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.

DT CEO ups US ambitions to double down on momentum

Deutsche Telekom CEO Tim Hoettges is looking to close the valuation gap between T-Mobile US and its rivals, as the telco revels following a very positive earnings call.

Share price in the German telco has jumped 3.9% in early morning trading following the financial results which saw revenues increase by 6.4% to €80.4 billion for 2019. Net profit was up by almost 80% to €3.9 billion, while free cash grew by 15.9% to €7 billion.

“The market environment in the European telecommunications sector is far from straightforward. Yet, despite the heavy regulation and inconsistent competitive situation, we emerged from the year just ended even stronger,” Hoettges said his letter to the shareholders.

“Not only that, but we are once again the leading European telco, based on both revenue and market value. That was and remains our overarching goal.”

Deutsche Telekom is one of the largest telcos across the world, but in recent years it is questionable as to whether it is one of the more progressive or future proofed. When looking at the penetration of full-fibre broadband or deployment of 5G infrastructure, the numbers are not as favourable, though the tide does seem to be turning.

The team now suggests 5G connectivity is being delivered in eight cities in its domestic German market, with ambitions to increase this to 20 by the end of 2020. Elsewhere, T-Mobile US launched its 5G offering in December and Austria has 31 5G base stations up-and-running.

Deutsche Telekom is heading in the right direction, but it is moving at a much slower pace than other telcos. It might want to proclaim itself as a leader in the telco arena, but realistically it is a fastish-follower at best, BT for example, has already launched 5G in 50 towns and cities across the UK.

One area where the company is proving to be incredibly aggressive is in the US, and this should continue over the coming months.

“We have the chance to become No.1 in the United States, to overtake AT&T and Verizon. That, at least, is our ambition,” Hoettges said during the earnings call.

With T-Mobile US and Sprint now looking at a clear path to the finish line, after a District Judge ruled in favour of the merger in the face of opposition from 13 Attorney Generals, the team can look further into the future. Following the merger, T-Mobile will be roughly the same size from a subscriber base as AT&T and Verizon, allowing more opportunity for the team to compete on a level playing field.

The US business is one which is once again proving to be very profitable for Deutsche Telekom.

T-Mobile US is the single largest business unit in the overarching business, accounting for just over 50% of the total revenues at €40.4 billion, a year-on-year increase of 10.7%. Momentum is clearly with the business also, the team boasted of 1.3 million branded postpaid net additions during its last financial results.

While the US is looking very positive for the telco, it will have to be careful sluggish activity in Europe does not open the door for rivals to steal market share in the various markets.

US is a more attractive investment than Europe – DT CEO

Deutsche Telekom CEO Tim Höttges is always a colourful character, but he hasn’t held back in brutally condemning Europe as we enter the digital age.

“I have 50%, 50% businesses in Europe and the US,” said Höttges at the FT-ETNO Conference in Brussels. “I would love to invest patriotically, but it is better to invest in the US. They want 5G for every citizen as soon as possible, they are bringing a lot of spectrum to the market.”

Europe is a market which has grand ambitions for the digital age, but it is struggling to keep pace with the likes of the US, China and Korea. As it stands, some could argue there is parity for control of digital economy, but it is questionable as to whether this will be the case moving forward.

“I would like to say the future is Europe, but I can’t, at least not unconditionally,” said Höttges.

Governments and regulators are demanding rapid deployment of infrastructure, but consolidation is the dirtiest of words. Scale is critical, but no assistance is being offered. There are positive noises about spectrum harmonisation, but fragmentation is rife. This valuable asset is becoming increasingly expensive with every passing auction. And the legal framework for digital services does not line-up between the telcos and the cloud players.

This is of course yet another example of a telco moaning about regulation, but if the moaning leads to investment being directed elsewhere regulators cannot ignore it for much longer. Höttges is a very honest CEO and today saw a statement which should seriously worry authorities across the continent.

Investors demand DT invests in areas which return the greatest profits, Höttges has a fiduciary responsibility to ensure this is the case. If the US landscape is more likely to generate the required returns, this is where the company will drive investment.

“I invest where I see the biggest opportunity,” Höttges stated.

US authorities and consumers will be thrilled to hear such proclamations. Over the course of 2018, DT investments totalled more than €12.2 billion worldwide. If the US is creating a more investment friendly landscape, regulators are arguably doing their job. This means more money being pumped into T-Mobile US, a company which is already forcing the hands of rivals with disruptive strategies. More money could mean more disruption. Theoretically, this will only benefit the US telecoms industry.

What is worth noting is that DT is not alone in its criticism. Telecom Italia Chairman Salvatore Rossi suggested there has not been enough attention paid to industrial policy. Altice Portugal CEO Alexandre Fonseca complained about market consolidation resistance from authorities when the fourth player accounts for less than 3% market share. Telefonica Chief Finance and Control Officer Laura Abasolo bemoaned shifting regulations; inconsistency is the enemy of investment after all.

These are only a few of the frustrations which were aired today. Some very senior people said some very condemning things, but this is of course not new.

Telcos will always complain about regulation. From their perspective, there are always too many rules, never enough subsidies and spectrum is consistently too expensive. The majority of the time these companies are trying to get more for less, profit is the ultimate goal after all, but occasionally you have to listen to the moaning. The outcome is arguably more important than the process, and this outcome is not beneficial for Europe or DT’s customers.

If investment is being directed elsewhere because the regulatory framework is not working for the continent’s largest telco, the dynamic needs to change, and change quickly.

Germany follows the UK on coverage collaboration

Deutsche Telekom will be joining forces with the German bits of Telefónica and Vodafone so they don’t duplicate each other’s efforts in remote locations.

The move seems identical to the initiative announced by UK MNOs a few weeks ago, which resulted in Ofcom removing coverage obligations from the next tranche of low-frequency spectrum to be made available. Presumably the German regulator has indicated it would be in their best interests for the German MNOs to follow suit, although in this case it’s more about satisfying existing coverage oblgations.

Right now, however, this is just a statement of intent rather than a hard pact. “The three telecommunications providers plan to coordinate the set-up and operation of up to 6,000 new cell sites and have signed a letter of intent to this effect,” says the announcement. “1&1 Drillisch AG has been invited to participate in this network expansion collaboration. A prerequisite for joining the collaboration is that the operator must be willing to take on an equal share of the expansion projects as the other parties.”

This seems a bit harsh on Drillisch as it’s currently an MNVO using the Telefónica and Vodafone networks and has far fewer subscribers than any of the MNOs. “The plan proposes that each company participating in the collaboration should set up an equal number of new sites which can then be used by the collaboration partners and fitted with their own antennas and the appropriate network technology as required,” added the announcement.

“The planned collaboration is a milestone for network expansion in Germany,” said Telekom Deutschland’s Managing Director Dirk Wössner. “Our common goal is to eliminate coverage gaps in the mobile network as soon as possible. Sharing infrastructure is nothing new for us. Sharing it at this scale, however, is a major step in the right direction. After all, high-speed internet and excellent voice quality on road, rail and water are vital for an industrial country like Germany that relies on mobile communications.”

“Mobile communications will be the most important technology in the coming decade. And we are pooling our resources to put Germany in an ideal position,” said Markus Haas, CEO of Telefónica Deutschland. “This collaboration is an outstanding example of intelligent cooperation towards taking the next logical step. We must join forces if we are to consolidate Germany’s position as a leading business location that is ready to take on future challenges. Together, we will take digital transformation in Germany to the next level.”

“Today, we are forging an alliance to combat dead spots and increase mobile communications coverage even in areas where it is not profitable,” said Vodafone Deutschland CEO Hannes Ametsreiter. “In future, hundreds of thousands will benefit from this – people in small rural communities, people on roads, people traveling by train. Together, we operators will construct and share a common infrastructure in dead spots – and of course continue to be rivals in a competitive infrastructure market in the rest of the country. This is good for the network, good for customers and good for Germany’s digital future.”

This looks like a good solution for the MNOs so long as they can agree on an equal share of the work. Drillisch announced it wanted to get into the MNO business buy winning some 5G spectrum in the most recent auction, leading to considerable sulking from the incumbents about the cost of it all. It looks like they’re going to make the newcomer pay to get into their little coverage club.

DT in legal battle over ownership of the colour magenta

Deutsche Telekom is testing out the resourcefulness of its lawyers in an attempt to own the colour magenta as it battles with Israeli insurance start-up Lemonade.

Shortly after launched the online-only insurance brand in the German market, a court injunction was filed by the telco with Lemonade being told to remove all branding with the offending colour. It does seem quite remarkable a company can ‘own’ a colour, but that it was the German courts have ruled.

Although the ruling is limited to the German markets for the moment, Lemonade is escalating the legal fracas to the European Union Intellectual Property Office to invalidate the decision. As with many legal decisions of this nature, there is the risk of precedent being set, with this ruling being used as a basis for future decisions in additional markets, though Lemonade wants to cut the monopoly down before any momentum can be gathered.

“At first we thought it was a joke,” Lemonade co-founder Shai Winiger said on Twitter.

“Turns out its anything but funny. So, we’re doing the one thing they least expect, by launching a legal attack against the ability of corporations to own things that should belong to humanity as a whole – like colours.”

What is slightly baffling about this case is the free-reign Deutsche Telekom has been handed by the courts. The patent doesn’t seem to be related to the use of magenta with certain letters, a concept, design or services, it apparently ‘owns’ magenta in Germany.

Launching the hashtag #FreethePink, the Lemonade team is challenging what seems to be a remarkable decision. The legal challenge is also generating a handy amount of PR for the business, which has its eyes set on international expansion after a positive start to life in Israel.

And as one would imagine, support on social media is gathering behind Lemonade with several users suggesting new targets for the telco to chase after. Perhaps the Pink Panther will be tackled next, or the hideous and slightly terrifying Troll Doll should start quaking it its boots. Maybe even Barney might be hauled out of retired to defend his tone, or if Deutsche Telekom fancies bullying children, it could take-on the Power Puff Girls.

Of course, this is not the first time Deutsche Telekom has attempted to use its legal weight to bully start-ups who dared to cross its colour palette. Dutch IT firm Compello felt the legal stick over the use of pink in its own logo, while dataJAR in the UK was also a victim.

Interestingly enough, in the case with Lemonade, the firm has not even been using the shade of pink Deutsche Telekom holds the patent for.

DT currently owns the patent for RAL 4010, a shade which is incredibly similar to the one being used by Lemonade, but not exactly the same. Following the ruling out of Germany, Lemonade has received a colour wheel from the telco, pointing out the colours it cannot use, one of which would be more readily described as Purple.

Although it might seem baffling a corporation can ‘own’ a colour outright, hopefully there will be some common sense shown by the European Union Intellectual Property Office and DT will be put in its place.

DT inches towards the 5G dream

The German telecommunications industry is doing everything it can to dispel the stereotype of German efficiency, but Deutsche Telekom is making progress in the 5G world.

When it comes to the connectivity rankings, the Germans do not generally feature towards the top. This is evident in both mobile, with 4G coverage, and broadband. However, at IFA the management team has been pitching its progress, and in fairness, DT has beaten the majority of telcos to the 5G punch.

5G is now live in Germany, with six cities welcoming the connectivity euphoria. A total of 129 5G antennae are now transmitting the super-speed connectivity, though plans are to have 20 cities on the coverage map by the end of 2020. DT is not moving as quickly as some European rivals, the UK telcos for example, though it is progress.

Berlin’s Mitte district is the largest coherent 5G coverage area in Germany, at around six square kilometres, with 66 5G base stations. Currently, work is being done to increase the coverage footprint in five cities, with single, clustered locations being targeted. It does appear to be a slowly, surely approach to 5G, but few will argue with progress.

However, you have to measure this progress against European counterparts. In the UK, three of the four MNOs have launched 5G services. EE, the first to launch, has promised 15 cities by the end of 2019, claiming to add 100 5G base stations to its network each month. In France, although 5G has not launched, Orange is suggesting it now has 352 5G pilot sites around the country. In Spain, Vodafone launched its 5G services in June with base stations in 15 cities across the country.

There are of course pros and cons to the breadth versus depth conversation, but it is always worth placing some context into the situation.

The claim has been made at the IFA conference in Berlin, where DT has also been plugging its broadband ambitions.

“For the first time in many years, we have succeeded in surpassing the range of cable companies with a bandwidth of 50 Mbps,” said Michael Hagspihl, Head of Consumers at Telekom Deutschland.

Broadband is another area where the Germans have been sluggish compared to European averages. According to the FTTH Council Europe, Germany has a fibre penetration rate of 2.3%, considerably behind the leaders such as Spain, Latvia or Sweden, all of which have penetration rates north of 40%. However, progress is being made once again.

DT is claiming its fibre network is the largest in Germany, measuring over 500,000 km in length. It has said more than 30 million households can now access broadband speeds between 50 Mbps and 250 Mbps, with 1.1 million able to purchase connectivity which exceeds 1 Gbps. These numbers are of course houses passed rather than actual connections, but it is a better position than previous years.

Whether the slowly, surely approach is going to be a winning strategy when the awards are handed out in a few years remains to be seen, though Germany is starting to sort out its own house.

DT gets slap on wrist for net neutrality naughtiness

Deutsche Telekom has found itself on the wrong side of right after its ‘Stream On’ offering was found to break European net neutrality rules.

After the Federal Network Agency (BNetzA) imposed restrictions on the telco on the grounds of net neutrality, DT took to the courts to fight the decision. Unfortunately, the lower courts and today in the Higher Administrative Court in Muenster, it was confirmed the telco would no-longer be able to offer the ‘Stream On’ value add feature in its current form.

The issue which the telco is facing boils down to the small print. DT customers have found themselves to have traffic throttled and are unable to make use of the ‘Stream On’ feature outside the German borders, violating European rules on roaming.

‘Stream On’ was first introduced to customers in the US, with the German business following suit after witnessing the success. Offering zero-rating benefits on video streaming, the proposition proved to be as successful in Europe, with two million German customers signed up.

It is of course a strategy which will sound attractive to the data-intensive consumers of today. With entertainment and gaming content from selected partners not bleeding the monthly data allotments, it sounds very interesting, however it seems DT is a victim of its own sluggishness.

One of the issues which BNetzA found was on the data throttling side of the offer. For cheaper data tariffs, download speeds were throttled with the critics arguing this violated one of the key principles of net neutrality, irrelevant as to whether the user consented to the downgraded speeds.

For the tariffs at the bottom end of the scale, download speeds had been throttled to 1.7 Mbps. This might have been sufficient at some point, but at this is not fast enough to deliver a HD quality resolution, the courts decided it was undermining the rules.

Secondly, in limiting the zero-rating offering of ‘Stream On’ to its own borders, DT has also been found to have broken European roaming rules. As the free data stream ended at the border, the courts agreed with regulators that the user was effectively being ‘charged’ for using video and gaming services when in another country. Charging more for services while abroad is a no-no when it comes to the European Union’s rules on roaming.

Although the telco will not be happy with the outcome of this case, it is not the end for the ‘Stream On’ proposition. With two million users signed up, it is clearly at attractive value add for DT, but the telco will have to tweak the small print and update some permissions to ensure it is compliant with current regulations.

SK Telecom and Deutsche Telekom buddy up for 5G

Collaboration is one of the key works currently floating around the 5G world and it seems SK Telecom and Deutsche Telekom haven’t missed the memo.

At a meeting attended by roughly 100 executives, the two operators announced a partnership with the ambition of seeking the promised revenues in the 5G epoch. As it stands, 5G is nothing new. It’s bigger, badder and faster than 4G, but that is not going to satisfy the financial demands of the telcos who need to invest so heavily in the future-proofed networks. The joint venture company created as a result of this partnership will be first tasked with developing new 5G technologies.

Initial focus will be to develop 5G repeater and a 5G in-building solution, as well as a Multipath UDP solution to manage accesses for a seamless connectivity experience and MPEG Media Transport (MMT) technology for low latency media streaming.

“Through partnerships with companies throughout the world, SK Telecom aims to expand beyond the realm of mobile communications to become a global ICT company,” said Park Jung-ho, CEO of SK Telecom. “And I expect this, in turn, will lead to the revaluation of assets and competitiveness of SK Telecom.”

“DT/SK Telecom partnership continues to be of strategic importance for both DT and SK Telecom.” Said Timotheus Höttges, CEO of DT. “We want to work together to make tangible result and strengthen our partnership also with closer technical cooperation.”

This sort of joint investment should not perhaps come as the biggest of surprises considering the pair signed a Memorandum of Understanding (MOU) at the Mobile World Congress Barcelona 2019. There is also the fact Alex Jinsung Choi, DT’s SVP of Research and Technology Innovation, was formerly the CTO at the Korean telco.

As part of the agreement, SK Telecom will also contribute $30 million to DTCP, an investment management group with $1.7 billion assets under management and advisory from Deutsche Telekom. The group is tasked with seeking new investment opportunities in technology, media and telecommunication sectors across Europe, the US and Israel. Moving forward, DTCP will open an office in Seoul to identify new opportunities with SK in Asia.

Looking at the greater opportunities for telcos in the 5G era, this could work out to be a very useful partnership for DT. Offering more products and extracting more revenue from enterprise customers is seem as a key objective, and the Asian telcos have progressed further here. Conversations with the verticals have been in play for longer periods of time and these telcos are closer to creating specific products for specific verticals. DT could certainly learn a thing or two.

Ericsson and DT manage 100 Gbps over microwave

A trial of wireless backhaul over microwave jointly conducted by Deutsche Telekom and Ericsson has managed to top the 100 Gbps mark.

Current commercial microwave backhaul rigs only manage a mere 10 Gbps, we’re told, so this is a fairly substantial increase, albeit in a trial environment. This mega-fast data rate was transmitted over a distance of 1.5 kilometres, which isn’t a bad effort. It involved an 8×8 line-of-sight MIMO with cross polarization interference cancellation (of course), using a 2.5 GHz channel bandwidth in the E-band (70/80 GHz).

“This trial signifies the successful establishment of true fiber capacities over the air using microwave,” said Per Narvinger, Head of Product Area Networks at Ericsson. “This means that microwave will be even more relevant for communications service providers in creating redundant networks as a back-up for fiber, or as a way of closing a fiber ring when fiber is not a viable solution. By carrying such high capacities, microwave further establishes itself as a key transport technology, capable of delivering the performance requirements of 5G.”

“Advanced backhaul solutions will be needed to support high data throughput and enhanced customer experience in the 5G era,” said Alex Jinsung Choi, SVP Strategy & Technology Innovation at DT This milestone confirms the feasibility of microwave over millimeter wave spectrum as an important extension of our portfolio of high-capacity, high-performance transport options for the 5G era. In addition, it represents a game changing solution for future fronthauling capabilities.”

The reason microwave backhaul is suddenly a big deal again is that 5G is going to require a lot more base stations than previous generations, partly because it uses higher frequencies with poorer propagation characteristics. Backhauling all of those new sites with fibre will often be expensive and impractical, so if networks can fall back to a decent microwave link when that happens then everyone’s a winner.

DT CEO moans as bidding in German 5G auction tops €1 billion

Just for a change operators are moaning about the amount they have to pay for licensed spectrum, arguing that leaves less cash for infrastructure.

This time the country in question is Germany, which is in the middle of a 5G auction its operators have had a problem with from the start. According to the regulator bidding has already topped a billion euros and, while it still has a way to go before reaching the orgiastic excesses of the Italian one, muttering about the cost has already begun.

Commenting at its recent AGM, DT CEO Tim Höttges made it clear he has a problem with the fact that not all available spectrum is even being offered in the action, which he reckons is bound to have an inflationary effect. “An artificial shortage of public resources is being created, which may push up the price,” he said. “In the end, there is no money for the build-out.”

There was also some general dissent about excessive regulation, ease and speed of access to new cell sites and access regulation for new fibre networks that is considered counterproductive. But the main theme of his speech at the AGM was ‘sharing and participation’ and featured largely generic sentiments about the importance of communications networks and how totally committed to them DT is.

This auction is expected to hit at least three billion euros but, as we saw in Italy, auctions can easily become frenzied. European operators seem to be feeling increasingly inclined to challenge the terms of spectrum auctions but so far their attempts at legal challenges have yielded little. It does seem odd that the German state has held back a bunch of spectrum, however, and it would be interesting to know the rationale for that.