GERMANY MAY MISS ITS BROADBAND GOALS

UNCLAS SECTION 01 OF 02 BERLIN 001567 PLEASE PASS TO EEB/CIP/BA:Timothy Finton; FCC:Robert Tanner DOC/ITA/OTEC:Andrew Bennett SIPDIS E.O. 12958: N/A TAGS: ECPS ECON GM SUBJECT: GERMANY MAY MISS ITS BROADBAND GOALS REF: STATE 27310; BERLIN 000707 ¶1. Summary: The German government introduced a National broadband strategy in early 2009 that spurred a flurry of activity aimed at expanding broadband deployment at the state and local levels. In the aftermath of the economic crisis, however, the telecom industry has not invested the large sums required. The government is still mapping the existing cable infrastructure, and work in various states and communities is progressing at different rates. In addition, bickering continues over wireless spectrum allocation of the digital dividend, with the European Commission likely to halt Germany's planned frequency auction unless its modalities are revised. In short, implementation of Germany's broadband strategy will take longer than projected, although the Economics Ministry (BMWi) and the Federal Network Agency (BNetzA) are still sticking to the original timeframe. Note: This cable is part of a regular series of updates on Germany's telecom strategies and goals. End Summary. Germany's Ambitious Broadband Plan -------------- ¶2. Aimed at fostering economic growth, Germany's broadband plan is an integral part of the government's economic stimulus package. The ambitious plan aims to provide every German household with access to broadband internet of at least 1 Mbit/s by the end of 2010; 75 percent of the connections would be at 50 Mbit/s by 2014, increasing to 100 percent as quickly as possible thereafter. This would primarily benefit the 800 towns and 1,400 rural communities with either no internet connection or low-bandwidth internet access. BMWi has established a webpage (www.zukunft-breitband.de) featuring best practices of 30 communities that successfully deployed broadband. High Investments Needed; Private Sector Reluctant -------------- -------------- ¶3. To date, only Deutsche Telekom (DTAG) has invested 3 billion euro to equip households in the 50 largest cities with 50 Mbit/s. Current deployment stalled when non-DTAG investment dried up as a result of the economic crisis. It will require a total investment of approximately 50 billion euro (of an estimated total of 300 billion euro EU-wide) to adapt German infrastructure to enable rapid broadband deployment. Even the dominant DTAG is seeking alliances with its competitors to share the investment burden. The telecommunications industry has concluded that the stimulus funds allocated for this are not sufficient. ¶4. According to a poll by the German ICT federation (BITKOM),the private sector strongly favors broadband deployment. A recent Columbia Business School study found that upgrading networks to 50 Mbit/s by 2014 would create 400,000 jobs in Germany and contribute 60 billion euro to German GDP by 2014. Digital Dividend Auction Likely To Be Postponed -------------- -- ¶5. In June 2009, the Upper House (Bundesrat) approved the "digital dividend" provision as an important step towards nationwide broadband deployment. The provision calls for the auctioning of frequencies no longer needed for broadcasting after digitalization. The auction has been scheduled for the second quarter of 2010. ¶6. The European Commission, however, decided that the modalities of the auction, as determined by BNetzA in October 2009, pose a potential disadvantage to smaller mobile operators who might not be able to acquire an adequate share of frequencies. The Commission is currently preparing infringement procedures. This would significantly BERLIN 00001567 002 OF 002 delay the reallocation of frequencies for broadband use and endanger the German government's broadband goals. ¶7. Critics, meanwhile, have dismissed the additional frequencies from the digital dividend as a "drop in the bucket," insufficient to close existing gaps and meet the needs of underserved areas. The Association of the German Internet Industry (eco) noted that more fiber optic links would be required over the long term. DTAG to Provide Last-Mile Access -------------- ¶8. German regulator BNetzA has ruled that DTAG must provide access to competitors beyond main distribution frames to the branch nodes. The regulator argued that this would allow competitors to provide "last mile" service to customers. The Association of German Cable Network Operators (ANGA) welcomed the step, but urged that fees be cost-based, so as not to pre-empt investments necessary for next-generation networks. Mapping Infrastructure Needs More Participation -------------- -- ¶9. The Federal Network Agency is currently compiling data for its "infrastructure atlas" to be released in December 2009, which will chart available infrastructure and serve as the basis for improvements and construction projects. A high rate of participation by companies with infrastructure could provide synergies and enable telecommunications companies rapidly to install fiber to new areas and customers at lower costs. The project is proceeding apace, but participation has not met expectations. Alliances for Deployment and Cost-Effectiveness -------------- -- ¶10. Germany's regulatory authority aims to boost deployment and cost-effectiveness by encouraging alliances between telecommunications providers and utility companies. Deutsche Telekom has confirmed talks with its competitors, while German power utility RWE is checking into potential synergies. DTAG and Ewetel, a subsidiary of EWE energy holding, have signed cooperation agreements at the regional level. ¶11. BNetzA also proposed that energy companies without a telecommunications subsidiary provide ducts for laying fiber optic cable. BNetzA President Matthias Kurth commended Switzerland as an example, where utilities are laying fiber optic all the way into the homes of Swisscom customers, enabling rates of 100 Mbit/s. Kurth has sent a letter to 3,000 companies with cable infrastructure in Germany requesting information on infrastructure that could be utilized for broadband service. Comment -------------- ¶12. Although the Economics Ministry and the Federal Network Agency continue to stick to their schedule, it appears increasingly unlikely that Germany will achieve its ambitious broadband deployment goals on time. Remaining hurdles -- from completing the infrastructure mapping to funding high investment costs during an economic downturn to delays in auctioning off spectrum -- will continue to slow the process considerably. End Comment. MURPHY