German FTTH market counts 620,000 connections in 112 projects

Wednesday 4 July 2012 | 13:09 CET | Background

Telecompaper has published the 'Fibre Networks in Germany' report, conducted by seim & partner (s&p), the German research associates of Telecompaper. The report gives an overview of the German FTTH and FTTB market and is available in German and English versions. Seim & partner (s&p) is a consultancy based in Taunusstein (Hesse).

Contracting market with new entrants 

The German telecom market is worth around EUR 60 billion annually. The value has contracted by around EUR 10 billion since 2005, when it reached its peak after market liberalisation in the 1990s. The decline in recent years is largely due to price pressure on the DSL market, which has not been compensated by volume growth. Data traffic over the same period has grown by a factor of 1.6, and the number of lines has also increased. Every 18 months the amount of data traffic doubles.  

The German market has been shaped by consolidation on the one hand and a stream of newcomers on the other. The newcomers take advantage of opportunities to carve up the value chain and focus on a specific segment. Deutsche Telekom is the only true vertically integrated player. 

Strategies of new and old players 

The strategies of established players are formed by a number of market imperatives, such as growth versus competition, mergers and takeovers, protecting existing markets, technical and regulatory barriers and limiting customer churn (through technical and contractual barriers). 

This has led to a few importat themes defining the market: cost control, consolidation and fibre optics. In terms of costs, Deutsche Telekom has reduced its workforce by 30 percent in the past ten years, while largely maintaining the same volume of sales. At its competitors, the workforce has contracted by around 15 percent, while revenues have fallen. Consolidation has been led by a few players, including Telefonica, Vodafone, Versatel, M-net, EWE TEL, QSC, 1&1/United Internet and Liberty Global. While the fixed market is still fragmented, it has become much more cohesive since 1985, in an attempt to gain synergies and economies of scale. At the same time a number of new entrants have arrived, especially from the utilities sector.  

Finally, fibre. The existing broadband market is controlled by Deutsche Telekom, Vodafone and Telefonica, with one other major service provider (1&1). Due to the major role still played by their legacy networks, they have invested very little in fibre-optic networks; fibre is currently seen as neither a threat nor an opportunity.  

For new market entrants, there are two strategies possible: 

  •  Use existing infrastructure by renting access to the local loop. This assumes competing on price, but given the market consolidation and cost cuts of recent years, this strategy offers only limited hope of success.  
  • Use new, superior infrastructure (fibre, with speeds currently up to 1 Gbps). The problem here is competition with cable, which thanks to targeted investments can already offer high bandwidths at low prices. 
The new entrant has roughly three areas to compete: 1) The costs of a fibre network are lower than a copper network while 2) end-user prices can be set higher and 3) new income sources can be developed, such as wholesale. Below we go into more detail on these three elements. 

First, the costs. Due to high fixed costs, small projects are not economically feasible below a certain number of households. We assume this is around 1,000 households. Given that civil works for digging cables and connections account for around 70 percent of the roll-out costs (see below), this is the most sensible area to seek savings. This can mean microtrenching (small and relatively shallow trenches cut through for example asphalt) and using overhead lines and poles for hanging cables.

Then the revenues. In terms of services, a fibre network can lead to the use of more bandwidth-intensive services, especially video and associated offerings, like HDTV, 3D, e-government, e-health and local content, as well as cloud computing. Research such as a study by BMWi shows however that the adoption of new services in Germany is lagging that of other countries, such as Japan, South Korea and Norway.And finally, wholesale. 

Deutsche Telekom presents itself in the FTTH market in three ways:

  • Its own roll-out. In April 2011, DT announced plans to roll out FTTH in 19 cities, covering 160,000 households.
  • Cooperation with municipal networks.
  • Lobbying for European rules that make the entry of utility companies in the sector more difficult.
Newcomers on the FTTH/FTTB market rarely choose vertical integration, and instead concentrate on a specific part of the value chain. It's important to note here that any public support is provided on the condition of ‘open access’. In practice this means access at various levels (bitstream, ducts, fibres), but, as far as we are aware, not unbundling. ‘Open access’ means in the bigger picture two things: access must be transparant (clear published tariffs) and non-discriminatory (no advantages for any one provider). 

In nearby countries Sweden and the Netherlands bitstream access (layer 2) is most common. Unbundling is applied in only a small part of the market. For whatever reason open access is only found sporadically in the German market. It should be noted here that the networks operated by utility companies are not 'open access'. 


The report includes profiles of 11 projects: 

  • Stadtwerke Neumuenster 
  • Bordesholm KNOV-Net 
  • EWE TEL: Westerstede, Nordhorn 
  • M-net: Munich, Erlangen, Augsburg 
  • BORnet: Bocholt, Borken 
  • Telsakom: Sasbachwalden 
  • Wilhelm.tel: Norderstedt 
  • NetCologne, NetAachen: Cologne, Aachen 
  • HeLi NET (City 2020): Kamen, Luenen, Hamm, Bergkamen 
  • R-Kom: Regensburg, Straubing, Woerth 
  • E.wa.riss: Biberach 


The report also provides a number of quantitative statements. These are based on various sources: public information, a macro-economic analysis and our own estimates. For the FTTH/FTTB market (so excluding FTTC) these are the following for 2011: 
  • In 2011 a total EUR 550-600 million was invested in FTTH/FTTB. This is equal to around 10 percent of the total investment in fixed and mobile. Of the total, around EUR 200 million comes from Deutsche Telekom and the rest is mainly municipal networks and utility companies. 
  • This amount could double in the next five years to EUR 1.2 billion, making FTTH/FTTB the third-largest area for investment, after LTE and VDSL. 
  • A total 112 projects with 620,000 homes connected were identified at the end of 2011. These are spread across around 100,000 buildings. This total of 620,000 is around 50 percent more than the estimate from the regulator (BNetzA). 
  • The 112 projects recorded revenues of around EUR 75-90 million per year (0.15% of the total telecom market), which could grow over the medium to long term to EUR 200 million. This excludes income from TV services. This is based on the assumption that DT networks have a penetration of around 10 percent and the remainder 20 percent. However, an exact number of homes activated is unknown.  
  • ARPU is estimated at EUR 43 (excluding TV). The price of a triple-play package currently ranges from EUR 51.40 to 55.60 per month. 
  • The most commonly used technology is GPON, especially at Deutsche Telekom. 
  • The most activity is found in the states North Rhine-Westphalia (31 projects, EUR 118 million invested), Lower Saxony (17 projects, 145 million invested), Schleswig-Holstien (18 projects, 100 millon) and Bavaria (16 projects, 100 million). In these states a few large operators are active: EWE, NetCologne, M-net and Wilhelm.tel. 
  • Connecting a building costs on average EUR 4,800 (unweighted average EUR 3,300) and ranges from EUR 945 at R-Kom to EUR 11,600 at Deutsche Telekom (in Henningsdorf). Per household the cost is around EUR 940-960, ranging from EUR 670 urban areas to EUR 1,475 in outlying areas. 
  • The costs can be split across different types of built-up areas, from outlying areas with less than 500 residents per km2 (category 1) to highly urbanised areas with over 2,000 residents per km2 (category 5). Categories 1 and 2 each attracted 19 percent of investments, 28 percent went to category 3 areas, 5 percent to category 4 and 29 percent to category 5. 
  • Costs can also be split by activity, namely: planning (12%), civil works/digging (34%), civil works/connections (28%), fibre splitting (9%), passive material (8%) and active material (9%). 
You can order the entire report (78 pages) now from Telecompaper.

Free Headlines in your E-mail

Every day we send out a free e-mail with the most important headlines of the last 24 hours.

Subscribe now

::: add a comment