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Dangerous dual expansion or infrastructure competition? How Deutsche Telekom and its competitors are wrestling with each other – and politicians are watching.

The expansion of fiber optics in Germany is progressing. Roads are being torn up all over Germany and fiber optic cables are being sunk into the ground. The days of copper wire and coaxial cables seem to be numbered. But the industry is warning that expansion is at risk of being slowed down further. This is because, on the one hand, conditions are becoming more difficult and, on the other, the battle is being fought tooth and nail. Telekom is at the center of the accusations.

The expansion of fiber optics is politically desired. The fastest network, everywhere – that is the hope associated with it. And the state has significantly accelerated the expansion in recent years: municipal utilities, network operators and new providers founded with investor funds are laying fiber optic infrastructure. By 2025, around half of all households in Germany should have fiber to the building (FTTB).

In the medium term, the copper wire connection, which is still the dominant medium on the "last mile" into homes, is also set to make way for this. With technologies such as VDSL/vectoring and G.fast, the end of the line has been reached for the old local loop (local loop) from the era of the Bundespost. The copper network is under the control of Deutsche Telekom. Network operators have been calling for a shutdown strategy for the copper network for some time. Although the Federal Ministry of Digital Affairs wants to deal with this, further delays are to be feared in view of the expected new elections.

After the gold rush, the fiber optic grave looms

During the low-interest phase, institutional investors in particular were looking for reliable investment opportunities with calculable returns. There was a gold-rush atmosphere on the market, with new fiber optic companies springing up like mushrooms. According to industry experts, a house connection costs providers around 1000 euros. With consumer prices of between 30 and 100 euros per month and an assumed service life of at least 20 years, this seemed to be a safe investment opportunity, whose refinancing and expected returns were easy to calculate.

However, with the rapid rise in interest rates two years ago, this became less attractive – Investors once again had more comparably secure alternatives to fiber optic gold, such as government bonds, some of which previously had zero interest rates. In addition, fiber optic companies now also have to pay more for the debt they use to pre-finance the expansion. This is why some companies are now adapting their strategy: instead of just developing areas ("Homes Passed"), the number of "Homes Activated" is becoming important – households that are actually connected and regularly pay for a service.

Fiber optic connections are faster and more stable than copper-based connections. However, the take-up rate of customers who actually book and pay for a connection falls short of expectations. And the expansion in the houses, when the cable is pulled into the apartment, also costs money and sometimes causes enormous bureaucratic effort with housing management or owners' meetings.

During the low-interest phase, it didn't matter: first of all, companies had to "throw in the towel", as they call it in the industry. In other words, making as many households as possible accessible with fiber optic networks. The sequence: planning, announcement, marketing, expansion. A company plans the expansion, then approaches potential customers and, as soon as a certain number of connections have been sold, concrete plans are drawn up. Excavators then roll in, slits are made in roads and earth rockets dig through the ground.

Sometimes an expansion is announced that then drags on for years. To show that work is continuing, progress is made in incremental steps. In some areas, the fiber optic cable is in the street, but the house is not connected. Elsewhere, construction is already underway for the house connection, but the connection to the network is missing. A problem of a lack of construction capacity, say operators. Only rarely is an expansion officially canceled – because the towel on the map is important.

This is linked to another development that is now preoccupying companies and politicians: The so-called double expansion or superstructure. While infrastructure such as electricity, water, gas or district heating is usually connected to homes once by territorial monopolists, European law stipulates that competition should prevail in the expansion of fiber optics. This brings market-based interests into play.

The problem of dual expansion

It can happen that two companies with their own infrastructure compete for customers in an expansion area. This should not really be a problem. This is because fiber optic connections, lines or data traffic can easily be shared in accordance with the "open access" principle. The network operator that has expanded leases its connections, access or a separate fiber to another provider.

However, despite all commitments to open access, problems arise time and again. Even the announcement that a second provider is expanding a fiber optic network can turn the first provider's calculations upside down. Deutsche Telekom in particular is accused of exploiting this and operating a "strategic superstructure". In other words, it deliberately goes into expansion areas or parts thereof where other providers have already started marketing or even actual development.

The Federal Network Agency should find out whether this is actually the case. A monitoring body set up specifically for this purpose collects reports from network operators, municipalities and other stakeholders. An interim report from April 2024 [1] caused discussion. While the Federal Network Agency was still very critical of Deutsche Telekom in particular at the draft stage, the concerns were significantly reduced in the final version. The industry suspected interference from the very top.

The Berliner Tagesspiegel was able to prove that the Federal Ministry for Digital and Transport (BMDV) exerted influence via documents under the Freedom of Information Act. However, the BMDV vehemently denies that this was inadmissible: "At the time when the first draft of this interim report was available, for example, a whole series of submissions were missing, which were later made up for," explains a spokesperson. "In light of this development, these votes took place and the report was tightened up accordingly."

By the beginning of October, the monitoring body had received 482 reports. A date for a further report has not yet been set. In fact, it is likely to be difficult to prevent the double expansion completely. However, as a look at the regions affected shows, it is doubtful that the reality makes sense for everyone involved.

Dual expansion in practice

What connects Kleinblittersdorf in Saarland, on the border with France, Horneburg in Lower Saxony, Abensberg in Bavaria and the Bavarian capital of Munich? A fierce battle is raging here for supremacy in the ground and among fiber optic customers.

The municipality of Kleinblittersdorf with its districts of Rilchingen-Hahnweiler and Auersmacher involuntarily became the scene of the dispute over the dual expansion. Deutsche Glasfaser had announced its intention to develop the area in 2022. However, apart from marketing activities, nothing visible happened at first. GlasfaserPlus then came to Kleinblittersdorf in 2023. And announced: We are expanding. GlasfaserPlus is a joint venture between Deutsche Telekom and an investor [2]. So far, only one provider has been offering its services on the network in Kleinblittersdorf: Deutsche Telekom.

Kleinblittersdorf thus stands for several areas in Germany. Mayor Rainer Lang (SPD) is annoyed. "As mayor, I see more disadvantages than advantages for the citizens and the municipal administration," he says. And fears that the fiber optic expansion by two companies could lead to two providers vying for customers in some streets, while the expansion in other areas is called off because it is no longer economically viable.

For residents, the competitive situation is accompanied by a great deal of uncertainty, reports Lang. And the situation is also a burden on everyday life: "Roads and sidewalks have to be opened and closed twice or even several times." The resulting even more frequent road closures and traffic light regulations would also cause resentment among citizens – and for the administration, says Mayor Lang, the additional workload is even "many times greater than just a double burden."

Competition for even more construction sites

Mayor Lang blames the legislator for the misery: The legislator has legally ensured "that companies that initially decided against an expansion now want to invest in fiber optic expansion after all". Lang is calling for "legal protection for citizens and for the municipality, so that as soon as the parties have concluded a contract, the fiber optic expansion must then also be carried out by the company on a binding basis".

Neither Deutsche Glasfaser nor GlasfaserPlus want to have made mistakes in Kleinblittersdorf or elsewhere. "Of course you don't give each other roses, but that's competition," says Jens Berwig, the commercial director (CCO) of GlasfaserPlus. He points out that every fiber optic infrastructure is itself already a competitor – to television cable and copper wire. The fact that there are multiple expansions is also common practice elsewhere in Europe.

"It is not part of our corporate strategy to deliberately harm competition through a planned double expansion of fibre optic networks," emphasizes Dennis Slobodian from Deutsche Glasfaser. For the company, double expansion is completely superfluous. "Every location that is rolled out twice means that another location has to wait for access to fiber optics." "There are hardly any consequences for expansion as a result of double expansion," disagrees Berwig. "To be honest, you have to say that the discussion about it is bigger than the fact itself. What we observe in the regions where we are active in terms of double expansion is manageable and manageable."

This is also in line with what is on file with the Federal Network Agency in terms of superstructure activities, says Berwig. In percentage terms, the issue only affects a "vanishingly small proportion". However, according to him, GlasfaserPlus, for example, does not even report to the monitoring body when it is affected. And is by no means the only operator to do so.

Abensberg: Telekom comes, Leonet cancels project

In Abensberg near Regensburg, Leonet withdrew after Telekom announced that it would be providing access to 6,000 households –, significantly fewer than Leonet wanted to expand. This meant that the number of connections required for an economically viable expansion was no longer achievable. "The approach, which focuses on the former monopolist and its subsidiary, resembles a bulldozer mentality in many places," says Wolfgang Wölfle from Leonet. This is because, especially in rural areas, a double expansion is nonsense, both economically and ecologically.

"The damage that the strategic superstructure has done to fiber optic expansion in rural regions in recent years is huge," says Frederic Ufer, Managing Director of the VATM association. Telekom has focused "on the lucrative inner-city areas". "This cherry-picking has destroyed the business case of competitors in many places, whose aim is to supply the entire village with fiber optics on their own," says Ufer. Several parallel networks are only viable in large cities. But even there, there are disputes.

The competition in the Bavarian capital of Munich is even fiercer than in Kleinblittersdorf or Abensberg. For years, it looked like peaceful coexistence there: M-Net, a subsidiary of Stadtwerke München, had undertaken the expansion of the inner city area, while Telekom wanted to focus its expansion on the outer districts. To this end, both companies had issued a fine-sounding declaration of intent in 2021.

Dispute in Munich

The idea: M-Net and Telekom give each other access to their networks to supply end customers and save expansion costs. However, a simple idea is far from a simple solution – and the tone has become harsher. M-Net believes that Telekom is to blame. For years, they had been trying to find a solution with Telekom. Then Telekom broke off the talks. Deutsche Telekom basically confirms this. However, it sees M-Net as being to blame. "Our common goal, as we thought, was always the cooperative expansion in Munich," says a Telekom spokesperson. "This was also clear and transparent to M-Net and the municipal utilities over many years of intensive discussions."

In Regensburg, for example, a good agreement was reached with the local municipal utility subsidiary R-Kom, Telekom cites as an example: "That would also have been a way forward in Munich. However, all negotiations and possible cooperation models have failed. In this respect, we are now expanding our network in Munich because the cooperation we wanted there was not possible."

Everyone in the industry likes to emphasize that open access is a successful model that they support. However, technical and financial issues are regularly the subject of dispute: under what conditions and how does a competitor gain access to the network? There are various models for this. One is that passive infrastructure is shared – where a provider rents a fiber from the network operator that has expanded the network. Each provider provides the active network infrastructure itself. Other variants are bitstream access to the active network, where only data streams are transferred, or even a white label connection for which the service provider only bills.

With bitstream access, two billing options are common: the providers pay a comparatively high price per connection in order to be allowed to use the infrastructure of the other provider. The second option is much more attractive for many connections: one provider pays a kind of basic fee, but the individual connection is cheaper. But Munich is also a special case here.

The 089 problem

Even in the age of fiber optics, this has to do with the age-old area codes. This is because Telekom's calculation basis for the "commitment fee", the basic fee, is the size of the theoretically available connections. And that is the number in the respective local network area code –, in this case 089. The entire local network of Munich, in which M-Net has already connected 640,000 households. While Telekom customers are already connected to M-Net's infrastructure, M-Net cannot market in the Telekom area due to the unresolved dispute over the calculation of the basic fee.

The Federal Network Agency confirms that the "commitment fees" are part of the problem. A small group of companies is affected, but so far the models have proved to be successful. There is still no final assessment of whether there should be a "static option", for example for entire streets. Deutsche Telekom does not answer questions on this aspect of the debate.

Deutsche Telekom is now planning to expand in the inner city area of Munich itself in parallel, adding 80,000 to 110,000 households per year. "In total, Deutsche Telekom plans to supply around one million Munich households with fiber optic to the home," says a spokesperson. Right into the home – M-Net has not yet reached many Munich residents. But at least it has already reached the basement. According to Munich's administration, this means that often no users are connected yet. But that is more than Telekom has achieved in the outer districts of the state capital bislang [3].

The future: Europe's Champions League

To understand why this dispute is being fought so bitterly, it is helpful to take a look at the market situation. So far, the xDSL business has been a profit generator for Deutsche Telekom. But the copper network will no longer be able to keep up with the next speed step. Even if it has already been refinanced: as soon as a relevant proportion of customers have switched to fiber optic connections, it is hardly worth operating a parallel copper network.

In Germany, even in many large cities, the real fiber optic roll-out rate is poor. Just under 70 percent of households are still connected to the network via a copper connection controlled by Telekom. Deutsche Telekom CEO Timotheus Höttges wants to maintain his market share and take it to the fiber optic infrastructure. However, of the almost 20 million "homes passed" that have been connected with fiber optics according to the German Broadband Association (Breko), only just under 40 percent are from Telekom. This is why Deutsche Telekom is pushing ahead with its own expansion.

Unlike its competitors, Telekom can pre-finance this from current revenues. This is because the many customers on the depreciated DSL infrastructure enable Telekom to migrate gradually. While competitors have to win customers quickly in order to be able to operate their business model, Tim Höttges has time. And most of today's applications can also manage with existing capacities.

Don't forget to switch off

Competitors are therefore demanding a clear timetable [4] for when and how the old copper access network of the Bundespost is to be switched off completely. The Beko accuses politicians and regulators of playing for time, "which reinforces our suspicion that the interests of Deutsche Telekom are being deliberately protected here – a company in which the federal government still holds more than 30 percent of the shares." The Ministry of Digital Affairs predictably thinks little of such accusations. "In the case of anti-competitive behavior, there is already a legal basis that allows the competition authorities to intervene," says a spokesperson. Double expansion is not problematic per se and most cases would be settled on the market.

In addition, competitors are demanding that Telekom and its subsidiaries must submit their expansion plans to the Federal Network Agency. The other providers hope that this will provide them with evidence should Telekom deliberately thwart the expansion plans of its competitors. However, there is currently no such obligation – and, if there were, it would probably have to be created for all market players.

EU plans could reorganize the playing field

In any case, the legal key does not lie with Digital Minister Volker Wissing (now independent) in Berlin or Chief Regulator Klaus Müller in Bonn. The telecommunications market is already essentially regulated under European law. A good 25 years after liberalization, there are strong tendencies in Brussels to revise the telecommunications market framework as a whole.

The "Digital Networks Act", which was still being considered under Thierry Breton [5], is intended to make the telecommunications market truly European: with cross-border offers and cross-border regulation. This should also strengthen the position of European champions vis-à-vis providers from the rest of the world, who do not have to be telecommunications companies themselves.

Commission President Ursula von der Leyen recently confirmed that a legislative proposal is to be made in this area. The so-called Draghi Report [6] recommends no longer using the markets of the nation states as a basis for assessing monopolies, but those of the entire EU, which is sharply criticized [7] by some experts.

The result could be a significant consolidation of the telecommunications market in the EU. Deutsche Telekom believes, perhaps rightly, that it can and must play in a European Champions League of telecom giants. Market observers assume that the war chest must be filled for this: After all, it's all about who comes out on top in the end.

At the same time, there is an entirely different option for providers driven by financial investors: if monopolies are measured against the European market instead of the national market in the future, their providers could be bought from the market at high prices – by Telekom, for example, which would then no longer have to deal with the federal German spectacles.

However, whether this would actually have positive effects for EU consumers is another matter entirely. And until that happens, some streets in Kleinblittersdorf in Saarland will be opened up and then closed, opened up and then closed again.

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