Network Agency has won the Agency's tasks and the aims and values acclaim in business and political circles of its staff. It strengthens staff motivation and amongst consumers. Its excellent and identification with the Agency, and reputation was a determining factor in provides fresh impulse for the future. The being assigned new tasks in the energy and mission statement is a public representa- rail sectors and is based on the high levels tion of the Agency and of the thinking and of commitment and performance of its doing of its staff. For the statement to find staff. We now want to publicise this multi- resonance with the public and to continue faceted, exceptionally good work, both to be put into practice, it is essential that internally and externally, and have a num- the management and the staff live by what ber of instruments with which to do so. it says. Only thus can this ongoing process be continued and invigorated with creati- One such – proven – instrument is the mis- vity. sion statement, with which public authorities, industry associations and companies, for instance, give a succinct account of themselves. After the Agency took the policy decision of a mission statement, it then considered the nature and the scale of the statement at a closed-door conference of senior management. These considerations were then incorporated in an internal draft to which all the staff were invited to respond. The General Staff Council was also part of the process and provided valuable input for the discussions. This led to the creation of the mission statement set out below, which was informed by the proposals and responses received. MISSION STATEMENT 199

OUR DUTY • a customer and market-driven approach, as a result of reconciling different inter- is to create and secure fair and effective ests competition in the networked business • European and international cooperation, sectors and • continuous quality of service controls. • electricity • gas We count on highly motivated staff to • telecommunications achieve these aims, and attach particular • post, and importance to • rail. • respect for the individual and the work Our aims are s/he does • expecting high standards of our staff, but • to promote the development of the providing development opportunities European single market too • to safeguard universal services through • trust and cooperation in our dealings efficient infrastructures and competitive with one another companies • an ability to give and receive criticism as • to protect the consumer and the an opportunity for improvement environment, and • confronting problems and learning from • to encourage innovation. mistakes • interdisciplinary work, and We pursue these aims by • cross-departmental participation in decisions. • open, objective and transparent dialogue with all stakeholders • consistent, technology-neutral decisions based on sustainable strategies • creating a sound basis for planning through efficient procedures and predictable frameworks • giving preference to voluntary agreements, given equivalent outcomes • interdisciplinary use of knowledge and experience 200 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Strategic plan 2008

The Federal Network Agency is required ante regulation is now seven, instead of the under section 122(2) of the Telecommunica- former 18. The amended recommendation tions Act (TKG) to include a strategic plan means that the Agency is now called upon, in its Annual Report, listing matters of under section 14(1) TKG, to review its mar- legal and economic policy in telecommuni- ket definitions and analyses and the regu- cations to be addressed by the Agency in latory orders based on them. The experi- the current year. In addition, the Agency is ence gained since introduction of the pro- reporting on all its main projects in all its cedures in sections 10 to 13 TKG shows that fields of activity in which issues of funda- a concurrent review of all the existing mar- mental importance are expected in 2008. ket analyses and regulatory orders is not Following a public consultation on the possible. The markets specified by the draft strategic plan, evaluation of the Commission have all been studied and, responses received and input from the depending on the outcomes, made subject Advisory Council1 at its meeting on 11 Feb- to regulatory orders. For some markets, a ruary 2008, the strategic plan 2008 set out review of the outcome is scheduled anyway below has been adopted. because the two-year period referred to in section 14(2) TKG is close to expiry. TELECOMMUNICATIONS The Agency is therefore beginning with Market definition and market analysis these markets, and has already initiated procedures, regulatory orders action. In the coming year, the first to receive Member states, when defining and analys- attention will be the wholesale markets for ing markets, are required to take the ut- interconnection services and the fixed most account of the European Commis- retail markets. Wide-ranging information sion's new relevant markets recommenda- on both has been requested, on the basis of tion following its publication in the Official which the draft decision from the Presi- Journal of the European Communities. The dent's Chamber will be drawn up. Finally, a number of markets recommended for ex survey and assessment of the conditions in

1 cf Advisory Council Decision of 11 February 2008, available for download at www.bundesnetzagentur.de STRATEGIC PLAN 2008 201

the mobile voice call termination market efficient investment in infrastructure, we and the wholesale broadband access (bit- are looking to shape the relation of the stream) market is planned. wholesale prices along the value chain in such a way that the providers operating at Basic rates regulation and consistency different levels of the chain can be successful issues with their own particular business model. Given the importance of consistent charging for a competitive environment in Also, past rates regulation cases have which companies with different network shown that, as regards the costs of efficient and service strategies can compete fairly, service provision, better documentation is the Agency will further refine the princi- needed of how non-infrastructure-based ples for consistent rates regulation. This costs (operating costs, rentals, common concerns, first and foremost, the individual costs) are identified. In the rates proposals Ruling Chamber decisions on charges, the proportion of costs that cannot be details of which cannot be anticipated directly allocated is very high, and also here, however. Flanking these decisions fluctuates considerably. Thus the Agency will be conceptual and basic positions on has examined the level of non-infrastructure- central aspects of the consistency require- based costs and mark-up rates, construct- ment to give market players a high degree ing a telecommunications process model of planning certainty and to facilitate dia- (common costs model) that has already logue with them in a context that is not been applied in rates regulation cases. related just to specific decisions. The Agency will also need to decide on In this connection, explanatory notes on application of the common costs model to price-cost squeeze have recently been the mobile market. It will also review the published. The notes can be conceptually criteria for fixing interest rates in the mobile refined, if necessary, to reflect new de- and the fixed network, possibly looking at velopments whose relevance was not clear the larger canvas to consider what eco- at the time they were drawn up and com- nomic criteria could also be applied in the mented on. While the explanatory notes energy and rail sectors. Also, in light of the address the relation between wholesale upcoming decision of the Federal Adminis- and retail charges, attention will be drawn trative Court, we should again think about in the next stage to the relation between whether to commission a cost model in and among various wholesale charges view of the need for further regulation in themselves. Mindful of the regulatory aim of the mobile market (see also the comments securing fair competition and encouraging on this in the strategic plan for 2007). 202 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Regulatory implications of the Specifically, we will need to consider the development towards NGN core effects of migration to NGN/NGA, in par- and access networks ticular, on the market analysis procedures As shown in the strategic plan for 2007, the and regulatory orders based on them. migration from conventional PSTN net- Rates cases for interconnect services and works to NGN IP-based core and access net- bitstream access are also on the agenda. works throws up a host of regulatory challenges. To take account of emerging Given the diverse implications, regulatory changes in the network and also to continue challenges and adaptation imperatives, we to provide a level playing field, the Agency, must continue to widen our NGN structure early on, initiated a series of discussions at and costs information base. national level (local loop consultation, within the advisory project group "Framework This migration from the traditional net- conditions for IP-based networks"), took works (fixed, mobile and broadband cable) decisions and engaged at European level in to converging NGN core and access net- the IRG/ERG debate (ERG Report on Inter- works presents us with a raft of technical connection, ERG Opinion on Regulatory challenges with regulatory consequences Principles of NGA). These activities must be and implications for the telecoms industry. continued and concretised in 2008. In its work in the various standardisation bodies, for instance in the ITU, ETSI/3GPP The changed network structures may make and ETSI/TISPAN, the Agency will push for it necessary to adapt today's wholesale transparent procedures and open inter- products. We must also look at the extent to faces, the inclusion of security concerns which NGNs may affect market definitions and service interoperability. and findings of significant market power, new regulatory orders and rates approval Consumer protection issues procedures. In this connection we will also Consumer protection is, essentially, an have to consider how the infrastructure ongoing task. Nevertheless, the following costs of a multi-service network should be activities merit special mention. allocated to the various wholesale products. The transition to NGNs may be • Ascertaining the extent of a text and accompanied, for instance, by changes in video relay service for the hearing im- economies of scale and scope, and in access paired. Hosting discussions on voluntary requirements, too. Given the bottleneck commitment by the telecoms industry to nature of access and originating networks, continue the pilot project. access to this infrastructure continues to be • Further implementation of the new con- a significant issue for competition in the sumer protection arrangements (notably broadband service markets. itemised billing, publication duties and technical checks) in the Telecommuni- cations Legislation Amendment Act. STRATEGIC PLAN 2008 203

• Monitoring compliance with the amend- And the interests of professional, scientific, ed consumer protection arrangements of military and safety-related radio services sections 66a ff TKG. Watching the must not be forgotten. market for any new misuse scenarios, say in the form of rules for payment systems Important spectrum management tasks bypassing diallers, and, if appropriate, are on the agenda for 2008, often as the introduction of measures under section prelude to conceptual or concrete projects, 67 TKG. Special attention will be paid to at international and European level. achieving high levels of price transparency. • Monitoring the arrangements on price Concrete award projects indication, price messages, price ceilings, • Drafting a decision on the award condi- cutting the connection and the right to tions and the design of the auction for receive information, extended to addition- spectrum in the bands at 1.8 GHz, 2 GHz al kinds of service and hence to addition- and 2.6 GHz for digital cellular mobile al subranges. The amended regulations radio. Translating the auction rules into are expected to increase our work to appropriate auction software, organisa- combat abuse. tional preparations for the auction. • Drafting a decision on the rules for award- Spectrum management ing further spectrum for Broadband The ever greater mobility of the communi- Wireless Access, Package D of the 3.4 to cations society is accompanied by growing 3.5 GHz band. Study of the 3.6 to 3.8 GHz demand for radio-based applications. band with a view to future use for BWA. However, this demand can be satisfied only • Provision of fixed link frequencies as part if enough spectrum is available. Techno- of digitisation for public safety organisa- logical progress, with its ever shorter inno- tions. vation cycles, also needs a flexible frame- • Opening the bands at 71 to 76 GHz and 81 work if suitable spectrum is to be made to 86 GHz for fixed link use. available in timely manner. Conceptual projects These technology and market-driven • Updating the Agency's Frequency Usage trends pose great challenges for the regula- Plan to incorporate the results and reso- tors. On the one hand, regulators are sup- lutions of the 2007 World Radiocommu- posed to provide spectrum in accordance nication Conference (WRC-2007) and with demand, ie with minimum delay, in amending the Frequency Band Alloca- appropriate quantities and, as far as possible, tion Ordinance accordingly; updating for multiple applications. On the other, the subplans in response to urgent na- they must see that spectrum is used effi- tional requirements. ciently and does not cause interference, • Implementing simplified spectrum and must secure fair competition and pro- award for all broadcasting applications. mote sustainable competition in markets. Meeting coverage requirements. 204 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

• Drawing up an Administered Incentive global technical standards are required on Pricing scheme as an instrument of spec- technical grounds. The Agency plays an trum management. active part in the standardisation of new • Further implementation of regulatory technologies and reconfigurable radio and technical criteria and framework systems, contributing to both national conditions to improve flexible spectrum (WIGWAM, EASY-C) and international use, eg as part of Wireless Access Policy research projects (E2R). One of its aims in for Electronic Communication Services doing so is the early introduction of regula- (WAPECS). tory requirements for specific equipment • Fresh concept for non-public radio appli- in conjunction with the industry to provide cations, particularly with a view to the timely introduction of new technology introduction of new digital mobile radio concepts and early innovation. A global (DMR). approach is envisaged for the introduction • Drawing up and implementing a concept of new technologies, for the above reasons. for future frequency assignment proceedings for narrowband trunked radio The following conceptual activities sched- (410 to 430 MHz band). uled for 2008 should be mentioned in par- • Drawing up a concept on the availability ticular. of spectrum for wireless microphones. • Setting up an ETSI Technical Committee European and international projects (TC) for ITS and for Software Defined • Opening new frequency bands for inno- Radio (SDR)/Cognitive Radio (CR) to vative radio applications within CEPT and define relevant technical concepts and the European Union, eg for ultra wide- requirements and to describe them in band (UWB) applications, for the devel- appropriate specifications. opment of intelligent transport systems • Developing a concept for flexible spec- (ITS) and for mobile satellite communica- trum use for cognitive wireless systems in tions systems with terrestrial compo- conjunction with industry partners in the nents. new EU E3 research project (End to End • Engaging in the European debate on the Efficiency). digital dividend. • Developing, in this connection, a flexible • Helping to progress the ERO Frequency certification concept for the R&TTE Information System (EFIS) to promote Directive for reconfigurable systems. transparency for market players. Pro- • Incorporation of the relevant research vision of information on the interface results in standardisation (eg ETSI, ITU). requirements applicable as from 2008. • Request by TCAM to the European Commission for ETSI to be given a man- Standardisation date to draw up a harmonised standard Before frequencies can be used nationally, for SDR/CR for application under the international coordination, agreements R&TTE Directive. and the provision of European and/or STRATEGIC PLAN 2008 205

• Supporting the ITU in drafting a report electromagnetic fields and evidenced this on CR. in a safety certificate.

ETSI was busy in 2007 with a number of The Agency intends to commission a study RFID activities, most notably UHF-RFID. in 2008 to assess fixed amateur radio trans- These included a new system reference mitters. Taking into account the special document to CEPT and a feasibility study. features of amateur radio, the study is to The harmonised standard was then adapt- look at the possibilities for incorporating ed, technical specifications provided on this equipment in the assessment proce- RFID installation and RFID readers synchro- dures. nised. ETSI field test results support this approach and the technology is now avail- Progressing controls procedures able in the market, sufficiently mature and Planned for 2008 is work to update the EMF with sufficient quality levels, for a number Controls Ordinance (BEMFV). International of implementations. 2008 will see the standardisation activities are to be includ- introduction of further equipment require- ed to a greater extent, in the interests of ments, also reflecting the convergence of harmonisation. mobile radio and RFID technology. Environmental Code Electromagnetic fields The new Environmental Code (UGB), in par- In the context of activities to protect per- ticular the draft Book IV (Non-ionising sons exposed to electromagnetic fields, we radiation) and the ordinance referred to in should mention the following, in particular. section 6 UGB IV (draft), makes participation by the Agency necessary in respect of Online site certificate application changes to the EMF Controls Ordinance A comprehensive specification has now that its implementation will make neces- been drawn up, as planned, to make it pos- sary. sible for operators to apply for safety certificates online. Online application is to be Technical emergency calls directive offered in 2008 as an additional service and Section 108 of the TKG 2004 describes the to reduce administration. essential requirements for emergency calls, modified by the Amending Act of Assessment of amateur radio equipment February 2007. The Federal Economics In Germany, every transmitter operator Ministry is currently agreeing with other has been required since 1 July 1992 to apply federal ministries and network operators for a safety certificate for transmitters that details of the ordinance referred to in sec- have an eirp of 10 W or more. Operation of tion 108(2) TKG on emergency calls, which the transmitter is possible only when the will then be submitted to the German Agency has determined compliance with Bundesrat for consent. the limits to protect persons exposed to 206 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

The Agency is required to draw up a techni- Market surveillance cal directive based on the TKG and the Section 13(2) paras 1 ff list our market sur- emergency calls ordinance to replace veillance tasks, in particular: Deutsche Telekom's now obsolete technical directive. New providers have entered the • conformity assessment continuing to market as a result of the move from line shift to the manufacturer's declaration, switched to packed switched technology • transferring Regulation 339/93/EEC on and other access technologies such as checks for conformity with the rules on broadband and voice offers based on VoIP, product safety in the case of products as a result of which it has become a matter imported from third countries, of urgency to revise the technical rules in • closer cooperation with the customs order to secure continued provision of authorities with the aim of including the emergency calling for everyone. Current applicable regulations on product safety plans envisage gradual implementation, to in the Regulation on a common regula- accommodate technological advance. One tory framework for the marketing of proof the first steps will be planning for the ducts, as all the other essential require- administration and allocation of technical ments of the EMC and the R&TTE Direc- numbers needed to reach the emergency tive besides product safety must be taken centres. into account, and • supporting the Commission's current Electromagnetic compatibility efforts to achieve more efficiency and Technical standardisation balance in market surveillance and to Section 13(2) para 6 of the new Electro- strengthen CE marking as a European magnetic Compatibility Act (EMVG) requires "quality mark". the Agency to cooperate on matters of technical standardisation in national and Enforcement of the order to protect international standardisation bodies and public telecommunications networks to act in a supporting role for other federal and radio equipment operated for safety authorities. This is particularly important purposes in light of the complex European debate A new task for the Agency is enforcement and national discussions with the Federal of the statutory order referred to in section Interior, Defence and Transport Ministries 6(3) of the EMC Act for the protection of and the Federal Criminal Police Office (pro- public telecommunications networks and tection of safety-related radiocommunica- radio equipment operated for safety pur- tion services). Our national interests in this poses. This will involve preventive action in area can be safeguarded at European level the shape of random checks, across the only when the Agency is proactive in the country, of unwanted emissions from wire- work of the relevant bodies. based telecommunications systems and networks, and taking any necessary action as a result. STRATEGIC PLAN 2008 207

Transmitters and receivers that need special Automated information procedure protection for reasons of public safety will The Agency's automated information pro- be monitored by the Agency in consulta- cedure as per section 112 TKG represents an tion with the federal authorities respon- important contribution to public safety. sible. Those affected will be included by The Agency is currently involved in draw- way of participation in two working groups ing up the new ordinance required by sec- (WG Random Checks, WG Monitoring). tion 112(3) TKG. This will be followed by a technical directive, essential for the design Numbering of the automated procedure in light, par- One of the aims of regulation, set out in ticularly, of the rapid pace of development section 2(2) para 8 TKG, is to secure in innovative services such as VoIP, drawn efficient use of numbering resources. up in conjunction with the industry associations and authorised bodies. Section 2 sentence 1 of the Telecommu- nications Numbering Ordinance (TNV) Technical implementation of intercepts requires the Agency, following a public The Agency's work on the technical imple- consultation, to publish an annual num- mentation of intercepts is another import- bering concept reflecting developments in ant public safety contribution. Most not- the telecommunications market and their ably, the technical directive as per section implications for the numbering plan. The 110(3) TKG provides the basis for the imple- concept should show, as stated in the an- mentations of the telecommunications alysis of the draft ordinance, how the num- companies, the manufacturers and the bering plan is expected to progress, in security authorities. The directive must be order to provide maximum transparency adapted constantly to accommodate new and a sound basis for planning. It will place communications technologies. individual measures in their overall context and provide an instrument with which The arrangements on Internet access (DSL, regulatory aims can be achieved by amend- cable and WLAN) in the December 2006 ing existing arrangements with the involve- directive have been taken forward. Work ment of all the stakeholders. The number- has progressed on the studies of WLAN ing concept, as stated in section 2 sentence market players and business models. 2 of the Numbering Ordinance, will con- Following completion of the VoIP stand- tain an overview of the degree of occu ardisation activities, a new technical direc- pancy and the development of demand in tive was drawn up in mid-2007 that covers all numbering spaces, numbering ranges VoIP communication for the most part. It and subranges used, identifying those entered into force in early 2008; companies spaces, ranges and subranges where must implement its amendments by the resources are expected to become scarce end of 2008. Further studies on this seg- in the next five years. ment of the market are under consideration for 2008 to allow full coverage of VoIP communication. Work will then 208 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

begin in the second half of 2008 to incorpo- The issue of so-called signature-prepared rate the findings in the directive. cards – some 24 million "rechargeable" bank cards have been issued to savings Arrangements for the secure electronic bank customers alone – has created the transmission of judicial intercept orders basis for the widespread use of qualified are also to be included in the directive in signatures in the private sphere (eg for 2008. home banking). We assume that the home banking application, in particular, will On 1 January 2008 the Telecommunications boost the spread of qualified electronic Interception and Other Undercover Inves- signatures among savings banks and other tigation Measures Reform and Transpos- financial institutions. ition of Directive 2006/24/EC Act took effect. The Agency is already involved in inter- In light of this most welcome breakthrough, national standardisation activities in light the Agency is called upon particularly to proof the data retention and information duties vide input and to push for further success. set out in the Act. Amendments to the Interception Ordinance and the technical The Agency expects that 2008 will bring a directive are likely in 2008 on this basis, to large number of new product certifications define uniform transmission methods. The and manufacturer declarations for publica- Agency will provide technical advice on tion. The main reason for this is that the this to the Economics Ministry, in charge manufacturers of qualified electronic of the amendments to the Ordinance. signature products must now, since the end of 2007, incorporate algorithms with ELECTRONIC SIGNATURE longer keys and other hash functions in their products or develop new products if Qualified electronic signature, after a they are to guarantee the security levels lengthy trial and consolidation phase, is required. now on the verge of breakthrough in Germany on a wide front. Processes are now under development to provide secure archiving for documents In the business and public service environ- with a qualified signature and will soon be ments there are now applications that can commercially available. When algorithm be handled electronically from start to suitability ends, the procedure set out in finish as an alternative to the traditional the Electronic Signatures Ordinance for paper-based processes (eg electronic inbox long-term data storage will become rele- for the courts, electronic entry in the com- vant. The newly developed technical speci- mercial register) and even ones that, by fications for signature renewals are cur- law, must be handled electronically (eg rently being translated into products. advance turnover tax notifications, emis- Signature renewals will also be needed for sions trading). the qualified certificates of the root and the trust centres. STRATEGIC PLAN 2008 209

The Agency will provide input for the forth- according to the common criteria. These coming revision of the Electronic Signa- developments must be fostered nationally. tures Act and the Electronic Signatures Ordinance. It aims mainly to incorporate We plan to continue our international con- past experience while maintaining the sulting as far as possible. Advising foreign high degree of legal certainty. This will be governments on qualified electronic signa- another marker of the success of qualified ture issues is starting to bear fruit; thus a electronic signatures. consortium of German companies is setting up the infrastructure with a root CA at Yet national success can be sustained only the Information Technology Industry if it is embedded in the right European and Development Agency (ITIDA) in Cairo. Four international environment. Achieving and accredited certification service providers underpinning this with its expertise will be will operate below the root, one at the another central concern for the Agency Finance Ministry, covering the entire alongside its priority national projects. public authority environment (administration PKI). Harmonisation of technical equipment at European and international level will be The German Electronic Signatures Act is further progressed by the European Com- thus showing many other countries the mission in a new standardisation initiative. way. Its high degree of acceptance under- Given the growing spread of qualified elec- scores the suitability of Germany as a place tronic signatures in other countries, anoth- to do business. er challenge will be to develop procedures to put foreign signatures on an equal POST footing and to determine equivalent security for foreign products. At European level, The postal markets are facing major talks on the cross-border recognition of change with expiry of the exclusive licence products and processes will be stepped up held by Deutsche Post AG (DPAG). The at the Forum of European Supervisory Agency will follow this process closely in its Authorities for Electronic Signatures role as regulator. (FESA). Consumer protection in a multi-provider New technical developments surrounding environment qualified signatures are also expected in In future, consumers will have a choice of 2008. For instance, a list of trust centres will provider in respect of services previously be specified at European level, available to reserved for DPAG under its exclusive users of qualified signatures; new protec- licence. This also holds good for many uni- tion profiles for secure signature creation versal services. devices will likewise be defined at Euro- pean level to make it easier for product This new situation will pose problems manufacturers to evaluate their chipcards above all at the recipient's end, eg in con- 210 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

nection with redirecting and storing mail. segments. Linkage with the traditional let- As the addressee does not usually have any ters market will also be examined in light influence on the sender's choice of mail of the existence of diverse organisational, provider, he does not know which provider financial and staffing links and the devel- he should request redirection or storage opment of cross-market products. services from. As regards the methodology, various tools Providers' statutory right to access to will be used; traditional participant sur- change of address information from dom- veys, secondary analysis, recourse to avail- inant licence holders (currently only DPAG) able data and studies collected and con- is not enough to safeguard consumer inter- ducted by the Agency in the past, and input ests: the addressee does not know whether from industry associations and institutions. the provider chosen by the sender actually The analysis is intended to provide base exercises this right. material that can be used to respond to short-term regulatory requirements and to The Agency will work out proposals for underpin any further studies that might practicable solutions and the rules needed prove necessary. for their implementation. Effects of licensing on competition in the Soliciting bids for universal services letters market If universal services cannot be provided DPAG's licence extension in 2002 for an- adequately, bids will be solicited, under other five years was followed by a number certain circumstances. The Postal Act (sec- of market exits and insolvencies as well as a tion 14(4) sentence 2) requires the Agency fall in the number of licence applications. to set objective, comprehensible and non- The number of active licence holders has discriminatory rules for any such bidding. also been in decline for some time now. A main reason for this trend was seen in the No bidding proceedings are planned at the extension of the monopoly and its reper- moment. The relevant arrangements of the cussions on the Agency's licensing practice; Postal Act were suspended for the period of yet there was no firm evidence of this. the exclusive licence, but will become applicable again as from 1 January 2008. The Agency therefore plans to investigate Thus one of the Agency's tasks in 2008 will the effects of licensing practice on compe- be to determine the bidding rules. tition in the letters market following expiry of the exclusive licence. The investigation Analysis of the courier, express and will focus on developments among the parcel services markets market players and in competition itself in The Agency is planning a detailed analysis the letters market in order to reliably docu- of the courier, express and parcel services ment the reasons for any changes. markets in 2008, looking in particular at the interrelations between the individual STRATEGIC PLAN 2008 211

Effects of VAT arrangements on demand more than 100,000 customers were required for postal services and on choice of to have completed legal unbundling by provider 1 July 2007. The Agency will continue its The VAT system in Germany has many supervisory activity in 2008, particularly as classification and exemption options, in regards operational and information both the private and the public sector. unbundling. We also plan to look, across the country, at the specific implementa- The fact that a market player is subject – or tions of legal unbundling. At European not – to VAT affects the market price and level, the Agency will engage in the current can therefore be an influencing factor on unbundling debate taking place under the demand. So that we may clarify the ques- European Union's third energy package by tion of whether, and if so, to what extent, actively participating in the relevant demand for postal services and choice of CEER/ERGEG unbundling working groups. provider is influenced by VAT issues, we aim to carry out a specific survey of end Incentive regulation customers. Now that the Incentive Regulation Ordinance (ARegV) has taken effect, its Postal service coverage – use of a implementation, scheduled for 1 January geodatabase 2009, will be one of the Agency's main The Agency is currently setting up a geo- work items in 2008. database to provide information on postal infrastructure and the services offered by The Agency will calculate the revenue caps mail companies in Germany. As an adjunct, for the first regulatory period, taking the Agency will investigate how the geo- account of efficiency requirements, the database can be used as a tool to safeguard retail price index, a sectoral productivity postal service provision, amongst other factor of 1.25 percent and any further ele- things for the early recognition of gaps and ments such as a quality element or a flat disruptions in a multi-provider environ- rate investment markup, issuing operators ment. a notice detailing their specific revenue path. This means that use of system char- A further step will be to extend the func- ges can be set on 1 January 2009 for the first tionality of the system in line with the time by way of incentive regulation. requirements of the e-government initiative (BundOnline) and to offer all the The foundation for incentive regulation is a Internet-capable functions online. broad, reliable database. That is why a plausibility examination of the data sub- GAS AND ELECTRICITY mitted by the operators in late 2007 /early 2008 is so important. The data exchanges Unbundling with the regulatory authorities of the feder- Unbundling continued steadily in 2007. al states must also take place smoothly and Distribution system operators (DSOs) with to schedule. 212 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Based on the data received, we will deter- when network operators are given suffi- mine the starting point and the individual cient incentives to minimise the costs that elements of the formula for companies' arise. specific revenue path. The revenue caps will start out from the costs examined in Additionally, the Agency will consider the approval proceedings. whether the data basis is sufficient to take account of a quality element in the revenue A main element of the formula for deter- cap in the very first regulatory period. mining the revenue path is the efficiency requirement, set as a result of benchmark- And finally, preparatory work is necessary ing. European benchmarking is also planned, in respect of the processes involved in any the coordination of which has been adjustment of the revenue cap within a assumed by the Agency in a European regulatory period. Annual adjustment of regulatory authorities working group, to the revenue cap is possible when there is a determine the efficiency requirements for change in the cost shares that cannot be the electricity transmission system opera- controlled on a lasting basis, and – upon tors (TSOs). In parallel, reference network application – in the case of unreasonable analyses are being prepared for the gas and hardship as a result of unforeseeable electricity TSOs for use when the interna- events. For DSOs, a long-term change in the tional benchmarking for the electricity services they provide can be reflected by an TSOs or the national/international bench- expansion factor. An incentive regulation marking for the gas TSOs fails to deliver account must also be opened, showing the reliable results on account of inadequate annual difference between target and real data from the above methods. revenues and the net balance at the end of the period. Another major work item will be to determine the non-controllable costs and, in Access to the electricity grid particular, the regulated costs. Relevant Market coupling here, for instance, is balancing energy, Market coupling is concerned with con- transmission loss and the process for the gestion management and allocates capacity TSOs of turning the main intermittent jointly to several cross-border interconnec- generation from renewable sources (main- tors. It is currently planned to introduce ly wind) into a constant monthly profile for market coupling for the German-Danish the suppliers. For some operators, these border and for the region comprising components make up more than 50 per- Belgium, France, the Netherlands, cent of their costs. Considerable efforts will Luxembourg and Germany. The first pro- be needed here to decide when we can talk ject is set to begin on 3 June 2008, and the about effective and full procedures regula- second on 1 January 2009. The Agency is tion, when such regulation is meaningful, actively involved in the work to establish then to implement it and to make sure that the projects. Besides the many technical we talk about effective regulation only issues that still need clarification, the anti- STRATEGIC PLAN 2008 213

trust requirements, in particular, must be Agency will therefore devise a system of met. The Agency is therefore working monitoring so that it can find out the closely with the Federal Cartel Office to this extent and the cost of the redispatch effort end. Any new aspects or findings are dis- from every TSO. Surveyed then, in particu- cussed with the TSOs concerned, the power lar, will be the time and duration of re- exchanges and the market players. dispatch measures, congestion levels and payments incurred. The congestion management study group set up at the Agency will also act as an Monitoring introduction of the information and discussion forum for the congestion management guidelines German parties during the introduction of The Agency will also take a strong stance in the projects. 2008 on improving transparency in the European electricity wholesale markets. In Internal congestion management 2007, the Agency was primarily concerned Under section 15 of the Electricity Network with drawing up the report on transpar- Access Ordinance, TSOs are required to ency in the regional electricity markets manage congestion, the emergence of with German participation. Now in 2008, which could not be avoided within finan- with reference to these transparency reports, cially reasonable limits, by means of market- the Agency will monitor implementation oriented, transparent and non-discrimin- of the transparency rules in the guidelines atory procedures. In early 2007 the Agency that took effect in December 2006 on the commissioned a study on the methods for management and allocation of available managing internal congestion in the trans- transmission capacity on lines between mission system, which was completed in national networks. Implementation of the December. The study compares the differ- transparency rules means that in 2008, for ent congestion management methods the first time, harmonised data will be available. It also discusses the issues involved available on electricity generation and, in in introducing a system of congestion particular, on scheduled and unscheduled management, most notably how it should interruptions to generating units. The be embedded in the existing framework. Agency will help steer this process and The study concludes that structural con- provide support if any obstacles arise. In gestion, in the normal course of events, Europe the Agency will focus its attention should be eliminated as rapidly as possible on seeing that the relevant data are pub- by expanding the network and should be lished in all the regions involved in a har- managed until then using a system of cost- monised manner. based redispatch. At the same time, however, the redispatch effort should be con- Connection and access to electricity stantly monitored so that, if particular supply networks thresholds are exceeded, it will be possible In connection with questions of access to to move in time to preventive congestion distribution systems, the Agency will pro- management, such as market splitting. The pose a market-oriented procedure for ten- 214 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

dering for the loss energy needed. Under Another work item for the Agency will be section 10(1) of the Electricity Network to address issues of smart grid and smart Access Ordinance, operators of supply net- metering development and integration. works must procure energy loss (transmis- Amid the growing demands of energy effi- sion loss) in accordance with transparent, ciency, economic efficiency (reasonably non-discriminatory and market-oriented priced energy supply) and environmental procedures, unless fewer than 100,000 cus- sustainability, intelligent solutions are tomers are connected to their distribution needed for matters such as optimised opera- system. This will be done by tendering, pro- tions to increase capacity and a system of vided there are no fundamental reasons for smart metering and measuring. The not doing so. Agency is involved in the introduction of metering and measuring liberalisation and Following the preparation of and consulta- the development of integrated smart grid tion on the publication duties presentation concepts. guidelines, work was completed on examining the responses and the guidelines were In this area, it will be possible to set priori- then published on 29 January 2008. The ties other than the determinations on pro- next step is to monitor the quality levels. cedures regulation we have already mentioned – in essence, matters of access regu- Much of the Agency's work will focus on lation – only to a limited extent. That said, examining the system status and system we may expect to be approached, as a mat- development planning reports according ter of urgency, with questions of connect- to section 14(1) in conjunction with section ing power generating plant to different 12(3a) of the Energy Act (EnWG). Amid the network levels, of the terms and conditions ever increasing number of decentralised for connecting offshore wind turbines, in generation units, capacity requirements particular, and of standardising and simpli- and the risk of congestion in the distribution fying the practice of collecting infrastruc- network, too, are growing. The network ture contributions. operators will report on this in 2008 for the second time. A more comprehensive look is Access to gas networks planned with the operators being given Reducing the number of market areas advance guidance on structuring the con- Reducing the number of market areas will tent of the reports. This brings the reports be another important work item in 2008. into line with those required from the TSOs. Section 20(1b) of the Energy Act requires For the rest, securing expansion of the net- the network operators, in the interests of work so that it can respond efficiently to promoting easy and efficient access, to the growing transport requirements of the reduce their market areas to a minimum. German electricity grid will be one of the This will counter fragmentation and main tasks in the coming year. increase the zones in which market players can freely trade gas amongst themselves. The expectation is greater liquidity in the STRATEGIC PLAN 2008 215

gas trading markets. So far it has been pos- Access to biogas distribution networks sible, chiefly as a result of internal concen- New regulations on biogas feed-in are likely tration, to achieve a clear reduction in the to take effect in the first quarter of 2008 as number of market areas. By the end of part of the implementation of the goals 2007 the number had been reduced volun- agreed by the federal cabinet in Meseberg. tarily to eight. The Agency will continue to These new regulations will bring major follow the process closely, stepping in to changes to the legal framework, particularly guide it where necessary. Further improve- as far as the arrangements for connection, ments will definitely require cross-com- accounting and avoided use of system pany cooperation in the market areas. If charges are concerned. For the market voluntary reduction does not appear possible players, putting these new regulations into within the envisaged time, the Agency will practice will involve a greater need for have to take a decision on whether to discussion and consultation on the achieve its goal by means of official proced- interpretation of the arrangements. The ures. Agency expects that it might also need to play an advisory role in this. Control and balancing energy Another important area in 2008 is control Switching supplier and balancing energy. The aim here is to The Agency on 20 August 2007 issued a deci- flesh out the framework of section 22 of the sion on uniform business processes, across Energy Act. A transparent, efficient and the country, for changing gas supplier. This pro-competitive control and balancing means that the rules by which a change of system for the gas sector is to be created in gas supplier is effected are now binding. agreement with the gas industry user and Accordingly, the process is to be automated operator associations. Once we have clar- as far as possible and based on a uniform ified the main theoretical basis for the new electronic data format. control energy system, we will turn our attention to a practical implementation The processes described (change of supplier, concept for its procurement, provision and end of supply, beginning of new supply, etc) billing. Then, when the new model struc- and the EDIFACT data format with the mes- tures are implemented, we will follow the sage types specified in the ruling are to be stages voluntarily implemented by the used as from 1 August 2008. The market companies, eg by way of amendments to players are thus required to develop and the general cooperation agreement. We implement standardised EDP processes will also clarify whether, and if so, to what based on the detailed descriptions. Respon- extent, official determinations are needed sibility for timely provision of the data for- over and above this for a legally sound mat rests with the network operators, who design of the control energy system. will need to coordinate this with support from the industry associations. Implemen- tation will be supervised by the Agency, 216 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

which will step in to provide advice and sup- France, Belgium, the Netherlands, port where necessary. Denmark, Sweden and Ireland. In matters of primary cross-border capacity the International affairs Agency is in charge of a sub-project which On issues of gas market regulation, the looks in detail at capacity-related processes Agency will be represented in the coming at the Bunde/Oude Statenzijl (Germany – year too in the ERGEG and CEER working Netherlands) crossing point, with a view to groups as chair and participant respectively. their improvement.

Thus the Agency, in conjunction with the In the European regulatory bodies, too, French regulatory authority CRE, will the Agency will provide specialist input for again chair the Gas Investment Framework the Commission's proposed third energy Task Force. Work will focus particularly on package. updating the report on application of Article 22 of EU Directive 2003/55/EC (gas Duties arising from the Renewable acceleration directive) in the individual Energy Sources Act member states. The First Act Amending the Renewable Energy Sources Act (EEG) gave the Agency Another focus of the Agency's work will be new duties as from 1 December 2006. the Gas Capacity Task Force, which will be Accordingly, section 19a(1) calls for supervi- chaired jointly by the Agency and the sion of payments for electricity fed in from Belgian regulatory authority CREG. Here, renewable sources (redistribution mecha- the Agency will be responsible chiefly for nism), supervision of publication duties capacity allocation and congestion and notification of the difference between management. payments for energy from renewable sources based on the Act and the average costs The Agency will also provide input for the for purchasing electricity. Gas Market Monitoring Task Force, the Gas Transmission Tariffs Task Force, the Gas Connected with supervision of the redistri- Storage Task Force and the Liquefied bution mechanism is the duty incumbent Natural Gas Task Force. on the electricity supply companies, DSOs and TSOs to provide comprehensive data to Besides these activities for CEER and the Agency. In 2008 data will be requested, ERGEG, continuation of its work in the Gas widening the 2007 survey, on 275,000 Regional Initiatives has high priority. The plants for the first time. This will make it Regional Initiatives aim to dismantle trade possible to check the working of the redis- and transport barriers between the EU tribution mechanism. states initially at regional level, in order to facilitate the creation of a single market. Gas and electricity tariff regulation Germany is a member of the North West Regulation by the Agency of the use of regional gas market, along with the UK, system charges is designed to promote effi- STRATEGIC PLAN 2008 217

cient service provision by the operators. RAIL Now that the charges approved in the first round expired as a rule at the end of 2007 With regard to regulating access to rail in the electricity sector and at the end of infrastructure, the Agency will continue March 2008 in the gas sector, the Agency is the work it began when it assumed respon- currently scrutinising the operators' new sibility on 1 January 2006. Following the proposed charges in a second round of consultations on partial privatisation of approvals. Charges will be approved until Deutsche Bahn AG (DBAG), the Agency has the end of 2008, ie until the introduction of drawn up a number of proposals on how incentive regulation. Any increases before the existing legal instruments could be that time must be applied for by the opera- made more specific and how details could tors and approved by the Agency. be changed. There is currently uncertainty about how matters will proceed, so that The publication duties set out in section 27 regulatory action will continue to be taken of the Electricity Network Charges Ordi- for the time being on the basis of prevailing nance (StromNEV) and Gas Network law. Charges Ordinance (GasNEV) are intended to bring greater transparency to the energy Tariff regulation market. Monitoring compliance with these The pricing of rail infrastructure use is a duties is thus an ongoing task for the central element of non-discriminatory Agency. access. Charges that are discriminatory, too high or that have a prohibitive effect Gas pipeline competition may make the exercise of statutory access The Agency is currently examining the rights much more difficult, or encourage notices from twelve operators stating that, anti-competitive practices. The Agency under section 3(3) of the Gas Network therefore commissioned a legal opinion to Charges Ordinance, they are not required clarify the charging issues in the General to set their use of system charges on a cost- Railway Act (AEG) and the Rail Infrastruc- oriented basis. The precondition for this is ture Usage Regulations (EIBV). Its findings that the operators are exposed, for the are the basis for an extensive review of the most part, to effective or potential pipeline pricing components, enabling the Agency competition. It was not possible to complete to monitor compliance with the criteria for the cases in 2007 as originally planned, due pricing levels and to identify any discrimi- to the complex economic and legal checks nation. required and the need to gather more information and market data. Completion Tariff regulation cases is now scheduled for 2008. Here, the Agency will be taking a close look at DB Station&Service's station pricing system and the path pricing system. 218 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Investigation of these cases will also in- prices (incentive path) in the particular clude the following: regulation period (three to five years) that stimulates efficiency and delivers suitable • looking at compliance with the full cost returns. If the company manages to reduce benchmark (establishing the costs that costs to a greater extent than specified, it have actually arisen, taking into consid- can keep this efficiency gain. Price cap eration cost coverage by public subsidy), regulation also provides an incentive to sell • allocation of common costs, more services and thus promotes the aim • taking account of head office charges of getting more traffic on to the rail. and internal prices in group companies, • reviewing individual components and It is recommended that baskets of products markups, regional factors in particular, be created, each with its own cap, eg one and for paths and one for service facilities by • looking at service facilities environments. traffic services in local passenger traffic, long distance passenger traffic and freight. Incentive regulation scheme The legal opinion on charging also found The Agency intends to take this concept considerably fewer price regulation arrange- forward, independently of the progress of ments in the rail sector than in other DBAG's partial privatisation, under its sym- regulated areas, and proposed that the metrical regulation, in order to provide the pricing regulations should be taken forward. lawmakers with conceptual proposals. At the proposal of the Federal Transport Responses to the final reports will need Ministry, the Agency thus set up a working close attention in 2008. group in mid-2007 comprising representatives of the Finance Ministry, the Transport The experience gained in the energy sector Ministry, the Economics Ministry, the fed- from introducing an incentive regulation eral state ministries, DBAG, the Netzwerk scheme will feed into this process. Privatbahnen (Network Private Rail), the Verband deutscher Verkehrsunternehmen Incentives to lessen disruptions (Association of German Transport Under- Under section 21(1) first sentence of the Rail takings, or VDV) and the Federal Cartel Infrastructure Usage Regulations, rail net- Office. The result of the group's work is a work operators must charge for their man- regulatory concept for future efficiency- datory services in such a way that they offer oriented tariff regulation. railway undertakings and rail network operators incentives, through perfor- In it, the Agency recommends application mance-related components, to lessen dis- of the price cap model. Taking account of ruptions and enhance rail network effi- the rate of price increases, the develop- ciency. ment of productivity, state subsidies and any other parameters, it sets a cap on the DB Netz AG as the biggest rail infrastruc- development of the regulated company's ture operator, introduced such an incentive STRATEGIC PLAN 2008 219

scheme on 10 December 2006, with its operational and technical regulations, we timetable change. Under the system, every will need to make further checks in future. delay longer than two minutes is registered New insights and conclusions from current by the infrastructure manager's service court cases will inform the process. providers, along with particulars of the causing company and a delay code, and an Implications of construction measures incentive charge of €0.10 per minute of for competitors delay is paid by the causing company to the The Agency will step up its efforts to find party concerned. A number of causes of out how users are informed about con- delay stemming from the rail network struction measures undertaken by the (construction measures) are excluded. The infrastructure manager before applying for category "no responsibility on the part of train paths and how users' concerns are any party" is detrimental to the incentive taken into account in planning. Just the scheme and runs counter to the intended extent of the construction measures effect of more efficient infrastructure use. planned for 2008 and subsequent years can Meanwhile, we have initial experience of have major implications for the competitive the scheme, which we now need to assess. position of the users. There are question marks in particular over how delays and their cause should be Infrastructure managers' European established, over concrete charging and planning how objections should be dealt with. As the rail networks in Europe become more integrated and cross-border traffic The Agency will help to refine such systems increases, national infrastructure manag- and to develop alternative models, if ers are stepping up their efforts to imple- appropriate. Every track and service facili- ment cross-border train path allocation ties operator is required by law to intro- mechanisms and capacity planning. Along duce incentives (section 24(1) of the Rail with the other national regulatory bodies, Infrastructure Usage Regulations). the Agency has the unchanged task of securing infrastructure access rights, not- Network and service facilities withstanding these developments. In con- statements sultation with the European Commission it Fundamental to access regulation is the is seeking maximum transparency in all preliminary examination of the network moves to realise and facilitate cross-border statement (SNB) and the service facilities train path rights. statement (NBS) as part of preventive regulation.

The Agency in 2007 made a number of checks and raised various objections to the statements. As the statements are constantly being taken forward and are linked with 220 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

List of abbreviations

A ATM Asynchronous Transfer Mode ACER Agency for the Cooperation of Energy B Regulators BAFA ACTA Federal Office of Economics and Export Allensbacher Computer- und Technik- Control Analyse BAPT ADSL Federal Post and Telecommunications Asymmetric Digital Subscriber Line Office

AEG BDEW General Railway Act Federal Association of German Energy and Water Industries AFuG Amateur Radio Act BEMFV Ordinance concerning the Controls for the AGB Limitation of Electromagnetic Fields General terms and conditions BGBl AGCOM Federal Law Gazette Italian communications regulatory authority BGH Federal Court of Justice ARegV Incentive Regulation Ordinance LIST OF ABBREVIATIONS 221

BKZ BVerfG Network costs contribution Federal Constitutional Court

BMAS BVerwG Federal Ministry of Labour and Social Federal Administrative Court Affairs BWA BMF Broadband Wireless Access Federal Ministry of Finance BWFA BMI Broadband Wireless Fixed Access Federal Ministry of the Interior BZA BMPT Outbound mail sorting centre Federal Ministry of Post and Telecommunications BZE Inbound mail sorting centre BMU Federal Ministry for the Environment, C Nature Conservation and Nuclear Safety CEE BMVBS Central Eastern Europe Federal Ministry of Transport, Building and Urban Affairs CEER Council of European Energy Regulators BMWi Federal Ministry of Economics and CEN Technology European Committee for Standardization

BOS CEPT Emergency organisations European Conference of Postal and Telecommunications Administrations BTOEltV Federal Tariff Code for Electricity CERP European Committee for Postal Regulation 222 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

CNSA DPAG Contact Network of Spam Authorities Deutsche Post AG

CP DPIHS Common Position Deutsche Post In Haus Service GmbH

CR DSL Cognitive Radio Digital Subscriber Line

CRE DTAG French energy regulatory authority Deutsche Telekom AG

CREG DUSS Belgian electricity and gas regulatory Deutsche Umschlaggesellschaft authority Schiene-Straße mbH

CSE DVB Central Southern Europe Digital Video Broadcasting

CUB TF DVB-H Competition and Unbundling Task Force Digital Video Broadcasting-Handheld

CWE DVB-T Central Western Europe Digital Video Broadcasting-Terrestrial

D E

DBAG e Deutsche Bahn AG expected

DECT EBC Digital enhanced cordless telephone Element based charging

DG ECC German Society for Deaf and Hearing- Electronic Communications Committee impaired Persons EDIFACT DMR Electronic Data Interchange For Digital Modular Radio Administration, Commerce and Transport Digital Mobile Radio LIST OF ABBREVIATIONS 223

EECMA ERG European Electronic Communications European Regulators Group Market Authority ERGEG EEG European Regulators Group for Electricity Renewable Energy Sources Act and Gas

EEX ETSI European Energy Exchange European Telecommunications Standards Institute EFIS ERO Frequency Information System ETSO European Transmission System Operators EG European Community EU European Union EIBV Rail Infrastructure Usage Regulations EuGH European Court of Justice EIU (Rail) Infrastructure Manager Eurostat Statistical Office of the European EMC Communities Electromagnetic compatibility EVU EMVG Railway undertaking Electromagnetic Compatibility Act F EMV-RL Electromagnetic Compatibility Directive FESA Forum of European Supervisory EMVU Authorities EMC and the environment FreqBZPV EnWG Frequency Band Allocation Ordinance Energy Act EQS TF FTEG Electricity Quality of Supply Task Force Radio Equipment and Telecommunications Terminal Equipment Act 224 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

G GW gigawatt GasGVV Basic Supply Ordinance for Gas GWB Competition Act GasNE Gas Network Charges Ordinance GWh gigawatt hour GasNZV Gas Network Access Ordinance H

GDL HDTV German engine drivers' trade union High Definition Television

GeLi Gas H-Gas Business processes for switching gas High Calorific Value Gas supplier HGB GHz Commercial Code gigahertz HGK GIE Häfen- und Güterverkehr Köln AG Gas Infrastructure Europe HPA GKG Hamburg Port Authority Court Costs Act HSDPA GPKE High Speed Downlink Packet Access Business processes for supplying customers with electricity HSUPA High Speed Uplink Packet Access GPRS General Packet Radio Service HVt Main distributor GSM Global System for Mobile Communications I

GSMR ICAO Global System for Mobile Communications International Civil Aviation Organisation – Rail LIST OF ABBREVIATIONS 225

ICP ISDN-PMX Interconnection Partner Primary rate ISDN lines

ICT ISO/IEC Information and Communications International Organization for Technology Standardization

IEB TF ISP Information Exchange und Benchmarking Internet Service Provider Task Force IT IEC CISPR Information technology International Electrotechnical Commission ITS IMT-2000 Intelligent Transport System International Mobile Telecommunications-2000 ITU International Telecommunication Union IP Internet Protocol K

IPR KeL Intellectual Property Rights Costs of efficient service provision

IPRI KEP International Performance Research Courier, express, parcel Institute kHz IPTV kilohertz Internet Protocol Television KOM IQ-C European Commission International Group for Improving the Quality of Rail Transport in the North- KraftNAV South Corridor Electricity Production Facilities Connection IRG Ordinance Independent Regulators Group kV ISDN kilovolt Integrated Services Digital Network 226 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

KVz N Cable distributor NAV kW Low Voltage Connection Ordinance kilowatt NBS kWh Service Facilities Statement kilowatt hour NCAH KWK National Communications Authority Combined heat and power system Hungary

L NDAV Low Pressure Connection Ordinance L-Gas Low Calorific Value Gas NE Northern Europe LNG Liquefied Natural Gas NGA Next Generation Access M NGN MessZV Next Generation Network Metering Access Ordinance NotrufV MHz Emergency Services Access Ordinance megahertz NRB MMS National Regulatory Authority Multimedia Messaging Service O MoU Memorandum of Understanding OLG MRA Higher regional court Mutual Recognition Agreement OTC MW Over the counter megawatt OVG MWh Higher administrative court megawatt hour LIST OF ABBREVIATIONS 227

OWP RFID Offshore windpark Radio Frequency Identification

P RL Directive PDLV Postal Services Ordinance RNE Rail Net Europe PKI Public Key Infrastructure RRC-06 Regional Radio Conference 2006 PMD Radio monitoring and inspection service RRL Framework directive PMR Private Mobile Radio RSC Radio Spectrum Committee PostG Postal Act RSPG Radio Spectrum Policy Group PSTN Public Switched Telephone Network R&TTE Radio equipment and telecommunications PUDLV terminal equipment and the mutual Postal Universal Service Ordinance recognition of their conformity

PZA S Service of documents SAR Q Specific absorption rate

QES SDR Qualified electronic signature Software Defined Radio

R SES Société Européenne des Satellites Reg TP Regulatory Authority for SGV Telecommunications and Post Rail freight traffic or transport 228 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

SigG T Electronic Signatures Act TAL SigV Local loop Electronic Signatures Ordinance TC SLP Technical Committee Standard profile TCAM SMS Telecommunications Conformity Short Messaging Service Assessment and Market Surveillance Committee SNB Network Statement TCB Telecommunication Certification Body SPFV Long-distance passenger rail services T-DAB Terrestrial Digital Audio Broadcasting SPNV Regional passenger rail services TF Task Force SRD Short Range Device TKÄndG Telecommunications Legislation SSB Amendment Act Interface specification TKEE StPO Radio equipment and telecommunications Code of Criminal Procedure terminal equipment

StromGVV TKG Basic Supply Ordinance for Electricity Telecommunications Act

StromNEV TKV Electricity Network Charges Ordinance Telecommunications Customer Protection Ordinance StromNZV Electricity Network Access Ordinance TNV Telecommunications Numbering Ordinance LIST OF ABBREVIATIONS 229

TPS UPU Train path pricing Universal Postal Union

TR TKÜ URB TF Telecommunications Interception Unbundling, Reporting and Benchmarking Technical Directive Task Force

TW URL terawatt Universal Service Directive

TWh UWB terawatt hour Ultra Wide Band

U UWG Unfair Competition Act UBB Usedomer Bäderbahn GmbH V

UCTE VDSL Union for the Coordination of Transmission Very High Speed Digital Subscriber Line of Electricity UGB VDV Environmental Code Association of German Transport Undertakings UIC International Union of Railways VfOSchli Amended rules of procedure UKW Very High Frequency (VHF) VG Administrative court UMTS Universal Mobile Telecommunications VKU System Association of Local Utilities

UN VO Funk United Nations Radio Regulations

ÜNB VoIP Transmission system operator Voice over Internet Protocol 230 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

VwGO WIMAX Code of Administrative Court Procedure Worldwide Interoperability for Microwave Access VwVfG Administrative Procedures Act WLAN Wireless Local Area Network W WPV WAPECS Universal Postal Union Wireless Access Policy for Electronic Communication Services WRC-07 World Radio Conference 2007 WAR Specialist group for regulatory issues Z

WIK ZDA Wissenschaftliches Institut für Certification service provider Infrastruktur und Kommunikationsdienste (consultancy)

232 FEDERAL NETWORK AGENCY ANNUAL REPORT 2007

Contact points

Practical information and help for those seeking advice

Please use the contact points below for queries Number information rights on the following: Queries on 0137 and 118 numbers Fax: +49 6131 18-5637 General questions on telecommunications, E-mail for 0137 numbers: post and rail [email protected] Tel: +49 30 22480-500 E-mail for 118 numbers: Fax: +49 30 22480-515 [email protected] [email protected] Queries on 0180 numbers Fax: +49 5231 913-180 General questions on gas and electricity E-mail for 0180 numbers: Tel: +49 30 22480-500 [email protected] Fax: +49 30 22480-515 [email protected] Radio interference Tel: 0180 3 232323* Number misuse, diallers and telephone spam Publications dispatch Tel: +49 291 9955-206 Tel: +49 361 7398-272 Fax: +49 6321 934-111 Fax: +49 361 7398-184 [email protected] [email protected]

Number management Tel: 0180 3 686637* *9ct/min from the fixed network; other prices possible [email protected] for calls from mobile networks Published by Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway Press and Public Relations Tulpenfeld 4, 53113 Bonn Tel: +49 228 14-9921 Fax: +49 228 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 heimbüchel pr, Berlin/Cologne

Printed by B.o.s.s Druck und Medien GmbH, Goch

Date of going to press 29. February 2008

Images Bundesnetzagentur/Christian Dalchow; istockphoto.com/Jacob Wackerhausen; PantherMedia/Ludger B., Alfred N.,Viktor W.; Sarbach Fotografie; Suk-Heui Park; ullstein bild/ Imagebroker.net

Agency's Annual Report 2007 under section 122 of the Telecommunications Act Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway

Tulpenfeld 4 53113 Bonn Tel: +49 228 14-0 Fax: +49 228 14-8872