Annual Report 2005 | Annual Report Federal Network Agency for Electricity, Gas, Telecommunications, Post and Railway Tulpenfeld 4 53113 Bonn, Germany 2005 Tel +49 (0) 228 14 - 0 Fax +49 (0) 228 14 - 8872 Federal Network Agency 2 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005 14 Triple play in Germany Contents President’s message 4 New responsibilities 8 Organisation chart 12 Triple play in Germany 14 Telecoms 22 Market watch 24 Consumer advice and protection 45 International developments 55 Ruling Chamber decisions 57 Administrative court proceedings 64 Technical regulation 67 Post 88 Market data 90 Public petitions and consumer protection 98 Ruling Chamber decisions 101 International activities 104 Administrative court proceedings 105 CONTENTS 3 22 88 108 130 Telecoms Post Energy Railway Energy 108 Regulation in Germany 110 Electricity 115 Gas 122 Market watch 125 Consumer Advice service 129 Railway 130 Agency’s functions, structure and core tasks 132 Specialist Group for Regulatory Issues (WAR) 136 Strategic plan 2006 138 List of abbreviations 150 Contact points 156 4 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005 President’s message The Federal Network Agency is pleased to present its first Annual Report documenting a concept, virtually unique in Europe, of integrated regulation for different network-based industries. Whereas regulation of the telecoms and postal markets can look back on a seven-year history and therefore has access to facts and analyses, our work in the electricity, gas and rail sectors is still in its infancy and is concerned with diverse fundamentals. It is often asked whether these different sectors are suitably accommodated under one roof, or whether this is not asking too much of one institution. Certainly, the products and services, the technologies and market structures are different for mail, gas, electricity, railways and telecom- munications. That said, there is a common thread running through the Agency’s functions and an economic policy mandate guiding our work. Despite natural and partial network monopolies, our job is to promote competition in these markets which are pivotal to the national economy, and to give customers and consumers greater choice. Whereas the fruits of competition and the opening of the markets – more offers, innovative products and lower prices – are evident in telecommunications in particular, general unease and a climate of suspicion between users and suppliers prevail in the gas and electricity markets. Responsible for this are not just the large hikes in energy prices, but above all the lack of pricing transparency and the great differences in transport and access costs. Thus important pioneering work is being done to bring transport costs down to efficient levels and to improve diversity of service by setting clear access conditions. The Federal Network Agency will not influence worldwide energy price levels, but it can make sure that German consumers get the best deal for their money, that lively competition and a wide range of services become the norm and that customers can switch supplier. PRESIDENT’S MESSAGE 5 In the rail markets, too, there is still much potential for competition. Our work will help to get more traffic from new providers off the road and onto the rail. The situation in the postal market has not changed significantly. In principle, fair, workable competition exists in the parcels, express and courier market. In the letter market, by contrast, the emergence of any such competition continues to be stymied by Deutsche Post AG’s exclusive licence. Independently of this, however, price levels for letters in Germany have again fallen as a result of regulation. It is pleasing to note continued growth in the telecommunications market, driving the German economy as a whole. Growth and competition are not mutually exclusive, but mutually beneficial, and have launched a huge wave of innovation and investment. This growth is due, in the main, to two factors: • the spread and use of mobile communications, • use of the Internet and the spread of broadband access. 6 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005 However, the fixed network, where voice has been challenged by low-cost mobile offers, has experienced a renaissance with DSL and will be a strong engine of growth for some time to come. There were around 10.4 million DSL lines in use at the end of 2005, and thus an increase of 3.6 million customers in this one year alone. 27 percent of households now have a DSL connection (after 17 percent in 2004). The disproportionately high increase in competitors’ market share is thus not surprising, but simply a result of competition. At the time of the last report the competitors provided only 9 percent of the DSL lines, a figure that had more than quadrupled by the end of 2005 to reach 38 percent. Yet it should not be forgotten that these success stories have been possible only as a result of consistent, competition-oriented regulation. And so I am concerned about a debate that often lacks nuance, supposedly saying “over-regulation must stop, so that investment and innovation can be promoted”. Apart from the fact that such arguments always come from a particular lobby, this report demonstrates exactly the opposite of what the proponents suggest as fundamental changes. Opening up monopoly networks, particularly in the access area, has spurred a new round of investment and dynamic growth in the telecoms market. The Federal Network Agency is still able to respond to new trends with the necessary flexibility. Both the EU regulatory framework and the German Telecommunications Act (TKG) provide scope – as with international calls, for instance – to withdraw regulation when competition has developed sufficiently. The continuation and review of the regulatory framework should there- fore be discussed objectively as part of the 2006 EU reviews. Creating a single European competition framework is appropriate if only because a large number of telecoms companies operate across Europe and would rightly categorise national “go-it-alone” approaches as a market barrier. PRESIDENT’S MESSAGE 7 On balance, this report is positive and better for competition than many had predicted. However, the Agency is always happy to engage in dialogue and to respond to facts- and arguments-based criticism. After all, our aim is to create planning and investment certainty for the business world, so that opening up and providing access to mono- poly networks continues to drive innovation and growth. Matthias Kurth President 8 FEDERAL NETWORK AGENCY | ANNUAL REPORT 2005 New responsibilities The Agency’s work in 2005 – besides a number responsibility of the Federal Railway Authority of important activities to do with the continu- (EBA). Reference is made to the chapter on ing duties of the former Regulatory Authority rail regulation for more on the Agency’s func- for Telecommunications and Posts – was tions and powers under the General Railway determined by two main events: Act (AEG). Thus another important network- • assuming responsibilities associated with based economic sector has been added to the regulating the gas and electricity markets, Agency’s remit. • preparing to assume responsibilities for securing non-discriminatory access to Back in July 2002, in its 14th Report 2000/2001 railway infrastructure. “Network Competition through Regulation”, the Monopoly Commission called for the intro- Enactment on 13 July 2005 of the Second duction of ex ante regulation of access to net- Energy Statutes Reorganisation Act also works and other infrastructure facilities in amended the Energy Industry Act (EnWG). the energy and rail sectors, recommending This gave the Agency responsibility for the that a “general regulatory authority for net- legal aspects of gas and electricity supply. work-based sectors” be set up, incorporating Reference is made to the chapter on energy the existing Regulatory Authority for Tele- regulation for more details of the Agency’s communications and Posts. Staff rotation functions and powers in respect of securing within the new authority should ensure that access to gas and electricity networks, price individuals did not become too associated regulation included, and supervision of com- with any one sector or business. pliance with unbundling and other regula- tions. At this stage it should just be said that What seemed highly unlikely then – at least the amended Energy Industry Act has wid- as far as the staff at the former Regulatory ened the former Regulatory Authority’s remit Authority were concerned – has now become to include two sectors that are very important reality. In his monitoring report on the impact for the economy overall. of negotiated network access on energy policy and competition published on 31 August 2003, Enactment of the Third Railway Legislation the then Minister of Economics and Labour Amendment Act on 28 April 2005 also tasked proposed that the Regulatory Authority for the Agency with securing non-discriminatory Telecommunications and Posts be charged access to railway infrastructure as from with gas and electricity regulation. The law- 1 January 2006. Previously, this had been the makers took up and implemented this pro- NEW RESPONSIBILITIES 9 posal in the amended Energy Industry Act. still not completed. Staff and resources are And, during negotiation of the amendment deployed where required and further staff of the General Railway Act, it was decided to taken on and organisational adjustments widen the Regulatory Authority’s remit still made in line with the