telecommunications
Discrimination from mobile operator 1&1? Cartel Office warns
The telecommunications provider 1&1 wants to start a new German cell phone network. photo
© Thomas Frey/dpa
The telecommunications provider 1&1 wants to launch a new German cell phone network soon. Industry experts expect more competition and benefits for consumers. But the company is under pressure.
With its difficult entry into the market as the fourth German mobile phone network operator, it gets Telecommunications provider 1&1 provides support from the Federal Cartel Office.
In September, the Federal Network Agency proposed foregoing the usual frequency auction – that would be a setback for 1&1, which needs additional frequencies for its own network that is currently being set up. Instead of auctioning, current usage rights would be extended – and 1&1 would be left out. A position paper from the Cartel Office now clearly criticizes the Federal Network Agency’s plan and warns of negative consequences for consumers.
According to the Federal Network Agency’s proposal, market participants and other institutions were able to contribute their views. The regulatory authority will then deliberate and announce its decision in 2024. The Federal Cartel Office only has a secondary role here – it issues the statement that has now become known, nothing more. But the opinion of Germany’s top competition watchdog certainly has weight. The objections of the cartel office should be taken seriously, says FDP member of the Bundestag Reinhard Houben.
Advantages of entering the market
In 2019, 1&1 auctioned frequency rights for its own network for the first time. The project is an expensive affair, costing the Montabaur-based company around 5 billion euros by the end of 2030. So far, 1&1 has used other networks for its mobile communications business and paid rent. With its own antennas, 1&1 would be on a par with the three established network operators Deutsche Telekom, Vodafone and Telefónica Deutschland (O2). They are not very enthusiastic about the up-and-coming competitor, whose expansion got off to a very slow start. The cell phone network will be activated soon.
In its position paper, the Cartel Office emphasizes the advantages of 1&1’s market entry. Functioning infrastructure competition is good for network expansion and enables “low prices for high-performance mobile communications products,” write the authors. Analyzes by market researchers pointed out that the price level and range of services in markets with four mobile network operators are generally more attractive than in markets with only three mobile networks.
If the new entrant is thwarted, “this could result in a variety of disadvantages for consumers and the economy, such as higher prices, poorer network quality and poorer network expansion.”
Various usage rights expire at the end of 2025, and the 800 megahertz frequencies with a long range are particularly important. According to the established network operators, there is not enough spectrum to divide it by four – they warn of a deterioration in network quality.
restructure networks
This argument is presented “dramatically” and may be “purely strategically motivated,” writes the Cartel Office and points out that the three network operators have usage rights in the adjacent areas with similar physical properties and that an exchange of frequency blocks could solve the problem. It is “important to consider” restructuring the networks.
In fact, the Federal Network Agency had considered such an exchange in 2022, but then did not pursue it further. According to industry circles, this was because they would have had to rely on the willingness of the top dogs to implement such a model. But they were not willing to exchange, also because that would have been tantamount to supporting their annoying competitor 1&1.
The fact that usage rights are now to be extended instead and the newcomer 1&1 is staring down the barrel is causing the cartel office to frown. Competition watchdogs complain that this would be a form of subsidization for the established companies. The extension would have “serious competitive disadvantages and disadvantage the […] Newcomers to the market are decisive compared to the established mobile network operators. Investments that have already been made would be devalued.
Different reactions
Consumer advocates are also critical of the network agency’s plan. “Suspension of the frequency auction would severely hinder the market entry of a new network operator,” says Felix Flosbach from the North Rhine-Westphalia Consumer Center. “As a result, no new network operator with sufficient coverage would come onto the market in the foreseeable future and be able to offer consumers an alternative to the existing offers.”
In politics, the Cartel Office’s statement is received differently. The network agency should “examine the objections very carefully,” says the liberal Houben. “In the end, the regulation should come from which consumers benefit most in the medium and long term.” Existing market conditions are unlikely to be cemented.
Johannes Schätzl from the SPD, however, is cautious. In principle, he shares the Federal Cartel Office’s objective that strong competition improves the market from the customer’s perspective. However, the frequency swap was not possible due to a lack of consent from existing network operators, so the network cannot currently be restructured. When weighing up the remaining options, the path suggested by the network agency is “the best way to improve the network from the customer’s perspective,” says the Social Democratic member of the Bundestag.