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Vodafone's German Gigabit Plan Piles Broadband Misery Onto DT

Iain Morris

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But customers choosing between a cable service advertised at 1 Gbit/s and a Deutsche Telekom line that promises 250 Mbit/s may not share his coaxial concerns. And the further loss of broadband market share would demand a response.

On the plus side, Deutsche Telekom has nearly finished its long-overdue upgrade to networks based entirely on Internet Protocol technology. "We will then have new funds freed up that can be reinvested," said Höttges last week, when asked what impact "all-IP migration" would have on broadband.

Facing Up to the Fiber Challenge
Deutsche Telekom's Timotheus Hottges may come under renewed pressure to do something about Germany's fiber lag.
Deutsche Telekom's Timotheus Höttges may come under renewed pressure to do something about Germany's fiber lag.

Yet without more partnerships and government assistance, Deutsche Telekom may limp on. Last year, there was talk of a fiber tie-up with United Internet, one of Deutsche Telekom's wholesale customers. Under a proposed scheme, the companies looked to jointly build an all-fiber network for about 5 million households. But discussions stalled over ownership terms.

More encouragingly, Deutsche Telekom has already teamed up with EWE, a German energy and infrastructure provider, on the construction of an all-fiber network for about 1.5 million households in the states of Lower Saxony, North Rhine-Westphalia and Bremen. Each company is to invest about €1 billion ($1.1 billion) over the next ten years. A partnership with regional authorities in Stuttgart has similar goals.

Outside these ventures, however, Deutsche Telekom has had little to show for its efforts. Its annual budget of around €2 billion ($2.2 billion) for all-fiber rollout provides room for other Stuttgart-like initiatives, it has said. And yet no major partners have been unveiled since Thomas Dannenfeldt, Deutsche Telekom's former chief financial officer, complained this time last year about the paucity of private-sector bidders during the Stuttgart all-fiber tender. "My expectation was that more parties would seriously put a stake into the ground," he told analysts at the time. Continued apathy could even jeopardize the all-fiber coverage target of 2 million homes a year.

For more fixed broadband market coverage and insights, check out our dedicated Broadband content channel here on Light Reading.

The blame could fall partly on Deutsche Telekom if stakeholders believe it has not offered enough incentives to prospective partners. In November, Höttges grumbled that United Internet wanted only a 25% stake in a fiber tie-up, and not the full risk-sharing that a 50:50 joint venture would entail. Its demand for a nationwide mobile roaming deal was also unacceptable, he said. The question for Deutsche Telekom is whether taking deals on sub-optimal terms presents a lower risk than not answering Vodafone's gigabit challenge.

As for the German government, it also needs to consider new ways of closing the giant fiber gap between Germany and other European countries. Vodafone's gigabit plans could spur interest in building all-fiber networks among private-sector companies, but only if conditions improve. Above all, that means scrapping regulations that make fiber rollout more difficult and expensive. Just allowing operators to lay fiber at a shallower depth could reduce civil engineering costs by 40% in some municipalities, said Höttges in October last year. Deutsche Telekom has already suffered ten years of broadband decline. If that slide continues, Europe's biggest economy could pay the price.

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— Iain Morris, International Editor, Light Reading

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