The warning comes only months after the EC initiated action against the German government over its failure to get Deutsche Telekom to open its local access network fully to competitors.

The latest EC investigation examined the price the German incumbent charges new entrants for access to its local network, such as the links between customers phones and the telephone exchanges.

The EC on Wednesday said it believes Deutsche Telekom is "abusing its dominant position through unfair pricing."

Specifically, EC investigators allege the German carrier charges new competitors more for wholesale access to the local network than it charges end-user subscribers for their service, producing an effect known as "margin squeeze" that discourages competition.

"This discourages new companies from entering the market and, therefore, creating new jobs, and reduces the choice of suppliers of telecoms services as well as price competition for consumers," the EC regulators said in a statement Wednesday.

The investigation concluded that Deutsche Telecom could have prevented this anti-competitive situation by reducing wholesale access fees or by increasing monthly line rental fees, or through a combination of the two.

"Deutsche Telekom's most recent tariff changes at both retail and wholesale level are to be seen as a step in the right direction, but are far from being sufficient in order to rebalance the local loop access tariffs," said the EC.

The German carrier now has two months to deliver its own arguments contesting the EC's position on its alleged market abuse. The EC will then publish a final position on this pricing matter.

At the end of last year, the EC began infringement proceedings against Germany and other European countries over their failure to share access to local telecommunications loops with competing telcos.

Shared access is essential for new operators seeking to provide broadband Internet access services like digital subscriber line (DSL).

That European action came hot on the heels of the reopening of an investigation into Deutsche Telekom's wholesale and end-user broadband prices by the German telecom regulator, RegTP.

RegTP said that Deutsche Telekom had not allowed would-be third-party broadband providers enough latitude to price service profitably so they can enter the market.

Reported By Newsbytes.com, http://www.newsbytes.com .

06:19 CST