Germany’s Contentious 5G Auction May Squeeze Telcos

Germany’s auction of 5G frequencies, now into its 10th week, has drawn 6 billion euros ($6.7 billion) in bids so far.  That amount raised in a record 405 auction rounds for the 41 blocks on offer is more than experts thought companies would spend all together for all rounds.   The duration of this auction has no precedent in Germany, with country’s 4G auction in 2010 lasting for 224 rounds.

German telco market leader Deutsche Telekom has complained that the regulator has forced up prices by offering too little spectrum.  Deutsche Telekom leads in 13 of the blocks, with competitor Vodafone ahead in 12 and Telefonica Deutschland in eight, according to auction results published by the Federal Network Agency (BNetzA).

Source:  Deutsche Telekom

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New entrant 1&1 Drillisch, a ‘virtual’ mobile player controlled by United Internet, leads in eight blocks, as billionaire CEO Ralf Dommermuth pursues his dream of becoming Germany’s fourth operator.

Drillisch, and United Internet, have slashed their dividend payouts to conserve cash so that they can stay in the game.

As the telecom industry prepares for the costly rollout of new 5G networks, with little prospect of any immediate revenue growth from new 5G services, the spectrum bill is a further squeeze. And while bidding has recently slowed, the contest is not yet over.

Industry leaders say that inflated auction costs would undermine their ability to invest the billions needed to build 5G networks – as happened in a pricey spectrum auction in Italy last year.

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German telcos appear to be grasping expensively for a small amount of spectrum in the 3.6GHz range, the “mid-band” that looks optimal for the delivery of 5G services. The fight would have been less damaging and drawn-out had German regulators put more of these airwaves up for sale, according to Timotheus Höttges, the head of Deutsche Telekom.  Instead, they chose to hold back 100MHz for industrial and local settings, such as German factories, leaving 300MHz to the telcos. Supply constraints have driven up the bids.

Competition has been especially fierce because of 1&1 Drillisch. Having previously bought network capacity from Telefónica, and functioned as a mobile virtual network operator, the broadband company is now determined to build a fourth mobile network using spectrum it picks up in the auction. After round 406, 1&1 Drillisch accounted for more than €1.1 billion ($1.2 billion) of the amount bid. Since the auction began, its share price has lost a quarter of its value as investors worry about the consequences of spending so much.

Outside Italy, Germany now values the mid-band at a higher level than any other European country that has licensed 5G spectrum. Were the auction to finish now, German telcos would pay about $0.16 per megahertz per head of population (per MHz pop, a common way of valuing spectrum) for 3.6GHz licenses. That edges Germany ahead of the UK, which raised about $0.15 (at current exchange rates) per MHz pop during a 3.4GHz auction in 2018. Spanish companies last year paid just €0.05 during a 3.6-3.8GHz auction (although this calculation does not consider usage fees they are also charged). Finland’s mid-band sale in October raised as little as $0.04.

Price per MHz Pop ($) for 3.4-3.8GHz Spectrum

Sources: Companies, regulators, Light Reading. Note: German auction is still open and the amount shown here reflects the value of spectrum on the morning of May 24.

Sources: Companies, regulators, Light Reading.
Note: German auction is still open and the amount shown here reflects the value of spectrum on the morning of May 24.
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However, the German auction is nowhere near Italy on this measure, and it will not even get close. After slapping just 200MHz of mid-band spectrum on the table, and slicing it like a badly cut pizza into uneven segments, Italian regulators made off with around $0.40 per MHz pop. The auction “winners” are now choking on their rewards. Telecom Italia and Vodafone, which landed the biggest mid-band concessions, are busy slashing jobs and pooling assets to ensure 5G rollout is affordable.

German telecom regulator Jochen Homann, the president of the Bundesnetzagentur, is said to have argued that bidders knew the conditions of the auction before it started and will have prepared accordingly. Yet analysts thought a spectrum sale would raise between €3 billion ($3.4 billion) and €5 billion ($5.6 billion), an upper limit the auction has now breached.

Light Reading says German authorities may still have cause to worry. While the country’s operators are in healthier shape than Italy’s, a large spectrum bill risks slowing down the pace of 5G rollout and jeopardizing national ambitions. With its large manufacturing sector, Germany is hopeful that 5G will support Industrie 4.0, a government initiative to bring communications technologies into factories and the workplace. The productivity boost this promises may be critical if Germany is to remain competitive with the US, China and other fast-developing Asian countries.

In the U.S., the FCC auctioned off 24GHz high-band spectrum in March 2019, with the announcement of more spectrum sales expected in the coming months.  The U.S. has yet to allocate any mid-band spectrum.

References:

https://www.reuters.com/article/us-germany-telecoms/bids-in-germanys-5g-auction-already-top-6-billion-euros-idUSKCN1ST24U

https://www.telekom.com/en/company/details/5-questions-and-answers-about-the-5g-frequency-auction-550970

https://www.lightreading.com/mobile/5g/germanys–euro-6b-5g-auction-should-be-a-break-point-for-telecom/d/d-id/751720?

https://www.bundesnetzagentur.de/EN/Areas/Telecommunications/Companies/FrequencyManagement/ElectronicCommunicationsServices/ElectronicCommunicationServices_node.html

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Related:  World leaders in 5G:

https://www.seacoastecho.com/news/national/report-says-u-s-now-among-world-leaders-in-g/article_7c933d11-bc91-5996-9545-cfae054f149b.html

Deutsche Telekom and SK Telecom Sign Strategic Cross-Investment Agreement in MobiledgeX and ID Quantique

Deutsche Telekom and SK Telecom today entered into a cross investment agreement to further strengthen their competitiveness in 5G and deepen their cooperation in the global market. With this agreement, the two market leaders of Korea and Germany continue their strategic partnership announced at Mobile World Congress 2016.

Under the agreement, SK Telecom plans to invest in MobiledgeX, an edge computing company founded by Deutsche Telekom and headquartered in Menlo Park, California, focused on delivering developer-facing edge computing services. Deutsche Telekom plans to invest the same amount to ID Quantique (IDQ), SK Telecom’s strategic partner in quantum cryptography communication technology based in Switzerland.

Mobile EdgeX is developing a middleware platform that will enable third-party developers to run their applications on edge computing platforms, is also now at the heart of an open source effort that is part of the Telecom Infra Project (TIP) and which is being backed by DT and Intel. (See TIP Forms New Edge Computing Unit.)

Other operators have shown interest in MobiledgeX, including Vodafone and Verizon, while Telefónica has included the Menlo Park, Calif.-based startup’s tech in a distributed cloud architecture initiative called CTpd.

Deutsche Telekom and SK Telecom intend to use mobile edge computing technologies to reduce data transfer time, latency and jitter.  With mobile edge computing, companies can conduct on-site monitoring of disaster-affected areas and respond faster to accidents.

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Deutsche Telekom CEO Tim Höttges and Park Jung-ho, President and CEO of SK Telecom, announced the cooperation in Seoul, South Korea.

Going forward, SK Telecom and Deutsche Telekom plan to share their technologies and knowhow. The two companies made their cross-investment decision to gain leadership in the upcoming era of 5G by offering specialized 5G services with ultra-low latency in areas like telemedicine as well as AR and VR, while addressing potential security threats.

“SK Telecom is pleased to enter into a cross-investment agreement with Deutsche Telekom as it will serve as a valuable opportunity for us to further solidify our 5G leadership in the global market and drive new growth,” said Park Jung-ho, President and Chief Executive Officer of SK Telecom.

“We look forward to intensifying our successful cooperation with SK Telecom. The partnership will help both companies to strengthen our global technology leadership and bring 5G and other innovative services to our customers,” stated Timotheus Höttges, CEO of Deutsche Telekom.

Unlike the pre-5G era, which was mainly about communication between people, the 5G era will be marked by communication between people and things, as well as communication between things (IoT), which will support intelligent services like connected car, smart factory and wearable devices.

Earlier this month, the German carrier said it expects to launch commercial 5G services in 2020. In May 2018, Deutsche Telekom announced the deployment of the first 5G antennas to test the technology in downtown Berlin. The antennas, which are based on 5G New Radio, allowed Deutsche Telekom to demonstrate what it claimed to be Europe’s first 5G data connection over a live network. The telco said that it is currently in the process of deploying a 5G cluster in Berlin.

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Separately, Deutsche Telekom is reviewing the idea of adopting quantum cryptography communication systems. Both SK Telecom and Deutsche Telekom are currently in the process of qualifying quantum cryptography technologies on their respective trial networks.

Deutsche Telekom will make an investment in ID Quantique, a Switzerland-based strategic partner of SKT. The start-up is focused on the development of quantum cryptography communication technology, an innovation designed to increase the security of telecoms services.  ID Quantique’s applications are already being tested in trial networks deployed by both Deutsche Telekom and SKT.

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Note that in February  2016, Deutsche Telekom and SK Telecom entered into a strategic business partnership agreement to collaborate in the fields of services, Internet of Things (IoT) and related R&D areas.  With the aim to strengthen their capabilities as ICT industry leaders and to achieve new growth through joint business opportunities in Asian and European Markets, SK Telecom and Deutsche Telekom will cooperate in the global sales of innovative solutions and products and work together to lead standardization of innovative technologies, including 5G enabling technologies and SDDC (Software-Defined Data Center).

Under the 2016 partnership agreement, the two companies will pursue joint R&D activities to develop cutting-edge technologies – including 5G  enabling technologies – and push for their standardization (where – in ITU-R WP5D for IMT 2020?), while actively taking a part in diverse global projects to drive ICT infrastructure innovations.

In particular, through development of key 5G technologies such as network slicing and mobile edge computing, the two companies  plan to drive standardization and implementation of 5G, and identify 5G key applications.

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References:

https://www.rcrwireless.com/20181023/5g/deutsche-telekom-sk-telekom-ink-cross-investment-deal-towards-5g

https://www.lightreading.com/the-edge/deutsche-telekom-to-swap-startup-investments-with-sk-telecom/d/d-id/746992?

Deutsche Telekom to deploy 1 Gb/sec fiber optic lines to 7,600 enterprises

Deutsche Telekom says it will begin the second phase of its fiber-optic network for business parks, which will provide internet connections at speeds of up to 1 Gb/sec to as many as 7,600 enterprises.

Deutsche Telekom’s latest fiber project will include laying almost 500 km of fiber-optic cables and connecting company locations directly to the fiber-optic network in 33 German towns and cities. The company says it is using sustainable, cost-effective micro trenching technology during construction to avoid inconveniencing town and city residents.

The German towns and cities whose business parks are being upgraded include: Amberg, Bielefeld, Bochum, Bonn, Braunschweig, Bremen, Cologne, Dippoldiswalde, Dresden, Düsseldorf, Flörsheim, Frankfurt, Frechen, Großbeeren, Hamburg, Hermsdorf, Hildburghausen, Hürth, Kelkheim, Kriftel, Langen, Leipzig, Lindlar, Lübeck, Mannheim, Markkleeberg, Nienburg, Oldenburg, Pinneberg, Planegg, Potsdam, Sandersdorf-Brehna and Seevetal.

Deutsche Telekom will connect companies at no additional charge should they make the switch to its business parks’ fiber-optic network “early on.” (timing unspecified?)

Sign with fibre for enterprises written on it

Fiber-optic lines for about 7,600 enterprises: In 33 business parks the companies that decide “early on” to switch to DT’s fiber-optic network will be connected at no additional charge.

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The range of fiber-optic rate plans runs from asymmetric 100 Mbps business customer lines through to symmetric 1 Gbps lines. The line growth follows previous expansion in 2016 and 2017, during which Deutsche Telekom invested nearly €5 billion annually on its network (see “Deutsche Telekom touts fiber-optic network investments”).

Deutsche Telekom currently operates a fiber-optic network of 455,000 km, with business parks a focus of its fiber to the home (FTTH) efforts, alongside subsidized expansion activities and partnerships with competitors (see “Deutsche Telekom pilots small town FTTH”).

“Business parks are at the heart of our fiber-optic build-out strategy,” said Hagen Rickmann, Telekom Deutschland director for business customers. “We are thinking nationwide, urban and rural, north, south, east and west. The decisive factor for us is customer demand, and we are pleased to be able to offer our business customers fiber-optic lines in a further 33 communities across the country.”

“We will execute this project quickly and supply the businesses with ultramodern technology, offering them the best infrastructure for the digital transformation. The build-out continues, and our interim goal is to connect 3,000 business parks across Germany to our fiber-optic network (FTTH).”

Deutsche Telekom invests around five billion euros every year and operates Europe’s largest fiber-optic network.

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More information at:
Hotline: + 49 (0)800 330 1362 77 (toll-free)
E-mail: vollglas@telekom.de
www.telekom.de/vollglas

References:

https://www.telekom.com/en/media/media-information/archive/fiber-optic-lines-on-the-way-for-7600-enterprises-512978

https://www.youtube.com/watch?v=N4r1Wb0O2Sk&feature=youtu.be

http://www.lightwaveonline.com/articles/2018/01/deutsche-telekom-rolls-out-1-gbps-fiber-optic-line-to-7-600-enterprises.html

 

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