Fiber optic expansion: Breko sees government goal at risk

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The market analysis presented today by the German Broadband Association (Breko) shows that expansion in the area has slowed down over the past year. This relates to so-called "homes passed", i.e. fiber optic cables laid in the street. While the number of area developments increased by 36% between 2022 and 2023, this growth slowed to 15% by June 2024. According to the market survey, 43.2% of all 19.9 million connectable units are now served by fiber optics from 194 of the almost 280 telecommunications companies.

The official government goal is to make half of all households connectable with fiber optics in the street by the end of 2025. Market analysis author Jens Boecker from Bonn-Rhein-Sieg University of Applied Sciences explains: "We believe the target is realistic and may even be slightly exceeded." The fiber optic providers have recently switched from area expansion to connecting properties. Under the current framework conditions, Boecker therefore sees little chance of the current federal government's goal of supplying all households, companies and authorities with fiber optics by 2030: "Fiber optic expansion will take a little longer than expected." Instead, he expects 76 to 86 percent.

Of the 19.9 million properties and households that can be connected, 10.5 million have actually been supplied with fiber optic right into the building so far. There are now 5.2 million connections actually activated, i.e. in use. While Deutsche Telekom can claim 39% of homes passed and its competitors 61%, the proportion of connections actually activated is significantly lower according to the Breko market analysis. Only 23%, or just under 1.2 million fiber optic connections, would be attributable to the Bonn-based telecommunications group, with the rest going to competitors.

Bavaria and Baden-Württemberg continue to perform poorly

The progress of fiber optic expansion varies from region to region. While Schleswig-Holstein is far ahead with 89.3 percent of homes passed and 52 percent of homes connected, Baden-Württemberg is lagging far behind with 29 percent of units basically accessible and 13.1 percent connected, as is Bavaria with 34 percent and 19.2 percent. This is partly since these federal states have relied heavily on subsidized expansion rather than expansion by commercial enterprises. Often, this caused a delay of two to three years, according to business administration professor Jens Boecker.

In Hesse, on the other hand, fiber optic expansion has recently accelerated significantly. One reason for this is likely to be the digital approval procedures. Among the city states, Berlin and Bremen bring up the rear. However, this does not appear to be due to population density: Hamburg clearly stands out with a good 80 percent of installations achieved and 40 percent of buildings connected.

Mobile telephony remains no substitute

These figures do not indicate the end of the landline connection: Only a small proportion of the population would do without it altogether. In addition, the lion's share of data traffic would continue to be handled via landline connections: 7.2 gigabytes in mobile communications per month would be compared to 332 gigabytes in landline connections.

Profitability before speed

Developments over the past year reflect the increasingly difficult market environment: investors have invested large sums in the expansion of fiber optics in Germany lately, coupled with expectations of returns. However, money only flows into the coffers of the companies – with booked connections and thus into the financing of further expansion, into the repayment of currently expensive loans or even into distributions to investors. As a result, investments by alternative providers fell for the first time –, albeit at a high level, to EUR 7.2 billion. At the same time, Telekom's investments in fiber optic expansion increased, according to the market analysis figures.

Binding copper switch-off plans required

This is also repeatedly the basis for the demands of the representatives of the now more than 500 member companies, many of them from the municipal utilities sector. The association emphasized that incentives for expansion must be promoted. The switch-off of the copper network where fiber optics is fully developed is central. Breko Managing Director Stephan Albers demanded: "It cannot be left to Telekom's discretion to shut down the copper networks only where it is expanding itself." The federal government and the Federal Network Agency are responsible for this.

Double expansion remains a point of contention

The competitive situation between other providers and Telekom, which has generally operated copper networks in the expansion areas to date and is now increasingly expanding fiber optics itself, is also still being discussed. As part of the market survey, 78 providers named 284 projects in which they claim to have been affected by a so-called double expansion. These are cases in which, in addition to a company that has announced or already begun expansion in an area, another company has appeared with expansion plans. In a third of the cases, the companies then withdrew as a result of this over-expansion announcement.

The accusation that Telekom and its joint ventures in particular have been deliberately obstructing the business models of other companies with this approach has been around for years. However, the Federal Network Agency, as the regulator, has so far seen no reason to intervene. The competition is demanding that Deutsche Telekom must submit its expansion plans to the Federal Network Agency so that it can then check whether it is strategically undermining the expansion plans of other competitors. Deutsche Telekom has repeatedly rejected the accusation of this "strategic overbuilding" in the past and referred to the legal situation, which allows a double expansion.

(olb)