Research conduced by DIW (the German Institute for Economic Research, a Berlin-based think tank) has found that of the five major Western European markets—Germany, France, Britain, Italy, and Spain—studied, the German one is the most unsupportive for its incumbent telecoms operator; the research was commissioned by Deutsche Telekom, Germany's incumbent. The analysis was based on five dimensions: fiscal policies (e.g. the level of taxation and tax incentives), labour-market regulations, competition laws (as related to M&A for example), state support (e.g. for deploying new infrastructure), and the level of state ownership. The policies were considered favourable to incumbents if they increased demand for telecoms services, did not restrict the incumbent's business strategies, or helped the incumbents. The results ranked France and the United Kingdom as the most incumbent-friendly environments—though for quite different reasons. The French government was most willing to use its role as a major shareholder to protect France Telecom and its antitrust policies were also the most favourable for the incumbent's acquisition plans; BT benefited from the United Kingdom's e-government goals, liberal labour market, and relatively lax taxation. Spain ranked the third; being "held back" by the lack of support for the industry, rigid labour laws and the fully privatised status of Telefónica. Telecom Italia operated in the second-most unfavourable government, which on one hand publically supports the telecoms sector and has fiscal policies which favour its incumbent, but on the other hand has the lowest-ranking competition laws. Germany's place at the bottom was explained by modest fiscal support, strict competition policies and the illiberal labour market (which hinders the incumbent's efforts to downsize and reallocate its workforce as the fixed-line sector, the former cash cow, declines).
VATM, an industry lobby consisting of German competitors of Deutsche Telekom, has dismissed the report as the incumbent's attempt at promoting regional price deregulation, expressing fears that the government may use it as an argument for a more dovish approach towards its former monopoly—which is still 31.7%-owned by the state. This is topical, as the German regulator has recently indicated that the time might be right for Deutsche Telekom to be allowed to restrict access for its fixed-line network in major metropolitan areas, which logically are the most lucrative DSL markets and the same ones where the incumbent has taken hardest hits from the competitors. Their case gains some credibility if one turns the study's raison d'être the other way around—indeed, it could be also argued that, in the light of the findings, of the largest telecoms markets in the European Union (EU) Germany's has become the most competitive and accessible for new entrants.
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