Powerhouse Germany badly trailing rivals in broadband
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Working from home in the eurozone’s most powerful country, Christian Grobmeier should have no problem in communicating with his global clients. But the German software developer found it almost impossible to secure a decent connection in the heart of the Bavarian countryside.
“I provide software services all over the world, meetings are by Skype, I need a reliable internet connection,” Mr Grobmeier said. “Trying to find somewhere where I could live and work was exhausting — 95 per cent of homes where I was looking didn’t have that.”
He is far from alone. Germany may be one of the world’s most advanced industrial economies, renowned as an export powerhouse, but its digital infrastructure is creaking at the seams. Mr Grobmeier, who lives 40km from Munich, hopes September’s federal elections will force Berlin to do more to solve the problem. “Digital will change everything; we need someone in government who understands this. ”
Germany has failed to replace infrastructure left over from a different age of telecommunications, missing the chance to replace its old copper lines — laid when the then state-owned Deutsche Telekom needed to provide a telephone connection to every household — to a much faster, more robust fibre-optic network. Last year just 1.8 per cent of broadband connections were fibre, compared with more than 50 per cent in other European countries such as Sweden and Latvia, according to Organisation for Economic Co-operation and Development figures.
Most of the last mile of connections between Germany’s network and households “has been in the ground for 40 or 50 years,” said Verena Weber, an economist at the OECD.
Digital is not the only underserved part of German infrastructure. The International Monetary Fund and European Central Bank have both criticised Berlin for under-investment in all areas. The call for more investment is a focal point of the campaign by Martin Schulz, leader of the opposition Social Democrats, to unseat Angela Merkel as chancellor in next month’s elections.
Few dispute the scale of the problem. Government figures show internet coverage is much too patchy and slow, particularly in rural areas. Berlin has set a target that all households should have access to bandwidth speeds of 50Mbits a second by 2018; consumer groups say today 19m households can only access internet at speeds of 10Mbits a second or under. Some have no access at all.
One fear is that poor internet access will worsen rural depopulation. Those in the countryside will become more cut off as government, industry and media move content online. “[Lack of internet access] is a social problem,” Lina Ehrig, team leader for digital and media at the Verbraucherzentrale Bundesverband, the national federation of consumer organisations, said. “We expect people to be more digital and use certain services — and if we are not able to use them, there will be a digital divide.”
There is also an economic threat. Germany has become the region’s industrial powerhouse through high quality exports such as cars. But the diesel scandal has led some to ask whether Germany has become too complacent about success. Critics say the country needs to get up to speed with the demands of data-hungry technologies such as self driving vehicles and virtual reality.
“I’m not sure where we’ll end up, but if you look at [new] technologies, they need a lot of computing power,” said Robin Weninger, managing director at incoverage, a software company. “When it comes to the digital economy, good connectivity is like oil for cars.”
The pro-market FDP, a possible coalition partner for Ms Merkel’s CDU party, has called for fibre cables to be laid across Germany, while Mr Schulz has unveiled a €30bn “investment offensive” into infrastructure, including fibre-optic cables, spread over four years. But such figures are dwarfed by the €80bn that think tanks and industry chiefs expect a fibre-optic network for the whole of Germany to cost.
Ms Merkel’s party has blamed cumbersome bureaucracy at the municipal level for failing to take advantage of funds from Berlin.
Others wonder whether the government should prod Deutsche Telekom, which was privatised in 1995, into doing more. The company, still one-third state-owned, still dominates the market.
Deutsche Telekom says it makes no sense to lay fibre-optic cables throughout the countryside. “We neither have the construction capacities nor the financial resources in Germany to build out a fibre-based network over Germany now,” it said.
The group has instead used vectoring — a way of increasing speeds on existing copper cables by limiting the interference to connections. Meanwhile other private providers have focused on richer rural areas and big cities.
Marcel Fratzscher, director of the DIW think-tank in Berlin, believes Telekom’s stranglehold is a big stumbling block to improvement. “The federal government is providing incentives for fibre optic, but Telekom is trying to undercut local municipalities through carrying out copper vectoring and then offering low-price deals,” he said. “Telekom has the dominant position in the market and they want to exploit it for as long as possible.”
While vectoring can produce speeds twice as quick as the 50Mbits needed to meet the government target, it is much slower than fibre and risks becoming outdated more quickly. Critics say the target itself is misguided. “Focusing on 50Mbits reinforces existing problems in the digital infrastructure,” said Mr Fratzscher. “The government should focus on providing internet connection through fibre optics instead.”
Back in Bavaria, Mr Grobmeier would welcome such a shift of stance and uses an analogy that car-loving Germans appreciate. “All our lives depend on it,” he says. “It’s like the autobahn.”
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