Flat-Rate Fiasco: Telekom Plan to Limit DSL Worries Berlin

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Telekom headquarters in Bonn: The German government is worried about company plans to curtail data speeds on flat-rate DSL plans. Zoom
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Telekom headquarters in Bonn: The German government is worried about company plans to curtail data speeds on flat-rate DSL plans.

German telecommunications giant Deutsche Telekom sparked controversy this week with plans to curtail flat-rate DSL speeds once certain data thresholds are reached. Customers, Internet advocates and the German government are all concerned.

Deutsche Telekom, Europe's largest telecommunications company, is creating quite a stir with its plans to impose data limits on its Internet connections. Critics warn of the negative impact on the Internet economy, and customers are worried that they might have to pay more in the future. An online petition at Change.org is gaining several hundred supporters by the hour, Twitter users are making fun of the restrictive "Drosselkom" (a German nickname for Telekom meaning "Throttle-kom") and German journalists have warned that the move is a threat to the free, open and secure Web.

Now, the German government is entering the fray. On Wednesday, Federal Minister of Economics and Technology Philipp Rösler of the business-friendly Free Democratic Party (FDP) wrote a letter -- a copy of which has been obtained by SPIEGEL ONLINE -- to Telekom CEO René Obermann, indicating that he was "concerned about the company's announced changes to its rate structures for Internet usage."

Rösler also warned against possible curtailments for flat-rate customers, adding that the German government and competition authorities would "very carefully follow ongoing developments with regard to a possible differential treatment of (Telekom's) own and rival services under the aspect of net neutrality."

The German government is still the largest shareholder in Telekom, which was formed in 1996 upon the privatization of the state-owned telecommunications monopoly Deutsche Bundespost. Part of this stake comes in the form of direct ownership of stock, but the government also has indirect influence through the large stake held by Germany's state-owned KfW development bank.

German Consumer Protection Minister Ilse Aigner of the conservative Christian Social Union (CSU), the Bavarian sister party to Chancellor Angela Merkel's Christian Democratic Union (CDU), has also criticized Telekom's new DSL rates: "At first glance, there is nothing to indicate that this is an improvement for customers," she told SPIEGEL ONLINE. "The company is apparently sending up a test balloon here. But Telekom has to be careful not to overshoot its goal," she warned, saying that "limiting flat rates like this is certainly not consumer-friendly."

Demanding Reviews, Issuing Threats

Many questions remain open, however, and Telekom is only providing scant information. One thing is for sure, though: In the future, Telekom intends to do away with flat rates as they are conventionally understood. Starting in May, a clause will be added to new customer contracts that provides for a curtailing of the speed of Internet service if a certain data volume is exceeded. Customers with mobile phone contracts have already experienced similar developments.

It's unclear when the speed limits will actually be introduced because it depends on how network traffic develops. The exact rate increases are also unknown. Rösler sees this as a dearth of information for a deluge of innovations -- and insists that it needs to be clarified: "I suggest that your and my experts collectively discuss these issues," he wrote to Obermann in his letter.

A particularly contentious aspect of Telekom's plan is its intention to exempt its own broadband services from this initiative -- and thereby possibly secure a competitive advantage. In concrete terms, this means that a customer who books the Telekom entertainment program T-Entertain, with which one can download rental films, for example, won't have to pay for the added data volume resulting from this increase in traffic. But customers with other streaming providers, such as Maxdome, would be the losers here, because at a certain point the connection speed would simply be inadequate.

Experts say that this is not only unfair competition, but also a violation of what is known as "net neutrality." This principle holds that all data flowing through the Web should be treated equally and not charged differentially according to the type of technology used. Up until now, users of data-intensive services, such as YouTube and the German music site Simfy, have not been charged extra -- and many net activists say that's a good thing.

'A Fair Solution'?

Plans to bottleneck Internet surfing speeds could now undermine this principle. Aigner takes a skeptical view of privileging Telekom services: "When a provider throttles the speed once a certain amount of data has been exceeded so it can give preference to its own services, the principle of net neutrality is called into question," she said, concluding that "this is a case that the Federal Network Agency should carefully examine."

Officials at the German Economics Ministry confirm that the Federal Network Agency is currently reviewing Telekom's business model, "also in light of net neutrality." Both Telekom and the Federal Network Agency are headquartered in the western city of Bonn.

Consumer Protection Minister Aigner is urging Telekom to provide details on how it intends to deal with this issue. "I expect a statement on how much value the company places on net neutrality," she said. "We cannot allow competition to be distorted at consumers' expense because individual providers introduce questionable priority rules."

The exception for Telekom services also bothers Economics Minister Rösler. Although he indicated in his letter to Obermann that politicians, as a matter of principle, do not interfere with companies' business models, he indirectly warned that he is not ruling out the introduction of legislative amendments to outlaw certain practices. "As you know," Rösler wrote, "the German government is committed to protecting net neutrality and permanently safeguarding a 'best-effort Internet,' particularly in the interests of users. This includes, if necessary, interventions with the goal of preserving net neutrality and ensuring (fair) competition."

Telekom reacted to Rösler's letter on late Wednesday afternoon with a press release, in which it stated that it was interested in holding an objective debate. "Minister Rösler also refers to this in his letter, in which he presents the federal government's goals concerning net neutrality," the company wrote, contending that "Telekom wholeheartedly supports these (goals)." The release added that Telekom "stands for a free and open Internet," but it also stressed that: "In the current debate, net neutrality is to a certain extent confused with a free-Internet culture."

The press release also noted that Telekom has announced that, starting in 2016, high-speed Internet access could become more expensive for some customers. According to the company, the alternative would be an across-the-board rate increase for all customers: "We have consciously decided against this," the company said. Instead, customers who require above-average high-speed volumes may have to pay extra in the future. "We think this is a fair solution," Telekom wrote.

Translated from the German by Paul Cohen

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