BREKO Broadband Study 2016 - Market survey among BREKO members Sources: BREKO network operators across Germany, if not indicated otherwise
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BREKO Broadband Study
2016
Market survey among BREKO members
Sources: BREKO network operators across Germany, if not indicated otherwise
Executive Summary Broadband Study
Digitisation – fully interconnecting all areas – carries a high potential
for growth and prosperity
Digitisation requires comprehensive deployment of optical fibre
networks
Status quo: in the absence of counter-measures, Germany will further
fall behind
Alternative network operators guarantee comprehensive optical fibre
deployment
2
2
Germany on the path to digital transformation?
Regional network operators are leading the way!
€ 78 billion
€ 0.6 - 1.2 billion cumulative potential of value added 20%
GDP growth at 1% through industry 4.0 by 2025 potential savings in
increase in fibre (equivalent to an annual growth of administrative costs
penetration 1.7% of gross value added) through eGovernment
(Source: Fraunhofer IAO) (Source: European Commission)
(Source: IW Consult)
8.6 80%
connected devices per of FTTB/H deployment
inhabitant in 2019 by regional network
(currently 4.6) operators
(Source: Cisco) (as of end 2015)
3
Study by Prof. Dr. Nico Grove: Why fibre networks?
Sustainable Deployment of Broadband Infrastructures
Source: Adam.J.W.C. (creative commons)
48 Theses
Sustainable Deployment of Broadband Infrastructures
1 Infrastructure decisions are hardly reversible and create a path dependency.
Sustainable infrastructure deployment takes the view of future needs set
2 against known physical and economic drawbacks.
3 Infrastructure supply creates and drives demand.
4 The trend towards exponential growth of bandwidth is set to continue.
5 Projections tend to underestimate future demand.
6 The future of mobile is fixed.
7 Download speed is not the only criterion determining Quality of Service.
Fibre is the broadband infrastructure with the highest potential to comply with
8 future quantity and quality requirements.
Source: Grove (2016)
5Future bandwidth development
Sustainable Deployment of Broadband Infrastructures
Bandwidth development WIK Study 2025
Nielsen’s Law:
(Supply drives demand)
Bandwidth doubles every 21
months
Source: Grove (2016); Monti, A. & Schäfer, R. G. (2012):
Marktpotentziale für hochbitratige Breitbandanschlüsse in
Deutschland: Abschlussbericht, Presentation. Bad Honnef.
WIK, Godlovitch, I., Lemstra, W., Pennings, C. & de Streel,
A. (2016): Public Workshop: Regulatory, in particular
access, regimes for network investment models in Europe
(SMART 2015/0002). Brussels. WIK, Deloitte & IDATE.
6How “good” is broadband?
Sustainable Deployment of Broadband Infrastructures
Quantity Application Bandwidth Delay/ Jitter Packet
Maximum speed Latency Loss
Up-/Download E Mail Low Low Low Medium
Average speed File Sharing High Low Low Medium
Web Access Medium Medium Low Medium
Quality
Delay/Latency Remote Login Low Medium Medium Medium
Jitter Audio on Demand Low Low High Low
Packet loss Video on Demand High Low High Low
DNS response time Telephony Low High High Low
Reliability
Videoconferencing High High High Low
(QoS: Quality of Service)
Source: Grove (2016); Tanenbaum & Wetherall (2011): Computer
Networks 5th Edition, Tanenbaum and Wetherall, Prentice Hall.
7BREKO member survey
representative for the fixed broadband market in Germany
151 network operators
(265 members in total)
• BREKO unites more than 80% of
broadband network operators in
Germany and thus represents “the
voice of competition”
• The leading fibre association in
Germany: 60% of competitive FTTB/H
deployment by BREKO network
operators
• Deploying fibre networks: Strong
partners for cities and municipalities!
8BREKO network operators are the
foundation of Germany's Gigabit Society
Indicators of BREKO network operators in 2015
Turnover: € 8 billion (+ 3%) Investment rates:
turnover: 24%
(Deutsche Telekom 17%)
EBITDA: 95%
EBITDA: (Deutsche Telekom 43%)
€ 2 billion Investments:
EBITDA € 1.9 billion 8.5 million
(+12%) fixed line connections
margin: 25%
(+7%)
Indicators do not include mobile
€ 9.5 billion invested since 2010;
depending on the framework conditions, BREKO network operators predict a further increase
of the 2015 investments by 15%
9Investment record: Alternative network operators
invest in the networks of the future
€ 8.1 billion investments in
2015
Total investments since 1998:
53%
• € 128 billion 47%
€ 4.2
• 53% of which by billion
€ 3.85
competitors billion
Deutsche Telekom Competitors
Source: BNetzA, BREKO Research
10Status quo FTTB/H deployment in Germany
FTTB/H total availability: 2.65 million households
81% of FTTB/H
deployment by
alternative network
operators
0.87 million
32%
1.28 million
49%
0.5 million
19%
BREKO network operators Deutsche Telekom Others
Source: BNetzA, TüV Rheinland, BREKO Research
11BREKO … DEPLOYING FIBRE NETWORKS!
BREKO network operators:
300,000 km of fibre in total 8.3 million
4.3 million
4.2 million of which
3.3 million
FTTB/H
2.4 million
1.28 million of which FTTB/H
2013 2014 2015 2016 - 2018
Number of households/businesses that have access to NGA networks* due to these investments
* NGA networks: ≥ 30 Mbps (definition by the European Commission)
12Broadband availability ≥ 50 Mbps in federal states for
households (fixed)
Hamburg 94.4%
Bremen 93.4%
Berlin 90.1%
North Rhine-Westphalia 76.1%
Schleswig-Holstein 74.4%
Hesse 71.4%
Baden-Württemberg 71.4%
Lower Saxony 70.9%
Saarland 70.6%
National average 69.8% *
Rhineland-Palatinate 68.5%
Bavaria 67.5%
Brandenburg 55.4%
Mecklenburg-Vorpommern 52.5%
Thuringia 50.4%
Saxony 49.5%
Saxony-Anhalt 41.9%
* Including wireless: 70.1%
Source: TüV Rheinland – end of 2015
13Availability of broadband connections ≥ 50 Mbps
for businesses
Risk of a location disadvantage for the German economy
Large businesses
68%
63% Medium size businesses
Average: 59%
58% Small businesses
Average rural area: 29%
Source: TüV Rheinland – end of 2015
14Fixed line network: Indicator of the digital economy
56
billion 80.4% (76% in
GB 2014) of mobile
internet usage
Fixed line data volume per year (incl. TV, streaming, M2M/IoT)
takes place in WiFi
Average fixed line data volume per connection and month (incl. TV, streaming) networks
(Source: Mobidia)
Mobile as share of total fixed line data volume
85% of Germans
do not want to do
without fixed
(only 65% in 2012)
14 (Source: D21)
11.8 billion GB
billion GB
9.7
7.8 billion GB 110 Data volume is
7
4.6
5.5 billion GB
billion GB
37
GB expected to triple
billion GB 32
billion GB
21.2 22.7
27.3
GB
GB by 2019
GB
GB GB 9% (Source: IW Consult)
1%
5% 6%
2010 2011 2012 2013 2014 2015 2016 2020
expected expected
Source: BNetzA, Cisco, BREKO Research
15Take-up of high bit rates is increasing
significantly
30.7 million (contractual) broadband connections in fixed line networks
by the end of 2015 (+1.1 million)
+2.2 million
44% 43%
42%
40%
36%
-3.8 million
29%
+1.7 million 2013
21% 2014
16%
13% +1 million 2015
8%
5%
3%
100 Mbps
Source: BNetzA, BREKO Research
16Bandwidth demand 2025
“Top-Level” demand: Ca. 12.1 million households
1 Gbps and more downstream 29.7%
Ca. 300.000 businesses
600 Mbps and more upstream
“High-Medium” demand:
500-1000 Mbps downstream Ca. 19 million households 46.6%
300-600 Mbps upstream
“Medium” demand: Ca. 3.5 million households
150-500 Mbps downstream 8.7%
Ca. 2.7 million businesses
100-300 Mbps upstream
“Low-Level” demand: Ca. 3.04 million households
Up to 150 Mbps downstream 7.5%
Ca. 590.000 businesses
Up to 100 Mbps upstream
No broadband / Refusal Ca. 3.06 million households 7.5%
Ca. 40.7 million households 100%
More than 75% of households will demand
bandwidths greater than 500 Mbps by 2025
* The demand estimates for businesses have not been updated
but were included in the projections for private households
without new calculations.
Source: WIK market potential model 2015
17Demand for high bit rate connections increases
BREKO members’ expected average bandwidth demand (in Mbps) by 2025
Download in Mbps Upload in Mbps
411
170 200
100
30
10
Present 2020 2025
Examples for current offers on the market:
Vereinigte Stadtwerke: 1 Gbps symmetrical speed
Unitymedia: 400 Mbps download speed
RFT kabel: 400 Mbps download speed
1&1 Versatel: 1 Gbps symmetrical speed for business
customers
18Is Germany on the way towards the Gigabit Society?
Households with available connection bandwidths ≥ 50 Mbps
+670.000 +3.750.000 +900.000
61.60% 63.60%
2014
2015
26.50%
17.10%
4.40% 6.71%
CATV VDSL FTTB/H
Source: TüV Rheinland – end of 2015
19What has vectoring contributed to the broadband target of
the German Federal Government?
Households with connection bandwidths ≥ 50 Mbps
27.83 More than 2/3 of
26.36 million the investments
million in 2015 have not
23.72
million contributed to the
broadband
targets of the
Federal
38% Government but
parallel have led to
roll-out parallel
26%
parallel infrastructure roll-
18% roll-out out
parallel
roll-out +3.87 Mio.
+2.48 Mio.
4.3 +5.12 million 6.78 +5.34 million 10.65
million connections million connections million
2013 2014 2015
NGA penetration ≥ 50 Mbps
Parallel roll-out ≥ 50 Mbps Source: TüV Rheinland für
Breitbandatlas BMWi – end of 2015
20Vectoring in the nearshore area: Regulatory mandated
overbuild of existing NGA infrastructures delays entire
broadband deployment
Deployment Deutsche Telekom Deployment alternative network
operators
Requirements: none Requirements: high
already 40% of all street cabinets covered in a
deployment area and 33% more than Deutsche
Deployment deadlines*: Telekom
20% after 18 months Deployment deadlines*:
20% after 27 months (2018 target expired) 100% after 18 months
60% after 30 months (2018 target expired)
Deployment technology:
Deployment technology: FTTB/H deployment of alternative network
FTTC/B/H taken into account operators (existing and future) is subject to
regulatory mandated overbuild
Substitute product:
Wholesale products: Without specifications on Deutsche Telekom’s
VULA (not available) VULA, no planning of migration, deployment and
Bitstream Layer 2 (Vectoring I decision) business possible
mandated in 8/2013, to date not available
* After completing procedure for LLU reference offer
(not started yet)
21Challenges for BREKO network operators in 2016
Vectoring in the nearshore area 40%
Parallel roll-out 39%
Price competition 38%
Public funding programmes 29%
Financing 24%
22Where does Germany stand in the international
competition?
According to the Digital Location Index, Germany ranks 6th in the global competition
(Source: TNS Infratest/BMWi)*
* Based on the degree of digitisation of business processes and in-house processes as well as the intensity of use of new digital
technologies and services
Share of the implemented digital potential in percent
USA 18
UK 17
Sweden 15
The Netherlands 15
Europe 12
France 12
Germany 10
Italy 10
0 2 4 6 8 10 12 14 16 18 20
Source: Mc Kinsey Global Institute
23Infrastructure objective in Schleswig-Holstein is effective
Households covered with FTTB/H
(homes passed)
National average:
6.7%
NRW is the second
federal state with an
infrastructure
objective
* Below national average
24The BREKO Broadband Study shows: Alternative network operators shoulder 80% of the deployment with ultrafast fibre connections BREKO network operators are prepared to take their fibre deployment to the next level Current political and regulatory framework conditions impede the urgently needed fibre roll-out 25
Areas of Action
Germany needs gigabit A regulatory framework A greater commitment to
1. Infrastructure
3. Framework Conditions
2. Competition
networks. with the aim to secure statements within a
Only fibre-to-the- and guarantee effective market exploration
building/home provides infrastructure-based procedure and
the necessary capacity competition is a investment protection
for a digitised economy. prerequisite for can prevent strategic
In order for Germany not investment in FTTB/H. overbuild and thus
to fall further behind promote FTTB/H
other leading industrial deployment.
nations, a political target Likewise, the regulatory
towards FTTB/H mandated overbuild
infrastructures needs to under Vectoring II must
be established. be prevented.
26Backup 27
Deutsche Telekom is still dominant in the access
segment
Phone connections based on DT infrastructure 16% 84% 2014
18% 82% 2015
Phone connections retail market 44% 56% 2014
45% 55% 2015
Broadband connections DT market share (incl. resale und
49% 51% 2014
bitstream)
49% 51% 2015
Broadband connections DT market share (excl. resale and
55% 45% 2014
bitstream)
59% 41% 2015
NGA connections (with bitstream) 60% 40% 2014
66% 34% 2015
NGA connections (without bitstream) 83% 17% 2015
Competitors Deutsche Telekom
Source: Deutsche Telekom, BREKO Research
28Regulation is not an obstacle: Deutsche
Telekom’s margin is highest in the regulated
domestic market
2013 2014 2015
40% 40% 39%
33% 34% 34%
29% 29% 29%
23%
20% 19%
9% 9% 9%
EBITDA margin EBITDA margin EBITDA margin EBITDA margin EBITDA margin
group Germany USA Europe systems solutions
Source: Deutsche Telekom
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