Innovation and EU competition law - a trade-off? The next generation Broadband Network in Germany from a legal and economic perspective

Daniel Neugebauer

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Seminar paper from the year 2007 in the subject Politics - International Politics - Topic: European Union, grade: 1,5, University...

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Seminar paper from the year 2007 in the subject Politics - International Politics - Topic: European Union, grade: 1,5, University of Twente (School of Management and Governance), course: European Economic Policies, language: English, abstract: Broadband development is considered to be central to economic growth in a knowledge-based economy. In Germany, the market leader (Deutsche Telekom) on the telecommunication market recently installed a "next generation" high-speed network (so called VDSL), which is able to transfer phone calls, internet and TV through only one pair of wire to the consumer. The company invested more than 3 Billion Euro. Due to these enormous costs, it claimed to be allowed to refuse competitors access to its new network. If those competitors would be allowed to use the new network, Telekom threatened to stop all investments into this technology, as it would not be profitable. The German Government followed the claim by adopting a new law in December 2006, which was often said to be a "lex Telekom" and guarantees "regulatory holidays" for the new network. The European Commission argues that the protection of a new technology against competitors is against EU competition law and opened a procedure against the German government on the same day. The question is, whether the strict EU competition law in this case prevents innovation. Starting with the liberalization of the telecommunication market in 1988, the policies of the European Union can be called a "success story". From state-run monopolies and imperfect competitive conditions with high barriers for new firms to enter the market, the situation has changed dramatically until today: A number of new companies entered the market, prices decreased significantly, and the traditional staterun monopolies lost market shares. Where those monopoly-like situations remain, the EU aims to prevent operators from abusing market power to harm consumers or impede competitors. At the same time, the EU wants to facilitate widespread deployment of new and innovative technologies. Under the heading "i2010", the digital economy component of the renewed Lisbon strategy, the greater use of telecommunication technologies is said to boost productivity throughout Europe, and generate new services and create jobs. To realize the conditions for a flourishing ecommunications environment, the EU has established a detailed regulatory policy. The so-called "Article 7 procedure" allows national Regulatory Authorities to put obligations on companies with significant market power, whenever a persistent market failure occurs. [...]