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March 9, 2009
Last month, the German government outlined its definition of broadband Internet access, raising the threshold for Internet connection speeds from 384Kbps to 1Mbps and setting the stage for an ambitious universal rollout by the end of 2010. This is the first part of the government’s two-phased strategy to deliver 50Mbps broadband connections to 75% of German households by 2014. Unlike the UK government’s digital initiative, the German model encourages collaboration between the public and private sectors — the government will deliver services in regions where private operators can’t. UK communications minister Lord Carter, meanwhile, criticized such measures in his Digital Britain report, claiming they only promote inefficiencies. Time will tell if the German government is capable of shouldering such a burden and meetings its own deadlines, but in the short term both fixed and mobile operators have reason to rejoice at the prospect of more subscribers in an already highly penetrated market.
Germany’s broadband sector is thriving, and we expect euro-denominated revenue to climb at an annual rate of 7% through 2013, despite high levels of competition. The government has been extremely proactive in breaking down the incumbent’s competitive barriers and opening up the market to new entrants. The same strategy paid off in the mobile market, where the market shares of niche operators reached almost one-third of total subscriptions in 2008.
Broadband and narrowband revenues in Germany
Source: Pyramid Research Germany Fixed Communications Forecast, Q4 2008
The government believes that its broadband strategy will encourage the use of wireless networks in delivering service to hard-to-reach, unprofitable regions. This news should come as a relief to mobile operators, which have been investing in their data networks for a long time. We expect mobile data to account for one-third of operators’ revenue in Germany by 2013, up from 24% in 2008.
Alternative fixed-line operators, meanwhile, should be thrilled about the government’s decision to allow them access to T-Mobile’s VDSL networks — a source of national and regional tension for some time. The decision will likely accelerate the slowdown in circuit-switched lines while hastening the take-up of VOIP, from the current rate of 16% to about 30% in the near future.
At Pyramid Research we continue to track the fast-developing German Internet sector closely. As we detail in our Germany Country Intelligence Report, its broadband market is growing at one the highest rates on the European continent, and operators are continually updating their product offerings while delivering better value for their customers. At the same time, mobile broadband services continue to expand rapidly, led by growth in both the consumer and enterprise sectors. As voice-based service revenue declines for mobile operators, the potential for growth in enterprise services — forecast to surpass $6bn in service revenue by 2013 — and mobile data subscriptions should maintain the operators’ overall levels of revenue growth.
— Andrei Tchadliev, Analyst, EMEA
Related Content:
Communications Markets in Germany
Country Intelligence Report published March 2009
Germany’s communications market is the largest in Europe, generating revenue of US$66.6bn in 2008. Its biggest growth opportunities are broadband, VoIP and mobile data. We forecast a decline in both circuit-switched and mobile voice revenue. We expect the intense competition in the mobile sector to continue, and IPTV adoption to accelerate from 2008 onward as the main providers focus on their triple-play offerings. This Country Intelligence Report analyzes Germany’s communications, media and technology industries, including key trends, regulatory pressures and the competitive landscape, making it an excellent complement to our Forecast products.
DT’s Broadband Leadership Not Jeopardized by Toughened LLU Regulation
Europe Market Perspective published March 2008
Despite market liberalization and increased competition, German broadband market incumbent Deutsche Telekom maintains its leadership position. Other alternative operators have complained about abuse of market power, citing continuous delays in local loop unbundling. As a result, the German regulator has tightened regulations surrounding LLU. This Perspective takes a look at how these new regulations will affect DT’s position in the growing broadband market.
Western Europe Fixed Communications Forecasts, Q4 2008
Forecasts published December 2008
Updated on a quarterly basis, our Fixed Communications Forecast products provide a complete picture of wireline voice and data communications in each of 10 Western Europe markets. The Excel output includes five years of historical data and five years of market projections for metrics such as demographics and economic trends, penetration of broadband and narrowband lines, Internet users, business users, voice telephony lines, VoIP, PCs, IPTV and revenue. We believe our Fixed Communications Forecasts are superior because they capture granular data gathered through extensive field research and use a thorough methodology consistently applied to all markets.
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