Cablegate: Germany May Miss Its Broadband Goals

DE RUEHRL #1567/01 3431541
R 091541Z DEC 09 ZDK


FCC:Robert Tanner
DOC/ITA/OTEC:Andrew Bennett


E.O. 12958: N/A

REF: STATE 27310; BERLIN 000707

1. Summary: The German government introduced a
National broadband strategy in early 2009 that
spurred a flurry of activity aimed at expanding
broadband deployment at the state and local levels.
In the aftermath of the economic crisis, however,
the telecom industry has not invested the large
sums required. The government is still mapping the
existing cable infrastructure, and work in various
states and communities is progressing at different
rates. In addition, bickering continues over
wireless spectrum allocation of the digital
dividend, with the European Commission likely to
halt Germany's planned frequency auction unless its
modalities are revised. In short, implementation
of Germany's broadband strategy will take longer
than projected, although the Economics Ministry
(BMWi) and the Federal Network Agency (BNetzA) are
still sticking to the original timeframe. Note:
This cable is part of a regular series of updates
on Germany's telecom strategies and goals. End

Germany's Ambitious Broadband Plan

2. Aimed at fostering economic growth, Germany's
broadband plan is an integral part of the
government's economic stimulus package. The
ambitious plan aims to provide every German
household with access to broadband internet of at
least 1 Mbit/s by the end of 2010; 75 percent of
the connections would be at 50 Mbit/s by 2014,
increasing to 100 percent as quickly as possible
thereafter. This would primarily benefit the 800
towns and 1,400 rural communities with either no
internet connection or low-bandwidth internet
access. BMWi has established a webpage
( featuring best practices
of 30 communities that successfully deployed

High Investments Needed; Private Sector Reluctant
--------------------------------------------- ----

3. To date, only Deutsche Telekom (DTAG) has
invested 3 billion euro to equip households in the
50 largest cities with 50 Mbit/s. Current
deployment stalled when non-DTAG investment dried
up as a result of the economic crisis. It will
require a total investment of approximately 50
billion euro (of an estimated total of 300 billion
euro EU-wide) to adapt German infrastructure to
enable rapid broadband deployment. Even the
dominant DTAG is seeking alliances with its
competitors to share the investment burden. The
telecommunications industry has concluded that the
stimulus funds allocated for this are not

4. According to a poll by the German ICT
federation (BITKOM), the private sector strongly
favors broadband deployment. A recent Columbia
Business School study found that upgrading networks
to 50 Mbit/s by 2014 would create 400,000 jobs in
Germany and contribute 60 billion euro to German
GDP by 2014.

Digital Dividend Auction Likely To Be Postponed
--------------------------------------------- --

5. In June 2009, the Upper House (Bundesrat)
approved the "digital dividend" provision as an
important step towards nationwide broadband
deployment. The provision calls for the auctioning
of frequencies no longer needed for broadcasting
after digitalization. The auction has been
scheduled for the second quarter of 2010.

6. The European Commission, however, decided that
the modalities of the auction, as determined by
BNetzA in October 2009, pose a potential
disadvantage to smaller mobile operators who might
not be able to acquire an adequate share of
frequencies. The Commission is currently preparing
infringement procedures. This would significantly

BERLIN 00001567 002 OF 002

delay the reallocation of frequencies for broadband
use and endanger the German government's broadband

7. Critics, meanwhile, have dismissed the
additional frequencies from the digital dividend as
a "drop in the bucket," insufficient to close
existing gaps and meet the needs of underserved
areas. The Association of the German Internet
Industry (eco) noted that more fiber optic links
would be required over the long term.

DTAG to Provide Last-Mile Access

8. German regulator BNetzA has ruled that DTAG
must provide access to competitors beyond main
distribution frames to the branch nodes. The
regulator argued that this would allow competitors
to provide "last mile" service to customers. The
Association of German Cable Network Operators
(ANGA) welcomed the step, but urged that fees be
cost-based, so as not to pre-empt investments
necessary for next-generation networks.

Mapping Infrastructure Needs More Participation
--------------------------------------------- --

9. The Federal Network Agency is currently
compiling data for its "infrastructure atlas" to be
released in December 2009, which will chart
available infrastructure and serve as the basis for
improvements and construction projects. A high
rate of participation by companies with
infrastructure could provide synergies and enable
telecommunications companies rapidly to install
fiber to new areas and customers at lower costs.
The project is proceeding apace, but participation
has not met expectations.

Alliances for Deployment and Cost-Effectiveness
--------------------------------------------- --

10. Germany's regulatory authority aims to boost
deployment and cost-effectiveness by encouraging
alliances between telecommunications providers and
utility companies. Deutsche Telekom has confirmed
talks with its competitors, while German power
utility RWE is checking into potential synergies.
DTAG and Ewetel, a subsidiary of EWE energy
holding, have signed cooperation agreements at the
regional level.

11. BNetzA also proposed that energy companies
without a telecommunications subsidiary provide
ducts for laying fiber optic cable. BNetzA
President Matthias Kurth commended Switzerland as
an example, where utilities are laying fiber optic
all the way into the homes of Swisscom customers,
enabling rates of 100 Mbit/s. Kurth has sent a
letter to 3,000 companies with cable infrastructure
in Germany requesting information on infrastructure
that could be utilized for broadband service.


12. Although the Economics Ministry and the
Federal Network Agency continue to stick to their
schedule, it appears increasingly unlikely that
Germany will achieve its ambitious broadband
deployment goals on time. Remaining hurdles --
from completing the infrastructure mapping to
funding high investment costs during an economic
downturn to delays in auctioning off spectrum --
will continue to slow the process considerably.
End Comment.


© Scoop Media

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