Open Access? Overbuilding! A Glance at Germany

Germany lags far behind in international comparison when it comes to fiber-optic expansion. The fact that this will probably not change in the near future is due to a vexed issue: Instead of leveraging synergy effects and Open Access, networks are regularly overbuilt, especially in the country's metropolises.

For a long time, Berlin was lagging behind in terms of fiber-optic expansion. In the meantime, network operators are virtually overflowing with announcements of expansion projects in the German capital. The latest example: Global Connect wants to provide Berlin with a broad FTTH network by 2030 at the latest. It's hard to imagine that the network operator won't get in the way of others. Tele Columbus, DNS:NET and Deutsche Telekom are also digging up Berlin streets to lay fiber. Instead of laying one fiber optic connection for every household and using it to offer the services of various telecommunications companies, quite a few Berliners will be able to "look forward" to two or even more network connections in the future.

The Negative Impact of Overbuilding

Overbuilding also casts its shadow over other cities such as Düsseldorf. This not only inhibits the speed of expansion and is simply uneconomical, but also wastes taxpayers' money: networks that have been expanded and financed independently are often overbuilt by subsidized ones. What Germany ultimately needs is competition on the networks - not between them. But unlike our neighbors in Poland or in Scandinavian countries like Sweden, Open Access is practiced by only some of the providers.

Open Access can avoid uneconomical overbuilding, protect the environment and citizens, and avoid construction noise and immissions. And while around 80 percent of the companies organized in the Bundesverband Glasfaseranschluss (Buglas) already offer third parties access to their fiber-optic networks, larger players such as the incumbent Deutsche Telekom seem to foster Open Access only on their own, self-build networks. "Customers also have a great advantage because the variety of providers will increase accordingly," states Josef Scherl (Deutsche Telekom) when asked about the dual rollout.

According to the federal government's gigabit strategy presented in the summer of 2022, co-investment and Open Access models are to play "an important role". The problem, however, is that it is still unclear how this should be structured in regulatory terms. Apart from publicly funded networks, where access for competitors is mandatory, cooperation remains voluntary for the time being.

Role Models: Poland and Sweden

The Open Access approach has proven to be a successful model internationally, including in Sweden. There, the focus has long been on a municipally driven expansion of fiber optic networks, and more than 80 percent of households now have access to such connections. In addition to better coverage, open access has lowered barriers to market entry, increased the productivity of companies and also led to spillover effects in other sectors such as healthcare, according to a study by the consulting firm SBR-net Consulting. The Scandinavian example shows how even large providers redefine their role during the fiber rollout: Telia in Sweden has formed wholesale agreements with many altnets and by switching off copper, it will be exiting the infrastructure market in these areas to focus on protecting its retail market share. Telenor in Norway does not have this option because most municipal fibre networks have exclusive partnerships with retail service providers, so in areas where it is not economic to overbuild with FTTP, the company is instead focusing on providing fixed-wireless access (FWA) services using its 4G and 5G networks.

An Effective Wholesale Strategy is the Best Defense

Consulting firm Analysys Mason urges provider to think in the long-term: "Network overbuild can make or break the business case for fibre investment, and operators must consider the various regulatory, commercial and technical factors at play; the best defence may be an effective wholesale strategy." At present, it remains to be seen when Germany will be able to make effective use of these synergies and when nationwide fiber-optic coverage will (finally) pick up speed.

Sources (mostly in German language):