Good internet at home is becoming increasingly important, be it for the home office, games or virtual reality applications. Fiber optics offer fast connections for this. But which provider is expanding where?
The controversial double expansion of fiber optic internet is causing heated feelings in Germany’s telecommunications industry. In a letter to the Federal Digital Ministry, the associations Breko, Anga and VATM, which represent the interests of Deutsche Telekom’s competitors, demand action be taken. The strategic double expansion – also called “superstructure” – is “a major problem for the further successful fiber optic expansion in Germany”.
With the double expansion, two companies separately lay fiber optics in an area or want to do so. This means that the excavators are missing in other areas where people cannot get fiber optic speed at all.
“Fiber to the Home” (FTTH) is considered the best technology for fast and stable internet. Connections via telephone cable (VDSL) are a discontinued model. Television cables (Docsis 3.1) offer more speed than thin telephone lines, but are susceptible to fluctuations – if the whole neighborhood is online, performance drops. Fiber optic connections, on the other hand, are remarkably stable at high speeds, but relatively expensive.
Shaking heads in the industry
The expansion has picked up speed; according to a Breko market analysis from August, one in three households in Germany can already be connected to fiber optic internet. Telekom in particular is investing heavily. The fact that the Bonn-based company is announcing expansion projects in some places, even though a smaller company has already announced or implemented plans there, is causing people in the industry to shake their heads. Critics say that when a company that dominates the market flexes its muscles, the smaller companies come under pressure without the overall Internet expansion being served.
A study by the consulting firm WIK-Consult, commissioned by the Federal Digital Ministry and recently published, supports the criticism of the Magenta Group. However, the study is not based on a representative sample of fiber optic projects, as the authors themselves limit.
The study states that the announcement of a market dominant company could lead to the previously published expansion plans of another company being impaired and the “first mover” advantage – that is, the first to have the local market for themselves – being taken away. “Such behavior by the dominant company carries the risk of ousting competitors from the market,” says the study.
Infrastructure competition
So is Telekom strategically using the double expansion to force the small companies – often municipal companies – out of the market? The Bonn group’s competitors are convinced of this. “The strategic superstructure, as practiced by Telekom, is slowing down the nationwide expansion of fiber optic networks throughout Germany,” says a spokeswoman for the Association of Municipal Companies (VKU).
Telekom, on the other hand, argues that infrastructure competition is good for consumers, who thereby have a choice. Germany boss Srini Gopalan warns against breaking with the principle of the free market and blocking Telekom investments in certain areas. That would prevent competition. “And in plain language this means that Germany would get a lot of locally limited fiber optic monopolies,” says the manager. “This is small government and cannot be the digital path that one of the leading economic nations is taking.”
The “only one person builds from idea” would also have disadvantages for citizens. Because where monopolies prevented competition, end customer prices remained high due to a lack of competition, argues the Magenta manager. “That’s why competition, especially in infrastructure, is politically desired.” Telekom also says that politicians have already come a long way to accommodate the competitors. A company spokeswoman cites, among other things, the monitoring center of the Federal Network Agency as an example of this.
Politicians with worry lines
This office was set up in July to keep an eye on duplicate structures and to check whether companies are using anti-competitive, abusive or unfair methods. The figures are now available: In the months of July, August and September, the monitoring body registered 292 responses on the subject of fiber optic expansion.
Submissions come from telecommunications companies, associations, municipalities and private individuals. They refer to the areas where the controversial “superstructure” is taking place. Multiple mentions are possible – i.e. several requests to speak that relate to one and the same area. There are also cases that are considered non-critical. The significance of the number is therefore limited. According to the VKU, the number is evidence that it is by no means a “niche phenomenon”.
In politics, the issue of superstructure is acknowledged with worry lines. The FDP member of the Bundestag Maximilian Funke-Kaiser says that there is a serious difference between urban and rural areas. “In the city, increased competition benefits customers and accelerates network expansion,” says the liberal. “In sparsely populated areas, the threat of a double expansion by Telekom is enough to force smaller competitors to withdraw.”
The network agency relies on transparency with its monitoring center. “The aim of monitoring double expansion projects is to be able to carry out a well-founded assessment of competition,” says an authority spokesman. “The evaluation will help to quickly lead an objective discussion about possible conclusions.” The work on this is being pushed forward “as a priority”.