R 121458Z JUN 09
FM AMEMBASSY BERLIN
TO SECSTATE WASHDC 4337
INFO USDOC WASHINGTON DC
FCC WASHINGTON DC

UNCLAS BERLIN 000707 
 
 
PLEASE PASS TO EEB/CIP/BA:Timothy Finton; FCC:Robert Tanner; 
DOC/ITA/OTEC:Andrew Bennett 
 
E.O. 12958: N/A 
TAGS: ECPS ECON
SUBJECT: GERMANY'S BROADBAND DEPLOYMENT INITIATIVE 
 
REF: STATE 27310 
 
¶1. Summary: This report is in response to reftel and overviews the 
German government's broadband initiative, a component of Germany's 
economic stimulus package.  The broadband strategy, approved by the 
Cabinet in February 2009, seeks to accelerate telecommunication and 
internet connectivity, close gaps in underserved areas by the end of 
2010 and ensure nationwide access to high speed internet by 2014. 
The federal regulatory authority BNetzA has prepared a "digital 
dividend" frequency auction schedule to support the initiative, but 
legislation is now stalled in the Upper House over concerns related 
to both the digital dividend and frequency transfer costs.  The 
Upper House decision is expected in mid-June 2009, subsequent to the 
government's clarification of these pending issues.  End Summary. 
 
Broadband Penetration Goals in Stimulus Package 
--------------------------------------------- -- 
 
¶2. Recognizing the growth potential inherent in high speed 
broadband, the government included the goal of nationwide telecom 
and internet broadband connectivity as an integral component of its 
stimulus package.  The multi-pronged approach approved by the 
Cabinet on February 18, 2009, aims to close gaps in underserved 
areas, upgrade existing broadband infrastructure over the short-term 
by deploying the entire range of feasible technologies - whether 
cable, fiber optics, satellite, or wireless - and utilize the 
digital dividend resulting from frequencies no longer needed for 
broadcasting following digitalization. 
 
¶3. This so-called "Broadband Strategy" seeks to provide 75 percent 
of German households with transmission rates of a minimum of 50 
megabits per second by 2014 and sets a 100 percent penetration 
target as soon as possible beyond that date.  (Hote: By the end of 
2008, 58 percent or 23 million of the 40 million German households 
enjoyed fast internet access.)  The government's plan focuses, in 
particular, on closing gaps in underserved areas by 2010, benefiting 
800 communities with five million inhabitants.  The German 
communities' association (Deutscher Staedte- und Gemeindebund) 
strongly supports the strategy, noting that it would create 250,000 
jobs in rural areas and foster new businesses and revenues.  The 
strategy also envisions federally-funded construction programs to 
support network expansion and the reallocation of frequencies no 
longer needed for radio and television broadcast - the so-called 
digital dividend - to rural areas. 
 
Digital Dividend 
---------------- 
 
¶4. In recognition of the digital dividend, the government has 
recommended applying frequencies between 790 and 862 megahertz for 
high speed internet service.  While the telecom industry welcomes 
such a step, radio and television broadcasters had been reluctant to 
give these frequencies up, claiming them for their own programming. 
The dispute continued until the government stepped in to allocate 
the frequencies to the broadband stimulus package.  German states, 
however, are responsible for approving the allocation of radio 
frequencies and therefore must approve this measure.  State concerns 
have stalled the legislative process, with the Upper House 
postponing a decision on the bill until the federal government 
provides additional clarification on digital dividend issues. 
 
Price Declines/Lower Revenues for Infrastructure 
--------------------------------------------- --- 
 
¶5. Strong competition among carriers has led to lower prices in 
urban areas, which means less in revenues for carriers to respond to 
the growing need for additional investments in infrastructure. 
(Note: Of the estimated 300 billion euros needed for EU-wide 
infrastructure investment, Germany needs 50 billion.)  The 
increasing financial pressures on carriers have led former 
competitors to seek alliances and cooperation to stem the high 
costs. 
 
Current Broadband Deployment Status 
----------------------------------- 
 
¶6.  According to official figures, German broadband penetration 
rates compare favorably with leading countries.  About 60 percent of 
households have high speed broadband access to the internet. 
Factoring in households linked by 384 kbit/s "mini dsl" connections, 
98 percent of households have broadband access.  Based on the 
currently accepted definition of at least one megabit per second 
(Mbit/s), broadband penetration amounts to 92 percent.  Over 79 
percent of households have access to transmission rates of at least 
2 Mbit/s and 20 percent enjoy high speed internet access via VDSL 
connections with up to 50 Mbit/s.  While these values are well ahead 
of comparable European figures, critics stress that penetration 
looks less favorable when omitting the 384 kbit/s connections from 
computation.  While urban areas are well-equipped with broadband, 
the "gaps" are often located just beyond city limits and stretch 
into rural areas and remote corners.  Note: Carriers have 
concentrated their investment and advertising on lucrative urban 
areas with high populations, bypassing underserved areas with few 
potential customers. 
 
EU Commission Urges Germany 
--------------------------- 
 
¶7. The European Commission has repeatedly urged Germany 
to step up efforts on telecom reform.  In March 2009, Commissioner 
Reding requested that Germany close existing infrastructure gaps, 
noting that only 27.5 percent of Germans subscribed to broadband 
service, putting Germany in 9th place among EU member states, and 
that 12.5 percent of Germans in rural areas had no technical access 
to broadband internet.  Reding urged the use of the digital dividend 
and noted that Germany, by neglecting to speed up infrastructure 
improvement, was shirking its role as the growth engine for Europe; 
more efforts were expected.  To address the funding problem, the EU 
Commission, will develop guidelines for financial assistance to EU 
member states. 
 
¶8. A considerable gap remains between regions in the western and 
eastern part of Germany.  While sixty of every hundred households in 
western states had high speed internet access, less than 45 
households in the eastern states had such access.  To help close the 
gap, the EU has been providing funding for infrastructure to the new 
Germany's eastern states. 
 
Government Efforts 
------------------ 
 
¶9. The focus in the current broadband strategy on infrastructure 
investment and broadband deployment is the culmination of an 
extended process starting with the EU Lisbon Accord.  This focus was 
continued under former Chancellor Schroeder who integrated IT 
leadership into Germany's "Agenda 2010" for economic growth. 
Chancellor Merkel has also sought to boost Germany's IT standing 
through private sector engagement, hosting two "IT summits" for 
industry in the past two years.  The Chancellor opened the 2009 
CeBIT fair in March 2009, stating her goal of nationwide broadband 
access by 2010 - the basis of the current broadband strategy bill. 
 
Strategy Measures 
----------------- 
 
¶10. In order to reach its goals, the government proposes 15 measures 
for implementation during the three months following adoption of the 
package (currently on hold by the Upper House).  Apart from 
encouraging carrier cooperation/cost-sharing and pooling of existing 
public and private infrastructure, the government proposed an 
incentive-oriented approach for infrastructure construction, sought 
supportive frequency policies, and committed to growth and 
innovation-oriented regulation as well as appropriate financial 
support.  Planned measures also include collaboration among urban 
developers, carriers and construction firms on installing ducting 
and joint infrastructure as well as cutting costs by compiling a 
construction site data base to accelerate integration of 
infrastructure hardware and cables during ground excavation. 
Short-term measures for nationwide coverage include financial 
support to local authorities and financing options for companies. 
 
Comment 
------- 
 
¶11.  While the government aimed for a quick-start, getting the 
process off the ground has been complicated.  Slower than expected 
approval of the broadband strategy by the Upper House is resulting 
in funding delays.  Furthermore, since state-level Finance Ministers 
are bound by their 2009 budget, which are based on 2008 budgetary 
decisions, they can't commit additional funds prior to drafting 2010 
budget plans.  It remains to be seen whether the government's 
ambitious plans will be effectively implemented.  Embassy Berlin 
will continue to monitor developments and provide periodic updates. 
End Comment. 
 
KOENIG