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Euro regulators braced for EU watchdog battle

European regulatory policy under spotlight

But Europe's incumbent operators are less excited. "Functional separation is not appropriate in today's highly competitive markets," wrote Michael Bartholomew, director of the European Telecommunications Network Operators Association, in an earlier statement on the topic. "Functional separation must remain a voluntary decision as part of a company's commercial strategy."

In Germany, where rivals have called for incumbent Deutsche Telekom to share its new VDSL (Very high bit rate Digital Subscriber Line) network, functional network separation has been a topic. In the absence of such a policy, Reding has started a lawsuit against Germany in the European Court of Justice in the hope of prying open the new broadband infrastructure to competition.

The incumbent operator has warned it will stop expansion of the network to 40 German cities if the new service is regulated. Its argument: VDSL infrastructure is costly to deploy, it's an entirely new market with plenty of risks, and entrepreneurial freedom is necessary to recoup its investment.

Although Deutsche Telekom has said it's prepared to share access to its new broadband network, it will do so only under its own conditions, and these remain a sticking point with rivals.

However, the national regulator believes sufficient regulatory measures are in place to ensure competition in Germany.

The unbundling regulation, for instance, has created competition in local network access, according to Boll, with Deutsche Telekom bleeding fixed-line telephone customers - more than 1.5 million in the past three quarters alone.

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