Viviane Reding, European commissioner in charge of telecoms, warned Germany yesterday that she would start legal proceedings against the country if a draft German telecom law is passed.

Reding said she would "start infringement proceedings against Germany if the draft should become law without substantial changes".

The draft law would grant a so-called "regulatory holiday" to Deutsche Telekom to allow it time to absorb the cost of recent investments. The holiday would, in effect, give Telekom an exemption from EU rules designed to open the telecoms market to competition.

"The Commission is concerned about all obstacles to competition whether today, tomorrow or in the long-term," Reding said. "We therefore do not accept monopolistic situations even if we are promised that they would only last for four or five years."

The German move could trigger copycat action in other EU countries, the commissioner said. "The German approach therefore sets a very dangerous precedent," she said.

Reding made her comments during a speech at the Bitcom conference in Brussels.

In the context of the review of the EU’s telecoms rules, which the commission is near to concluding, Reding said there is a need for one EU telecom regulator.

"I see a clear, long overdue need to make the internal market a reality also in regulatory terms," she said.

"The most effective way to achieve a real level playing field for telecom operators across the EU would of course be to create an independent European telecom regulator that would work together with national regulators in a system, similar to the European System of Central Banks," Reding said.

The ECSB comprises officials from all 12 national central banks in the euro zone. They sit on the board of the European Central Bank, which decides monetary policy for the 12 countries.

She proposed the idea of creating a European spectrum agency to handle radio spectrum management and licensing across the EU. "We have to recognise the competitive disadvantage the EU faces because, instead of having one single regime for spectrum management and spectrum licensing, as they do in the US, we have 25 different ones," she said.

She urged member states to support the idea of a single spectrum agency, while acknowledging that it isn’t very popular at present.

A more market-based approach to spectrum management is required, she said, pointing out three ways spectrum for electronic communications could be better used.

First, the regulation of spectrum allocation needs to be more technology neutral. Second, the EU needs to introduce spectrum trading across the EU in selected bands agreed at EU level.

And third, the EU needs rules better suited to companies that operate across national borders. "Those who develop wireless services with a wider reach than a single country should be able to obtain a market entry authorisation as easily as those who offer services only in one member state," she said.

Background material on the 2006 Review of the EU Telecom Rules is available here.