Obligation of functional separation of a vertically integrated undertaking

(1) Where the Federal Network Agency concludes that the obligations imposed under section 13(1) have not led to effective competition, and that important and persistent competition problems or market failures exist in the markets for specific wholesale access products, it may, as an exceptional measure, require vertically integrated undertakings with significant market power to place their activities connected with the provision of the wholesale access products concerned in an independently operating business unit, by way of functional separation. That business unit supplies access products and services to all undertakings, including the other business units of its own parent undertaking, within the same time limits and on the same terms, including as regards charges and scope of services, and by means of the same systems and procedures.
(2) Where the Federal Network Agency intends to impose an obligation of functional separation, it transmits to the Commission a corresponding request comprising:
1. evidence that the Federal Network Agency's conclusion under subsection (1) is well founded;
2. a reasoned assessment that there is little or no prospect of effective and sustainable infrastructure-based competition within a reasonable time frame;
3. an analysis of the expected effects on the Federal Network Agency, on the undertaking, in particular on the staff of the separated business unit, and on the telecommunications sector as a whole, including investment incentives, having particular regard to the need to preserve social and territorial cohesion, and on other interested parties, including the expected effects on competition and possible consequences for end users;
4. an analysis of the reasons justifying the view that this obligation is the most efficient means of addressing the competition problem or market failure identified.
(3) The Federal Network Agency submits to the Commission, together with the request under subsection (2), a draft measure comprising:
1. the precise nature and level of separation, specifying in particular the legal status of the separate business unit;
2. an indication of the assets of the separate business unit, and of the products and services to be provided by it;
3. the organisational arrangements to ensure the independence of the staff of the separate business unit, and the corresponding incentives;
4. rules to ensure compliance with the obligations;
5. rules to ensure the transparency of operational procedures, in particular towards other interested parties;
6. a monitoring programme to ensure compliance with the obligation, including the publication of an annual report.
(4) Following the Commission's decision on the request under subsection (2), the Federal Network Agency conducts, in accordance with the procedures under section 12, a coordinated analysis of the markets connected to the local access network. On the basis of its analysis, the Federal Network Agency issues a regulatory order under the procedure of section 14.
(5) Any of the obligations under section 13(1) may be imposed on an undertaking with significant market power on which functional separation has been imposed, in each individual market in which it has been designated as an undertaking with significant market power under section 11.