Accessing fast internet connections is likely to become more expensive in the coming months. The days of continued falling prices in the telecom market are largely over, not just due to general inflationary pressure, leading heads and employees of fiber optic network operators and investment firms agreed on Tuesday at Fiberdays 22. of the Federal Association of Broadband Communication (Breko), which combined the fair and the conference in Wiesbaden.
price increase in sight
If the market continues to develop from input costs, there will be no way around a price hike, explained Soeren Wendler, sales manager at Deutsche Giganet. “The big ones have to start”, he appealed to Deutsche Telekom, Vodafone, Telefónica & Co. “Let’s try”. Inflation could also be an opportunity to explain the technological change from copper to optical fiber and the associated value added such as applications in the smart home. This is similar to moving from 4G to 5G in mobile communications.
Fortunately, the cost of materials in the telecommunications sector is not that high, 10 to 15 percent, Wendler explained the price trend so far. By 2025 at the latest, however, he also expects “the first signs of consolidation” in the market: “Patchwork networks will no longer be sustainable”. Small town carriers, for example, “are not viable”. The sales expert also has great concern that “out of zeal” a “tsunami wave” of subsidized broadband expansion will hit the industry. The shortage of skilled labor on the construction and official side is already great, which could lead to further delays.
Everyone in the industry is currently planning for next year when capacities will be reduced and prices may rise, added Thorsten Dirks, head of fiber optics in Germany. The monthly costs for a fiber optic provider would currently be between 70 and 90 euros for 1 GBit / s, and sometimes only 39 euros for other infrastructures such as cable. We must not only always talk about bandwidths, but also about short response and latency times and the new applications that this allows, for example for the home office in times of pandemics.
Inflation as a price factor
Inflation is already affecting construction costs and general end customer prices, currently at 7.9 percent, stressed Jürgen Hansjosten, managing director of the Infrafiber infrastructure fund. In the construction sector, the rate is expected to reach double digits next year. The investor sees this as a “compulsion” to raise the prices of fiber optic connections. Additionally, there is “uncertainty in the funding situation,” as the federal government’s gigabit strategy is not yet in place. Therefore, at the moment no one is making a decision in the communities, although fiber optic now has priority there, at least in principle.
“Dear ISPs, dare to raise your prices,” said Jens Prautzsch, head of Our Green Fiber Optic (UGG), directly to the provider. “We will have to go in that direction.” There is also “pressure from our upstream side”. At the same time, the joint venture between Allianz and the Spanish Telefónica group is trying to get a higher load on the network. At best, if this strategy is successful, the price issue may no longer be that important.
“The inflationary pressure is not affecting us much yet,” revealed Stefan Holighaus, board member of the fiber optic provider DNS: NET. “We went shopping early.” However, he fears that the development “will massively catch up with us next year” and “fall on its feet”. So the maximum would probably be “scratched at the edge”. Rising energy costs alone were not even imaginable until now, which has a particular effect on the parallel operation of the data centers by the company, in which the British investment group 3i Infrastructure holds the majority.
For Holighaus, turning the screw on final consumer prices is only a matter of time: the first person who dares to break the cover “will hit it all,” he predicted. Three months later, the entire industry will follow suit.
Affordable and subsidized fiber optic expansion
“We’re starting to oversize each other in the fiberglass market,” chief marketer at DNS: NET also referred to the new excesses of state-sponsored gigabit expansion. Effective tools are needed to counter it. A “financing tsunami” would ultimately destroy the model. If network operators expand independently, state funds should no longer be used for parallel projects.
On this front, UGG’s Prautzsch supported at least freezing the grant if an operator was already operating locally and opening up its network to competitors via the open access model. In this case, some kind of investment protection is needed.
Breko chairman Norbert Westfal took the opportunity to urge countries pursuing their agenda to “develop ways for an efficient combination of self-financing and subsidized expansion in constructive dialogue with industry.” This is the only way to achieve the goal of being able to offer gigabit optical fiber nationwide by 2030.