Fiber optics: Expert brings fixed switch-off date for copper networks into play

A report on a "2030 model" for competition in the fixed network market advocates a "fixed and realistic switch-off date" for all copper lines in the German market. This would enable "non-discriminatory and customer-centric copper-to-fiber optic migration", which is essential for the telecommunications market in Germany to thrive. The report was commissioned by the industry association VATM (Association of Telecommunications and Value-Added Service Providers) and is authored by Achim Wambach, President of the Leibniz Center for European Economic Research (ZEW). The VATM is an association of network operators that compete with the former monopolist Deutsche Telekom.

Thanks to regulation, competitors have access to Deutsche Telekom's copper network. This is intended to "prevent distortions of competition", explains Wambach. This principle must also apply to copper-fiber optic migration: Similarly well-developed fiber optic networks should lead to identical switch-off behavior. This principle must apply regardless of who laid the lines. Otherwise, there is a risk that "strategic switch-off behavior will reduce the incentives for competitors to expand their fiber optic networks". In any case, "competition-securing advance services" must be offered on which Telekom's competitors can build their own offers.

A complete copper-to-fiber optic migration by 2030, as envisioned by the EU Commission despite criticism, seems "almost impossible" in Germany, the researcher explains. Deutsche Telekom has an incentive to switch off its copper networks quickly, especially in areas where it has laid fiber optics itself. From their point of view, this has the additional advantage of being able to migrate large parts of their extensive existing customer base to their own products through lock-in effects. Depending on the design of the new wholesale products, Telekom could also gain new end customers "if wholesale customers of the copper network withdraw from the region or offer less attractive end customer products on the basis of" new contractual conditions.

Moratorium demanded for fiber optic overbuild

The expert also calls for the crowding out of competitors through abusive overbuilding of fiber optics to be avoided. A dominant company in the fiber optic market could have the incentive to hinder the entry of competitors "through loss-making measures". Expansion would then be slower and competition would be reduced. As a remedy, Warmbach suggests obliging Telekom to present "expansion plans with sanctions" for an appropriate period of time. This could be supplemented by a "moratorium on overbuilding in regions with few households". Telekom challengers have long been calling for measures to prevent the top dog from cherry-picking.

According to the analysis, the feared competitive distortions caused by abusive double expansion and discriminatory copper-glass migration would be "considerably lower if expanding fiber-optic network operators were able to achieve high capacity utilization at an early stage". In addition to open access and provider diversity on the networks, "demand-driven promotion in the form of non-discriminatory voucher programs" would also be helpful for higher capacity utilization. However, open access alone is not a miracle cure: "Regulation becomes necessary when there are no voluntary offers on the wholesale market and competition is slowed down as a result." A reduction in the requirements for telecommunications would therefore have to be critically reviewed. In view of the results, VATM Managing Director Frederic Ufer appealed to the new German government to implement the regulatory recommendations quickly and to distance itself from clientele politics and sham competition.

(ds)