Mobile combat With 5G telecoms, Germany lays unlikely claim as a giant-slayer

The future 5G network will revolutionize business and daily life. But will Germany succeed in a mobile technology catch-up with the US or China?
Germany seeking the connected world.

Eighteen years ago, Germany’s national telecoms regulator refereed a huge sell-off of licenses for the Universal Mobile Telecommunications System. Better known as UMTS or 3G, the technology allowed cell phones to become “smart” and conquer the internet, paving the way for Apple’s wildly successful iPhone.

The German auction, played out with great suspense in the summer of 2000, plopped a record €50.8 billion ($59.2 billion) into government coffers but crippled the telecoms companies that won bids, preventing them from investing sufficiently in the networks they erected. This meant that Germany remained a laggard in, say, the laying of fiber-optic cables, the bearers of high-speed broadband internet. Will things be any different this time?

That, as they said in the era of rotary phones, is the $64,000 question. In a document obtained by Handelsblatt, the Bundesnetzagentur, Germany's federal network regulator, on Friday unveiled most of rules and procedures for the 5G auction on September 27. Bidding will be kept in check: The agency said the requirements laid down for 5G network operators shouldn't exceed the economic value of the frequencies up for auction. "Minimum bids should not be prohibitive and discourage potential bidders from taking part in the auction at the outset," it added.

31 p53 Making billions out of thin air-01

Last year, Timotheus Höttges, the boss of Deutsche Telekom, estimated the costs of constructing a blanket 5G network in Europe at between €300 billion and €500 billion. That’s on top of the costs posed by Germany’s auction, which is set for spring 2019. According to the big three mobile network providers Deutsche Telekom, Vodafone and Telefónica, achieving blanket 5G coverage in the country would cost a combined €60 billion. A host of other Western European countries, including Austria, Belgium, the Netherlands and Switzerland, have announced 5G license auctions over the next two years; this summer, France already awarded 12-month trial licenses for providers in a handful of regions.

The Bundesnetzagentur is well aware of the financial burdens. The agency is no longer demanding that telecoms companies provide gap-free 5G coverage, despite a plethora of dead zones, because of the exorbitant costs. But network operators will have to guarantee that 98 percent of households, not to mention all motorways and primary roads, have access to mobile data speeds of at least 100 megabit per second (Mbit/s) by 2022. In the same period, the companies will be required to erect at least 500 5G telephony masts at a price tag of €350,000 each, and each individual operator to set up another 500 masts in regions currently without mobile coverage.

Significantly, the agency said it welcomed new bidders but was considering lowering the household coverage requirement to 50 percent for telecoms companies that lacked the network infrastructure of the big three.

The 5G auction is supposed to liberate Germany from its reliance on old, established industrials such as carmaking, engineering and chemicals to fuel the economy. For new technologies and services, particularly in things digital, Germany is mediocre at best, and leading politicians know it. “We have to pay attention that we in Europe and especially in Germany need to win the [digital] competition,” said Chancellor Angela Merkel back in 2015.

31 p53 Dead zones despite soaring demand-01

Can 5G do that for the Germans? Caution is their watchword, and for good reason. In 2000, the national UMTS auction raised hopes that Europe, perhaps led by Germany, would surge ahead of America, which then dominated fixed-line internet services led by Yahoo, AOL and Cisco. They’re now dinosaurs, but Germany missed the chance to challenge their mobile successors in the form of Apple, Facebook and Google. The power of US behemoths to command Big Data threatens to relegate the leading European providers to installers of networks.

The 5G race has barely started, but German aspirations to use the technology to surge past or even equal its international rivals already seems misplaced. Apart from the Americans, China, aiming to become a “global cyberpower,” wants to allocate a staggering €400 billion for 5G in the current five-year plan ending in 2020.

China, which already has virtual blanket coverage in 4G, last year built an average 460 telecoms masts every day, driven by the political ambition to dominate 5G telephony. Tellingly, in China, there are already 14.1 masts per 10,000 inhabitants, compared to 8.7 in Germany and 4.7 in the US, according to experts at CCS Insight, a telecoms market researcher. The mobile technology is delivered by Chinese tech giants Huawei and ZTE, who, unlike Germany's Deutsche Telekom, make and sell hundreds of millions of smartphones every year. For 5G, Ms. Merkel may have to be satisfied with slowing the Chinese onslaught rather than repelling it.

Handelsblatt correspondents Daniel Delhaes, Thomas Jahn, Ina Karabasz, Martin Kölling and Stephan Scheuer reported this story. Jeremy Gray, an editor for Handelsblatt Global in Berlin, contributed and adapted the article into English. To contact the authors: [email protected]