Dispute over fiber optics in buildings: market failure or overregulation

The federal government wants to accelerate fiber optic expansion. According to a market analysis by the telecom industry associations VATM and Anga, around 30.5 million German apartments are in apartment buildings. So far, only 2.9 million of these apartments have a fiber optic connection.

The shortcoming is intended to be reduced by the right to full expansion, which is included in the draft bill for the Telecommunications Act (TKG). This would give network operators the right to install connections in all apartments in an apartment building if they connect the entire building. In addition, network operators should have easier access to the infrastructure of other network operators in the building. Because laying additional fiber optic cables in parallel in an apartment building that is already serviced by a network operator is hardly worthwhile for competitors and would also annoy the residents.

Telekom fears cherry-picking

Both network operators and housing companies are fundamentally in favor of full fiber optic expansion. But the proposed legal claims would confuse agreements that network operators have already concluded with housing companies for the purpose of fiber optic expansion. Stefan Rüter, Chief Commercial Officer at OXG, explained this on Tuesday at the Anga Com broadband trade fair in Cologne. “Partnerships are being interfered with from the side,” he says angrily. Kristin Lumme, Head of Multimedia at Vonovia, referred to plans for fiber optic expansion that are scheduled to last several years and that would be torpedoed by the right to full expansion.

Rüter fears that the law provided for in the TKG draft bill will make the expansion of fiber optic in-house networks unattractive. “We will not build more in-house networks, but with this (regulation) fewer,” he predicts. It leads to “competitors such as Deutsche Telekom cherry-picking and suddenly expanding individual attractive properties.”

The feared consequence: the neighboring buildings left out by Telekom in the scenario alone could be too few to make the development of the block or the entire street economically viable for alternative providers. This left the remaining properties without fiber optics. Conversely, the investor could also not invest in the attractive property if the investor had to make his cables available to the competition. A Gordian knot.

In-house expansion: “Not much happened”

From Cara Schwarz-Schilling’s point of view, however, the critics’ argument is simply an attempt to maintain a natural monopoly, namely their telecom infrastructure in other people’s buildings. Schwarz-Schilling heads the Scientific Institute for Infrastructure and Communication Services (WIK). She explained at Anga Com that many market participants made good money from their cables in other people’s buildings: “You just don’t want to leave that behind.”

What’s more: She explained that the actually cheap FTTH expansion in apartment buildings in Germany doesn’t work, as the low fiber optic coverage shows. “We now have an unregulated situation in in-house expansion and we realize that not much has happened,” said the WIK boss. “The market-driven expansion of an in-house monopoly is simply denying access.” That is why she strongly supports the right to full expansion from the TKG draft.

Natural monopoly or infrastructure competition

The economist advocates infrastructure competition. “If I build a network and get to the street, then I also want to get into the house,” said the telecommunications expert in Cologne. “But if you can lock the front door, there is no infrastructure competition.” Because in-house cabling is a natural monopoly, it makes sense to regulate it, says Schwarz-Schilling. She referred to countries such as France and Spain where this has happened and which are further along in fiber optic expansion than Germany.

However, neither the representatives of the network operators nor those from the housing industry shared this opinion at Anga Com. OXG manager Rüter wants a right to full expansion that, in his view, solves the actual problems: It should be used when individual building owners refuse access. It should also enable faster fiber optic expansion in home ownership communities that only meet once a year to discuss, for example, the modernization of the telecommunications infrastructure in the building.