DT Expands Its Vectoring Commitments

It may be another copper-line reason not to invest in FTTH, but it is hardly copper-bottomed.

In an update buried in the German-language section of its website, Deutsche Telekom AG (NYSE: DT) has identified "super-vectoring" as the latest way to inject more pep into its VDSL fixed broadband services. Use of that technology could boost connection speeds to as high as 250 Mbit/s, claims the operator, from the 100 Mbit/s that plain old vectoring makes possible over the final copper connection to houses and businesses.

Clearly, this would address a growing concern that 100 Mbit/s is simply not going to be enough to halt Germany's DOCSIS 3.0-powered cable operators in their tracks. In November, Vodafone-owned Kabel Deutschland GmbH announced its launch of 200 Mbit/s services and promised these would be available to 3 million German households by September this year. Smaller rival Tele Columbus AG is plotting the launch of a 400 Mbit/s offer. Noting Deutsche Telekom's ongoing loss of broadband market share to cable rivals, investors may be feeling somewhat rattled. (See Tele Columbus to Launch 400Mbit/s Service and Speed Battle Rages in Germany.)

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But Deutsche Telekom is not only looking for performance improvements. It has also rather dramatically upped the coverage targets for its vectoring service to 80% of Germany's population by 2018 from an original target of 65% by 2016. That will mean extending the high-speed service to another 5.9 million households.

Vectoring, of course, is integral to the strategy that Deutsche Telekom unveiled during its last capital markets day at the tail end of 2012. Promising to spend more than €6 billion (US$6.8 billion) on the technology over 2013-20, the operator has been counting on vectoring as a kind of broadband restorative. Yet these network investments have been eating away at free cash flow and dividends, and all while revenues from broadband and TV services have continued to fall. (See Vectoring: Some Va-Va-Voom for VDSL.)

No doubt, it is still early days. Vectoring was available to as few as 200,000 households in November, and Deutsche Telekom can hardly afford to relax while Kabel Deutschland and others invest in higher-speed technologies of their own. But the latest plans could present all sorts of challenges while raising further questions about Deutsche Telekom's FTTH avoidance strategy.

For one thing, regulators may balk at the expansion program. Vectoring prohibits any sub-loop unbundling (SLU), making virtual access products the only wholesale option for alternative operators at vectoring-enabled exchanges. Deutsche Telekom persuaded regulators to support the bulk of its original plan -- largely because SLU has failed to catch on -- but it was not permitted to terminate existing SLU arrangements if competitors refused to budge to vectoring.

Once again, the operator has approached authorities asking if it can say no to rivals that want to unbundle its network. It also wants to be able to terminate existing VDSL connections provided by its competitors. These "would have to be... switched to an alternative product to ensure a comprehensive vectoring supply," noted the operator in its statement. If regulators refuse to play along, Deutsche Telekom will have to rethink its plans.

Next page: Dividend pressure

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VernonDozier 11/28/2015 | 5:28:53 AM
Hey Ma, that's a monopoly..! In the US, telecommunications companies have been forced to upgrade networks to both Fiber and HFC networks to create redundant networks which meet consumer demand and incentivize competition.  

The issue is, and has always been that twisted pair copper doesn't scale, and will always have a fixed bandwidth of 300-350Mhz.  Regulators are making a mistake in saying a "virtual" service is the same as a physical one.  Who owns the meter..? 

As a former Government-owned monopoly, and part of the Germany's post office, Deutsche telekom will always have built-in bureacracy. 

Deutsche Telekom is only going to do what the law says it SHOULD do, and not what it COULD do from a service perspective. 

For example, to maintain a wireless license in the US, the letter of the law states that wireless providers are only required to provide coverage to 70% of the licensed service area.  This FCC requirement leaves up to 30% of the area to be un-covered, but still covered on the map.  As another example, Deutsche Telekom's US division was found guilty in issues of labor.  The company required female employees to sign gag orders when they have become victims of sexual harassment.  Deutsche Telekom has ignore requests of its employees, along with 20 elected members of congress, and also the orders in the Court (NLRB) Ruling where Deutsche Telekom was found guilty of 11 counts.  (only appealed two).   What kind of service would you expect from a company that operates this way, and by extension of the Federal Government ownership, will never fail..?

Not only should this be questioned; but DT's attempt to acquire British Telecom is also now very suspect.  The technology is designed in a way that prevents choice, competition, and requires goverment to pick companies to become monopolies.
iainmorris 2/24/2015 | 3:14:49 PM
Unambitious? Deutsche Telekom is certainly not the only European operator resisting FTTH but its broadband strategy does seem to lack a degree of ambition -- especially considering how far-sighted the operator looks when it comes to IP network investments and even technologies like SDN and NFV. 
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