Deutsche Telekom Raided With Orange as EU Probes Internet

Deutsche Telekom AG, Orange SA and Telefonica SA were raided by European Union officials looking into whether Internet providers restricted access to companies that offer services that require high levels of data.

Germany’s biggest phone company was “astonished” by the inspections and is wrongly targeted; officials are still at “a number of premises” belonging to Paris-based Orange; and Telefonica is “closely cooperating” with investigators, the companies said in e-mails.

The raids follow complaints to local regulators by Cogent Communications Group Inc., a Washington-based Internet provider whose customers send traffic across carriers’ networks. European telecommunications companies don’t allow enough downloading capacity to meet end-users’ demand, and connections aren’t large or streamlined enough to allow clients like Cogent to offer adequate service to their own customers, Chief Executive Officer David Schaeffer said.

“The European Commission is focused on ensuring that consumers and entrepreneurs get the services that they pay for and are not being abused by any dominant carriers,” Schaeffer said today. “Ultimately, all we did was shine a light on these practices.”

Cogent was asked to fill out a detailed questionnaire by the European Commission as part of its investigation, though Schaeffer said he isn’t sure if his company’s grievances led directly to this week’s raids. In the past, Cogent filed complaints to German and French competition regulators, and has appealed the agencies’ decisions. Schaeffer said he believes the local companies are unfairly protected by their governments.

Antitrust Raids

The raids, which began July 9, are part of an antitrust investigation into “a number of telecommunications companies active in the provision of Internet connectivity” in several EU countries, the Brussels-based authority said in a statement. The commission didn’t identify the companies involved and declined to comment beyond today’s statement.

The investigation is into “potential abuse of an alleged dominant market position” in the context of interconnection of Internet backbone grids, Deutsche Telekom said in a statement. There is no such abuse, it said.

EU regulators have made Internet access a battleground for more than a decade, with rules intended to open up networks to competition and fines imposed on Telefonica and France Telecom, now known as Orange, for antitrust violations. The commission said today it’s looking into whether companies abused their dominant market positions as they provided wholesale services and carried content.

Cogent Complaint

Former monopolies still control large parts of the Internet infrastructure in their countries, carrying Web traffic and leasing their networks out to other providers.

The inspection may take several days to wrap up, Orange said, adding it’s cooperating with the commission and that business would continue as normal. It’s “confident about the eventual outcome of this matter, given the French Competition Authority decision regarding Cogent which exonerated our group,” according to the statement.

Cogent filed a complaint with the French regulator in 2011 after the U.S.-based company said France Telecom took too long with network upgrades and their agreement to carry traffic hurt connectivity. The regulator accepted Orange’s proposed fixes to the issue and closed the matter last year without any penalty.

French newspaper Le Figaro reported the raids earlier.

Content Businesses

Europe’s phone companies are looking to offload Internet and content businesses as they seek to raise money for building high-speed mobile networks. Telefonica, based in Madrid, last year sold its stake in online travel agency Rumbo, while Telecom Italia SpA divested a television unit in March.

The commission has said it wants to give all Europeans access to Internet speeds of more than 30 megabits per second and that half the EU should have connections faster than 100 Mbps by 2020. The average downloading speed now is about 20 Mbps, according to the EU’s executive arm.

Operators are critical of the EU approach, saying its focus on regulating prices and access restricts their cash flow and cuts into funds for new networks and technology.

Before it's here, it's on the Bloomberg Terminal.