International Journal of Communications Law and Policy

Workshop "Internet Telephony" at Marburg (Germany), June 5 to 6, 1998

 

Access to the network and obligations to permit interconnection in the case of Internet telephony in Germany
by Ralf Capito, Andreas Berner & Niels Fassbender

 

I. Introduction

The topic of the present discussion is the category of Internet telephony which operates between two traditional telephones. In order to place a telephone call via the Internet, points of interconnection have to be established between the internet and the public switched telephone network (PSTN). These so-called gateways are supplied by Internet telephony service providers (ISPs). These ISPs need access to the public switched telephone network to offer telecommunication services. The German Telecommunications Act 1996 ("TA") distinguishes between general and special network access. In addition, interconnection is defined as a particular form of the special network access. The special network access is of outstanding importance for the ISP, as it is not possible to offer telecommunication services using general network access, for capacity and costs reasons. It would stop most new operators entering the German market, were such operators unable to connect their customers with the dominant market players' network at reasonable cost.

II. Obligation to permit Interconnection (SS. 33, 35 TA)

SS.33 and 35 TA lay down the preconditions for public switched telephone network operators' obligation to permit interconnection.

1. S.35(1) TA entitles only the operators of a public telecommunications network to claim the right of interconnection. The internet is a public telecommunications network. The question arises, however, whether the ISPs operate such a network. "Operating" a telecommunication network is defined as the exercise of the legal and factual control (Funktionsherrschaft) over operations which indispensably have to be provided, in order to offer telecommunications services. Whether the ISP can be referred to as an "operator" depends on what facilities of the legal and factual control are to be regarded as indispensable. There are two different ways of interpreting the term indispensable. If one construes this term narrowly, all internet facilities which are used to provide a connection between the two customers are to be considered as indispensable. In a wide interpretation, facilities are to be regarded as indispensable which must be under the control of the ISP in order to be able to place a call. Neither the wording, nor the Government Motives to the TA, nor the purpose of the legislation, can be cited as unequivocal support for one of the two options.
The relevant provisions of the TA have been based on Directive 97/33/EC (the Interconnection directive). The only requirement which Article 4(1) establishes for interconnection, is the supply of telecommunication services, and in so doing control of the means of access to one or more network termination points (for example a gateway). The TA has to be construed in conformity with the Interconnection Directive. Therefore, the term indispensable has to be interpreted widely. For this reason, the ISP is an operator of a telecommunication network.
According to the second sentence of S.35 (3) TA, the ISP must have a license (S.8 TA) or fulfil the prerequisites for obtaining a license (reliability, operating capacity and expertise). This means that even ISPs without a license could claim interconnection. However, this has apparently not occurred yet.

2. Those carriers of telecommunication networks which dominate the market within the territory they cover (Market Dominating Carrier) are required to grant access to other users to such network or to any part of it (S.35 (1) TA). Considering the structure of the German telecommunication market, it is hardly an exaggeration to say that this provision will only apply to Deutsche Telekom AG, the former monopolist, in the next few years.

3. The access shall be granted on the basis of an interconnection agreement. Such agreement has to be based on objective criteria and must be non-discriminatory and transparent. Moreover, it should guarantee equal access to the networks of the Market Dominating Carrier (Sec. 33 TA). The market dominating carrier may refuse access only for the following reasons: security of network operations, maintenance of network integrity, interoperability of services (in justified cases) or data protection (as appropriate). The market dominating carrier could possibly argue that there is no uniform standard for Internet telephony as yet.

To sum up, an ITSP is entitled to claim interconnection from the market dominating carrier (Sec. 33, 35 TA).

III. Essential Facility Doctrine

The question arises, however, whether this claim could not be restricted or excluded on different grounds. Such a restriction or exclusion could be based on the essential facility doctrine which underlies the provisions of the TA dealing with interconnection. This doctrine originated in American law but can also be detected in Article 86 EC Treaty. Because of the supremacy of EC law the essential facility doctrine trumps the relevant national law of the Member states. According to this doctrine a monopolist is obliged to grant its competitors access to its essential facilities. It follows that those facilities which cannot be duplicated for economic or factual reasons are to be regarded as essential, for example gas pipelines, power supply systems or even telecommunication networks. A restriction of the access to those facilities is possible, however, when so-called relevant reasons can be argued. It has to be discussed whether S.1 of the Unfair Competition Act 1907 could possibly be regarded as such a relevant reason.
The courts and legal scholars have developed a number of different categories of cases to determine the meaning of S.1 of the Unfair Competition Act 1907. Those categories share as common ground that a competitor offers services without being able to use its own resources to do so. This include especially market disturbance (Marktstörung), the usage of other competitors` services, or price undercutting have been regarded as contrary to public policy. When attempting to determine whether the services offered by the ISP fall into one of these categories, it is difficult to assess whether or not those services are based upon the ISP's own resources. It is a typical feature of the Internet that everyone can access all available facilities, which also applies to providers of voice telephony, of course. Furthermore, it has to be assumed that Internet telephony will only be offered in the market as long as it works more or less properly. If the Internet were 'congested' (market disturbance!) Internet telephony would no longer be feasible.
For this reason, the preferable view for the time being seems to be that Internet telephony is not contrary to public policy within the meaning of Sec. 1 of the Unfair Competition Act 1907. Therefore, an application for an injunction could not be based on that ground.