The bill, which was approved earlier in the year by the lower house of parliament, the Bundestag, aims to break former monopoly telephone company Deutsche Telekom's near 95% grip on the so-called local loop by allowing call-by-call and preselection services. These services allow other companies to provide telephone and dial-up Internet service over infrastructure leased from Deutsche Telekom.
The Bundesrat is made up of the heads of the German states, called Länder. Wolfgang Clement, president of the populous state of North Rhine Westphalia (NRW), opposed the amendment on the grounds it would have a negative impact on companies that invested in local network infrastructure and would discourage others planning to make similar investments.
NRW has several competitive local carriers in addition to DT. Around 60 local carriers currently provide a service in Germany.
Clement said he sees no opportunities for small and medium-sized operators to benefit from the new legislation. The state president referred to the speed at which the German telecommunication market has been liberalised as "too fast".
The German telecommunication regulator, RegTP, regrets the decision and can expect "plenty of problems" with the European Commission, a spokesman said. Earlier in the year, the Commission issued a warning to Germany to amend its rules allowing for greater competition in local loop services, according to the spokesman.
The bill will not be put back on the agenda until after the September elections, the RegTP spokesman said.