The European Commission said Monday it was suing Germany over a law allowing Deutsche Telekom AG to keep rivals off its high-speed Internet networks.
EU spokesman Martin Selmayr told reporters that a letter "of formal notice" was sent to Berlin after it ignored repeated warnings not to adopt legislation that could grant Deutsche Telekom a de-facto monopoly on a new broadband network.
The German parliament on Friday passed the telecommunications law, exempting Deutsche Telekom's high-speed network from regulation and demands to open up its network to competitors, at least for now.
Under legal procedures, the German government has been given 15 days to answer the legal notice issued by the commission.
"I regret that Germany has chosen to ignore the commission's concerns about this new telecom law despite several clear warnings from the commission," said Viviane Reding, EU commissioner in charge of telecommunications issues.
She said the German law is "an attempt to stifle competition in a crucial sector of the economy, and in violation of the EU telecom rules in place since 2002."
Selmayr added the EU intends to take the case to the EU's court of justice.
Monday's move comes in a long-standing battle between Brussels and Berlin over EU claims Deutsche Telekom is working to keep competitors off its broadband network, which it has to open up to others under EU rules.
The former German state-owned telephone company plans to roll out a high-speed optical fiber network that will transmit data up to 20 times faster than current offerings.
The plan is to provide Germany's 50 largest cities with high-speed broadband lines by 2007. Berlin had agreed with Deutsche Telekom's argument that it could only make a decent profit on the network if it was exempt from any requirement to offer its lines to rivals.
The Commission called the arrangement unfair and threatened to sue unless changes were made.
Reding and EU Competition Commissioner Neelie Kroes had last October sent a letter to German Economy Minister Michael Glos arguing against the German law, saying it would violate EU rules.
"The German law, as now adopted, jeopardizes the competitive position of Deutsche Telekom's existing competitors and makes it much harder for new competitors to enter German markets," the commission said in a statement.
It added that the company controls access of over 9 million telephone lines out of 12.9 million lines in Germany.