A.1. Speed of process

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1 ANNEX IV - GERMANY [All questions regarding Germany are answered on the basis of the current version of the Telecommunications Act, as Germany has failed to implement the new European Regulatory Framework on time. There still only exists a draft of the amendment of the German Telecommunications Act, which has not been taken into account.] A. REGULATOR - GENERAL FUNCTIONS A.1. Speed of process 1. What is the average timeframe for obtaining reservation of numbers? 1 week. 2. What is the average timeframe for reviewing reference interconnection offers (assessed over the past three years)? In Germany, there is no Reference Interconnection Offer ("RIO") as defined in the European framework. Germany's NRA, the Regulierungsbehörde für Telekommunikation und Post ("RegTP") usually only requires that certain interconnection tariffs or conditions become "Standard Terms" (so-called "Grundangebot"). Such Standard Terms exist, for example, with regard to interconnection rates, the rates for unbundled access to the local loop and for linesharing, as well as for leased lines. However, there are no complete agreements on telecommunications services which were declared Reference Interconnection Offers. This constitutes a hurdle for new entrants as it increases the need for new entrants to revert to the dispute settlement procedure, which will then deal with the entire contract. The absence of a real RIO does not allow disputes to be restricted to those points that are actually disputed. RegTP reviews interconnection offers on an individual basis, which takes approximately 10 weeks. 3. In practice, what is the average timeframe for the negotiation of an interconnection agreement for a new entrant which does not yet have an interconnection agreement with the incumbent operator? 2 to 6 months. A.2. Transparency 4. Is your NRA required to make public consultations prior to deciding on issues of general interest? RegTP carries out public consultations on general issues (for example, on the cost model for the introduction of EBC Element Based Charging, i.e. interconnection rates based on the number of network elements in 2000, market definitions in 2001 and 2002, and on non-reciprocal interconnection rates in 2003). However, there is no legal requirement to carry out such general consultations. 5. Explain how the decision making process works within the NRA. Does it provide at any or some stage of the procedure, some transparency or visibility on the decision making process? - 1 -

2 RegTP must not give information on its decision prior to a formal decision. However, there is most of the time a public hearing where RegTP asks specific questions. As regards interconnection (voice or data), RegTP has a maximum of 10 weeks as from receiving the application to adopt a decision. It may consult internal or external resources and must inform the BundesKartellamt (Competition Authority) before publishing the decision in order to confirm its findings in relation to the market analysis. In the case of tariff applications, the decision making process at RegTP may start earlier with internal or external consultants preparing reports on tariffs comparisons or cost models. The formal process (and the 10 week deadline) starts as from receipt of the tariff application. As regards access products other than interconnection, RegTP can review an application without any deadline and may open an investigation (abuse of market power or Missbrauchsverfahren ) without any deadline. Once the investigation has been finalized and a case has been opened, the timeframe for adopting a decision is 8 weeks. 6. Is your NRA required to effectively motivate its decisions? If so, is there any possibility of appeal in the event of the NRA's violation of its obligation to motivate its decision? Within what timeframe? RegTP is required to provide detailed reasons for its decisions (Section 79 para. 1 of the Telecommunications Act ("TKG")). Interested parties may appeal decisions if the regulator fails to provide a detailed explanation. However, in practice, appeals based on such grounds are virtually unknown, since the regulator usually sufficiently substantiates its decisions. 7. Is your NRA required to publish all its decisions upon their adoption? Yes. Holdings of all decisions are published in RegTP's Official Journal. Full versions (including the holding, the underlying details and reasons) are available from RegTP's publication service. Confidential information contained in the decisions is removed and is not published or otherwise available. This may concern large parts of the decision. 8. Does your NRA have a "management plan" disclosing its action plan on an annual basis? If yes, is it public? Not yet. A first strategy plan was published in February A.3. Effectiveness of sanctions and scale of resources 9. Is your NRA entrusted with the power to impose fines? If so, up to what level? Does it include also the possibility of imposing periodic penalty payments or of suspending the commercial launch of services? Under the TKG, RegTP can impose administrative fines of up to EUR (Section 96 TKG). It can also impose fines if regulatory decisions (to publish offers etc.) are not observed. These fines are capped at EUR The TKG does not provide for the possibility to impose periodic penalty payments. This is not considered sufficient in practice to ensure effective compliance. -2-

3 10. Are the powers of your NRA clearly defined by law? Yes, the TKG defines the powers of the RegTP (in particular, see Sections 15, 33, 35, 37 and 96). 11. What is the number of employees employed for general regulatory issues (excluding frequency and numbering management)? How many competition economists are included in the staff? According to the RegTP's annual report for 2002, it employed about people. Among these, handled regulatory issues (including 70 for frequency and numbering management). Nevertheless, competition issues concerning telecoms and post are handled by less than 200 people. There is no information available on the number of economists employed by RegTP. 12. What are the specific procedures for selecting NRA's personnel? (Specific exams/ general State recruitment exams) As with all other public authorities, the criteria for selecting RegTP personnel are skill, qualifications, aptitude, and seniority. Members of the Ruling Chambers must be qualified for "higher public services" (Section 73 para. 4 TKG). 13. Does your NRA have the financial freedom to set levels of remuneration to attract appropriate staff? RegTP does not have freedom to determine the level of remuneration of its staff. Most RegTP staff are appointed as civil servants and are therefore subject to fixed pay-scales. However, RegTP does attract quality staff because positions as civil servants are wellregarded and provide other attractive benefits. 14. Can your NRA have recourse to outside expertise such as consultants? Yes, as provided for in Section 70 TKG. RegTP has often sought outside expert advice. A.4. Effectiveness of appeal procedure 15. Does the appeal of a NRA decision suspend the binding effects of the decision in question? An appeal against a NRA decision does not suspend the effects of the decision (Section 80 para. 2 TKG). 16. If the appeal does not suspend the binding effects of the decision of the NRA, what is the applicable standard to obtain such suspension and how is it applied in practice? Pursuant to 80 (5) of the German Federal Administrative Court Act (VwVfG), a court may order the suspension. The Court will examine: (i) the grounds of appeal; and -3-

4 (ii) the interest of parties and the need to execute RegTP's decision. Except for the approval of Deutsche Telekom AG's ("DT") rates, the Court has applied the requirement for suspension rather loosely, and has ordered a suspension of the RegTP's decisions pursuant to 80 (5) VwVfG. Such suspensions constitute one of the hurdles to the effective enforcement of the regulatory framework in Germany. 17. What is the percentage of decisions that have been appealed? Around 40%. 1 However, in practice DT appeals every decision that affects them. 18. What is the average timeframe for an appeal procedure? 2-4 years. 2 A.5. Independence 19. Is your NRA subject to any injunctions from political authority (other than through removal), when it grants authorisations (services/networks licences, frequency and number authorisations) or enforces SMP regulations (e.g., ex ante approval of standard interconnection offers, compliance with cost accounting separation)? RegTP has an independent status (Section 66 of TKG). Important decisions concerning license allocation, universal service, ex ante and ex post tariffs regulation, ONP and interconnection are made by "Ruling Chambers" (Section 73 TKG), which are administrative bodies within RegTP. Although subordinate to the Ministry of Economy, the RegTP enjoys relative freedom since the Ministry may only advise the RegTP in general terms, and not with regard to specific cases (Section 66 para. 5 TKG). While in theory RegTP enjoys freedom of intervention, there have been cases reported (especially in connection with decisions on rate regulation for unbundled access to the local loop) where the Ministry became involved in pending RegTP procedures. In addition, the RegTP management is appointed to reflect proportional representation of the major political parties. 20. What is the duration of office of your NRA's management? Is there a possibility of reappointment? 5 years (may be re-appointed). RegTP officials at non-management level are generally life-time civil servants. 21. What are the grounds for removal of your NRA's management? The TKG does not specifically provide for removal of RegTP management. However, under general principles for the conduct of civil servants, RegTP management may be removed for misconduct. 22. What are the eligibility requirements for your NRA's management? 1 2 Estimated figure based on the annual reports. Information from the BIICL. These figures include both appeals against decisions of the NRA and the dispute settlement body. -4-

5 RegTP management is appointed to reflect proportional representation of the major political parties. See above Question 12. All staff are appointed on the basis of fair and non-discriminatory proceedings ("equal access to public office"), with regard to special skills and qualifications required for the given position. Criteria for promotion into RegTP management, like other German public authorities, are based on skills, qualifications, aptitude, and seniority (Section 73 para. 4 TKG). 23. Are clear objectives assigned to the NRA for its long term actions? Are such objectives set in the law or defined by the NRA's? Section 2 TKG sets out six general objectives for the regulator, including securing sustainable competition, consumer protection, availability of universal services etc. 24. What percentage of the incumbent share capital is held by the Government? Does it confer control? 30,92 percent of DT's shares are held by the Government directly and 12,13 percent indirectly through the German Recovery Bank - Kreditanstalt für Wiederaufbau ("KfW"). The Government is represented in the Supervisory Board, but publicly claims to always go with the majority. Incidents surrounding the resignation of Ron Sommer, however, do not totally support this view. Even if shares are held by the KfW, it does not alter the incentive for the Government to secure the value of DT's shares. Indeed, the Government must reimburse KfW if KfW has to sell its stake for a lower price than the transfer price from the Government. If DT stock performs better, the Government receives the surplus. B. REGULATORY DISPUTE SETTLEMENT B.1. Speed of process 25. What was, over the past two years, the average timeframe for obtaining a decision from your NRA acting in a capacity as a dispute settlement body? Section 37 TKG provides for a timeframe of 6 weeks for interconnection orders and rate regulation procedures. Such timeframe can be extended to 10 weeks. RegTP uses the possibility of an extension in almost every interconnection or rate regulation case, which means that the average timeframe for such procedures is 10 weeks. While this 10-week term allows for a fairly quick process for settling disputes, it should be noted that RegTP reserves itself the right to define the subject matter of the dispute and has developed a tendency to restrict this to existing interconnection matters. Indeed, experience shows that RegTP generally does not mandate new wholesale products under the interconnection dispute settlement regime (or else seeks to find other justifications for rejecting the complaint, e.g., no failure of commercial negotiations). This is clearly illustrated by the fact that RegTP neither regards bitstream access nor PPC's to be an interconnection service (although such services contain interconnection elements). Thus, this allows RegTP to disregard the 10-week deadline, which only applies to interconnection services. This results in periods substantially longer than 6-10 weeks until a decision is rendered. In practice, cases can take 10 to 15 months. -5-

6 26. Can your NRA adopt interim measures? Yes, Section 78 TKG provides for the possibility of the Ruling Chambers to issue and adopt interim decisions. Nevertheless, this possibility is not often used. B.2. Due process 27. Is the dispute settlement process subject to the principle of contradiction? Ruling Chambers, which also act as dispute settlement bodies, are bodies considered as similar to courts. They decide in a formal procedure which consists of a written part, (where the parties exchange briefs) and a public hearing (similar to a court hearing). Ruling Chambers must ensure that the parties have the usual procedural rights. This includes the right to review written statements of other parties, unless they are protected by confidentiality provisions. 28. What are the possibilities to appeal a decision of the NRA acting as dispute settlement body? Decisions by RegTP may be appealed before the Administrative Law Courts, which consist of three levels: the Lower Administrative Law Court (Verwaltungsgericht), the Appellate Administrative Law Court (Oberverwaltungsgericht), and the Federal Administrative Law Court (Bundesverwaltungsgericht). Additionally, injunctions (such as preliminary stay orders) are available at the level of the Lower and Appellate Administrative Law Court. B.3. Effectiveness of sanctions 29. Is your NRA entitled to impose fines or periodic penalty payments? Yes, see above Question Does your NRA have the power to enforce its own decision? Yes, but in many cases, enforcement is not very effective in practice. RegTP can enforce its decisions by applying administrative law enforcement measures and by ordering fines in case of non-compliance (see Question 9 for the maximum fine of EUR 1.000). However, parties may appeal against the imposition of such sanctions and ask the Court for a suspension of the decision. B.4. Effectiveness of appeal procedure 31. Does the appeal of a NRA decision suspend the binding effects of the decision in question? An appeal does not suspend a RegTP decision, Section 80 para. 2 TKG. 32. If the appeal does not suspend the binding effects of the decision of the NRA, what is the applicable standard to obtain such suspension and how is it applied in practice? See Question

7 33. What is the percentage of decisions that have been appealed? 60% Average timeframe for an appeal procedure? 2-4 years. 4 C. APPLICATION OF ACCESS REGULATION C.1. Cost orientation 35. Is there a detailed model covering each and every or all regulated services for SMP operators? Over the past years, RegTP has developed cost models mainly for interconnection services and local loop unbundling and applied them in rate regulation decisions. Pursuant to a Court case on element-based charging of 3 May 2001, however, the court questioned RegTP's ability to rely on its cost model. For this reason, RegTP continues to rely on a benchmark method in its decisions (although it does internally cross-check the result of the benchmark with a cost model). 36. What is the type of cost accounting methodology used? LRIC-methodology. 37. Does the NRA have the power to seek cost orientation of retail tariffs? When regulating retail tariffs, RegTP is seeking cost orientation. However, retail tariffs are mostly regulated using price caps. These allow DT to deviate from cost orientation to a certain degree and to balance one product's price against another. Tariffs used at the starting point of price cap regulation in 1998 were not necessarily cost based. The price squeeze practice by DT condemned by the European Commission is an illustration of the potential problems that could result from such a price cap system, as it did not allow RegTP to avoid the price squeeze. It should be noted that DT still disputes RegTP's power to seek cost orientation of retail tariffs in court. However, DT's legal argument seems weak. It should further be noted that the level of regulation of retail tariffs will be substantially lower under the new Telecommunications Act. C.2. Cost accounting separation 38. Are SMP operators subject to effective cost accounting separation obligations? Yes, DT is obliged to apply cost accounting separation. However, since all of DT's cost information is protected as business secrets, competitors cannot verify whether this 3 4 Estimated figures based on annual reports. Information from the BIICL. These figures include both appeals against decisions of the NRA and the dispute settlement body. -7-

8 obligation is observed by DT. In particular, doubts exist about the correct distribution of common and joint costs. C.3. Availability of information 39. Is there any information available (e.g., number of subscribers, key for cost allocation between network components, WACC) enabling competitors/third parties to understand cost models and assess regulated operators' compliance with their cost orientation and accounting separation obligations? Such information (except for the WACC) is not available to the public or to competitors, because it is all considered to be protected business secrets of DT. Only RegTP has access to such information and is barred from disclosing any such information pursuant to court decisions. This issue is currently pending before the Supreme Court, as RegTP is trying to broaden the scope of information that it can disclose. 40. Are the accounts drawn in accordance with cost accounting separation effectively published? The accounting model is transparent, but accounting data is not. There is no obligation to publish an accounting model. Information about the accounting model of DT can only be derived from the few DT statements in rate regulation proceedings that are nonconfidential. C.4. Procedures satisfying access requests in an effective and timely fashion 41. What is the procedure for the negotiation of a reference interconnection agreement or standard interconnection agreement with the incumbent? If there is no standard agreement, please elaborate. What is the timeframe for entering such an agreement - are there any material barriers to entering such an agreement? With regard to Reference Interconnection Offers, see Question 2. In Germany, there are only certain "Standard Terms" (Grundangebote), which DT includes in its General Terms and Conditions. It is possible to enter into an agreement based on such General Terms and Conditions with DT relatively quickly (about 4 weeks). If there is a dispute about the agreement, an interconnection procedure before RegTP will, (in theory) take 10 weeks (see above Question 25). 42. Is there a standard procedure available for operators to negotiate alternative access products/services not explicitly provided for in the standard reference interconnection offers? There is no specific procedure available for operators to negotiate alternative access products/services. An operator can request alternative access from DT. If DT denies this request or fails to respond to it, an operator can appeal to the regulator for dispute resolution. However, the RegTP is only required to adopt a decision within a certain timeframe (i.e., 8 weeks) once it has formally opened the case. A case is only opened by RegTP on the basis of a prior investigation, which is not limited to a particular timeframe. -8-

9 C.5. Rights of way 43. Are operators entitled to free rights of way on public land? Although the Courts have clarified that local authorities cannot charge fees for granting rights of ways, certain communes continue to charge such a fee. D. KEY ACCESS PRODUCTS D.1. Voice interconnection 44. What is the level of interconnection tariffs for carrier select, carrier pre-select and call termination with interconnection at the tandem switch level? Termination single transit: 1,07 Eurocents (9th Implementation Report, Annex 1, p.25). Termination double transit: 1,86 Eurocents (9th Implementation Report, Annex 1, p.25). 45. Do detailed cost models for SMP operators exist? The model for DT's interconnection costs was subject to a consultation process in ("Kostenmodell für das Verbindungsnetz", "Kostenmodell für das Anschlußnetz"). However, RegTP's attempt to determine interconnection rates based on this cost model was overturned in court, and RegTP subsequently determined interconnection rates based on an EU-best practice comparison. 46. Does the NRA have the power to apply a price squeeze test and the power to review the level of retail tariffs on the basis of alleged discriminatory access at wholesale level? Has your NRA applied this power effectively? RegTP has applied a price squeeze test only in very few cases and without specifically referring to it. It based the first flat rate Internet access decision in 2001 on a price squeeze argument. However, it has not based a rate approval decision in the area of voice interconnection on a price squeeze test; it used the price squeeze test only as an auxiliary argument. The RegTP has only once rejected a DT voice tariff due to price squeeze in a 1999 decision. D.2. Leased lines and partial private circuits offer 47. Are there any wholesale private line offers ("ppcs") in your country? No. DT only offers end-to-end leased lines, but does not offer partial private circuits. There are published offers for wholesale lines (Carrier Festverbindungen - CFV) and for retail lines (Standard-Festverbindungen-SFV). Migrating retail SFV circuits to wholesale CFV circuits is possible. More than 50% of the circuits are eligible for migration within 6 months of launch. The CFV segments (access and trunk) are priced on a cost-oriented basis (but not available separately). Since there is no PPC product available, the PPC segments (trunk segments and ppc access tails) are not available on cost-oriented terms. The existing voice interconnect infrastructure may not be used for bandwidth handover. 48. Comparison of tariffs for wholesale leased lines offers for 2 Mbits/s on average distance of 2 km? -9-

10 EUR per year (9 th Implementation Report, Annex 1, p. 86). 49. Do detailed cost models exist for SMP operators? Not in the area of leased lines. 50. Does the NRA have the power to apply a price squeeze test and the power to review the level of retail tariffs on the basis of alleged discriminatory access at wholesale level? Has your NRA applied this power effectively? Not in the area of leased lines. 51. Are there effective measures to prevent discrimination in the provision of ppcs and leased lines? In a decision of 31 May 2002, RegTP imposed strict lead times and delivery dates with uncapped penalties, and also included detailed reporting obligations to RegTP in the area of carrier leased lines. Unfortunately, this decision was suspended in a provisional stay order of the Administrative Court of Cologne, which was upheld by the Appellate Administrative Law Court of Muenster in early As a result, there are currently no new effective measures in place to prevent discrimination. D.3. Fixed to mobile 52. Do detailed cost models exist for SMP operators? RegTP does not consider that any of the German mobile operators has significant market power (SMP), and therefore does not regulate fix to mobile rates. 53. What is the average interconnection charge for fixed to mobile calls? 15,05 Eurocents/min. (9 th Implementation Report, Annex 1, p. 29). 54. Does the NRA have the power to apply a price squeeze test and the power to review the level of retail tariffs on the basis of alleged discriminatory access at wholesale level? Has your NRA applied this power effectively? RegTP does not consider any of the German mobile operators to have significant market power (SMP), and therefore does not regulate fix to mobile rates. D.4. Local loop unbundling 55. Is there a detailed cost oriented model in relation to ULL? Yes, there is a detailed cost model. 56. What is the tariff charged for ULL access? 16,5 EUR/month (9 th Implementation Report, Annex 1, p.61). 57. What is the number of unbundled lines as a percentage of total lines? 1,73 % (ECTA Scorecard). -10-

11 58. Does the NRA have the power to apply a price squeeze test and the power to review the level of retail tariffs on the basis of alleged discriminatory access at wholesale level? Has your NRA applied this power effectively? The NRA has the power to do this. However, this was not done for ULL, which resulted in the finding of a price squeeze by the European Commission. D.5. Wholesale DSL products 59. Is there a detailed cost oriented model in relation to wholesale DSL products? No. 60. Is a wholesale offer published so as to enable launch at the same time as the SMPoperator? No, there is no such offer. However, in August 2003, RegTP ordered that DT must offer a wholesale product allowing the use of all frequencies bands on a single line. DT has not complied with this requirement. In any event, the offer would not be limited to a wholesale DSL product. Shared access was ordered in March 2001 and came into operation in March 2002 with the first rate setting by RegTP. Due to price squeeze issues in relation to DT's retail ADSL offer, almost no lines have been ordered. Until now, RegTP has not received a formal request for bitstream service by a new entrant, and RegTP is legally prevented from intervening ex officio under the current regime. RegTP has, however, launched a consultation process concerning bitstream access in November 2003, which would allow it to intervene quickly once requested to do so. 61. Are the terms of the wholesale offer equivalent to the terms benefited by the SMPoperator downstream operating retail arm? Not applicable. There is no knowledge about internal transfer prices. 62. Are there volume order requirements per site? Not applicable. 63. Is there an access option at the nearest ATM node? Not applicable. 64. Is a price squeeze test applied by your NRA? Does your NRA have the power to review the level of retail tariffs on the basis of alleged discriminatory access at wholesale level of SMP-services; and if so does it apply such power in practice? RegTP has such powers. However, as there is no bitstream offer, this is not applicable. -11-

12 E. IMPLEMENTATION OF THE NEW REGULATORY FRAMEWORK 65. Has the new regulatory framework been transposed in your country? If so, when? Not yet, the process is still pending (see introductory note above). Germany is currently amending its Telecommunications Act in order to implement the framework; a draft of the amended Act has been published in October It is currently in the political decision making process. 66. Has the NRA completed the market analysis? 0 registered "Article 7" notifications received by Commission (see