Broadband in Germany: promoting fiber optics

German technology is symbol of reliability, quality, innovation and high technology. We analyze the Broadband Society in Germany in collaboration with Natalie Barresi, from UPF. As it refers to high-speed internet broadband, Germany is certainly at the head of the group, right? Wrong, actually Germany scrambles to merely cover large cities with broadband and has consistently missed the dates agreed by both government and telecom companies to build a digital infrastructure that matches their European neighbors’. 

According to the Organization of Economic Cooperation and Development, a research center composed of the world’s most developed economies, Germany’s adoption of fiber-optic cable stands at just 1.8 percent of Internet users, putting it fifth from the bottom in the list of the OECD’s 35 members. In contrast both Japan and South Korea have more than 70 percent of subscribers on super-fast fiber-optic cable.

The German government and the industry met in Berlin in 2018 to (once again) try to find a solution to this problem that grows every day of inaction, which requires a large investment by both the government and the enterprises, and which also has been neglected for years. Germany is now so far behind its European neighbors that the situation will take tremendous efforts to be resolved. Germany has tried several times to address their delays to get broadband coverage across the country, but these have consistently failed because of the government bureaucracy, the interests of the telecom companies and the traditional German way to look for the “perfect plan” before even getting started.

After reiterated discussions and delays, the government has now established a new target date to have nationwide broadband by 2025. This plan is already running late as nothing has really changed in the government’s posture and the private sector’s attitude.

The big barrier toward a breakthrough is the tremendous required investment in fiber optic infrastructure. The Telecom companies have minimum incentive to undertake the massive costs because their stock price would be negatively affected by the heavy impact on the “bottom line”. Paradoxically, this impasse is creating a vacuum for someone else to move into this space. Under this scenario, these companies would be then pressed to significantly increase their efforts in order to keep their current business and gain new customers.

The VOUCHER idea. There is a fundamental reason why, these companies do not want to go into areas that do not have broadband infrastructure: Once they have invested the money for digging the trenches and laying the pipes for optic fiber, it is inevitable that the competitors will follow the completion of the works and will immediately come along to piggyback on that just completed infrastructure by somebody else.

During one of the BDI (Bundesverband der Deutschen Industrie, Federation of German Industries), some industry representatives suggested the creation of a (recovery) voucher for companies that invest in infrastructure that would let them recover some of the infrastructure costs as a way to overcome this obstacle. Several firms supported this idea and participants acknowledged that something has to be done, and quickly.

However, these proposals have failed due to the fact that the confidence level by the banks is low due to previous projects to expand the digital infrastructure in Germany have been failed consistently, or discarded. Government subsidies to promote broadband infrastructure do not materialize due to the varied interests of federal, state and local governments. Some states will bend the rules for subsidies in order to get an edge on other states. The situation is in summary quite chaotic.

On top of all this critical situation, Germany is certainly under political pressure to catch up on broadband infrastructure, and so now, the demand for contractors far exceeds now the supply of available resources (concept and planning, digging trenches, laying the fiber). This shortage of resources  has led to rising construction prices as well as to declining quality. Costs to expand the network have already risen up to 20 % since the prior year, assuming that a contractor can be found, as the capacity has reached the limit.

Other countries models:Another option would be to get the companies to work together, as they have done in Portugal. The process would be to create a consortium without creating a monopoly and to preserve competition in some form. Another proposal is to separate the network infrastructure from the service vendors, as was done in Britain and the Czech Republic. In the meantime, the central German government is facing a tough decision to make.

The situation in major cities of Germany. Berlin. For years in Berlin there were very few (especially affordable) options for householders to surf faster than the usual 8-16Mb/s. 1&1 changed that and offers really affordable internet via glass fiber with usually up to 50Mb/s. up to 100Mb/s. Currently just a few companies offer high speed internet in Berlin via glass fiber or cable. For high speed internet via glass fiber Telekom or Vodafone, which currently offer clients up to 100 Mbit/s in Berlin.

Frankfurt and surroundings. In the city of Darmstadt, in the south of Frankfurt, the citizens have the privilege to have one of the fastest Internetinfrastructures in Germany, maybe because of the Technology University of Darmstadt. But also, in Wiesbaden at 30 minutes from Frankfurt they have a similar situation. In these cities, 98 percent of households have a connection with 50 megabits per second or more. 

There are also some 96.5 percent in the city of Offenbach, and 94.9 percent in Frankfurt that have the similar internet speed. These county areas have the best service, 96.4 percent of the households have access – the nationwide major cities stay at the top place in the country.

According to the district administrator Oliver Quilling (CDU), in a nationwide comparison, the counties of the district of Offenbach reach the sixth place in the nationwide ranking, according to a report by the Federal government in response, in November, to a request by members of the FDP parliamentary group on the state, about the necessity of broadband development in Germany.

In the North of Frankfurt exist a clear division between the urban and rural areas (one of the most important Nationwide’s issue) consequently in the city of Kassel, 91.7% of the households have broadband available, in contrast in the rural district of Kassel only 53.5 percent have it. Since last fall, more than 120,000 of the 152,000 households could benefit in the district of Offenbach, the fast Internet, the Telekom, with shares Quilling. Most of the customers could actually negotiate rates up to 100 megabits per second. The requirements of the circuit, providing a minimum bandwidth of 30 megabits per second, would be exceeded significantly.

The German glass fiber is also active in the areas of Mainhausen, Seligenstadt-frog Hausen also living with glass fiber connectors wool. Other providers, such as Unitymedia and Entega, would be add shortly.

Gigabit infrastructure in Frankfurt. German cable operator Unitymedia offers 1Gbps internet access in Frankfurt  since October 2018. The move has turned Frankfurt into Unitymedia’s second Gigabit city following the rollout in the city Bochum; the deployment in further cities is to be announced shortly.

The Gigabit connection is available across Unitymedia’s entire coverage area in Frankfurt and can be accessed by around 380,000 households, corresponding with 90% of all Frankfurt households.

For the high-speed upgrade, Unitymedia has equipped its fibre-optic-based cable network with gigabit-capable network elements and introducing the new cable standard DOCSIS 3.1. The service will provide a data rate of up to 1,000Mbps for downloads and up to 50Mbps for uploads.

For new customers, the Gigabit tariff costs €99.99 per month with a minimum contract term of 24 months. In Bochum, Unitymedia currently offers 1Gbps access for just €49.99 per month. This is a temporary special price in the first Gigabit city, a Unitymedia spokesperson told Broadband TV News.

Frankfurt’s upgrade to become the first metropolitan area in German with city-wide Gigabit coverage is part of the Europe-wide GIGAWorld initiative of Unitymedia’s parent group Liberty Global. The company will soon announce its Gigabit expansion plans based on DOCSIS 3.1 for other European countries.
We analyze international broadband evolution (here, the German case) in this blog, in Research Group about Digital Journalism and Marketing and Broadband and in Research Group on Innovative Monetization Systems of Digital Journalism, Marketing and Tourism (SIMPED), from CECABLE,  Escola Universitària Mediterrani of UdG, UPF and Blanquerna-URL, in Twitter (@CECABLEresearch), Google+, in the group of LinkedIn, in the page of LinkedIn, in the group of Facebook, in Instagram (CECABLE), in Pinterest and in this blog. We will go in deep in the XXV Cable and Broadband Catalonia Congress (31 March-1 April 2020, Barcelona).