On December 30, 2019, the FCO approved the creation of a joint venture by Telekom Deutschland GmbH (“Telekom”) and EWE AG (“EWE”) for the expansion and operation of fiber-optic networks (FTTB/H) in parts of north-west Germany after an in-depth review.
The parties had first informed the FCO of their intended cooperation at the end of 2017. They formally notified the joint venture to the FCO in March 2019. In advance of the merger control clearance, the FCO had already examined the intended cooperation under cartel prohibition provisions (Section 1 in connection with Section 32 ARC) and closed those proceedings with a commitment decision on December 4, 2019. In the merger clearance decision for the planned joint venture, the FCO relied on these commitments noting that they will have positive effects on the competitive conditions in the relevant telecommunication markets, including in rural areas, and thereby eliminate any competition concerns.
In its preliminary assessment, the FCO found Telekom and EWE to be two of the strongest competitors in north-west Germany. It took the view that, in light of the currently still limited demand from end-customers for gigabit-ready broadband access, the parties’ key motivation to build FTTB/H currently is to secure a first-mover advantage. The FCO, therefore, concluded that a cooperation of the parties would reduce their incentives to make the necessary significant investments.
The FCO also found that the parties jointly provided a substantial part of the end customers in the cooperation area with internet and telephone services which they could migrate to the new fiber-optic network. The FCO held that this advantage would eliminate any incentive that each cooperating company would otherwise have to grant other telecommunication companies access to the new network in order to make full use of the network capacity.
To eliminate the FCO’s concerns, Telekom and EWE have undertaken the following commitments, which are binding for six years:
The joint venture will build at least 300,000 FTTB/H connections in the concerned area within four years without public funding, to some extent also in rural areas. This number exceeds both the parties’ original proposal and the number of connections the FCO expected to occur if the parties were to make investments independently of one another.
In contrast to their initial plans, Telekom and EWE committed to continue to participate independently in tenders for public funding of FTTB/H connections, especially in rural areas, where commercial network expansion would not be profitable. This commitment is expected to further increase the total number of connections to be deployed by the parties.
Telekom and EWE committed to refrain from focusing only on urban areas which already have cable networks and in which cable providers exert a certain competitive pressure.
The parties also committed to refrain from strategic defense measures vis-à-vis competing companies, such as short-notice announcements to develop a certain area in order to deter a competitor to develop that area.
The parties will grant other telecommunication companies non-discriminatory access to the joint venture’s new network and to high-quality technical upstream services. Within a specific period, a certain share of the connections will be handed over to competitors for their marketing to end customers.
The commitments do not set prices and conditions for a third-party access to future networks. The FCO recognized that it remains an open question whether and to what extent the FNA should regulate fiber-optic networks.
While the immediate impact of the cooperation between Telekom and EWE is limited to an area in north-west Germany covering less than 10% of all German households, the cooperation and commitments could serve as a model for network expansion in other parts of Germany.
 The fibre-optic cables connect to a building (Fiber-to-the-Building, “FTTB”) or to an apartment (Fiber-to-the-Home; “FTTH”) rather than ending at a distribution box in the street.