Germany's forced fibre switch is the wrong move

Millions of households in Germany could soon have their DSL connections switched off. The reason: they are supposed to be forced to migrate to fibre. I think that is the wrong approach.

The EU Commission and Germany’s Federal Network Agency are preparing to phase out the classic DSL copper network step by step. The goal is to accelerate the shift to fibre. What is being sold as modernisation is, in reality, a fateful intervention in a functioning market.

Switching off the copper network undermines two market mechanisms at once. First, direct infrastructure competition between copper and fibre disappears. Second, consumers are deprived of a product that still meets their needs.

Many households manage perfectly well with download speeds of 100 or 250 megabits per second. When customers do not switch, that is not a market failure – it is a price signal. Fibre tariffs are often too expensive. The added value is not obvious to end users.

The fibre rollout is not stalling because of the copper network. It is stalling because of insufficient demand. Banning the old option does not automatically make the new one attractive.

More than 200 providers are active in Germany’s fibre market. Some have overextended. If end customers are now to be pushed out of the copper network by regulation in order to force through more expensive fibre tariffs, that is less innovation policy than corporate helplessness. Those who cannot make a convincing offer simply ban the alternative – a reflex from the planned-economy era.

For many smaller providers, it is convenient to cast Deutsche Telekom as the villain. But that is too easy. Often they simply have not managed to convince end customers of their products.

Particularly misguided is the criticism of vectoring, a technology that improves internet speeds over existing copper networks. The accusation is that Telekom accelerated DSL and thereby delayed the shift to fibre. In reality, vectoring ensured that fast internet connections were available across rural and suburban areas. It was the digital lifeline during the Covid pandemic. Vectoring was not the problem – it was the solution.

The prospect that Telekom’s multi-billion-euro investments could now be devalued by regulation also sends a damaging signal to Germany as a place to invest. Vectoring was not a wrong turn. It was a rational response to demand, cost and local technical realities.

I wrote the full commentary together with Olga Scheer for Handelsblatt.