Germany's government is leaning on the country's telecom operators to make a "significant" increase in spending on fiber networks to support the forthcoming rollout of 5G services.
In a 5G strategy plan published this week, authorities said that a "substantial reinforcement" of fiber infrastructure is needed if Germany is to have a "high-performance" 5G network in place by 2025.
The plan, which appears amid concern that European countries risk lagging other regions on 5G, makes no mention of any major funding support from the German government.
Instead, authorities say they assume "that network operators will significantly increase their investments in fiber optics for connection to basestations."
Telcos have indicated that running more fiber out to basestations represents one of the biggest investments they will face in preparing for the introduction of 5G services.
"With 5G you are talking about many gigabits per second per sector and … the limiting factor is going to be getting data from the basestation to the core network," said Kye Prigg, Vodafone UK's head of mobile networks, in a recent discussion with Light Reading. "We're tackling the backhaul part now but we need to work it out on an industrial scale." (See Vodafone UK Turns Mobile Network Guns on BT/EE.)
Vodafone UK has relied heavily and somewhat unhappily on wholesale agreements with fixed-line incumbent BT for mobile backhaul, but it is now considering investing in its own fiber networks if it can obtain access to BT's network of ducts and poles on favorable terms.
Government pressure in Germany is likely to fall hardest on former state-owned monopoly Deutsche Telekom AG (NYSE: DT), which still operates the country's biggest fixed-line network as well as its largest mobile business.
But the scale of the investment that is needed remains unclear.
During a presentation at this year's Mobile World Congress in March, Deutsche Telekom CEO Timotheus Höttges put the cost of blanketing the whole of Europe with 5G networks at between €300 billion ($342 billion) and €500 billion ($570 billion). (See DT Plots 5G Across Entire Footprint.)
According to another 5G action plan from the European Commission, however, 5G upgrades across the region will cost only €57 billion ($65 billion).
Germany's Federal Ministry for Transport, Innovation and Technology does not cite figures in its own 5G strategy plan, but acknowledges that: "To achieve the full performance of 5G networks, massive infrastructure investments by network operators will be required."
Rather than committing public sector funds to 5G rollout, authorities say they aim to encourage private sector investments by ensuring the right conditions are in place.
Among other things, the government has set up a working group that will look at using public utility "passive" infrastructure to support fiber rollout. It also believes that "street furniture" such as traffic lights and road signs could be used to host the antennas needed for micro- and pico-cell deployments.
Light Reading approached Deutsche Telekom for its reaction to the government paper but had not heard back as this story was published.
Before taking into account payments for spectrum licenses, the operator this year plans to invest about €12 billion ($14 billion) in capital expenditure across all of its markets, including the US. That would represent an increase of 9% on overall spending -- excluding spectrum payments -- in 2016.
"Over the next two years … we want to continue investing heavily in building out our network infrastructure in Germany, the US and Europe in order to safeguard our technology leadership in the long term," said Deutsche Telekom in its 2016 annual report. "In 2018, capital expenditure is expected to decrease slightly."
Despite the increase in spending, Deutsche Telekom has balked at pouring more funds into the rollout of fiber networks to residential and commercial properties.
Concerned that authorities will force it to open those fiber networks to rivals on regulated terms, it has instead embarked on an upgrade of its copper networks using a technology called vectoring, which boosts connection speeds by cutting out noise interference between lines. (See DT Expands Its Vectoring Commitments.)
When it comes to mobile backhaul, rivals such as Vodafone have been lobbying regulators for access to dark fiber and passive infrastructure owned by Europe's fixed-line incumbents, but legislation here risks dissuading Deutsche Telekom from investing in more fiber and could upset the government's 5G targets. (See Brighter Outlook For Dark Fiber in 4G Era.)
Last month, a senior executive from Finland's Nokia Corp. (NYSE: NOK) slammed Europe's regulatory authorities for a lack of "investor-friendly" policies that could encourage 5G deployment. (See Nokia CTO 'Not Optimistic' About 5G in Europe.)
Hossein Moiin, Nokia's chief technology officer, said he was "not optimistic" about 5G in Europe, blaming regulatory aversion to the kind of takeover activity that would produce a smaller number of big European operators.
While several US operators have now announced firm plans for the launch of 5G services over the next few years, European telcos have been far more tight-lipped about their intentions.
It is not just Deutsche Telekom and Vodafone, however, that have voiced concern about the 5G investment hurdle.
In May, Ramon Fernandez, the chief financial officer of France's Orange, said he was unsure whether 5G investments would be "sufficient to meet the objectives that have been set at a European level."
Those remarks came after several of Europe's biggest operators had taken the European Commission to task over its 5G action plan earlier this year, describing the investment expectations in that paper as a "pipe dream," according to reports.
— Iain Morris, , News Editor, Light Reading