Fiber optics: Plan for full rollout or full failure?

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The modalities of the nationwide rollout of optical fibers have been among the major points of contention in the telecommunications business for years. But after many disputes surrounding whether the copper monopolist is unfairly distorting the market, whether years of rollout delays render a contract invalid, or whether the multiple rollout in streets or municipalities is a problem, the perhaps final round is now following: It's going into the houses – more precisely: into apartment buildings.

Because very many people in Germany do not live in terraced houses or semi-detached houses: according to the Federal Statistical Office, 23.5 million apartments, and thus more than half, are located in apartment buildings. And thus a significant part of the customer base, which would actually be particularly attractive for fiber optic rollout: Once connected, several contracts can be sold here at once. But only if the fiber optic actually reaches the end customer. And precisely for this, the Federal Ministry for Digital and Modernization of the State (BMDS) now wants to create a clear legal regulation: A “right to full rollout” is to be introduced.

After months of preparation, round tables, discussions, and a large number of statements, the ministry presented this week the draft bill for amendments to the Telecommunications Act (TKG), which is the preliminary stage for the cabinet version, which will be discussed in the Bundestag and Bundesrat after adoption in the ministerial council. So, many changes are still possible.

Knocking is followed by a rollout obligation

What the ministry is now proposing is a two-step process. The first step is the “right to full rollout”: Operators who connect a house can demand from the owner that they also be allowed to expand the network within the house. And completely – not just connecting a single customer. This is precisely intended to promote economic viability for the companies. However, if the owner says no, he must commission a rollout himself within 24 months after an provider has knocked on his door.

With the TKG amendment, there is thus a drastic intervention in the property rights of homeowners, which, if announced in the Federal Law Gazette, will most likely be subject to constitutional review.

Step by step: Rollout right is linked to conditions

However, for this extensive right, the providers must also do something: They must lay at least four fibers, document them, and adhere to the recognized rules of technology. However, this in turn contains a loophole that is unlikely to please owners and especially the housing industry – if the legally stipulated standards are technically not possible or too expensive, they do not have to be adhered to. There is likely to be a lot of dispute here.

But the second condition for the full rollout right sparks the most discussions: The regulatory requirements will then no longer only affect clearly market-dominating former monopolists on copper cables. Because in return for the concession regarding the rollout in apartment buildings, all rolling-out companies must swallow a big pill: They must grant access to other companies if a second network would not make economic sense, for example.

While it seems sensible from the user's perspective not to have multiple fiber optic strands in the same house, this is a potential problem from the perspective of parts of the industry. Because those who roll out want to have the customers – with all their might or at least the largest possible service package, which they are then expected to pay dearly for. This is the basis for the enormous investment sums of the past and coming years.

Housing industry as a natural in-house monopolist?

But as soon as other providers, perhaps even a Telekom, are allowed to connect to the networks of other providers by force, the business model depends much more on others. In particular, one area could now enter the market, which has been predicted by experts for years: the housing industry. It is no secret that, for example, particularly large providers in the housing industry earn their revenue not so much from rental income but from all the “services” around it, from janitorial and garden services to heat contracting. But if the large landlords now come up with the idea of supplying their houses with in-house fiber optics themselves, they will earn from a service for decades to come. It is a one-time investment with almost guaranteed refinancing. For fiber optic providers, however, this further complicates the market – and in a way, it would even be a reward for those companies that have so far particularly stood in the way of the rollout.

Ultimately, it would be up to the Federal Network Agency, which would very likely be involved in the question of what an appropriate price for the use of in-house fiber optics can be. For the assumption that court disputes will also follow here, one does not need a particularly high-performance fiber optic ball.

Not only the fiber optic industry affected by TKG “take-it-or-leave-it”

Loud interest group criticism is also certain for the proposed TKG amendment due to “take-it-or-leave-it” elements in other areas as well. For example, the railway is to be forced to improve mobile communications along its routes. And electricity suppliers must not only provide data on power connections, but connect mobile communication sites “without delay,” i.e., without culpable delay – to solve one of the many other strange problems of German rollout.

A clear legal regulation is also intended to end an eternal dispute on another major fundamental issue: Telekom is to provide information in good time before the shutdown of copper networks – with a “comprehensive migration plan,” as stated in §25 of the draft. Theoretically, this paragraph could also be applied to cable network operators by the Federal Network Agency.

Consumers must wait and see

However, it is also unclear whether consumers will actually receive better internet connection qualities in a timely manner at a price effectively capped or even reduced by competition in the now planned shift to symmetrical regulation. So far, customers have often held back with their wishes for less latency and more bandwidth. Therefore, for whether fiber optics will actually become mass-attractive, it depends heavily on the pricing of upstream services. If the in-house installation pricing already ensures that consumers cannot book small tariffs, a completely different problem looms here: mobile communications would become an attractive alternative. On the other hand, more users would also mean lower costs per connection – here, providers must decide what is more valuable to them: higher per-capita revenues or more heads who also book fiber optics.

The ministry is not complying with the industry's request to extend the duration of the fiber optic provision fee for in-house installation beyond the currently permissible 5 years at 60 Euros per month from tenants. This can be interpreted as meaning that an over-burdening is not considered politically justifiable.

Interactions still difficult to assess

At the same time, however, it also applies: the TKG amendment is still only a draft bill, i.e., a law not yet adopted, which still has two important stages ahead with the Federal Cabinet and the Bundestag. Satisfied lobbyists are not known, especially not at such an early stage. Some regulations will still be intensively worked on here.

And indeed, the interactions of the various measures now proposed – some of them predetermined by European law – are hardly to be assessed seriously. What is relatively clear, therefore, is only this: copper cables will be displaced in the foreseeable future, and now more systematically. And thus the end of DSL and cable connections will also move closer for users as soon as a company actually starts to develop blocks of houses in the vicinity.

Receipt for years of mutual obstruction

The draft bill for the TKG revision must, not least, be interpreted as a receipt for the botched rollout of recent years. Because many stakeholders will be subject to a lot of new and more detailed regulations in the future, despite all the deregulation speeches of the black-red federal government. However, this is primarily caused and to be held responsible by their behavior in recent years, the fiber optic gold rush, the promises of rollout and returns, along with many justifiably angry customers.

Because so many such regulations will be necessary in 2026, when supposedly everyone wants the same thing, namely fast fiber optic connections nationwide, while in other European countries this discussion has long been over, is the real indictment. It would be desirable if these regulations now actually lead to exactly that: truly fast internet for everyone, providing the necessary capacity for 20 years, at reasonable costs and with functioning competition. But that – given the previous fiber optic history of the republic – is rather unlikely.

(dmk)