Telekom's fiber optic strategy change: The action is in the countryside

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Deutsche Telekom is under pressure in its home market. For a long time, the Bonn-based company had been pushing fiber optic expansion rather by supplying sidewalks with lines than citizens. But that is now to end: Deutsche Telekom wants to lay one million fiber optic connections to households with its partners by 2027. And it sees itself on track for this: 25 million fiber optic connections by 2030 remain the goal, sets the board member Rodrigo Diehl, responsible for Germany since March 2025, the mark firmly.

This does not only mean "Homes Passed", i.e. fiber optic at the sidewalk, assure several representatives of the group. Nor simply "Fibre to the building" (FTTB), i.e. building entry and network termination point in the basement. But fiber optic actually available to the end customer – in apartment buildings, this also includes the necessary cabling within the building, network level 4 (NE4).

From 12.5 million households, past which 870,000 kilometers of Telekom fiber optic run, more than half of all German households are to become available in the foreseeable future. With this, the native Argentinian Diehl is initiating a strategic change. Diehl wants to actually achieve the various goals that Telekom has set for itself over the years.

Take-up rate to increase significantly

This is not happening voluntarily: The pressure to shut down the DSL network in an orderly process is increasing. The EU Commission wants to achieve this "copper-fiber migration" throughout Europe by 2035 at the latest. The Federal Network Agency, as the responsible regulatory authority, presented a concept for this this week.

For Telekom's German business, which accounts for two-thirds of its revenue, fixed-line connections are the bread-and-butter business. It has already significantly expanded its infrastructure in recent years, even if there are very different calculations in the industry regarding the exact investment volume.

So far, customers have seen little reason to switch to fiber optics: prices are too high for products whose performance exceeds the needs of many users. This is a problem – although so far less for Telekom than for its competitors, who do not benefit from DSL usage. The so-called take-up rate, the ratio of available to actually booked connections, has been extremely poor so far. Last year, the group reported a meager 16 percent.

However, Telekom also has to move away from old technology. While expansion costs have risen significantly in recent years – by 46 percent since 2020, according to Telekom – consumer prices are not keeping pace. But the provider faces a dilemma: either it expands and connects itself – or it loses customers permanently to the competition. Therefore, the goal is now: customers should book fiber optics, and preferably with Telekom itself.

The house-to-house battle continues

Diehl explains that the take-up rate is good for single-family homes, but still needs improvement for apartment buildings. This is the current main bottleneck for faster fiber optic expansion: Germany is a country of renters, and over half of the 39.3 million households are rented.

In addition, there is a strong urban-rural divide: Especially in conurbations, where Telekom already has a lot of fiber optic laid in the street, the number of rental apartments is high. However, expansion within buildings, the so-called network level 4, is technically difficult and organizationally complex. "No business case flies with 10 percent utilization," says Diehl in Berlin. However, the 90 percent without a contract represent the chance for good business.

In particular, coordination with landlords for expansion is difficult, alongside outdated regulations for laying on network levels 4 and 5. But even though Telekom and competitors repeatedly emphasize that they are in talks with the housing industry: little has happened here so far.

Landlords do not directly benefit from faster infrastructures. Whether there should be a "right to full expansion" for fiber optic providers is currently the subject of political discussion. Then, expansion would occur for all customers as soon as a single connection is booked.

For Diehl, this is the key: In the past, Telekom went into apartment buildings for each individual contract to carry out the expansion to the end customer, he says. That is too expensive, and that should now stop: full expansion is the only sensible way.

Main opponent: TV cable

Telekom's main opponent in the fiber optic house-to-house battle remains an actually ancient technology. "TV cable networks are also copper networks," says Diehl. Clarity is needed that only fiber optic networks are the future, he explains. And not terms like "gigabit-capable networks," with which cable network operators operate. Not an entirely new demand, but one that is crucial for Telekom.

"We are against forced migration," says Diehl. But discussing rules for DSL shutdown is apparently no longer completely taboo. Telekom wants to show more openness here than in the past, when it insisted that it alone decided on its copper network. It is also not saving a cent on the maintenance of its copper networks as long as they are operated.

Diehl also showed himself to be quite willing to consider more open access models for competitors – if open access were mandatory for everyone in the market. This would also play into Telekom's hands for other reasons: Telekom has a good starting position in the economies of scale of telecommunications.

Diehl wants to go to the countryside – and overbuild

This, in turn, is linked to perhaps the most consequential change in Telekom's strategy: While the large cities with apartment buildings remain contested, Diehl now wants to attack the direct competition where it has so far been alone with fiber optics. "Our competitors have mainly expanded in rural areas," says Diehl. That's where the action is. This means, among other things: single-family homes. They book fiber optic connections particularly frequently – also because this increases the value of the property.

However, while Telekom has so far made a strong effort to avoid the impression of direct competition with other fiber optic providers, this now sounds quite different: Only three percent of areas in Germany are overbuilt areas. Spain, for example, has 70 percent of repeatedly expanded areas, so that is not a problem, Diehl explains.

This can be interpreted as a declaration of war – which is being closely watched by competitors. The capital-driven fiber optic expansion market is currently under immense pressure since interest costs have risen. Takeover rumors are currently part of daily business.

"We will build much more in rural areas," explains Telekom's Germany board member. And this also includes overbuilding: In the future, several fiber optic providers could offer their services to a customer with their physical lines.

In addition to the DSL network, the Bonn-based group has another decisive advantage: the company is less dependent on interest costs and can largely finance the expansion from its own funds. Many fiber optic providers have calculated their business models with higher revenues per user, Rodrigo Diehl calculates.

If Deutsche Telekom now also enters areas already developed by competitors, it could mean the economic death knell for some. Diehl does not categorically rule out Telekom taking over other networks, but dampens expectations: A cooperation would only be considered if a network also technologically approximates the Telekom standard. And, of course, antitrust law would also play an important role – and make a takeover of the size of "Deutsche Giganetz" impossible from the outset. Investors will have heard this.

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