Bonn/Berlin, 17.10.2023 – Today, WIK-Consult published the study commissioned by the Federal Ministry for Digital and Transport (BMDV) entitled “Dual expansion of fiber optic networks – economic analysis and legal classification”. The study provides an economic and legal analysis of the so-called “overbuilding problem” in fiber optic expansion based on an evaluation of 93 specific cases of dual expansion. The analysis shows that a dual expansion of fiber optic networks – or even the announcement of such an expansion – can be problematic not only in regions where either no or only one fiber optic network is economically viable, but also where two or more fiber optic networks would theoretically be economically viable. According to the authors of the study, the distribution of market shares, which in turn depends on the existing infrastructure and the number of existing customers, is decisive for the question of whether dual expansion is actually problematic. The study concludes that the dual expansion of fiber optic networks – or its announcement – is problematic if it is carried out by a dominant company.

The Bundesverband Breitbandkommunikation e.V. (BREKO) comments on the results of the study as follows:

“The study shows that the strategic dual expansion and also pure dual expansion announcements by Telekom pose a major problem for the further successful expansion of fiber optics in Germany. Germany cannot afford to wait and hesitate on this issue, which is crucial for achieving the expansion targets, in view of the many companies and investors willing to expand. We expect the Federal Ministry for Digital and Transport to take concrete measures immediately on the basis of these findings in order to stop Telekom’s strategic double expansion activities.

We have already put an efficient and tried-and-tested measure on the table as a concrete proposal, which the authors of the study also consider to be legally possible and fundamentally expedient: To protect against strategic double expansion, Telekom, as a dominant company, is obliged to enter its fiber optic expansion plans in a non-public list nine months in advance. This will prevent it from reacting to competitors’ expansion plans at short notice in order to jeopardize or even prevent their expansion projects. We expect this proposal to be discussed at state secretary level in the federal-state round table scheduled for October 26.

The BMDV’s activities to date on this topic, such as the establishment of the double expansion monitoring office at the Federal Network Agency, have not led to any improvement in the situation. The fact that, almost four months after the start of the monitoring office, there is still no evaluation of the more than 290 reported cases of double expansion gives the impression that the issue is not being treated with the necessary priority.”

Brief classification of the most important study results:

Essentially, the study confirms BREKO’s criticism of Telekom’s dual fiber optic expansion and underlines the acute need for action. Among the many problematic aspects of the ex-monopolist’s current expansion and announcement tactics documented by the study, four statements are particularly relevant for finding an effective regulatory solution:

Based on the potential analysis published in February for the roll-out of fiber optic networks on a commercial basis, WIK-Consult calculates that at least two thirds of German households are located in such sparsely populated areas that at most one fiber optic network can be built and operated economically. This means that in 66% of cases, a dual roll-out makes no economic sense, as at least one of the two companies would make a loss.
Even in metropolitan areas where, according to WIK-Consult, two or more parallel fiber optic networks would also be profitable, fair infrastructure competition is not possible if one of the expanding companies has many existing customers on the copper network. Due to this sales advantage of Telekom, it is to be expected that competitors will not be able to achieve sufficient market share to operate their network profitably with parallel fiber optic expansion.
In addition to the actual dual expansion of fiber optics, the announcement of a dual expansion by Telekom is also highly problematic, as, according to WIK-Consult, competitors must assume in most cases that they will not achieve profitability if Telekom actually expands in parallel. What is particularly critical is that such announcements have an immediate destructive effect, as a result of which a quarter of the affected competitors in the sample analyzed by WIK-Consult have already scaled back their expansion plans or cancelled them altogether. This obstruction of nationwide fiber optic expansion can therefore only be prevented by preventive measures.
WIK-Consult highlights one option for action as “less conflict-prone and quicker to implement”: systematic monitoring of expansion planning in order to immediately identify purely tactical behavior. BREKO has already proposed such a measure: As a market-dominant company, Telekom would be obliged to enter its fiber optic expansion plans in a non-public list nine months in advance. This will prevent it from reacting to competitors’ expansion plans at short notice in order to jeopardize their expansion projects through targeted duplication.