Barely two months after the 26 September elections for the German Bundestag (Germany’s parliament), Germany has a new government led by the new Chancellor Olaf Scholz of the Social Democratic Party (SPD).

For the first time in German history, this new government has been formed by a coalition of three parties: the SPD, the Greens and the Free Democratic Party (FDP). Each party brings different perspectives, so they naturally had different plans on how to achieve network expansion and accelerate internet speed across Germany before the elections. (See our blog Germany’s parliamentary elections: what the parties say on high-speed internet and 5G.) Within the framework of their coalition negotiations, however, the three parties had to decide on a joint plan.

A joint plan on network expansion and high-speed internet

The new government plans comprehensive coverage with fibre optics (fibre-to-the-home or FTTH) and the latest mobile communications technology.

A ‘self-economic network expansion’ (ie without public funding) has been prioritised. However, as previous experience has shown this is not economical in certain rural regions (so-called white spots) so the parties intend to fund a fibre expansion.

In the case of full public financing, the operator model has priority (ie the municipality builds passive infrastructure which is operated by a private company). Open access must be granted under fair conditions, and will be ordered by the Federal Network Agency if deemed necessary. The new government also plans – as a complement to FTTH and in-house fibre optic cabling – to initiate voucher funding.

To enhance the fibre network rollout, the parties have agreed on streamlined digital application and approval procedures. (This goes hand in hand with the general aim to modernise, de-bureaucratise and digitalise the administrative, planning and approval procedures.) Moreover, they plan to standardise alternative installation technologies and develop a nationwide gigabit land register in which all state and private institutions must register their network infrastructure in order to obtain a transparent overview of the areas that are underserved with broadband.

On the consumer protection side, consumers will be better protected through liquidated damages if guaranteed internet speeds are not met.

Regarding mobile networks, the SPD, Greens and FDP intend to align frequency allocation with specifications for area coverage. Negative auctions may be used, too.

Evaluation and outlook

All in all, the agreed framework can be seen as a compromise between the three parties in government. For example, the idea of promoting the operator model is based on the demands of the Greens. In contrast, the idea of using vouchers to expand fibre networks was in the FDP’s election programme.

While it was foreseeable that nationwide coverage with fibre optic technology would play a prominent role, it was unclear how the new government planned to achieve this. While the profitability gap model is the most widespread in practice, the operator model will have priority in the future. 

For the network operators, this means a change in their business model, at least with regard to subsidised regions. While in the first model a private company builds (and owns) the network, in the latter model, the municipality will be responsible for the erection and the owner for the passive infrastructure. This development could also attract new companies that do not have all the technical skills for building a network and therefore increase competition because the investment requirements are not as high. This in turn is likely to have an impact on private equity investors, who have increasingly invested in infrastructure companies in recent years.

It remains to be seen whether the changes in the bureaucratic process will have the desired effect. However, a lack of civil engineering capacity will remain a problem for the fibre network expansion.