Major regulatory decisions

Our business activities are largely subject to national and European regulation, which is associated with extensive powers to intervene in our product design and pricing. We were again subject to extensive regulation in our mobile and fixed-network businesses in 2018. The focus was primarily on the regulation of services for wholesale customers and the corresponding charges as well as the award of mobile spectrum.

Regulation

Supreme Administrative Court ruling in our favor provides legal certainty for rolling out VDSL in the direct vicinity of local exchanges. Competitors had appealed against the Federal Network Agency’s decision of September 2016 to green-light the deployment of vectoring. In September 2018, the Supreme Administrative Court upheld the Agency’s decision, simultaneously establishing legal certainty regarding the VDSL rollout.

Federal Network Agency decision on StreamOn. On December 15, 2017, the Federal Network Agency prohibited elements of the MagentaMobil StreamOn add-on option. According to the Federal Network Agency, two aspects of this option breached the EU Regulations on net neutrality and roaming. The ruling stipulates that we must transmit all StreamOn data traffic at the maximum available bandwidth and that this also cannot be deducted from the included data volume contingent when roaming within the EU. However, we believe that our service complies with EU law. We continue to seek a preliminary injunction against the Agency’s decision with the Münster Higher Administrative Court.

Federal Network Agency decisions on bitstream charges. On March 8, 2018, we received the Federal Network Agency’s final decision on our rate application dated September 21, 2017. The application relates to the rates we can charge to wholesale customers for access to our broadband lines for “layer 2 bitstream access.” In its final decision, the Federal Network Agency confirmed its preliminary decision from December 2017 and largely approved the majority at the current levels. We had requested an increase in the monthly rate as part of contingent models. As per the preliminary decision, this application was not approved in the final decision. On September 18, 2018, the Agency published a draft consultation on bitstream charges for supervectoring, which is used to make download bandwidths of up to 250 Mbit/s available. The approved charges are higher than the charges for slower speeds and were adopted unchanged in the final decision on December 18, 2018. The Agency thus consistently acknowledges investments in higher bandwidths.

Federal Network Agency grants preliminary approval of new interconnection rates. On December 17, 2018, the Agency provisionally approved the fixed-network interconnection rates. The charges for fixed-network termination were reduced by 20 percent from EUR 0.10/min. to EUR 0.08/min. and for call origination by around 43 percent from EUR 0.23/min. to EUR 0.13/min. These rates were approved through December 30, 2020 in the draft ruling. The draft approval of the final rates is now the subject of a national consultation process, to be followed by consultation on a European level. The final rates approval is expected mid-2019.

Awarding of spectrum

In Germany, the terms and conditions for awarding spectrum in the 2.1 GHz and 3.4 to 3.7 GHz ranges in the coming auction turned into a central topic of political debate in the latter half of 2018. Attention focused predominantly on requests to close gaps in mobile data coverage and internet access (known as “white spots”) alongside as rapid and comprehensive a rollout as possible of the new 5G mobile standard. The aim is to expand coverage to rural areas in particular and to all major transportation routes (road, rail, water). Given this, the final award conditions included extensive coverage obligations as well as legally disputed conditions on the granting of access between mobile network operators. Along with at least eight further market players, we have filed suit against the final award conditions.

The table below provides an overview of the main spectrum awards such as auctions as well as license extensions in Germany and at our international subsidiaries. It also indicates spectrum to be awarded in various countries in 2019. For further information on the spectrum awards, please refer to the section “Risk and opportunity management”.