Germany versus EU Broadband

James Enck, while visiting San Francisco, was unabashedly enthusiastic about many European countries moving aggressively towards what he thinks is a “municipal fiber revolution.” Ireland, for example is building 120 metro area networks (aka rings around the cities, not last mile connections), while France has similar fiber ambitions. In addition, Muniwireless says that the European regulators are forcing the incumbents to give open access to rivals, hoping that this is going to get the broadband penetration numbers up dramatically, which are lagging when compared to Asia.

Broadband ‘take-up’ or ‘penetration’ rate is measured as the number of lines per 100 of population. In January 2006, broadband reached almost 60 million subscriber lines in the EU25 and a penetration rate of about 25% of households. (EU view of the broadband penetration and subscriber data.)

Netherlands is being the most aggressive and is jump starting Muni deployments along with forcing incumbents to toe the line, and give open access to competitors. (Netherlands stats from Broadband Wiki)

Now compare this with Germany, where Deutsche Telekom is asking the regulators for “regulatory holidays” so it can build out its fiber networks, and not share them with their competitors. Just like US. “We want the same competition rules as in the U.S.,” Peter Heinacher, who oversees regulatory affairs at Deutsche Telekom told the Wall Street Journal last week. The company has been threatening that it will layoff workers, stop spending on the networks and basically do everything to scare the hell out of politicians. The German government, which owns a large minority position in DT is thinking about getting rid of the line-sharing rules. Much like our FCC! (Germany stats from Broadband Wiki)

I wonder if DT is cutting its nose to spite the face? According to a study (download PDF) by the German Ministry for Economics and Technology and the German IT industry, a 14% decline in prices increases the broadband coverage by 8 percentage points by 2010, while broadband take up continues to increase at an annual 15-25% rate.

This will spill over to the whole economy and generate a virtuous growth-productivity and employment cycle, leading to an increase of GDP by € 46 billion between 2004 and 2010 and to the creation of 265.000 jobs.

When there is no competition, the incumbents almost never cut prices, but instead figure out ways to dip into your pocket a little bit more. Anyway we shall be following this Berlin versus Brussels drama closely and see how it shakes out. Because if DT gets its way, then expect other incumbents jump-up and down to make similar demands.


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