iesy Repository GmbH - Irish Stock Exchange

provision and may not be abusive. Subscription fees that are to be paid by end-customers are, as a rule, subject to an ex post
review and will be scrutinized whether they are abusive. They may be subject to ex ante control by RegTP under certain
conditions. Fees are abusive in particular in case they prevail solely as a result of having significant market power,
significantly restrict competition of other telecom operators, which, for example, is the case if the fees do not cover all the
costs, result in a margin squeeze or cover unreasonably bundled products, or in case they are discriminatory. See
“Regulation.”
We presently utilize a range of rebate or volume-related pricing mechanisms. To the extent that our fees are or in the
future will be regulated, we may be restricted by telecommunications law, and eventually by antitrust laws from imposing or
enforcing certain pricing mechanisms. Volume-based discounts, one means of avoiding churn to competing infrastructures,
may also be affected in this way. In such cases, we could, under certain circumstances, be found liable for fines or damages if
these clauses were successfully challenged. This could adversely affect our competitiveness, financial condition and results of
operations.
Following a decision of RegTP in 1999 that ordered that DTAG may not charge different fees for feeding in analog
terrestrial or analog satellite signals (see “Regulation”), DTAG sued by way of sample proceedings a regional public
broadcaster in Brandenburg to pay fees for the feed-in of terrestrially transmitted signals. In 2002, a regional court in
Brandenburg decided that the regional public broadcaster in Brandenburg is not obliged to pay carriage fees for the feed-in of
analog terrestrial signals to the regional Level 3 provider, inter alia, due to a particular provision in the applicable state media
law. Despite the court decision, the German public broadcasters entered into a carriage fee contract with us in 2003 and pay
analog and digital carriage fees. In light of this court decision and the RegTP decision of 1999, however, both public and
private broadcasters might refuse to pay their carriage fees in the future and force us to sue them in court. We cannot predict
the outcome of any such potential litigation.
Under the new State Broadcasting Treaty that is applicable as of April 1, 2005, our analog and digital carriage fees
will, in addition to the price regulation by RegTP mentioned above, be subject to regulatory review by the state media
authorities. The state media authorities will review whether the prices we apply are restrictive or discriminatory with respect
to certain content providers. As a result, we may be further constrained in respect of the pricing models we agree with content
providers for both analog and digital products and our results of operations may be adversely affected.
In addition, we are prohibited from charging carriage fees to certain radio and television channels operated by nonprofessionals
(so called “open channels”).
We are required to carry certain programs on our network, which may adversely affect our competitive position and
results of operations.
We are required to carry certain broadcast and other channels on our cable system that we would not necessarily carry
voluntarily. In the digital range, these “must carry” obligations currently apply to the bandwidth equivalent of four analog
television channels (including the capacity for ARD and ZDF, the German public broadcasters, across three channels) plus,
as of April 1, 2005, the capacity for the two private broadcasters carrying regional programs which currently amounts to two
streams of one analog channel.
In the analog range, the specific allocation of channels varies from state to state and rules relating to the allocation of
radio channels are usually less strict than those relating to television channels. In Hesse and other states, the state media
authorities make allocation decisions for all of the analog channels available in the network, i.e. there is no discretion of the
cable network operator with regard to the allocation of analog programs. iesy currently transmits between 30 and 35 analog
channels and is currently obliged to block at least 28 channels for analog transmission that currently may not be digitized.
The state laws in North Rhine-Westphalia have a less strict approach, as the respective state media laws define a number of
“must-carry” channels (currently the channels reserved for the public broadcasters and open channels as well as 17 additional
channels) while the network operator is entitled to allocate the remainder of its capacity. See “Regulation”. Under the “must
carry” regulations currently in force, the number of programs that enjoy “must carry” status is not fixed in principle and we
may be required to carry additional programs in the future. Increasing the number of programs that we must carry on our
network would use valuable network capacity that we would otherwise use to deliver alternative programs or services that
may be profitable. In addition, we may be at a competitive disadvantage compared to certain of our competitors that are not
subject to such extensive “must carry” obligations, as they may be able to provide programs that are more appealing to endusers.
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