Today, the German Council of Ministers approved the draft text of modifications to the Telecommunications Act (Telekommunikationsgesetz - TKG), prepared by the Ministry of Economy and Technology.

The text focuses on:

1) The regulatory approach to “emerging markets”.

2) Consumer protection (in preparation for several years).

Especially the first point has been subject to major controversy, within Germany and also with the European Commission.

The draft proposes to incorporate a new paragraph (Paragraph 9a) into the Act, containing the following:

Die Einbeziehung neuer Märkte in die Marktregulierung nach den Vorschriften dieses Teils soll in der Regel nur erfolgen, wenn Tatsachen die Annahme rechtfertigen, dass anderenfalls die Entwicklung eines nachhaltig wettbewerbsorientierten Marktes im Bereich der Telekommunikationsdienste oder –netze langfristig behindert wird. Bei der Prüfung der Regulierungsbedürftigkeit nach § 10 und der Auferlegung von Maßnahmen nach diesem Teil hat die Bundesnetzagentur die Verhältnismäßigkeit der Festlegungen unter besonderer Berücksichtigung der Ziele, effiziente Infrastrukturinvestitionen zu fördern und Innovationen zu unterstützen, zu berücksichtigen.

Freely translated, this paragraph indicates that regulation should only ensue as and when facts justify the assumption that (without regulatory intervention) the development of a sustainable competition-oriented market for telecommunications services or –networks would be hampered in the long term. The German regulatory authority (the Bundesnetzagentur) must, when verifying whether a market should be regulated, and whether regulatory remedies should be imposed, consider whether this would be proportional in view of the goals stipulated. These goals are efficient infrastructure investment and the support of innovation.

The Ministry stated in its press release today that sector-specific regulation should be “reticent” and enable resourceful and innovative companies to flourish in the market, all the while allowing “imitators” to flourish as well, as long as they make investments themselves.

Consumer protection will also be enhanced by the changes to the Act. According to the Ministry, this will impede “black sheep” in the market from abusing the end users and prevent such providers from tarnishing the reputation of bona fide providers.

The draft will now be forwarded to the Parliament, with an expectation of ratification towards the end of the year 2006.

The full text (in German) of the draft modifications to the Telecommunications Act can be accessed by clicking here.

The press release (in German - link to the list of all press releases) of the Ministry can be accessed by clicking here.