For a country that has pinned its economic fortunes heavily on the digitalization of the workplace, Germany looks surprisingly ham-fisted when it comes to high-speed broadband. While other European operators roll out fiber and launch gigabit-speed services, Deutsche Telekom, the German incumbent, is still fixated on getting to 100 Mbit/s over last-mile copper. If a wave of forthcoming applications requires more capable networks, Germany could miss out. (See Industrie 4.0: Rebooting Germany.)
Authorities are trying to do something about the broadband lag, announcing plans earlier this year to develop "gigabit-capable" infrastructure by 2025. The scheme would see networks upgraded in four phases over the next few years, and receive about €10 billion ($10.9 billion) in public-sector funding, That comes on top of an estimated €4 billion ($4.4 billion) that has already been spent.
Yet the details of the plans remain sketchy. In the first phase, the government would continue to push for universal coverage of 50 Mbit/s by 2018. The second would see "underserved industrial areas" hooked up to new fiber connections by the end of 2019. After that, it gets hazy. During a third phase, the target would be to ensure that conditions are in place for a "nationwide 5G rollout" by the end of 2020, which hints vaguely at a more ambitious fiber rollout. From there, Germany is expected to make the fourth-phase leap to a "gigabit-capable converged infrastructure" by the end of 2025.
What's clear is that policymakers expect private sector players to do their bit. Companies involved in the Network Alliance group, which includes several of Germany's largest service providers, invested a total of €8 billion ($8.7 billion) in broadband rollout last year, according to Germany's ministry for transport and mobility, and are set to increase funding in future, the government says.
Despite efforts to date, however, Germany is at risk of falling behind some of its key European rivals. In France, Portugal and Spain, regulation and competition have driven a number of private sector operators to start investing in fiber-to-the-premises (FTTP) networks that can support services of up to 1 Gbit/s. France's Orange (NYSE: FTE) has even said it expects gigabit-speed services to be "common" in its European markets by 2018. (See Orange Sticks to High-Fiber Diet.)
In Germany, by contrast, Deutsche Telekom AG (NYSE: DT)'s current focus is on a copper-based technology called vectoring. By cutting out the interference between copper lines, this aims to boost connection speeds on VDSL networks. But it cannot lift speeds above 100 Mbit/s. A newer technology called "supervectoring" could increase maximum broadband speeds to about 300 Mbit/s, according to equipment vendor Adtran Inc. (Nasdaq: ADTN). Yet that would still leave Deutsche Telekom a long way behind those in Europe's FTTP vanguard. (See Adtran Squares Up to Huawei on Supervectoring.)
Encouragingly, Germany also features a sizable number of cable operators providing services of up to 400 Mbit/s. It is the pressure from these players that has largely driven Deutsche Telekom to pump funds into vectoring. But cable operators do not have a nationwide footprint.
Like the UK's BT Group plc (NYSE: BT; London: BTA), in which Deutsche Telekom holds a 12% stake, the German incumbent does not see a business case for building nationwide FTTP networks that it would have to "open" to wholesale customers on regulated terms. "We do not want to build a network for United Internet," said Timotheus Höttges, Deutsche Telekom's CEO, during a call with analysts in August, referring to one of the resellers that makes use of its lines.
Both BT and Deutsche Telekom, however, have recently showed signs of warming to FTTP. BT earlier this year said it would extend FTTP networks to about 2 million homes by 2020, up from around 330,000 today, and this week launched its first gigabit-speed services for small business customers. (See Can DT, Regulators Find Common FTTH Ground? and BT's Gigabit Plans & the UK's Digital Abyss.)
Deutsche Telekom, meanwhile, has acknowledged that vectoring and supervectoring represent steps toward an all-fiber future. During a conference in Nice earlier this year, it also indicated that replacing copper with FTTP networks would allow it to shut down some of the facilities it maintains near customer premises, and thereby reduce costs. (See DT Eyes FTTH Solution to German Opex Issue.)
Even so, connecting every home in Germany to an FTTP network would cost an estimated €60-80 billion ($65-87 billion), according to the operator, explaining its FTTP aversion. The costs are so high because much of Germany lacks the multi-dwelling units that have made FTTP projects economically viable in other parts of the world, including some countries in eastern Europe.
Germany's current situation is far from dire. A recent report from Akamai Technologies Inc. (Nasdaq: AKAM), a content delivery network, ranks it 24th globally on average connection speeds, behind Scandinavia, Spain and the UK but ahead of France. Research from consulting group Analysys Mason , meanwhile, puts it behind only Sweden and UK in a comparison of seven western European countries plus Australia and New Zealand. But if Germany is to maintain or improve its broadband standing, it will need to get cracking.
— Iain Morris, , News Editor, Light Reading