The German network and telecommunication agency, Bundesnetzagentur, has taken a decision to prolong the frequency usage rights for the operators free of charge. What this means is that Deutsche Telekom, Vodafone and O2 Telefonica will be permitted to continue utilising the current mobile radio spectrum they own, but in exchange with additional coverage obligations and the opening of usage of frequencies to competitors. The ruling provides for a five-year extension of use rights in the 800 MHz, 1,800 MHz and 2,600 MHz bands of frequencies.
No auctions, but investment commitments
The sense is that whoever saves billions will then have to invest. This is something that will doubtless please visitors who are innocent victims of the digital divide, as mobile coverage in Germany is quite patchy in rural areas and blank white spaces are to be found, for example, around Berlin, along the way between the airport and the capital. And so, to address this structural coverage shortfall, the German federal government has decided to offer the major operators’ existing frequencies, expiring this year, for free in exchange for tough network coverage commitments. Compensation to operators after the 5G auction?
A record donation to German operators, where the previous 5G auction in 2019 had been a EUR 6.5 billion bloodbath, had invited huge criticism from the telcos. But now the situation has changed totally in Germany, where the state no longer wishes to shift the buck to the telcos and is even planning to broaden the purse strings to fund its infrastructure and defence. Now, the aim is to fill the coverage gap in rural areas of the country.
Deutsche Telekom, Vodafone and Telefonica will have to make commitments to cover 99.5 per cent of the country with a speed of 50 Mbps or higher by 2030, or at least 99 per cent of households in sparsely populated municipalities with a minimum speed of 100 Mbps by 2029. Coverage would be around 98% of the territory today. 8% of the country’s area still must be met with 4G today in Germany, and 15% still must be covered with 5G. As announced by the German Federal Network Agency, the extended frequencies will be allocated later together with the rights expiring in 2033 for the 700 MHz, 900 MHz, 1,500 MHz and 1,800 MHz bands.
Conditions include preferring the new entrant
The German regulator, which owns not only the TLC networks but also the electricity and rail networks, imposed an extra condition on the three incumbents, i.e., to negotiate with the new entrant 1&1, which is considered the fourth largest operator in the country after the Telefonica-E-Plus merger in 2014. As they expand their networks, the operators will also have to extend to 1&1 the use of spectrum below the 1 Ghz band. In addition, there is also an obligation to negotiate with third-party network and antenna operators, so-called Mvno, such as Freenet. 1&1 acquired its first frequency in 2019 and currently has more than 12 million mobile clients. The group, which has a market capitalization of EUR 2.6 billion, did not favour the extension of licenses to competitors: “It essentially constitutes a one-way subsidy to its competitors”.
To further facilitate the development of networks, the German government recently passed a law defining the expansion of telecommunications as a “priority public interest” on a par with energy infrastructure. This should simplify the construction of new networks and accelerate the achievement of coverage targets. The license extension and the new rules mark a turning point for the German telecommunications market, with implications that will extend well beyond 2030. It remains to be seen whether the compromise reached will meet the needs of operators as well as those of consumers and new entrants.
