Primacom challenges KDG wholesale pricing

The German cable operator Primacom has complained to the regulator Bundesnetzagentur about the wholesale pricing of Kabel Deutschland (KDG) for the delivery of television channels to Level 4 operators. “The issue is important not only for us, but is also of great importance to nearly all German cable network operators with end-user relationship,” said Primacom CFO Michael Buhl in an interview in Die Welt.

The issue concerns one of the peculiarities of the German cable TV market: cable networks are divided in Level 3 and Level 4 networks. Only Level 4 networks have a direct relationship with the end consumer, Level 3 networks deliver signals to dozens of Level 4 networks. Kabel Deutschland (KDG), Unitymedia and KabelBW, all three being former Deutsche Telekom networks, are Level 3 networks, but all three have been busy buying up Level 4 networks in order to strengthen their position with the end consumer.

Especially smaller Level 4 networks have always been dependent on the signal delivery of the Level 3 operator with a real choice of provider. The only way out has been the creation of their own satellite head-end rather then buy the wholesale signals from a Level 3 player.

The issue on which Primacom now wants a decision from the regulator concerns contracts in the cities of Osnabrück and Mainz. Until now, KDG delivered the television signals under an existing contract between Deutsche Telekom and the operator, which KDG as the new owner had to honour. The pricing was such that Primacom could make a sound business case.

With the contract now up for renewal, KDG plans to charge a flat fee, independent of the number of homes actually taking the signal. The operator already uses this pricing models with other sub-contractors. According to Primacom, this will make it impossible to build a business case and it wants a reduction of 33% of the proposed fees.

The regulator will have to respond before December 28.