Deutsche Telekom

The Situation

Deutsche Telekom is one of several European telecommunications companies interested in upgrading their networks to VDSL (very high bit-rate DSL) in order to accelerate Internet access to speeds 25 to 50 times faster than current ADSL technology, and to improve upload capacity. Due to the enormous economic potential of the VDSL market, the German federal government and regulatory authority are in favor of leaving new broadband services unregulated. However, while German authorities want to postpone a decision on the necessary level of regulation until data on concrete experiences with the market and competitive structures are available for review, the European Commission insists on regulating new broadband networks immediately.

NERA's Role

Deutsche Telekom commissioned NERA and sister company Mercer Management Consulting to examine the case for deregulation of certain telecommunications markets in Europe, and to assess the potential benefits that would result. The report contains a discussion of the rationale for regulation, and ways in which regulation can distort the market and the economic arguments for deregulation. The team, led by Nigel Attenborough, examined experience of deregulation of fixed networks in Europe and the US. The study estimated the potential benefits of deregulating existing broadband services if this led to greater take-up of broadband services. NERA measured benefits at the industry level (in terms of turnover, consumer surplus, and value-added) and at the economy-wide level (in terms of total turnover, GDP, and employment). NERA also estimated the potential benefits if new broadband services were to be deregulated and if this were to result in greater investment in platforms capable of delivering new broadband services.

The Result

The final report was used to inform the debate in Germany and Europe over regulatory holidays and the potentially damaging effects of inappropriate regulation.