Up until 1989, a public body, the Deutsche Bundespost, had been granted the almost exclusive right to provide and operate the German telecommunications network and related telecommunications services. Then in 1989, the so-called "Postreform I" introduced the first structural changes to the German telecommunications sector. First, the Deutsche Bundespost was split into three separate public undertakings, the Deutsche Bundespost Postdienst, Deutsche Bundespost Postbank and Deutsche Bundespost Telekom, the existing functions of the Bundespost being allocated between them. Deutsche Bundespost Telekom was given responsibility for the telecommunications sector. Secondly, the state's monopoly position in telecommunications sector was withdrawn save in relation to the provision and operation of the telecommunications network infrastructure, radio installations and voice telephony. The reforms of Postreform I were considered within a relatively short period of time as being insufficient - not least because of German unification in 1990. New discussions over the future of Deutsche Bundespost and its three undertakings were thus initiated in the middle of 1991 and resulted in a second stage of structural reforms known as "Postreform II", introduced in 1994. Postreform II entailed the laying down of foundations for the ending of all monopolies by 31.12.1997 to comply with EU directives and the privatisation of the three Bundespost undertakings, thus opening up the telecommunications market to competition. The three Deutsche Bundespost undertakings were converted into stated-owned stock corporations, Deutsche Bundespost Telekom becoming Deutsche Telekom AG.

In March 1995, the Federal Ministry for Post and Telecommunications (Bundesministerium fur Post und Telekommunikation) introduced a guideline laying down a framework for the future regulation of the German telecommunications industry. A preliminary draft was presented in May 1995 which was revised in October 1995. In February 1996, the Government introduced the draft Telecommunications Act to the German Bundestag. After controversial parliamentary and public discussion, the Act was passed by the Bundestag on June 13, 1996. Because the second parliamentary chamber, the Bundesrat, voted against passing the Act, the Act was made subject to the parliamentary mediation committee. After some minor amendments, the Act passed the legislation procedure the second time round and finally came into force on August 1, 1996.

It is already clear that this Act will lead to far-reaching changes to the German telecommunications market. This market is at present dominated by Deutsche Telekom AG, which currently is the only undertaking which disposes over a modern network reaching almost 40 million customers and a network infrastructure which covers the whole of the Federal Republic of Germany. Deutsche Telekom AG itself proclaims that it operates the world's most developed ISDN network and at a length of a 100,000 km it is the owner of the most compact fiber optic cable network in the world. In addition, it also has the largest wide-band cable network (for cable television). A subsidiary of Deutsche Telekom AG operates a GSM mobile telephone network (D 1), one of only three such mobile networks in Germany. For the foreseeable future, therefore, Deutsche Telekom AG will remain the dominant provider of telecommunication services in Germany. However, the market is beginning to show movement and a number of undertakings are standing ready to secure a portion of it. In particular, large German group undertakings are preparing to offer competition often by forming associations with banks and foreign telecommunication groups. Particularly noteworthy of mention are the electricity companies which own internal corporate networks, often based on optic fiber techniques. It is likely that three to five of the joint ventures set up by these companies will become competitions of German Telekom AG, particularly because of these companies large profit reserves which run into billions and their association with foreign telecommunication companies. Notably, such competitors already exist in the mobile telephone sector, namely D 2 and E-Plus. However, this movement in the market will not just be limited to the network operators. There will be a considerable impact on every company offering telecommunication services. Already, service providers, high-tech-companies and similar enterprises as well as public law entities such as districts and municipalities are preparing for positions in the new market and for full scale competition.

The relevant legal framework for the opening up of competition in the telecommunication sector is the new Telecommunications Act. This Act changes the former legal situation dramatically. Where previously licenses and permits were only granted as an exemption to the state monopoly, the new Act is considered to give any competitor an equal chance to secure a share in one of the most important commercial markets of the near future. The Act contains detailed provisions governing, inter alia, licensing, the regulation of undertakings with a dominant market position, access to the network, interconnection, the allocation of telephone numbers and the granting of radio frequencies. The new Act also regulates the use of public ways and private property for the laying and operation of telecommunication lines. To supplement the new Act, detailed rules will be contained in statutory instruments, which, however, are not yet in force.

The following articles will focus on an overview of the basic content of the new German Telecommunications Act.

For further information please contact Dr. Markus Deutsch, Gleiss Lutz Hootz Hirsch & Partners , Gartnerweg 2, 60322 Frankfurt, Germany, Fax: +49 69 955 14 198 - or enter text search 'Gleiss Lutz Hootz Hirsch & Partners' and 'Business Monitor'.

The article is correct to the best of our knowledge at the time of publication. However, it is written as a general guide and should not be relied upon as offering specific advice on any set of facts. Therefore specialist advice should always sought in relation to your specific circumstances.