Europe's top telecoms groups in competition probe

Europe's competition watchdog is investigating some of the region's biggest telecoms companies over whether they abused their market position in deals with internet companies to deliver content to consumers.

Offices of Germany's Deutsche Telekom, France's Orange SA and Spain's Telefonica were searched by European Commission regulators on Tuesday looking into concerns raised by U.S.-based Cogent Communications.

The probe is likely to worsen an already strained relationship between the regulator and big telecoms companies. The Commission is looking at ways to boost investment in fixed and mobile networks and foster a single market for communications services in the region.

Telecom operators once had high hopes for the Commission's plan, expected in September, but are now angry that the drafts include measures that will hit sales, such as an end to roaming fees.

Cogent is one of several companies that act as a middle-man to carry data traffic on behalf of internet companies like Google's YouTube to consumers around the world.

Cogent Chief Executive Dave Schaeffer told Reuters on Thursday that the three telecom operators were degrading the quality of services its customers received because the connection points between Cogent's networks and their own were overloaded.

By doing so, he said, the operators were using their commercial relationships with internet users in France, Germany and Spain to bolster their own global internet transport business, which competes with Cogent's.

Another aim would be to negotiate higher fees from Cogent for delivering its traffic to users or favouring the telcos' own content, said Schaeffer. For example, Orange owns a video streaming website called Dailymotion that competes with YouTube.

"These telcos have refused to upgrade the capacity of the interconnections, resulting in poor quality of service to our customers and theirs," said Schaeffer.

The amount that telecom operators charge for delivering content has become a sore point with some internet companies. In the past, delivery was free. But with data traffic from video streaming and other downloads booming, operators argue that the internet companies should pay more.

Cogent has filed complaints about the practice in France and Germany in recent years.

The European Commission said on Thursday it had raided the offices of some telecoms providers in several countries on July 9 but did not identify the companies nor the specific objective, in line with its usual policy.

Deutsche Telekom and Orange confirmed the raid. Orange and Telefonica said separately that they were co-operating fully.

Schaeffer said Cogent's concerns only touched on telecom operators that it felt were abusing their market positions. "We have good relationships with many operators in Europe, including Telenor, KPN and Belgacom," he said.

Companies can be fined as much as 10 percent of their global turnover for breaching EU antitrust rules.

In France, competition regulators have already examined a complaint by Cogent that Orange was overcharging it to deliver content to Orange customers there. In September 2012, the French watchdog sided with Orange, saying the operator could legally ask Cogent for more money to compensate for the high level of traffic it was delivering.

Cogent said it was appealing against that decision.

German regulators also examined and dismissed a similar case involving Cogent, a person familiar with the matter said.

© Thomson Reuters 2013