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Summary:

Less than a month after European Union ordered German incumbent telecom operator, Deutsche Telekom to share its fiber/VDSL network with rivals, the company announced that it was slashing prices by 30% in what can easily be viewed as a bid to hang onto its market share. […]

Less than a month after European Union ordered German incumbent telecom operator, Deutsche Telekom to share its fiber/VDSL network with rivals, the company announced that it was slashing prices by 30% in what can easily be viewed as a bid to hang onto its market share.

The company is offering a quad play offering for about 81 Euros a month. Vodafone, and Telefonica are already planning cheaper packages. Telefonica for instance is offering a Mobile/DSL package that includes a 16 megabits per second connection and flat rate calls to domestic landlines and O2 mobile phones.

The price war will run its course, but DT’s price cuts show that quasi-monopolies that have feasted off consumer way too long need a swift kick in their pants and some competition to start treating their customers right. It happened before in Italy, France and United Kingdom – not exactly ideal practitioners of free market economics. Why we can’t some of that in the US. Never mind, it was a rhetorical question.

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  1. Well, although the question is rhetorical it’s worth exploring. The most important factor, IMHO, is that Germany’s population density is 8 times ours here in the states. So, as a first-order approximation, a kilometer of fiber offers 8x the ROI in Germany than it does here.

    Also, the cost of Germany’s telecom infrastructure is largely obscured, since much of it is borne by taxpayers. So, although the bill might say 81 euros, the Germans have sunk much more money than that, per capita. The DT (and FT) pensions need to be paid, after all.

    I am glad to see that they are reaping some benefits, but keeping up with the Joneses is not the ideal motivator for telecoms policy. Martin Geddes puts it well: http://www.telepocalypse.net/archives/000955.html

  2. Matt S, regretabbly, got it completely wrong.

    “important factor, IMHO, is that Germany’s population density is 8 times ours ” In some place Germany is denser than the US, but the comparison is ridculous. Germany is a EU member state, the same as a state in the US. The US is a continental federal republic, like the EU.

    “Also, the cost of Germany’s telecom infrastructure is largely obscured, since much of it is borne by taxpayers.” AT&T, Verizon, SBC, etc. are all statutory monopolies in their territories. No one can compete with them at the local level. All of their pensions, benefits, executive bonuses, etc. are paid for by rates that ratepayers are required to pay. The same is true for all European telecoms, BTW, which were de-nationalized decades ago. The American telecos have never lost their statutory monopoly; in fact it has gotten even stronger.

    Nice trolling by telecom employee/advisor Matt S (yeah Matt, we could tell, just scroll over his name). It was almost interesting, unless you actually know something.

  3. South Africa is one of the most expensive in the world & the Minister of Telecomunications does everything in AFRICA time!!
    Everything is NON competive . See HELLKOM.CO.ZA

  4. Michael Bailey Thursday, January 4, 2007

    It doesn’t matter that Germany’s population density is 8x that of ours here in the USA.

    The cost to lay fiber in Germany is probably 50x of what it is here at home.

    Have you priced one acre of land in Germany lately?

    The point is that most of the ‘other’ countries are getting it right, while our few select corporations here at home continue to hold back development progress while they try to wring as much profit out of what they already have.

    If, for example, Verizon has so much cash that they can lobby congress at a burn rate of $1.25 million PER WEEK to fight against Net Neutrality, then they’re obviously making enough cash. Why would they need to spend MORE of their money to offer you a broader service at a lower charge?

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