SPIES & WREDE TYPESET.DOC

07/13/99 2:54 PM

THE NEW GERMAN TELECOMMUNICATIONS ACT
Axel Spies and Jan F. Wrede* Cite As: Axel Spies and Jan F. Wrede, The New German Telecommunications Act, 4 Mich. Telecomm. Tech. L. Rev. 1 (1998) available at <http://www.mttlr.org/volfour/spies.pdf> Introduction.... 2 I. The Rocky Road to the TA... 4 A. The Deregulation Process in Germany.. 4 B. Groundwork for Deregulation by the European Union EU... 5 C. Legislative Process Leading to the TA.. 6 II. The Applicability of the TA.. 7 A. Activities Covered by the TA.. 7 B. Territorial Scope of the TA.. 8 C. Persons Covered... 9 III. The Regulator... 10 A. Structure of the Regulator.. 10 B. Tasks of the Regulator... 10 1. Administration of the Telecommunications Market. 10 2. Supervision of the Telecommunications Industry. 12 3. Protection of Customers.. 12 IV. Telecommunications Licenses.. 13 A. Levels of Governmental Supervision and Regulation.. 13 B. Licensing Requirement.. 15 C. Classes of Licenses Available... 16 D. Prerequisites for Obtaining a License.. 17 E. Procedure for the Award of the License.. 18 F. Application for Licenses not Subject to Freqency Restrictions.. 18 G. Grant of Licenses if the Number of Licenses for a Particular Market Are Limited.. 19 H. Licenses Predating the TA.. 21
Please Note: Because many of the citations used in this article are in German, these citations have not been verified by the staff of The Michigan Telecommunications and Technology Law Review.Eds. * Rechtsanwalt Dr. iur. Axel Spies is an inhouse-counsel of VEBA AG, Dsseldorf; Rechtsanwalt and Attorney-at-Law (New York and California). Jan F. Wrede is a partner of Pnder/Volhard/Weber & Axster, Dsseldorf/ Hong Kong.
Michigan Telecommunications and Technology Law Review

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V. Duties of the Licensee.. 21 A. Duties Imposed in the License... 21 1. Licensing Fee... 21 2. Miscellaneous Other Obligations Imposed in the License.. 22 B. Obligations Imposed by the TA.. 23 1. Obligation to Provide Universal Services (Universaldienstleistungen).. 23 2. Definition... 23 3. Implementation by the Federal Government.. 24 4. Provision of Universal Services by Deutsche Telekom AG... 24 5. Costs of Providing Universal Services.. 25 6. Obligation to Permit Interconnection.. 25 7. Obligations for the Market Dominating Carrier. 25 8. Interconnection Obligations of Other Carriers. 27 9. Data Protection, Emergency Calls.. 28 C. Consequences of the Failure of the Licensee to Comply with its Obligations under the License or the TA.. 28 VI. Rights of the Licensee.. 30 A. Interconnection... 30 B. Rights of Way (Fernmeldeleitungsrecht).. 30 Conclusion... 32

Introduction

In the wake of the debate in Germany on how to weather the storms against the marketplace Germany (Unternehmensstandort Deutschland) the new German Telecommunications Act (TA)1 has been earmarked as a milestone.2 Its supporters hail the TA to spur competition in Germanys telecommunications market, which they expect to have a turnover of over DM 100 billion (app. US $66 billion) by the year 2000.3
1. Telekommunikationsgesetzpublished in BGBl. I 1996, p. 1120. 2. Funke, Grundgedanke des neuen Telekommunikationsrechts, Handelsblatt, June 26, 1996. 3. Lindemann, Expectations mixed on new telecoms law, Financial Times May 8, 1996. Even the German Commission on Monopolies (Monopolkommission), a panel of academics which advises parliament on industry concentration, expects the German telecommunications industry to reach the economic significance of the car industry. See 10th Report of the Monopolkommission dated July 22, 1994, Bundestags-Drucksache 12/8323, p. 19.

Plus Mobilfunk GmbH in 1993. Lastly, the telecommunications equipment market was liberalized, a move which has had a fundamental impact on consumers who, previously, had to either buy or lease all telephony equipment from Deutsche Bundespost.11 The second phase followed five years later with the privatization of Deutsche Telekom on January 1, 1995: Deutsche Telekom became a private joint stock company (Aktiengesellschaft) under German law whose shares until recently were held exclusively by the Federal Government.12 As part of the transformation into a joint stock corporation, Deutsche Telekom AG obtained the full capacity to act in Germany and, for the first time, also abroad.13 As a further step in the privatization process, Deutsche Telekom AG has conducted an initial public offering in November 1996. B. Groundwork for Deregulation by the European Union EU The EU deserves the laurels for getting this deregulation off the ground and paving the way for the TA.14 Since 1987 the EU has striven to open the door to competition in the telecommunications sector. For this purpose a number of greenbooks, counsel directives and counsel resolutions were put in place.15 Apart from those measures, the European
11. See Sec. 2a of the Fernmeldeanlagengesetz dated 3 June 1989as amended (BGBl. I 1994, p. 1455) pertaining to terminal installations. One of the consequences was that until the beginning of the nineties, telephone answering machines were a rarity in Germany, as these were expensive to buy or lease and, in addition, special fees were incurred for operating them. 12. Postreform II, implemented by the Postneuordnungsgesetz of September 14, 1994 (BGBl. I 1994, p. 2325) with the by-laws of Deutsche Telekom AG attached as Exhibit 3 to Sec. 11 Subs. 2 of the Postumwandlungsgesetz (BGBl. I 1994, p. 2339). 13. As a government agency, Deutsche Bundespost's ability to act abroad was extremely limited. However, Deutsche Telekom AG, once permitted to join the international parquet, rapidly did so and now seeks to become a global player. On July 17, 1996 the EU Commission consented to Atlas (a joint venture of France Tlcom S.A. and Deutsche Telekom AG) and Global One, a joint venture of Atlas and Sprint Corp. of the U.S. See Frankfurter Allgemeine Zeitung, Die EU-Kommission genehmigt Telekom-Projekt Atlas, July 18, 1996, p. 1. 14. A statement also strongly supported by Scherer, supa note 9, at 2953, with more references in footnote 5. 15. The most important being: Greenbook on the development of the Common Market for telecommunications services and telecommunications equipment, June 6, 1987, COM (87) 290; Commission Directive of June 28, 1990 on the establishment of the internal market for telecommunications services through the implementation of open network provision (90/387/EEC), OJ 1990, No. L 192/1 (the ONP-Directive) as amended by Commission Directive of March 13, 1996 (96/19/EC), OJ 1996, No. L 74/13); Commission Directive of June 28, 1990 on the competition in the markets for telecommunications services (90/388/EEC), OJ 1990, No. L 192/10; Council Resolution of July 22, 1993 on the review of the situation in the telecommunications sector and the need for further development in that market (93/C/213/01), OJ 1993, No. C 213/1; Council Resolution of December 22,

IV. Telecommunications Licenses
A. Levels of Governmental Supervision and Regulation As to the telecommunications activities regulated by the TA, the TA distinguishes between three types of activities which are subject to different levels of governmental supervision and regulation: (i) activities which are not subject to the regulatory framework imposed by the TA, (ii) activities which are subject to a notification requirement and certain other rules and regulations,56 and (iii) activities which require a license.57 The telecommunications activities outside of the regulatory framework of the TA are those which are not covered by Sec. 4 TA.
53. Gesetz gegen Wettbewerbsbeschrnkungenas amended from time to time, for the last time on October 10, 1994, BGBI I 1994, p. 3210. 54. Sec. 26 TA. 55. Sec. 24 Subs. 2 TA. 56. Sec. 4 TA. 57. Sec. 6 Subs. 1 TA.
Section 4 TA requires any provider of telecommunications services to notify the Regulator of the commencement, change or termination of the operation of such service. The purpose of this notification requirement is primarily to enable the Regulator to observe the market efficiently.58 Provider in this context is everybody who exerts the legal and factual control over the operations necessary for the transfer of information via transmission lines (Sec. 3 item 1 TA). Consequently, the TA grants some leeway in order to shift the status as a provider to a third party, e.g. by way of outsourcing such activities from the owner of the transmission lines. Telecommunications services in turn are defined in Sec. 3 item 18 TA as the commercial offering of telecommunications. While neither the TA nor the legislative motives define the term commercial (gewerblich), it should be interpreted in line with the constitutional definition of commerce as an activity which seeks to generate a profit.59 One of the examples for telecommunications activities which are therefore not subject to notification is the operation of a companys internal computer network since such network does not provide commercial telecommunications services. Similarly, the interconnection within a group of companies (closed user group) does not constitute offering commercial telecommunications services and will not fall within the legal framework of the TA. However, in such case, the exact structure of the interconnection arrangement will determine whether a service is offered commercially and accordingly, whether the notification requirement of Sec. 4 TA applies. In particular for tax reasons it may be necessary to charge other group companies for the telecommunications services provided by one member of the group (in particular in the case of outsourcing) which the Regulator may interpret as rendering the services commercially. Until an administrative practice will have been developed, there will be some uncertainty as to when the offering of telecommunications services can be qualified as commercial and, accordingly, when they are subject to the notification requirement. The TA does not contain a de minimis rule which would impose the notification requirement only on those providers whose activities are in any way relevant for the market. While Sec. 96 Subs. 1 No. 1 TA

offering a telecommunications service to the public. It is therefore the responsibility of the offeree of such services to produce sufficient evidence to show that the services are not open for the public. On the other hand, the Government Motives to the TA state explicitly that a company which provides telecommunications services to fulfill only its own needs (Eigenversorgung) is not subject to any license.65 The same is true for a company which plans to operate a network on its own plot of land (Grundstck), e.g. on the premises of its factory; it does not matter whether this plot of land consists in reality of several registered pieces of land next to each other. It is sufficient that they form a unit by their appearance or by their economic use (Sec. 6 Subs. 1, 3 item 6 TA). Taking into account the uncertainty arising from the lack of any established administrative practice, it is advisable to contact the Regulator before setting up a network which does not simply serve to interconnect terminal equipment within the same legal entity, even if it is run as a corporate network. The Regulator may verify whether such corporate network is really restricted to a closed user group or whether it is open for any outsider to become a member of the club.66 For the distinction between public and non-public telecommunications services, it is irrelevant whether the telecommunications lines are operated by the licensee itself or are leased from a third party.67 Summarizing this section one may state that the licensing requirement is rather broad and considering the presumption in favor of an offer to the public, most commercial telecommunications activities governed by the TA will also qualify under the licensing requirement of Sec. 6 TA. Accordingly, the licensing requirement will in practice be the ground rule for commercially relevant telecommunications services in Germany. C. Classes of Licenses Available Section 6 Subs. 2 TA is a focal point of the TA. It provides for the following four classes of licenses: Class 1: cellular license (Mobilfunklizenz) Class 2: satellite radio license (Satellitenfunklizenz) Class 3: telecommunications services for the public which are not covered by class 1 or class 2
65. Government Motives, supra note 6, p. 37 (comments on Sec. 6 Sec. 1). 66. Hiltl/Grossmann, supra note 37, p. 171; Scherer, supra note 9, at 2955. 67. Government Motives, supra note 6, p. 37 (comments on Sec. 6 Sec. 1).
Class 4: license for Voice Transmission Services on the basis of self-operated telecommunications networks. The division into these four classes has more a technical then a legal background: Class 1 and Class 2 activities require radio waves as their means of transmission. Since there is not a unlimited number of frequencies available, those licenses require a sophisticated distribution system. Services under Classes 3 and 4 can at least in theory be offered by a huge range of service providers. The tariffs for services under the Classes 3 or 4 are subject to the approval of the Regulator (see Sec. 25 Subs. 1 TA). In addition, it is important to understand that Class 4 does not include the right to operate transmission lines as it is stated explicitly in Sec. 6 Subs. 2 No. 2 TA. Instead, it covers those cases in which transmission lines are leased from other carriers or in which the connection is not based on cables (the definition of transmission lines only covers cable facilities). However, the Regulator may grant the right to operate transmission lines under Class 1, 2 to 3 together with a Class 4 license (see Sec. 6 Subs. 4).68 For example, the offeree of a voice telephony service to the public over its own transmission lines would require a Class 3 and a Class 4 license. If such offeree intents to offer only data transmission for the public via its own network, such offeree would require a Class 3 license only. D. Prerequisites for Obtaining a License The number of licenses is generally not limited and the Regulator is required to issue a license to the applicant unless any of the reasons outlined in the TA apply as grounds for denying the license.69 Section 8 Subs. 3 TA lists the grounds for denial of a license as follows: (a) the Regulator has no frequencies available for the operation envisaged by the applicant (Sec. 8 Subs. 3 No. 1 TA); (b) facts justify the assumption that the applicant does not have the reliability, operating capacity or expertise for exploiting the license and it can be expected that the applicant will not exploit the license permanently (Sec. 8 Subs. 3 No. 2a TA);70

the minimum number of frequencies to be purchased at the auction (Sec. 11 Subs. 4 TA). If the Regulator decides to impose additional requirements, these must be non-discriminatory, objective and transparent. In any event, in setting additional requirements, the Regulator shall take into consideration the interests of small and medium-sized enterprises. This last requirement has been implemented during the course of the legislation to appease lobbyists; its practical value may be questioned. The purpose of the tender is to determine which prospective licensee is most capable of satisfying the need of the customers (users) for the telecommunications services for which the license will be granted (Sec. 11 Subs. 6 TA). Therefore, in the tender process the decision to whom the license is awarded is not based solely on the amount of the bid. The legal conditions for the tender which the Regulator has to comply with are very similar to those which apply to the auction (definition of the technical requirements, the architecture of the system, the geographic area and the percentage of the population to be covered). However, as distinguished from the auction process, the applicants have the opportunity to define the scope of the license it seeks to obtain within the parameters given in the tender condition. The Regulator awards the licenses on the basis of the following criteria: expertise of the applicant, efficiency and suitability of the proposed solutions to render the services and
the promotion of a functioning competition in the relevant market. In particular, the Regulator may consider the degree of the territorial coverage in the relevant geographic area (Versorgungsgrad) which may be reached with the telecommunications service offered by the applicant in the tender. In any event, all criteria for the selection of the successful candidate must be objective, non-discriminatory, proportionate and transparent.73 In the improbable case that, after the Regulator has evaluated all offers several candidates are equally qualified, the award of the license will be decided by drawing lots.
73. Art. 2 Sec. 3 ONP-Directive, as amended by Commission Directive 96/19/EC of March 13, 1996 (OJ 1996, No. L 74/13). If the Regulator does not comply with these rules, any competitor of the licensee may challenge the procedure by a law suit: Scherer, supra note 9, at 2957.
Last but not least, it should be noted that the Regulator has the right to exclude a bidder if its successful bid would endanger the fair competition on the relevant telecommunications market (see Sec. 11 Subs. 3 TA). The idea behind this is to grant to new companies the opportunity of a fair market access.74 H. Licenses Predating the TA As a general rule all licenses which were granted before the TA entered into force will sustain under the new regulatory framework. Sec. 97 Subs. 5 rules that the awards (Verleihungen), i.e. privileges according to Sec. 2 Subs. 1 of the Telecommunications Installations Act which were issued before the TA came into force, remain in force,75 but can be amended and revoked according to the rules of the TA (for instance if the licensee does not follow the conditions of the license). One noteworthy exemption exists for the privileges which were or will be granted to the Deutsche Telekom AG until January 1, 1998 in the field of voice telephony or tariffs: Those privileges may only continue until December 31, 2002 at the latest (Sec. 97 Subs. 3 TA). After this deadline Deutsche Telekom AG will be treated as every other market participant.

V. Duties of the Licensee
After the Regulator will issue the license, any licensee is subject to two sets of obligations, the once imposed in the license itself and the once imposed by the TA for the provision of telecommunications in general. A. Duties Imposed in the License 1. Licensing Fee Again, with regard to licensing fees, it is necessary to distinguish between licenses which are available without restrictions and those which will be awarded after a tender or auction proceeding. If the license is awarded without tender or auction, the licensee is to pay only an administrative fee for the work involved in the grant of the license and the other administrative costs associated therewith. These
74. Government Motives, supra note 6, p. 39 (comments on Sec. 11 Subs. 3). 75. With regard to license already issued, Secs. 6 to 11 which govern the grant of a telecommunications license do not apply. No new application for a license is necessary.
fees are not intended to generate an additional source of revenue for the government but are instead only intended to cover the costs of the Regulator. They are to be fixed by regulation of the Ministry of Post and Telecommunications (BMPT) as it is set forth by Sec. 16 TA. Insiders estimate that a nation-wide license will cost up to DM40 million.76 In those instances in which the license is awarded in a competitive process, the licensee will be required to pay the fee offered in the tender or auction. 2. Miscellaneous Other Obligations Imposed in the License The Regulator has the right to attach Nebenbestimmungen to the license. Nebenbestimmungen is a term defined by the administrative law.77 It means that the Regulator may put the license under conditions (e.g. to cover a geographic area within a certain period of time) which the applicant has to fulfill under or in connection with the license. Such license conditions are only permitted if they serve to ensure the purposes aimed at by the TA, in particular to safeguard the interests of the users, ensure fair and effective competition on the relevant market, safeguard an overall basic supply of telecommunications services, and

maintain the interests of public security All Nebenbestimmungen have to be proportional with regard to the scope of the license to the issued.78 One important license condition could be that the Regulator forbids a company which dominates a market sector to merge with another company doing business in this market (Sec. 33 TA). The license may also be granted for a certain period of time if only a limited number of frequencies are available (Sec. 8, Subs. 4 TA). The intention behind this rule is that this time limitation enables other competitors to offer their services on the relevant market. 79 Any restriction imposed by a Nebenbestimmung needs to be balanced against the freedom of trade and commerce (Gewerbefreiheit) which is guaranteed by the Articles 12 and 14 of the Basic Law and has to be revoked if it is no longer necessary to safeguard the aforementioned purposes.

76. 77. 78. 79.

Rheinische Post, Telekom-Lizenzen teurer, October 26, 1996. Sec. 36 Verwaltungsverfahrensgesetz (Law on Administrative Procedures). Government Motives, supra note 6, p. 38 (comments on Sec. 8 Sec. 2). Government Motives, p. 38 (comments on Sec. 8 Sec. 4).
B. Obligations Imposed by the TA In addition to specific requirements imposed in the license itself, the licensees will be required to comply with the obligations deriving from the TA itself, in particular including obligations relating to universal services, interconnect and data protection. 1. Obligation to Provide Universal Services (Universaldienstleistungen) The most onerous obligation which the TA imposes is the requirement to provide a so called universal service. Fortunately for new competitors in the market, not every company offering telecommunications services will be required to provide a universal service. Instead, the requirement will be imposed on new companies in the market by the Regulator only if otherwise it is not sufficiently secured that the public has universal services available. 2. Definition The notion of universal service is not a German invention. In the opening paragraph of the US-Communications Act of 1934 it was already stated that the Act was created to make available, so far as possible, to all people of the United States rapid, efficient nationwide and worldwide wire and radio communication service with adequate facilities at reasonable charges.80 Nowadays, this notion has been shifted from the creation of a telephone service for everyone to ensure that everyone will receive a minimum amount of key telecommunications services in a more and more competitive environment. Under Art. 87f of the Basic Law,81 the Federal Republic of Germany is required to assure the availability of full territorial coverage of adequate and sufficient telecommunications services. Adequate in this context refers to the quality and kind of those services, whereas sufficient means a sufficient quantity of the services.82 While the Basic Law does not expressly mention universal services, the law is regarded as requiring the Federal Government to ascertain universal services without being required to provide either the service nor the necessary infrastructure itself.83

80. This notion can be traced back to the Kingsbury Commitment of AT&T in 1913cf. Rowe, supra note 29, p. 46, 47. 81. Inserted 1994 by Constitutional Amendment, BGBl. I 1994, p. 2245. 82. BT-Drucksache. 12/7269, p. 5; BT-Drucksache. 12/8108, p. 6. 83. Jarass/Pieroth, supra note 59, Art. 87 f, note 3.
The Federal Government translated the requirements of the Basic Law in Sec. 17 Subs.1 of the TA. In the TA universal services are defined as minimum offer of telecommunications services to the public for which a certain quality is fixed and which have to be accessible for all users irrespective of the location of their home or their residence. The minimum offer of telecommunications services cover those services which are indispensable for the public as key services or, as the TA names it, as basic supply (Grundversorgung). The TA fails to specifically list the services covered but leaves the details to be dealt with in governmental regulations. This is to permit more flexibility in amending the services regarded as universal services in light of the moves of the market. The German lawmaker hopes that a multitude of citizens will take new additional services for granted and hence indispensable. Such services can then be determined as universal services without requiring a revision of the TA itself.84 3. Implementation by the Federal Government On the basis of the TA, the Federal Government in the meantime acted: On September 2, 1996 the cabinet adopted the Regulation on Universal Services (Telekommunikations-Univeraldienstleistungsverordnung).85 According to its paragraph 1 such universal service comprises voice telephony on the basis of the ISDN standard, the provision of the necessary transmission lines, assistance of an operator with regard to numbers of the subscribers, and the publication of a directory which contains the data of the subscribers which have not objected to the entry of their data. 4. Provision of Universal Services by Deutsche Telekom AG As currently Deutsche Telekom AG, the monopolist for voice telephony, is required to and does provide a universal service, for the time being other market participants will not be responsible to comply with the obligation to provide universal services. Furthermore, Deutsche Telekom AG is required to notify the Regulator one year in advance if it discontinues providing universal services. Only then the Regulator may impose the duty on other companies, and only those which have obtained a market dominating position in the relevant area. In this sense, being required to provide the universal service can almost be regarded as an honor, if not at least a marketing tool.
84. Government Motives, supra note 6, p. 41 (comments on Sec. 16). 85. Handelsblatt, Netzzugang zu fairen Bedingungen, September 3, 1996.
5. Costs of Providing Universal Services If the company responsible for rendering the universal services produces sufficient evidence that the long-term costs for these services within the relevant geographic area exceed the gains, it is entitled to a compensation (Sec. 20 Subs. 1 TA). This compensation will be financed by a levy which will be imposed on every licensee who operates on the relevant product market and holds a share of at least 4% of the total turnover in such product market within Germany. The amount of the levy which such licensee has to pay via a fund (Universaldienstfonds) will be calculated on the basis of its turnover in proportion to the total turnover of the other licensee(s) which operate in the relevant market (Sec. 21 Subs. 1 TA). The Regulator will determine the levy at the end of each calendar year in which the compensation will be granted (Sec. 21 Subs. 2 TA). So far it is not clear whether Deutsche Telekom AG, initially responsible for the services will be in a position to obtain any compensation for its provision of universal services. 6. Obligation to Permit Interconnection The most important rules for new entrants into the German telecommunications market may be those relating to the interconnection between networks. It would stop most new operators to come into the German market if such operator were unable to connect its customers with the network of the dominant market players at a reasonable cost. It should not cause astonishment that the issue of interconnection became (and still is) a bone of contention between the Deutsche Telekom AG which currently still controls the vast majority of telephone lines in Germany and the prospective private carriers.86 The solution of the TA mirrors the political compromise achieved which aims to transfer European law on the national level.87 The concept, even though far from being stringent, differentiates between those carriers dominating the market within the territory they cover (Market Dominating Carrier) and all other carriers: 7. Obligations for the Market Dominating Carrier A market dominating carrier88 of a telecommunications network is required to grant access to the other user to such network or to any part

cess, i.e. it has to offer interfaces in such a way, that no services will be passed to the other carrier which such carrier does not demand (e.g. an access for voice telephony for a data service provider). This unbundling also includes the direct access to those network links which connect the Market Dominating Carrier directly with its clients (i.e. without intermediate switches). However, and this is the other side of the coin, the market dominating carrier may refuse to unbundle if it can show that the unbundling is not justified in the individual case. This restriction has been criticized as a loophole for Deutsche Telekom AG to evade its obligation to provide interconnect to each carrier by arguing that it is too complicated or too expensive to provide an interface which is designed to comply with each of their specific needs. Consequently, those carriers might be required to pay for the music which they have not ordered and which they have not even listened to. This may hamper or even undermine the competition which the TA intends to spur.93 From a practical point of view, the list which is attached to Sec. 5 Subs. 2 Netzzugangsverordnung may be the most relevant passage of this regulation: It contains those stipulations which have to be implemented into the interconnect agreement, in particular: location of the points of presence, technical norms, network management, safeguard of quality, payment. In any event, considering the economical relevance of the Netzzugangsverordnung and the critic it has already drawn, much will depend on how strictly the Regulator will apply this regulation against Deutsche Telekom AG. 8. Interconnection Obligations of Other Carriers While Market Dominating Carriers are required to grant access, with regard to interconnections other operators of public telecommunications networks are only under a duty to negotiate (Sec. 36 TA). It is not yet clear how the legal terms interconnections and network access relate to each other. By the mere sense of the word, interconnections are less than the full network access provided for by the Netzzugangsverordnung. Duty to negotiate means the following: If one carrier demands interconnection from another carrier, it is upon such other carrier to make an offer. Both sides have to negotiate thereafter in good faith in order to make possible and to improve the communication between the users of the different public telecommunications networks. Only in
93. Handelsblatt May 9, 1996 (supra note 86). Deutsche Telekom AG counters this argument stating that it is not a supermarket and with increased costs for such as special access 'made-to-order' of each individual carrier.
case that those carriers do not reach an interconnect agreement, the Regulator may interfere to secure an open access (Sec. 37 TA). 9. Data Protection, Emergency Calls The TA and other regulations impose a number of requirements on the operator of a public telephony network relating to the issue of security in the widest sense. Germany imposes rather stringent rules on the privacy of telecommunications and data protection. The basic rule is that whoever offers telecommunications installations has to protect its back-up system against illegal access and interferences from outsiders. On the other hand, Government agencies which prosecute criminal acts may demand the transfer of personal data of a suspect from the operator if this is necessary to fulfill their tasks and may even, if authorized by a court ruling, eavesdrop into the conversations of a suspect.94 Correspondingly, the operator is required to build the network in a manner which permits it to grant the access to the security forces. Sec. 90 Subs. 2 TA states that all companies which offer telecommunications services have to hold disposable their updated client files for on-line retrieval by the appropriate public agencies. This rule has been severely criticized as a violation of data protection and as an open door for computer hackers.95 The providers of the telecommunications services are allowed to publish the names, addresses, professions, area of business, and the kind of telecommunications connection of their customers in printed or electronic directories if the customer consents. With regard to the security of the individual using telephone equipment, the operators are under an obligation to permit emergency calls free of charge and without requiring any access code. C. Consequences of the Failure of the Licensee to Comply with its Obligations under the License or the TA The basic remedies available for failing to comply with the obligations imposed by the TA are the revocation of the license, indemnification and, in limited circumstances criminal penalties (Sec. 96 TA).

VI. Rights of the Licensee
A. Interconnection As discussed above, not only are their obligations imposed upon the operators of telecommunications networks to permit interconnection, but correspondingly the operators are also entitled to interconnect with other operators as well. B. Rights of Way (Fernmeldeleitungsrecht) Considering that Germany is a rather densely populated country, no operator would be in a position to build or maintain a telecommunications network unless such construction or maintenance is facilitated by special rights. Practically, telecommunications lines are for most parts built over or under public ways which in turn are in most cases either owned by one of the Federal States or a local community. As there was no issue that the public roads also in the future would be used for telecommunications lines, the issue became whether and if so how the Federal States and the local communities would be compensated for the use of their land. Considering the financial stakes involved it is hardly surprising that the issue of remuneration for the use of public lands became one of the biggest bone of contention in the legislative process. The solution which was finally agreed upon in the mediation committee (Vermittlungsausschu) of the two Chambers of the German Parliament is as follows: The Federal Republic (Bund) has the right to use all public ways (highways, water ways, etc.) free of charge provided that the use does not continuously infringe upon the purpose for which the way is dedicated (Sec. 50 Subs. 1 TA). According to Sec. 49 Subs. 2 TA, the Bund transfers this right to the licensees as part of any telecommunications license issued by the Regulator. Thereby, the licensees obtain the right to use the public ways for their lines. Any operator using public ways for telecommunications lines must maintain its lines and must ensure that any temporary or continuous restriction on the public way is kept to a minimum. To the extent that the lines or their maintenance result in a temporary or permanent restriction of the public use, the operator is required to compensate the owner of the public way for such restriction (e.g. warning signs, detours). Similarly, to the extent that the operator does undertake any construction work, it is responsible for fully repairing the public way and the TA contains a number of provisions to preserve the rights of other users of the public ways such as utility companies. There even exists an entire

96. This is why the announcement of a 49.8% participation of the German Mannesmann Group in DB Kom, the telecommunications subsidiary of Deutsche Bahn AG, on July 17, 1996 met a huge repercussion in the German media. 97. Most recently, RWE linked-up with the rival team VEBA/Cable & Wireless for this purpose, while VIAG is still standing aside. See for instance Financial Times, Big contenders regroup for telecoms battle, October 10, 1996.
challenge the provisions on the use of public ways.98 This should not give rise to concern: The chances that the justices will render the TA null and void are not very high since Art. 87f Basic Law contains an authorization for the Federal Parliament to create the regulatory environment for the telecommunications sectorwhich includes rules on the use of public ways.

Conclusion

The TA needs to be evaluated in light of the economic circumstances in which it was adopted and in which it will be applied. The telecommunications market will be of growing importance in the next years and for Germanys position in the global market the world is turning into having a competitive telecommunications industry is of significant importance. On the other hand, the telecommunications industry is so important and moving so fast that Germany can hardly take the risk of leaving the development of the industry solely to market forces. This holds particularly true in light of the fact that for the foreseeable future Deutsche Telekom AG is expected to remain the dominating force in the market with a market share of app. 90%. Deutsche Telekom AG may therefore have the power to steer the market in a direction which would not be in the best interest of the Federal Republic of Germany as a whole.99 Considering this background, it is hardly surprising that the TA is not a daring piece of legislation which simply opened up the market and left it to determine the future development. The reliance on market forces might have been futile anyhow. For these reasons, the TA is to be looked at more as an attempt to set forth an outline of the regulatory framework in which the German telecommunications market will develop rather than setting forth the regulatory environment itself. Critics of the law are skeptical and fear that rather than creating a competitive environment which would tackle Deutsche Telekom AGs preeminent position in the market, the TA will turn out to be a Trojan horse to protect Deutsche Telekom AG against fledging newcomers. In particular the TA was attacked for opening the market too late, thereby giving Deutsche Telekom AG too much time to prepare for the new competitive pressures which it will face. Representatives of the industry
98. Scherer, supra note 9, at 2961/2962. There are strong arguments that the described provisions of the TA are constitutional as listed by Schuetz, Wegerechte fuer Telekommunikationsnetze, NVwZ 1996, p.1053-1061. 99. E.g. Lindemann, supra note 3.

also worry whether the new Regulator will be aggressive enough to impose its rules on Deutsche Telekom AG.100 Whether these critics will turn out to be right depends less on the TA itself but much more on the regulatory environment to be set by the governmental regulations provided for in the TA (such as the interconnect regulation) and the application of the TA and the governmental regulations to be issued thereunder by the Regulator.101 With regard to many critical issues the TA is simply too vague to stand in the way of a particular development but on the other hand fails to give enough guidance to steer the ship in a particular direction. In any event, if the deregulation fails to provide the results hoped for, it will most likely be the TA which will be looked at as the source for such failure. In this respect, any forecast of the success or failure of the TA is highly speculative. The ado about the future of telecommunications in Germany has not fully abated even though the very ambitious goals of the TAmore competition and technical innovation on the one hand, consumer protection on the other handhas up to now received a broad support in Germany. The TA has certainly not put the discussion to rest.
100. Lindemann, supra note 3. 101. This view is shared by Scherer, supra note 9, at 2962.