Deutsche Telecom, which is partly owned by the state, was set to benefit from a new law introduced by the German government that gave it a regulatory holiday on its roll-out of VDSL. VDSL gives very high speeds over short lengths of copper wiring, and as such is normally deployed by connecting fibre from the local exchange to the street cabinet, thus drastically reducing the amount of copper cable in the local loop. The new law would effectively have allowed Deutsche Telecom exclusive access to this network, and was granted due to the large amount of investment the company would have made.
TechWorld.com has more on the possible legal action that the European Commission (EC) may take now that Germany has passed the law. Warnings were given when it was in the draft state and even the German telecoms regulator 'Bundesnetzagentur' appears to have warned about the dangers of giving exclusive control of the new service.
In theory agreements like this are possible but must be granted in consultation with the EC. A lot, of course, depends on the market behaviour in a particular country. Additionally, different parts of a country can be deemed to need additional state aid particularly where commercial competition has failed to produce a vibrant competitive market.