German Government Awards Five WiMAX Licences

The German Federal Network Agency (Bundesnetzagentur) has awarded licences for five entities in the auction of BWA licenses. The winning bidders will pay a total of 56 million euro (US$73 million) for access to frequencies in the 3.5 GHz band. Three companies—Clearwire Europe, Inquam Broadband, and Deutsche Breitband Dienste (DBD)—won permits for all 28 regions (each of which provides 42 MHz of spectrum), while Televersa Online won permits for two regions and MGM Productions Group won 1. Global wireless broadband technologies and solutions provider, NextWave Broadband, which is one of three joint-venture partners in Inquam Broadband, together with BFD Mobile Radio Partners and Omnia Holdings, has announced in the press release that the venture will pay US$23.1 million for the licence, which will cover more than 82.5 million people. Omnia Holdings controls the Zapp mobile broadband networks in Portugal and Romania. A sixth bidder, EWE Tel, failed to win a licence.

Outlook and Implications

• Competition to Benefit from WiMAX: The BWA licences will enable the introduction of new and innovative wireless broadband services based on WiMAX technology throughout Germany and improve access to broadband connections for Germans. The German broadband market has been recently undergoing dynamic change towards more competition, but rivals are still dependent on its DSL infrastructure. The planned deployment of WiMAX is likely to change this set-up, surpassing Deutsche Telekom-controlled local loop. Currently, DSL prevails over other broadband access methods, with some 27% of German households using a DSL line to access the internet, against 17% in 2004. Germany had 10.64 million broadband lines in operation at end-2005, of which 10.4 million were DSL connections. Deutsche Telekom, which operates its internet unit, T-Online, is indisputably the market leader and controlled 62% of the German DSL market in 2005. However, major rivals are rapidly catching up and at end-2005 together held 40% broadband market share, up from 20% in 2004. Broadband penetration in Germany stood at 11.4%, compared with 14.9% for the United Kingdom and below the European Union (EU) average. Hence, tremendous growth opportunity exists in the German broadband market.
• Incumbent Out of WiMAX Game: The country’s incumbent telco, Deutsche Telekom, did not participate in the BWA auction, as the company plans to invest in the roll-out of its VDSL technology nationwide (see Germany: 6 November 2006: Deutsche Telekom Not Interested in WiMAX Licences in Germany). The incumbent is planning to invest a total of 3 billion euro in its new VDSL infrastructure, which will give the company a competitive advantage over its rivals in the delivery of new advanced IP-based services, including IP TV and video-on-demand. The new network, which promises download data speeds of up to 50 Mbps, was rolled out to 10 major cities in November this year, with a further 40 planned for 2007. With the VDSL network in place, the incumbent will roll out triple- and quadruple-play services, including IP TV, on a nationwide scale, which is expected to drive future growth. Deutsche Telekom, which is still 32% owned by the state, has recently succeeded in its efforts to push through the German parliament new telecoms legislation that will enable the incumbent to close its new ultra-high-speed fibre-optic network to rivals in order to recoup its hefty network investment. It also gives the telco full control over the prices it charges smaller rivals to use its new network, which is due to be completed in 2008. The prices will become subject to regulation only when the national telecoms regulator deems that competition is being stifled in the long term. The new protective measures, which have been strongly criticised by EU regulators, are designed to enable Deutsche Telekom to revive declining growth (see Germany: 18 December 2006: EU Regulators Collide with German Government Over Deutsche Telekom's VDSL Network). The telco has suffered from declining revenues from its domestic fixed-line business, losing some 1.5 million customers to rivals in the first nine months of this year. Its attempts to revive its product portfolio have already resulted in 3.5 million new and existing customers signing up to its new bundled voice and internet packages launched in September 2006. Its DSL customer base hit 10.6 million at the end of September (see Germany: 18 December 2006: EU Regulators Collide with German Government Over Deutsche Telekom's VDSL Network).
• Alternative Broadband Technology: The Bundesnetzagentur, which expects that the auction will assist the country in reaching its broadband deployment targets, has urged localities to support the construction of antennas to enable the companies to build out their networks. According to the licence requirements, the winners will be obliged to cover 25% of the population in the auction area by 2009 and another 25% by 2011. WiMAX technology is capable of replacing the last mile in a cost-effective way and offering high-speed internet access to residential homes as well as businesses. So far, one of the auction's winners, DBD, has begun trials of WiMAX technology in Berlin, the capital, and is planning to roll-out its WiMAX networks throughout Germany in co-operation with Airspan Networks (see Germany: 12 September 2006: DBD Signs Airspan for WiMAX Roll-out). The global trials of WiMAX technology have been supported by the world's leading chipmaker Intel. WiMAX is especially well suited for rural and remote areas, which are not fully covered by DSL services. It has high potential in developing markets of Latin America, Asia, and Eastern Europe (see United Kingdom: 15 August 2006: Pipex, Intel Report on WiMAX Trials, World: 9 March 2006: WiMAX Chipsets for Laptops Ready in H2 2006 - Intel, and World: 4 May 2006: Intel and NDS Demonstrate TV over WiMAX).