The German government is cancelling a contract with Verizon over fears the company could be letting US intelligence agencies eavesdrop on official communications.
The Interior Ministry says it will let its current contract for internet services with the New York-based company expire in 2015.
The announcement comes after reports this week that Verizon and British company Colt provided internet services to the German parliament and other official entities.
Germany has been at the forefront of international outrage over alleged electronic eavesdropping by the US National Security Agency and Britain's GCHQ, revealed last year by former NSA contractor Edward Snowden.
Ministry spokesman Tobias Plate said on Thursday that Germany wants to ensure it has full control over highly sensitive government communications networks.
Verizon didn't immediately respond to a request for comment.
In February this year, Verizon's general counsel Randal Milch said that the US government could not compel the American telco giant to hand over customer data stored outside of the United States. However, privacy experts questioned Verizon's take on the issue.
"Verizon's lawyer is arguing the international legal position, but he seems to assume that the US courts — in particular, the Foreign Intelligence Surveillance (FISA) Court — is going to be as respectful of international sovereignty as international law would like the US to be," said Douwe Korff, professor of international law at London Metropolitan University, at the time. "Verizon is right in terms of what the law should be, but [Milch is] totally wrong as to how the law should be applied in practice."