Article by Markus Haas, CEO of Telefónica Deutschland:

We need strategic 5G expansion

Markus Haas
We are currently having a lively debate, and rightly so, about the 5G frequency awards and the expansion of wireless networks in Germany. The demands for equal treatment of urban and rural areas are also legitimate. However, what matters is that we look very closely at needs, possibilities, and goals. Only if we carefully consider the frequency awards and infrastructure expansion, and provide a framework that promotes investment, can Germany be a global leader in 5G. Telefónica Deutschland is making a specific proposal for this. There is a lot of debate, involving a wide range of interest groups – politicians, consumer protection agencies, network operators and industry representatives – each presenting their own arguments. So many demands get tangled up with each other that there is no clear picture. First of all, we need to close coverage gaps and make high-speed internet available to everyone. Of course, for us as a company, it is one of our stated goals – especially as a wireless provider for nearly half of all private consumers in Germany.

Coordinating 5G expansion with actual needs

At the same time, some politicians are demanding that the new 5G wireless technology be expanded to full coverage practically overnight. I think they are forgetting where and why 5G is actually needed. At first, 5G will mainly be used to enable brand new applications in the industrial sector. Understandably, the automotive and manufacturing industries, logistics companies, and mechanical engineering firms want to be prepared. We must all work together so that we can use these opportunities as Europe's largest economy. Of course this includes small and medium-sized companies, which are often located in rural areas. Accordingly, we must expand the infrastructure right where companies actually need it. The Federal Network Agency wants to keep part of the 5G spectrum from the national network operators and reserve it for local applications, which I think is fatal. For the best 5G networks in Germany, we all need the right frequencies.

LTE provides high-speed internet to everyone

On the other hand, consumers mainly need LTE for high-speed internet and their digital applications. And they need it wherever they go. However, with the frequencies to be awarded in spring 2019, full coverage of this kind is not physically or financially feasible. It would require many thousands of new wireless towers and would cost an exorbitant amount of money, just as the Head of the Chancellery Mr Braun recently noted. This is why at Telefónica Deutschland we are proponents of infrastructure expansion in moderation. We must build the right technologies at the right location while keeping pace with technological requirements. There's no question that in the future, Germany will need wide-coverage 5G networks. But we need the right frequencies and the right time line.

Expansion of coverage spectrum alongside 5G expansion

Therefore, we have a proposal for the Federal Network Agency. For the coverage frequencies that we wireless network operators have until 2025 or 2033, it should renew them now until 2040, at an affordable price. These coverage frequencies are the only way for us to expand the network in a financially sensible manner throughout Germany. This renewal could then include strict supply conditions for national 5G coverage. For instance, we could stipulate that network operators work together to provide coverage for 98% of households along with all motorways and federal roads with 100 Mbit/s by 2022. This would allow us to ensure that every region has at least one operator to provide a network for customers. By 2025, every network operator would have its own individual coverage options.

The right conditions require higher investments

However, we must remember one thing: Even with the right frequencies and time line, infrastructure expansion is a major financial challenge that requires politicians to be on board for us to succeed. We have reiterated over the last months that we need framework conditions to foster investment. The more we have to pay for frequency auctions, the less we have for network expansion after that. Wireless providers don't have unlimited funds. This is why the Federal Network Agency should not focus on an auction with the highest possible profit. It must structure the payment terms to that network operators would not pay for frequency until the spectrum is actually available and could pay in instalments. Easing the financial burden on network operators would immediately result in more infrastructure investments.

Cooperation is gaining in importance

We are also against national roaming and covert service provider obligations. We cannot be forced to give other companies access to our network even if they have personally invested nothing in the networks and did not have to pay any frequency costs to the tune of 60 billion euros to date. Looking at other industries, we see how ridiculous the discussion about obligatory national roaming is. For example, no one in this country would force a machinery manufacturer to make products on its own production equipment for a newcomer after this manufacturer had invested billions in development and patents. That would be like expropriation, and violate our constitution. Rather, we should look to voluntary commercial cooperation. We have proven often enough that these types of cooperation can succeed, such as with mobile towers and partnerships for connecting these towers to fibreglass. Cooperation among companies, industries and politicians will gain importance in the future. This is why we must remember in the current debate that we all have the same goal – to secure Germany's digital future. We cannot do this without joining forces as we map out a clear, realistic plan for the road ahead.