Major regulatory decisions

Our business activities are largely subject to national, European, and U.S. regulation, which is associated with extensive powers to intervene in our product design and pricing, particularly in Europe. We were again subject to extensive regulation in our mobile and fixed-network businesses in 2021.

Regulation

Commitment agreements entered into force. The agreements with Telefónica and Vodafone concerning their long-standing cooperation in the fixed network were extended in the fourth quarter of 2020 in the form of new commitment agreements to replace the former quota-based agreements under what had become known as the “contingent model.” Long-term agreements were also signed with 1&1 and NetCologne in the first quarter of 2021. Since there were no regulatory objections to the agreements on the part of the Bundesnetzagentur, they entered into force effective April 1, 2021. Beyond the continued use of VDSL, the agreement also set the course for the use of the FTTH fiber-optic networks to be continuously built out by Deutsche Telekom in the years to come. This has established a solid foundation on which to take forward cooperation in the fixed network over the next 10 years.

European Commission set termination rates from July 1, 2021. On April 22, 2021, the European Commission published a Delegated Act setting single maximum Union-wide mobile (MTR) and fixed-network (FTR) termination rates. The Act will reduce MTRs to a uniform level of 0.2 eurocents/min. by 2024 using a phased approach. A uniform level of 0.07 eurocents/min. was set for FTRs from January 1, 2022, prior to which updated price caps still applied from July 1, 2021 (varied by member state).

European Electronic Communications Code (EECC) transposed into national law. The Telecommunications Modernization Act (Telekommunikationsmodernisierungsgesetz – TKMoG) entered into force in Germany on December 1, 2021. The reform of the German Telecommunications Act (Telekommunikationsgesetz – TKG) became necessary to transpose the provisions of the EECC into national law. The biggest changes affect the rules on consumer protection, the regulation of very high capacity networks (including FTTH), spectrum policy, and the rules on universal service. TKMoG will also remove the right of property owners to pass on cable TV service costs to tenants via the service charges included in rental agreements. The rules on contract terms and contract extensions were modified in favor of the consumer, with customers now being able to cancel contracts on a monthly basis after reaching the minimum contract term. Other changes affect the existing rights of retail customers to a price reduction in the event of defective performance – a modification that has now also been incorporated into the TKG. The deadlines for fault clearance have been further tightened. In terms of wholesale regulation of companies with a dominant market position, the amended TKG will ease regulations regarding the build-out of FTTH networks. The previous universal service is being replaced by an entitlement to fast telecommunications services. The thresholds for this will have to be laid down in an ordinance that has the force of law. One important change is the abolishment, effective June 30, 2024, of the privilege for property owners to pass on cable TV and internet service fees as ancillary rental costs to tenants. The fiber-optic build-out will be financed using new instruments, such as the fiber-optic provisioning charge for tenants capped at EUR 60 per year for 5 or 9 years, a cost apportionment added to the basic rent excluding service charges, or the existing rules on network usage charges. This step will also reduce the costs for network operators of using in-house networks. The EECC has already been transposed into the national laws of Greece, Austria, Slovakia, the Czech Republic, and Hungary (with varying deadlines for entry into force, in particular with respect to customer protection provisions). The legislative process is still pending in Croatia, the Netherlands, Poland, and Romania.

Bundesnetzagentur presents draft decision for FTTH network regulation. On October 11, 2021, the Bundesnetzagentur presented its draft decision on the future regulation of access to Deutsche Telekom’s copper and fiber-optic network. The draft contains proposals for easing FTTH network regulation, which would put an end to “ex ante” and access regulation. Non-discriminatory access will instead be secured under the Equivalence of Input (EoI) principle enshrined in the new Telecommunications Act (Telekommunikationsgesetz – TKG). Under the new system, wholesalers would have access to the same material and human resources as Deutsche Telekom’s sales teams. The Bundesnetzagentur further proposes to abolish the traditional “ex-ante” regulation of layer 2 (VDSL) products and tie charges to a disclosure obligation. The draft decision also includes the requirement for Deutsche Telekom to grant access to cable ducts and operational support systems. The period for responses to the draft decision ended on November 15, 2021. The Bundesnetzagentur is expected to notify the European Commission of the draft in the first quarter of 2022.

German court overturns approval under merger control law for the joint venture Glasfaser NordWest. Telekom Deutschland and EWE founded the joint venture Glasfaser NordWest in 2020. The aim of the joint venture is to provide up to 1.5 million households and business locations with fast internet. If the Düsseldorf Higher Regional Court’s decision of September 22, 2021 becomes final, the case will be referred back to the Bundeskartellamt for a new decision on approval and any further conditions. The joint venture can continue building out FTTH in the interim. The Bundeskartellamt, EWE, and Telekom Deutschland have lodged a complaint against the decision of the Düsseldorf Higher Regional Court to not allow an appeal.

Bundesnetzagentur’s security catalog classes operators of public telecommunications networks for the first time as having an increased risk potential. On August 25, 2021, the Bundesnetzagentur determined new security requirements for operators of public telecommunications networks. Under the IT Security Act 2.0 (IT-Sicherheitsgesetz 2.0) critical components are subject to special legal requirements, such as mandatory certification.

For further information on the Bundesnetzagentur’s TKG security catalog, please refer to the section “Risks and opportunity management – Risks and opportunities relating to regulation.”

European roaming regulation. In December 2021, the European Commission, the Council, and the European Parliament agreed to extend the current roaming regulation until 2032. The Roam like at Home principle introduced in 2017, which allows consumers to make calls at domestic terms and conditions and use data volumes within the European Union, will thus apply for a further ten years. New rules were also added on transparency, and the new regulation will ensure that the quality of roaming services is not lower than mobile services at home. New, lower price caps through 2031 are being set for inter-operator rates for corresponding wholesale services, to be re-examined in 2024/2025. Earlier discussions on possible steps to tighten regulation on voice calling and text messaging (SMS) between EU member states were not included in the draft. The regulation is expected to come into force as of July 1, 2022.

Awarding of spectrum

The assignment phase of the C-band auction (3.7 to 4.2 GHz) in the United States ended on February 17, 2021. On February 24, 2021, the FCC announced the number of licenses obtained by participating companies. Verizon paid around USD 45 billion for 3,511 licenses, AT&T over USD 23 billion for 1,621 licenses, and T‑Mobile US USD 9.3 billion for 142 licenses. A total of 280 MHz was sold at the C-band auction. The new license holders must make relocation payments over the next three years to cover the transfer of licenses from the former holders. The payments T‑Mobile US will have to make are expected to amount to USD 1.2 billion. In Hungary, proceedings to re-award 900 and 1,800 MHz spectrum licenses that are due to expire in 2022 were held on January 28, 2021 and concluded the same day. Magyar Telekom acquired 2x 8 MHz and 2x 20 MHz in the respective bands for a total price of EUR 123 million (when translated into euros). On August 12, 2021, Hrvatski Telekom in Croatia acquired spectrum in the 700; 3,400 to 3,800; and 26,000 MHz bands for a total purchase price of EUR 17.4 million. In Romania, the regulatory authority confirmed the extension of Telekom Romania Mobile Communications’ 2,100 MHz usage rights for 2022 until the end of 2031 following payment of a one-time fee in the amount of EUR 25 million; the formalities were completed by the end of 2021. The remainder of the 800; 2,600; and 3,400 to 3,800 MHz spectrum in Romania was awarded in December 2021. For harmonization purposes with other sub-bands, short service lives of only around 4 to 7 years were assigned to these frequencies. Hence, no spectrum was purchased by the three Romanian market incumbents, including Telekom Romania Mobile Communications.

As previously, Poland has made no further announcements regarding a new start date for the postponed auction for 3,400 to 3,800 MHz. The process is being held up by incomplete legislative procedures. A further four 80 MHz licenses, capped at 80 MHz, are expected to be awarded by way of an SMRA. All further details of the auction are pending. Romania is planning the award of 5G spectrum in the 700 MHz and 1,500 MHz bands, which is expected to take place in the second half of 2022. The Slovakian regulatory authority is preparing to allocate the 3,400 to 3,800 MHz band, which will not become available for mobile broadband usage before 2024, however. A public consultation was held and the decision made to postpone the award until the first half of 2022. In the meantime, the previously unused 2,600 MHz TDD band (50 MHz) has been added to the spectrum award planning. In the United States, the 3,450 MHz auction began on October 5, 2021, at which the FCC was offering aggregate spectrum of 100 MHz in the 3,450 to 3,550 MHz band. The assignment phase ended on January 4, 2022. The winning bids totaled over USD 22.5 billion, thus surpassing the reserve price of USD 14.7 billion. T‑Mobile US paid USD 2.9 billion to secure itself a total of 199 licenses. In Germany, the usage rights for 800; 1,800; and 2,600 MHz are due to expire at the end of 2025. According to its current consultation, the Bundesnetzagentur still sees a considerable need for clarification on a range of issues. Licenses are not expected to be awarded before 2024.

The following table provides an overview of the main ongoing and planned spectrum awards and auctions as well as license extensions. It also indicates spectrum to be awarded in the near future in various countries.