Broadband internet Germany scrambles to meet newest target on digital infrastructure

Government and industry met in Berlin to break out of a syndrome that has hobbled much-needed investment for years. Germany is now far behind its European neighbors and that’s not likely to change soon.

Germany’s efforts to get broadband coverage across the country have consistently foundered due to a mishmash of corporate greediness, government bureaucracy, and that peculiar German fondness for having everything perfectly mapped out before they even get started.

The government’s newest target to have nationwide broadband by 2025 is also running behind and a meeting Wednesday between the industry association BDI and government officials in Berlin did little to help things along.

Telecom companies have little incentive to undertake the massive investment because their stock price takes a hit. But if there is a risk someone else is moving in on their turf, then they feel obliged to duplicate their efforts in order to keep their lucrative contracts with the end-customer.

Business floats voucher plan

No one wants to go into areas that are lacking first because when they front the money for digging the trenches and laying the pipes for optic fiber, it is inevitable that a competitor will come along and want to piggyback on that infrastructure.

At the BDI meeting, industry representatives suggested a voucher for companies that invest in infrastructure that would let them recoup some of the costs as a way to overcome this hurdle. Several firms supported this idea and participants acknowledged that something has to be done, and quickly.

The efforts so far have flopped due to a Catch-22 that Deutsche Bank summed up in a recent study: “The political goals for expanding the digital infrastructure in Germany have been missed consistently, or thrown out as soon as it became clear they wouldn’t be hit.”

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Government subsidies to promote broadband infrastructure get hung up on the varied interests of federal, state and local governments. Some states will bend the rules for subsidies in order to get an edge on other states. Then the federal government is tempted to go over their heads and deal directly with the investors, in a violation of the protocol governing infrastructure investments.

There is a perfect English word to describe this situation which cannot appear on a family website, but let's just say it starts with cluster and ends with a k. Mess hardly does it justice.

On top of everything else, Germany is now so far behind and political pressure to catch up is so intense that demand far exceeds the supply of available resources — from concept and planning to digging the trenches and laying the fiber.

“If I weren’t a government minister,” Helge Braun, Chancellor Angela Merkel’s chief of staff, joked in the Wednesday meeting with industrialists, “I would start up an underground engineering company.” (Mr. Braun, who has a full-time job running the chancellery, has also been tasked with being the point man on this urgent issue.)

The shortages have led to rising construction prices and declining quality. Construction costs have already risen up to 20 percent since last year, said Uwe Nickel, head of Deutsche Glasfaser — that is, if you can even get a contractor since capacity is already at a maximum.

Other countries' solutions don't seem to work

Mr. Braun suggested the government could declare the development of the broadband network a matter of public service, freeing it from the vicious circle created by profit-seeking companies.

Another option would be to get the companies to work together, as they have done in Portugal. The trick is to form a consortium without creating a monopoly and to preserve competition in some form. One method is to separate the network infrastructure from the service vendors, as was done in Britain and the Czech Republic. But when that idea was floated in Germany a couple of years ago, there were no takers. Companies, in general, have shown little interest in working together.

So, six months after installing a new government that took six months to form, Berlin is addressing this “urgent” issue in typical German fashion. A centralized association of industrial companies meets with the federal government to mull over just how to design a perfect method for building an internet infrastructure in a way that will keep all interested parties perfectly satisfied.

Don’t hold your breath.

Daniel Delhaes covers digital infrastructure for Handelsblatt. Ina Karabasz covers telecommunications and IT. Darrell Delamaide adapted this story into English for Handelsblatt Global. To contact the authors: [email protected] and [email protected]