IHS Global Insight Perspective | |
Significance | Vodafone Germany and Deutsche Telekom have reached a deal on VDSL wholesale access. In other news, industry association VATM has lauded Deutsche Telekom's plans to cooperate with gas and electricity firms on excavation works. |
Implications | The wholesale agreement allows Vodafone to start providing Deutsche Telekom's VDSL access on a resale basis and under its own brand later this year, over the incumbent's network which currently has coverage in over 50 cities. As regards potential excavation partnerships, they would reduce costs of expanding both VDSL and basic broadband infrastructure. |
Outlook | Most significantly, VDSL resale will let Vodafone to catch up with the market leader's service portfolio before starting its own fibre-optic deployments. In the meantime, the two companies will still have to agree on the conditions on which Vodafone can access Deutsche Telekom's civil infrastructure in order to save in deployment expenses. As per this goal, as well as cooperation with utilities, regulator BNA's initiative for launching a database comprising all relevant infrastructure in the country may set an interesting precedent. |
Vodafone Germany and Deutsche Telekom have confirmed to various media that they have signed an agreement on the conditions of VDSL wholesale access. The two companies have not provided details of the contract, but according to Vodafone the monthly wholesale price is below 30 euro (US$41.7) a month—with newspaper Frankfurter Allgemeine Zeitung having reported last week that the sum would be 28 euro (see Germany: 2 July 2009: Vodafone and Deutsche Telekom Reach Deal on VDSL Wholesale—Report). Deutsche Telekom, which had initially proposed 30 euro, has also said earlier that the monthly tariff will decrease as the usage of the network increases. A Vodafone spokesman told Dow Jones that the company should begin offering its own VDSL service in autumn.
In other news, Handelsblatt writes that the VATM—a German industry association consisting mostly of alternative operators—lauds Deutsche Telekom's plans to expand broadband infrastructure in collaboration with utility firms. The paper cites Juergen Gruetzner, the head of the VATM, as saying that since the utilities will dig up the ground anyhow for their own purposes, it would make sense for the telecoms industry to cooperate and install their equipment during the same works.
Outlook and Implications
- Vodafone Becomes Germany's First VDSL Reseller: The wholesale deal allows Vodafone to start providing Deutsche Telekom's VDSL access on a resale basis and under its own brand later this year. As such, it is something of an interim arrangement for Vodafone, allowing it to catch up with the market leader's service portfolio before starting its own fibre-optic deployments. The agreement concerns the incumbent's entire network, which at the moment has coverage in around 50 cities across Germany and can deliver access speeds of up to 50 Mbps. The data rate of 50 Mbps is, most significantly, sufficient for provision of high-definition TV broadcasts. In April this year, Vodafone opened its global R&D centre for IP TV products and services in Eschborn, Germany, and the company will namely use the German business to pilot its innovations—we see this as another signal that the company's long-term investments in fibre in Germany are likely to be substantial.
- Duct-Sharing Still Under Discussion: As regards Vodafone's own deployments, the company and Deutsche Telekom's are currently in separate negotiations over access to the civil infrastructure accommodating the incumbent's fibre-optic cables, which would reduce deployment costs for the smaller carrier and thus speed up its roll-outs. Earlier this week, Focus magazine cited Vodafone Germany's chief executive accusing Deutsche Telekom of "stalling" the other talks (see Germany: 7 July 2009: BNA Encourages Deutsche Telekom to Cooperate With Utilities—Report). The German model for regulating the incumbent's fibre-optic network is largely self-regulatory, and for this approach to work in practice it would be necessary that the telcos could agree also on the duct-sharing without watchdog BNA's intervention, as in our view it is namely the easy and well-coordinated access to Deutsche Telekom's civil infrastructure—rather than resale services—which will encourage alternative investment and thus boost the competition in the long run.
- Infrastructure Atlas to Aid Excavation Partnerships: Last month, the BNA opened a public consultation on its proposal for a database, which is meant to include all infrastructures relevant for broadband roll-outs (see Germany: 30 June 2009: German Regulator Publishes Proposal for Broadband Infrastructure Atlas). The consultation period ends tomorrow on 10 July, and the regulator intends to make the first version of the database available in the coming autumn. The point of the project is to make coordination of excavation works—as well as sharing the civil infrastructure—more efficient, and the news about Deutsche Telekom planning to team up with utilities are part of the same goal. Cooperation in necessary earthworks would contribute to expansion of both VDSL and basic broadband networks to new regions, thus extending the lower and the higher end of the market. Similar arrangements have also been mulled in other countries now and then, yet thus far there have been very few concrete results—if their German version will prove successful in practice, the BNA's database initiative could become an interesting benchmark for other telecoms regulators to replicate.