DT Seeks Fiber Allies to Tackle Germany's Gigabit Lag

Buying a broadband service from Deutsche Telekom is like dining at a restaurant where the menu options are restricted to certain tables. Worst of all, the real treats are served in just one booth.

The German telecom incumbent has dabbled in nearly every flavor of broadband from ADSL (an old-fashioned copper service) to the gourmet dish of FTTH (all-fiber connectivity). But while its copper-based services are widely available, its all-fiber goodies are off the menu for most customers. Although Deutsche Telekom AG (NYSE: DT) does not publish details of all-fiber coverage or subscriptions, and did not respond to Light Reading's queries about these numbers, the OECD reckons that just 744,000 of more than 40 million German homes used fiber broadband at the end of last year. About 24.6 million used some form of copper, it says, with 7.7 million on cable. (See Germany's Gigabit Lag.)

Table 1: Broadband Customers and Coverage (Millions)

	Retail lines	Wholesale lines	Coverage (homes)	Coverage (%)
Broadband	13.4	6.3	N/A	N/A
Fiber (FTTC/VDSL, vectoring, FTTH)	6.6	4.4	32	74%
Source: Deutsche Telekom. Note: FTTC = fiber to the curb; VDSL = very high speed digital subscriber line; FTTH = fiber to the home.

Table 2: Broadband Coverage Targets (Millions)

	Coverage (homes)	Coverage (%)	Coverage end 2018 (homes)	Coverage end 2018 (%)	Coverage end 2019 (homes)	Coverage end 2019 (%)
Vectoring (50-100 Mbit/s)	N/A	N/A	27	62%	35	80%
Supervectoring (up to 250 Mbit/s)	6	14%	15	35%	29	67%
Source: Deutsche Telekom.

This is not surprising in a country where building a nationwide all-fiber network might cost between €60 billion ($68 billion) and €80 billion ($91 billion), according to estimates. Deutsche Telekom does not want to invest in networks it would have to "open" to rivals on terms set by authorities. Nor have others filled the fiber void. Competitors say they cannot access infrastructure owned by Deutsche Telekom under acceptable arrangements, blaming the regulator's "timid line" toward the incumbent. (See Europe's Backhaul Black Hole Looms Above 5G and Vodafone Calls for Broadband Regulation Shake-Up in Germany.)

But there are signs of change. Galvanized by cable competition and some political pressure, Deutsche Telekom has embarked on several all-fiber projects in the last year. Partnerships with regional authorities and other fiber investors have been key.

Two initiatives stand out in particular, and are likely to serve as templates in future. In December, Deutsche Telekom teamed up with EWE, a German energy and infrastructure provider, to build an all-fiber network for about 1 million households in the states of Lower Saxony, North Rhine-Westphalia and Bremen. Together, the companies will invest about €2 billion ($2.3 billion) in all-fiber connectivity over the next ten years. Each will own a 50% stake in the network they jointly construct. (See Eurobites: Deutsche Telekom, EWE Form FTTH Joint Venture.)

An alliance with regional authorities in Stuttgart has similar goals. Under that plan, announced earlier this year, Deutsche Telekom will invest €1.1 billion ($1.2 billion), with Stuttgart contributing another €500 million ($566 million). More than 1.24 million homes and 140,000 businesses are promised "gigabit" connectivity by 2030. (See Eurobites: Opera Files for Nasdaq IPO.)

Table 3: EWE All-Fiber Plan

Criteria	Details
Partner	EWE
DT investment	€1B
Partner investment	€1B
Project duration	10 years
Number of households in coverage area	1M
Number of businesses in coverage area	N/A
Targets	Operations to begin in mid-2018; joint venture to make accesses available to third parties, for use at commercial terms
Headline speeds	N/A
Source: Deutsche Telekom.

Table 4: Stuttgart All-Fiber Plan

Criteria	Details
Partner	Stuttgart regional government
DT investment	€1.1B
Partner investment	€500M
Project duration	10+ years
Number of households in coverage area	1.38M
Number of businesses in coverage area	140,000
Targets	Cover 90% of businesses by 2022; half of households by 2025; 90% of households and all businesses by 2030
Headline speeds	1 Gbit/s
Source: Deutsche Telekom.

Both schemes would seem like small beer alongside Deutsche Telekom's latest proposal. According to reports that originated with the German press, Timotheus Höttges, Deutsche Telekom's imposing boss, has reached out to United Internet, a broadband operator and wholesale customer, and suggested they jointly build an all-fiber network for about 5 million households. Ralph Dommermuth, United Internet's CEO, is said to have responded with interest. He thinks Deutsche Telekom should control 75% of the joint venture, with United Internet owning the remainder, to reflect their shares of Germany's broadband market. (See Eurobites: 'Get Carter!' Says BT's Board – Report.)

All of these moves are encouraging. Along with the UK, Germany has fallen a long way behind southern European markets when it comes to high-speed broadband. All-fiber services are now available to 89% of premises in Portugal, and 71% of properties in Spain, according to a recent UK government report. Germany's gigabit lag could leave its economy at a major disadvantage in the future, politicians fear. (See UK Bumpkins Told Not to Expect Fiber in Their Lifetimes.)

Next page: Long walk to fiber