Toothless German regulator capitulates during 4G coverage review

German telco regulator, Bundesnetzagentur has let all three mobile network operators escape any punishment for missing coverage obligation deadlines.

While many regulatory authorities might choose to punish telcos for missing coverage obligations, Germany’s Bundesnetzagentur is perhaps offering some colour as to why the country lags behind others in terms of connectivity benchmarking. All three failed to meet commitments made to the regulator in 2015 but have been afforded the opportunity to correct mistakes by the end of 2020.

A regulatory enforcer who does not dish out punishments when telcos fail to meet obligations is as useful as a chocolate teapot in a Saharan Quidditch match.

“Our primary goal remains to ensure that the coverage of mobile broadband is moving forward,” said Jochen Homann, President of Bundesnetzagentur. “We want to see verifiable improvements over the next few months that will ensure that the requirements are fully met by the end of the year. This expressly includes that we may impose fines and fines if necessary.”

A fine might be directed towards the telcos in the future, but that is not the point. If you give these companies an inch, they will take a mile. If this deadline was not actually a deadline, what was it?

This relaxed attitude towards enforcement of obligations perhaps explains why Germany is seen as a laggard in the connectivity stakes.

Looking at OpenSignal’s 4G coverage data, Germany is one of the poorest performing European nations with geographical coverage of 76.9%. These estimates are slightly dated, but the rankings would not have changed that dramatically. But it would be unfair to reserve all the criticism for the MNOs when the broadband service providers are similarly sloppy.

According to the latest estimates from the FTTH Council Europe, Germany has only connected 3.4% of homes to full-fibre broadband, which is only set to increase to 24.8% by 2025. To demonstrate the performance of Germany to date, the UK currently has a higher percentage of full-fibre homes. Being behind the UK today is a pretty embarrassing place to be.

Coverage maps and data does not give the complete picture for a measure on how developed a country’s digital society and economy is, but it is a useful yardstick. As a more traditional country, it would surprise few Germany has been slow to evolve, however when you add into the mix a regulator which does not run a tight ship, it starts to become more obvious as to why.

These telcos are pursuing profits, therefore the urban environments will be favoured in the ROI chase. The regulators have to force telcos to provide connectivity in the most sparsely populated areas, as few telcos care about farmer John or dog walker Jane. This is where Bundesnetzagentur is failing as a regulator; it is not holding the telcos accountable, instead it added some extra slack to the leash.

In the review, Telefónica failed to meet requirements in all 13 federal states and only got to 80% coverage on major transport links. Deutsche Telekom missed the requirements in three states and failed to meet the obligations for main traffic routes with 97% coverage for motorways and 96% for the railways. Vodafone fell short of expectations in four states, while coverage of 96% for motorways and 95% for railways are below the coverage requirement.

The obligations which were agreed were 98% 4G coverage of households nationwide and 97% of households in each federal state with minimum download speeds of 50 Mbps. In addition, all major transport routes would have to be fully covered.

Although some might suggest these obligations were too high, the telcos did have five years to meet the expectations, and they agreed to them in the first place.

Telcos and regulators have to have a working relationship. Collaboration is a buzzword, but it is perfectly suitable and should be appreciated by all markets. However, there also needs to be a bit of fear to ensure the dynamic works effectively. The regulator is a watchdog, not an industry partner, and the prospect of swift and measured punishment needs to be a realistic possibility.

A self-regulating industry almost always fails in some way or another, and that is effectively what situation is created when you have a toothless regulator.

Germany green lights 5G plans despite industry protest

German regulator Bundesnetzagentur has said it will move ahead with the proposed 5G auction plan, despite German telcos and industry lobby group GSMA slamming the plans as a commercial nightmare.

The auction, which will take place in early 2019, requires minimum data rates of 100 Mbps available by the end of 2022 in 98% of households in each state as well as along all major transport paths. Each of the telcos must also install 1000 5G base stations and 500 other base stations, and by 2024, the data coverage must be extended to seaports, main waterways and other minor roads.

While data rates for the longer-term targets will be lower, this is still a big ask for a country which currently does not meet the standard for 4G coverage. For the GSMA, the conditions placed on the spectrum are unreasonable and not commercially viable for the telcos. The risk is Germany will be left behind as the rest of the world progresses into the 5G economy.

“The mobile industry is essential to delivering on Germany’s vision for 5G leadership,” said said Mats Granryd, Director General of the GSMA. “We are alarmed that – despite real and substantial concerns raised by the mobile industry on the original proposals – the proposed terms make the situation worse by doubling down on unrealistic conditions that puts Germany’s 5G future at risk.

“Operators in Germany have invested billions in the country’s networks and have proven through history that they are committed to investing and providing innovative services. German consumers and businesses will be the ones to lose out from unreasonable obligations that make investment in 5G rollout uneconomical.”

One of the concerns surrounds the 3.6 GHz band, which can deliver on the high capacity demands though it does not offer the same advantages for coverage. To meet the 98% coverage conditions, the economics do not match, especially when you take the huge transport network into account. The GSMA also considers the roaming and wholesale obligations attached to the 3.4 to 3.7 GHz band as suspect, perhaps creating a critical level of legal uncertainty and will could deter investment in 5G networks. This is also where some of the telcos have found complaint.

“Our decision sets vital preconditions for the digital transformation of industry and society,” said Bundesnetzagentur President Jochen Homann. “Through the award of frequencies, we are creating planning and investment certainty, and contributing to a fast, needs-based rollout of the mobile radio network in Germany.”

Another issue with the auction requirements, which will certainly have the incumbent players up in arms, are the lighter conditions placed on new market entrants. As it stands, new comers could pick and choose their markets, as national roaming requirements could be negotiated with the regulator. It is creating a unfair environment, with the incumbents forced to provide coverage in the less commercially attractive regions while new comers could focus resources on the more profitable urban environments.

While telco moaning is usually taken with a pinch of salt, in this case you have to have a bit of sympathy for the established players. The German regulator seems determined to create an environment which increases the number of telcos in the country, and potentially builds the prospect of furthering the digital divide between urban and rural environments. Not only does this favouritism go against a lot of the independent values supposedly in place at government level, but risks the spread of wealth. This in turn will decrease a telcos ability to invest. Just as the industry is craving consolidation, the German regulator seems to be shooting off in the other direction.

The plans seems incredibly short-sighted, though it reeks of bureaucrats who wanted to clock out on time for the 4pm happy hour stein and bagel.