The European Commission is examining German plans to support the fibre optic industry. The Christian Democrat (CDU/CSU) parliamentary group asked for early approval, while the fixed network industry association BREKO is opposed to the measures. EURACTIV Germany has seen both letters.

In the coalition agreement, the German government promised that all households will have access to an internet connection with gigabit speed (1000 Mbps) by 2025. To this end, the fibre optic network is set to be expanded.

Yet Transport Minister Andreas Scheuer’s (CSU) latest subsidy proposal is stuck in Brussels and the funding for “grey spots” on the data speed map has been on the desk of Competition Commissioner Margrethe Vestager since June 2019.

The Commission fears that the support programme would distort competition, a spokeswoman told EURACTIV. “There is a risk that Germany’s plans will not accelerate expansion, but merely replace private investment.”

Scheuer’s CDU/CSU parliamentary group became impatient and wrote a letter to the Commission on 17 April, listing arguments in favour of funding.

In response, the Federal Association of Broadband Communication (BREKO), which represents fixed-line broadband providers, wrote a letter two weeks later. In it, the association argues against the planned funding. Both letters were made available to EURACTIV Germany, and the Commission spokeswoman ensured they would be answered “in due course.”

White or gray spots?

The point of contention concerns where the state should support the expansion of fibre optics. The German government is committed to the principle of self-supporting expansion and believes the state should only provide funding where the market fails. These include sparsely populated areas, where private investment would not be profitable, for example.

But how slow must the internet be for the state to intervene? Up to now, fibre optic expansion has only been supported in “white spots,” where connections up to 30 Mbps were possible.

Scheuer’s proposal would also subsidise “grey spots.” These are areas with over 30 Mbps, but under the 1000 that the government promised by 2025.

These grey spots often contain old copper network cables that have been boosted through super-vectoring, making speeds of up to 250 Mbps possible, though still not 1000 Mbps.

Priority is given to prioritisation

Such a lifting of the “pickup threshold” of 30 Mbps is a thorn in the side of BREKO, because state money would crowd out private investments, said spokesman Sven Knapp in an interview with EURACTIV Germany.

This is in line with the concerns of the Commission. “We will not manage without state funding” in the fibre optic expansion, says Knapp, but clear prioritisation is important, particularly because fibre optic expansion requires underground construction, and resources for this are limited in Germany.

Imminent losses

Furthermore, this plan could devalue recent investments. Bringing copper cables to performance levels of up to 250 Mbps costs money. Recent investors, who now earn a share of the network revenues, would face losses if state-subsidized fibre optic cables were suddenly laid next to copper.

The subsidy could bring another disadvantage for BREKO: more competition, says Torsten Gerpott, head of the Department of Corporate and Technology Planning at the Mercator School of Management Duisburg.

“If more funding is provided, a number of BREKO members with VDSL local area networks could encounter further providers in the funding competition who would otherwise not have invested in the expansion of the region,” says Gerpott. “This would increase the competitive pressure.”

“As a politician, I cannot explain that to any citizen”

For its part, the CDU/CSU parliamentary group tried to convince the Commission of the necessity of the new funding. The EU had recently called for a pick-up threshold of 100 Mbps, but this would lead to “grotesque scenes,” Hansjörg Durz (CSU), deputy chair of the Bundestag’s digital committee, told EURACTIV Germany.

With higher speeds closer to the distribution box, internet speed varies from house to house. “But if the neighbouring household, which is closer to the distribution box, is on the network at just over 100 Mbps, then the excavator will stop digging at the property boundary, and the neighbour will not get a gigabit,” says Durz.

“As a politician, I can’t explain that to any citizen. That’s why we are campaigning against pickup thresholds.” BREKO spokesman Knapp understood this problem and advocated for a solution even if pick-up thresholds remain.

However, Durz could understand that more funding also leads to more expensive underground construction and therefore he would certainly, like BREKO, advocate national prioritisation, even if without a threshold. He is “sure that we can manage that.”

Edited by Samuel Stolton