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Deutsche Telekom will spend €3bn ($3.7bn) over the next two years upgrading large parts of its network to deliver ultra-high speed broadband capable of delivering a range of multi-media services including high-definition television.

The move comes as many incumbents around Europe are investing in upgrading their networks, replacing the old analogue, switched technology with the Internet Protocol technology that drives the internet.

The so-called integrated operators, including Deutsche Telekom, which own fixed-line, mobile operations and an internet service provider are banking on a strategy known as “convergence” – the ability to offer multi-media services such as e-mail and television over fast broadband connections, both fixed and mobile – to fend off intense competition.

The upgrade will involve stripping out large parts of the old copper wire network, which runs between the local exchange and the junction box, and replacing it with high-capacity fibre-optic cable. The new technology will provide speeds of up to 50Mb, which Deutsche Telekom claims will give Germany the fastest access in Europe. Two pilot schemes will start shortly in Hamburg and Stuttgart but the roll-out aims to cover 10, as yet unidentified, cities by mid-2006 before being extended to cover Germany’s 50 biggest cities by 2007.

Kai Uwe-Ricke, chief executive of Deutsche Telekom, hinted he did not expect the new network to be covered by the current regulatory regime and called on the
telecoms regulator to allow the company to earn a “fair return on capital” on the investment.

The dominant player is under attack on all sides in its domestic fixed-line market, where it is battling intensifying competition and increasing migration of calls to mobile services as well as regulatory intervention.

to. T-com, its fixed-line unit, saw a 5.3 per cent drop in core earnings to €2.4bn during the second quarter.

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