Blog Post

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.

5 Responses to “Germany versus EU Broadband”

  1. Om,
    There isn’t a plan. It is quite frustrating. The Government build the fibre rings, they then hand them over to a private company to run and sell on to ISPs. (This private company has losses of 4m so far and its biggest customer spends a mere 150k a year)The private company called E-Net then have the job of connecting each individual ring to a backbone provider. There is a backbone owned by a state agency that some fibre rings can access but not all of the 120 fibre rings. Many of these fibre rings are just rotting in the ground as they go nowhere. Who wants to connect their business to a fibre ring if it goes nowhere?

    So, some of the fibre rings can connect to the backbone which will connect to Dublin an international connectivity.

    So, connecting the last mile to the fibre ring? Well a business can connect directly to it at a substantial cost to dig (circa 6k-12k) and then connect to an ISP via the ring and the national backbone.

    For an end-user they have to go via an unbundled phone exchange which are still rare because LLU doesn’t work in Ireland despite it being a reality on paper. An ISP has to dig from the fibre ring going around the town/city to a local phone exchange owned by eircom, the Irish incumbent. This digging costs quite a lot. They then have to build ducting and chambers to connect to the exchange and then have to rent space and electricity and aircon in the exchange too. They install their DSLAMs and other equipment, eventually they connect to a customers phoneline at €110 a line plus paying for an eircom engineer to be present in the exchange while they do it. To get control of the line they then have to pay around €14.20 er month (wholesale) . As you can see there is a lot of expense for an ISP to unbundle lines and also so you know the ordering system is manual, people will not be able to keep their existing phone numbers (discouraging businesses) and there can be downtime on the phone and broadband service.

    The competitive landscape is being conservative, appalling. The consumer lobbying group I’m in want to see broadband for all. Here is our last submission to the Government about the state of broadband in Ireland:

  2. damien,

    is there any clear information on what and how they plan to connect the rings to the backbone and how they plan to connect to the end users?

    what is the competitive landscape in the country?

  3. Om, Ireland is spending 170m euros on fibre rings around towns but and it is a big BUT -They have no plans to actually connect these rings to end users. This is not a fibre to the home plan. It is simply a ring around the town and it gets worse: many of these rings around towns and cities don’t connect to a national fibre backbone. It is like building a ring road around a town and not connecting it to a national highway system or even having onramps!

    The idea is that ISPS will connect to the ring, which may eventually connect to a national backbone which will connect to international connectivity. So far only a few ISPs have connected some phone exchanges to these fibre rings and offer dsl or in rare circumstances they offer ADSL2 . We’ve (consumer group IrelandOffline) calculated that at most 4000 customers have so far gotten ADSL via connecting to an exchange which connects to a fibre ring which connects to backhaul. 80m has been spent so far so we’re talking an average cost of 20k per customer. Yes, the Govt has spent 20k per customer to get build a fibre ring that gets them DSL. This leaves out costs of unbundling exchanges and connecting to national backhaul that the ISP has invested in. Remember this is for DSL and not fibre! These fibre rings are barely used and are going to cost a shambolic 170m and still 25% of Irish people cannot get broadband.