Arcor AG & Co. KG (C-152/07), Communication Services TELE2 GmbH (C-153/07) and Firma 01051 Telekom GmbH (C-154/07) v Bundesrepublik Deutschland.

• Jurisdiction: European Union
• Celex Number: 62007CC0152
• ECLI: ECLI:EU:C:2008:181
• Date: 01 April 2008
• Docket Number: C-154/07,C-152/07
• Court: Court of Justice (European Union)
• Procedure Type: Reference for a preliminary ruling

OPINION OF ADVOCATE GENERAL

RUIZ-JARABO COLOMER

delivered on 1 April 2008 ¹(1)

Joined Cases C‑152/07, C‑153/07 and C‑154/07

Arcor AG & Co. KG, Communication Services TELE2 GmbH, and Firma 01051 Telekom GmbH

v

Bundesrepublik Deutschland

(References for a preliminary ruling from the Bundesverwaltungsgericht, (Germany))

(Telecommunications – Financing of universal service obligations – Payments additional to the interconnection charge – Interpretation of Article 4c of the Competition Directive and Articles 7(2) and (4) and 12(7) of the Interconnection Directive – Direct effect – Triangular relationship)

I – Introduction

1. The Bundesverwaltungsgericht (Federal Administrative Court), Germany has requested the Court of Justice to rule on the scope attributed to the financing of certain universal service obligations by Commission Directive 90/388/EEC of 28 June 1990 on competition in the markets for telecommunications services (‘Competition Directive’ or ‘Directive 90/388’) (2) and Directive 97/33/EC of the European Parliament and of the Council of 30 June 1997 on interconnection in telecommunications with regard to ensuring universal service and interoperability through application of the principles of Open Network Provision (‘Interconnection Directive’ or ‘Directive 97/33’). (3)

2. The referring court asks whether it is lawful to impose, for the benefit of the dominant operator in the public telecommunications network, charges additional to connection charges in a sector characterised by the liberalisation (4) fostered by the Competition (5) and Interconnection Directives, (6) and completed by the ‘new regulatory framework’, (7) adopted on 7 March 2002 and published on 24 April 2002. (8)

3. The undertakings required to pay those additional charges dispute their validity, (9) invoking the principles of free competition, the prohibition of discrimination and administrative transparency.

II – The legislation applicable

A – Community law

4. The creation of a competitive, harmonised European market, founded on the free choice of telephony operators, commenced in 1987 with the drafting of the Green Paper on telecommunications. (10)

5. The administrative deregulation of the sector significantly transformed its legal status, which had been based on the notion of publicatio or keeping the operation of telecommunications networks in the hands of public bodies: the traditional system of state monopolies, incapable of satisfying the demands of the ever-increasing number of users resulting from the revolution which had taken place in the industry, disappeared.

6. That trend crystallised in a new framework, contrasting with the state involvement in the provision of the service which had moulded it to the predominant political will, (11) to the detriment of the liberalisation of the sector.

1. Directive 90/388 (12)

7. The judgment in Italy v Commission (13) sent shockwaves through the world of telecommunications by holding that the rules on competition apply to public bodies holding special or exclusive rights.

8. Notwithstanding the adjustments made in case-law, there were notable gaps in the system, made evident by the complexity of the field and the continued existence of markets dominated by the state operator, whose participation could be achieved only by means of specific statutory measures.

9. There was an even greater reaction to the expected liberalisation, effected by Directive 88/301/EEC (14) and consolidated two years later by Directive 90/388, which abolished special and exclusive rights. There were a number of exceptions, including, in particular, voice telephony, in respect of which the opening-up to competition was delayed until Commission Directive 96/19 of 13 March 1996 amending Directive 90/388.

10. Article 4c of Directive 90/388 (15) calls on the Member States to rebalance tariffs, providing for the essential guideline to the effect that the price of universal service provision may be increased, while bearing in mind the need to ensure its affordability. The article is also aimed at ensuring the conciliation of operators’ revenues, taking account of specific market conditions and in the spirit of cooperation which is fundamental in order to enable all individuals to enjoy telecommunications services.

2. Directive 97/33 (16)

11. On a separate front, the route to harmonisation, (17) which ran parallel to the efforts to remove the barriers restricting effective competition between operators, encouraged the entry of new operators into the market, by ensuring the establishment of a permanent equilibrium between those involved in open network provision. (18)

12. However, harmonisation also needed to extend to access to and location of the infrastructures, thereby guaranteeing interconnection between public networks and their suppliers.

13. As I explained in my opinion in Telefónica O2 Czech Republic, (19) that objective led to the adoption of Directive 97/33 which concerns certain financial aspects of interconnection between operators and precludes the fixing of tariffs below the threshold of the actual costs, while at the same time preventing mercantilist dabbling by prohibiting charges which exceed that threshold (recital 10).

14. Article 7(2) of Directive 97/33 provides:

‘Charges for interconnection shall follow the principles of transparency and cost orientation. The burden of proof that charges are derived from actual costs including a reasonable rate of return on investment shall lie with the organisation providing interconnection to its facilities. National regulatory authorities may request an organisation to provide full justification for its interconnection charges, and where appropriate shall require charges to be adjusted. This paragraph shall also apply to organisations set out in Part 3 of Annex I which have been notified by national regulatory authorities as having significant market power on the national market for interconnection.

…’

15. In order to prevent fraud, Article 7(4) provides that, in accordance with Community law, interconnection charges must be sufficiently unbundled, so that the applicant is not required to pay for anything not strictly related to the service.

16. In addition, following the adoption of Directive 98/61, which inserts a paragraph 7 into Article 12 of Directive 97/33, subscribers are granted the right to access the switched services of any interconnected telecommunications provider and the national regulatory authorities are required to ensure that pricing for interconnection is cost-orientated and that any charges imposed do not act as a disincentive for the use of the facility.

17. The Community provisions on competition in the field of telecommunications, which are structured towards the protection of consumers, provide for interconnection charges but exclude sums which are not intended to cover the actual costs of the services concerned by enshrining the principle of transparency. (20)

B – The German legislation

18. Paragraph 35 et seq. of the Telekommunikationsgesetz of 25 July 1996 (Law on telecommunications; ‘TKG’) sets out the obligations incumbent on the dominant operator with regard to providing access and interconnection. (21)

19. In accordance with Paragraphs 39 and 27 et seq., all charges relating to access to the network must be submitted for authorisation so that the licence holder does not receive payments in excess of those approved by the administrative authorities.

20. Paragraph 43(6) of the TKG, in the version of the Law of 21 October 2002, (22) provides for the levying of additional charges to compensate for any deficit suffered by the dominant operator.

III – The facts, the main proceedings and the questions referred for a preliminary ruling

21. Arcor AG & Co. KG, Communication Services TELE2 GmbH and Firma 01051 Telekom GmbH operate in Germany using public telecommunications networks, and offer their customers a carrier selection service through interconnection to the local network of Deutsche Telekom.

22. The regulatory authority requires Deutsche Telekom to provide the facility Telekom B.2 (Ort.), in return for a charge paid by Arcor AG & Co. KG, Communication Services TELE2 GmbH and Firma 01051 Telekom GmbH.

23. By decision of 29 April 2003, following an application by Deutsche Telekom, the Regulierungsbehörde für Telekommunikation und Post (Regulatory Authority for Telcommunications and Post), (23) relying on Paragraph 43(6) of the TKG, ordered, with effect from 1 July 2003, an additional non-cost based contribution in respect of the Telekom-B.2 (Ort.) facility, in the amount of EUR 0.0004 per minute, on the grounds that revenues accruing to Deutsche Telekom from end users did not cover all the costs of activating the local loop.

24. Barely one month later, the Commission (24) fined Deutsche Telekom EUR 12 600 000 for abusing its dominant position by requiring its competitors to pay a price for access to the local network which was higher than the one it charged its own subscribers for use of the fixed network.

25. By decision of 23 September 2003, the regulatory authority annulled (ex nunc) the imposition of the additional contributions, which were thus restricted to the period from 1 July to 23 September 2003.

26. Each of the three undertakings required to pay the additional charges individually contested the administrative decision approving those charges.

27. By judgment of 3 November 2005, the Verwaltungsgericht (Administrative Court), Cologne upheld their claims on the grounds of infringement of Community law, in particular Article 7(2) and Article 12(7) of Directive 97/33, as amended by Directive 98/61.

28. Germany and Deutsche Telekom brought an appeal before the Bundesverwaltungsgericht, which took the view that Paragraph 43(6) of the TKG may be incompatible with Community law. Accordingly the Bundesverwaltungsgericht stayed the proceedings...