Germany's tortuous progress to an all-fiber future

News that a Liberty Global fiber joint venture in Germany has abruptly halted its operations came as an unwelcome new year gift to a number of smaller communities that had been banking on the altnet to provide them with much-needed high-speed connectivity.

Liberty Networks Germany, established as a 50:50 joint venture between Liberty Global and private equity firm InfraVia Capital in 2021, had planned to deploy fiber-to-the-home (FTTH) networks across Germany in underserved municipalities. It set up the helloFiber brand to accomplish this task and was apparently making progress in a number of locations, including the Rems-Murr and Esslingen districts in Baden-Württemberg as well as parts of Bavaria.

As first reported by Broadband TV News, helloFiber is now being shut down due to "changed macroeconomic conditions," according to its CEO Christian Böing.

The collapse of Liberty Global's helloFiber JV has come as unwelcome news for certain German communities as rising costs affect fiber deployments.
 (Source: the lightwriter/Alamy Stock Photo)
The collapse of Liberty Global's helloFiber JV has come as unwelcome news for certain German communities as rising costs affect fiber deployments.
(Source: the lightwriter/Alamy Stock Photo)

Böing has apparently blamed factors such as rising inflation, higher interest rates and difficulties in securing external finance. The JV is reportedly now exiting the German fiber market and has filed for insolvency. Both the helloFiber and Liberty Networks Germany websites have been down for several days.

Reports by German media reflect feelings of dismay and surprise among local government officials, who had thought helloFiber projects were on track as recently as December 2022. Indeed, Holger Niederberger, the mayor of Berglen in Rems-Murr, said intensive discussions were still ongoing at the end of 2022.

As is the case for other local mayors, his mission is now to find an alternative, with some placing their hopes in the FTTH rollout plans of incumbent Deutsche Telekom (DT).

Cost concerns

The collapse of helloFiber certainly raises a number of questions, such as which altnet in Germany will be next to fail in view of the increasingly fragmented nature of the market and pressure on costs.

Indeed, Light Reading sister company Omdia already noted late last year that small fiber operators in Europe are in a difficult position to absorb rising costs, and said there is a risk that deployment will slow down or be less extensive. "This is particularly true for those altnets that focus on underserved or unserved areas, as these are typically hard-to-reach and among the more expensive areas to build fiber," Omdia added.

German altnets have also become increasingly vocal about what they regard as egregious behavior on the part of DT: building competing infrastructure over an existing FTTH network, such as the one operated by NetCologne in the city of Cologne.

Böing himself has been complaining about such tactics on LinkedIn for several months. Jürgen Grützner, managing director of Verband der Anbieter von Telekommunikations- und Mehrwertdiensten (VATM), a German telecom association, has also weighed in on the matter, declaring that overbuilding existing structures in large cities such as Cologne makes no sense from either an economic or business point of view, "and harms companies and citizens."

Grützner noted that Germany is still a long way from achieving nationwide fiber deployment. He also said future investment plans by altnets in certain towns "will be ruined if Telekom cherry-picks and builds a second network parallel to the existing one" in economically attractive urban areas.

Furthermore, he accused DT of "directly attacking the federal government's expansion targets" for gigabit networks and asserted that international investors "will also have to withdraw from the German market" if this "predatory" behavior is not stopped.

DT stepping up fiber plans

DT has robustly defended itself, meanwhile, telling German media that it is engaging in normal infrastructure competition by building its own fiber connections in areas where it is economically viable to do so.

The telco has recently accelerated the pace of its own fiber deployment, with plans to build up to 3 million fiber connections in 2023 compared to 2 million in 2022. At the end of last year, its FTTH network covered 5.2 million households and it is still aiming to cover 10 million premises by 2024.

DT has also established the GlasfaserPlus JV in Germany in collaboration with Australian investor IFM that is aiming to cover 4 million premises in mostly rural locations by 2028.

One interesting factoid here is that GlasfaserPlus does not require a minimum percentage of local residents to sign up for a broadband service before construction can begin. In Germany, it is often the case that at least 40% of inhabitants must first commit to a service from a local provider in advance – a task that often proves challenging for altnets in particular.

Bonfire of regulations?

One issue that DT and altnets are united on is that it is not easy to build FTTH in Germany, even without the added complication of inflationary pressures. Germany has 16 federal states, around 12,000 authorities with different requirements and forms, onerous planning requirements and restrictions, and slow approval processes.

As indicated by Grützner, the German government has already unveiled a strategy that it hopes will drive the deployment of "gigabit" broadband, in part by eliminating some of the red tape. The target is to provide FTTH and 5G wherever people live, work and travel by 2030. Interim goals also include the aim of providing FTTH to at least 50% of homes by 2025.

The 2030 goal, in particular, is widely regarded as optimistic. Although there have been recent signs that fiber deployment in Germany is finally picking up speed, German broadband association BREKO has observed that the outlook for further deployment is "generally positive but remains associated with risks."

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This year will prove crucial for Germany's infrastructure players if the market is to achieve government targets in the coming years. The degree to which altnets and others will continue to be pummeled by rising costs will play a significant role, as will government efforts to ease building efforts and support FTTH deployments in less economically viable locations.

As things stand, a recent report from BREKO showed that a quarter of German households were able to access a fiber connection by mid-2022 with 26% fiber coverage and 12.7 million fiber connections, of which 8.8 million or 71% were built by altnets.

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— Anne Morris, contributing editor, special to Light Reading

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