“Pay-as-you-go 2.0”: Setting levers in motion for digitalization

Modernize operating costs regulation, accelerate fiber optic expansion
Bonn/Berlin, 28.10.2020 The amendment of the Telecommunications Act and related laws and regulations is planned for this year. One topic that is already generating discussion even before the draft bill is published is the ability to pass on broadband connections via ancillary rental costs. The plans of the Federal Ministry for Economic Affairs and Energy (BMWi) envisage an amendment to the Operating Costs Ordinance and a deletion of the apportionability as part of the amendment to the law. From the BREKO’s point of view, the deletion without replacement means that an important instrument for bundling forces for digitization is being wasted. The German Broadband Association (BREKO) is therefore campaigning for a modernization of the regulation on apportionability, which offers great opportunities for accelerating the expansion of fiber optics.
The recent increase in the fiber optic penetration rate to 13.5% communicated as part of the BREKO market analysis20 is a positive signal for fiber optic expansion. However, the figure also shows that further efforts and improvements to the framework conditions are required in order to achieve the political goals that Germany has set itself for the provision of modern fiber-optic infrastructure right into buildings. In order for the digital transformation of the German economy to succeed, so that citizens can work and live connected, all levers must be set in motion to make progress in expanding the digital infrastructure. In the BREKO’s view, one of these levers – assuming a sensible design – can be the apportionability of ancillary TV costs.
“There is great potential in the apportionability to give fiber optic expansion a motivational boost, even in cities where we typically have multi-family housing development. With a forward-looking design, the ability to pay-as-you-go is not a relic of the past, but can become a driver for fibre expansion and thus for digitization,” explains BREKO Managing Director Dr. Stephan Albers. “In short: we need ‘pay-as-you-go 2.0’. The upcoming revision of the Telecommunications Act offers the opportunity to set the right course and to further develop the regulation on apportionability in the interests of tenants as well as homeowners and housing associations.”
This is what a modernized “apportionability 2.0” could look like from BREKO’s point of view:

The possibility of billing the costs of the broadband connection via the operating costs will in future be linked to new investments in fiber optic networks to the buildings and apartments. Companies that connect buildings, in particular apartment buildings, with real fiber optic connections can continue to charge the costs for this connection via the operating costs.
It should not be possible to agree the allocation “indefinitely”, but for a period that takes sufficient account of the value of the investment in the new fiber optic infrastructure.
In addition, in order to create incentives for cooperation and the greatest possible diversity of offerings, companies that enable other providers to access customers on their network by granting open access should be able to benefit from the possibility of apportionment for longer.

The proposed amendment to the Operating Costs Ordinance would lead to a win-win situation for tenants, building and apartment owners, housing associations and forward-looking network operators:
“Apportionability 2.0” would enable tenants to receive a future-proof and sustainable fiber optic connection at an attractive price. This would be significantly lower than the costs that would be incurred if collective collection were to be discontinued when booking individual connections. In addition, opening up the networks would provide tenants with a much more comprehensive range of services. Today, cable network operators usually only offer their own or selected TV services and often do not transport third-party TV services, for example. With the open access concept preferred by BREKO, on the other hand, tenants would be able to choose from a comprehensive range of services from a large number of providers. Overall, this would lead to significantly more competition on the provider market, as there would not only be a TV product from one cable network operator to choose from, but also offers from other TV service providers.
For building owners and housing associations who want to make their properties fit for the future with a high-performance and future-proof infrastructure and thus attractive for private and commercial tenants, there is no way around fiber optics. For them, this would result in a significant increase in the value of their properties. This would make their own efforts to modernize the buildings obsolete.
For network operators and investors, a sensibly designed option for allocating costs would have a positive effect on the calculability of the often uncertain revenue side in the “fiber optic expansion business case.” This can have a positive influence on investment decisions regarding fiber optic expansion and thus accelerate it.
“The ability to pay-as-you-go is an instrument that – if designed correctly – can be used to provide effective incentives for fiber optic investments without making it more expensive for tenants. On the contrary: they benefit from higher-quality connections and more diversity. Legislators should therefore not simply abandon this instrument, but develop it further in line with the times,” summarizes Albers.