Opinion

Germany Wants More 5G Faster. That May Not Be Better

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Germany Wants More 5G Faster. That May Not Be Better

5G mobile networks will be better, faster and stronger than their forerunners. In Germany, at least, they could also make life a lot harder for carriers.

Deutsche Telekom AG has joined Vodafone Group and Telefonica Deutschland Holding AG in suing Germany's federal regulator over the terms of the planned auction of next-generation wireless frequencies, deeming the conditions too onerous.

The complaint seems valid. Germany's Bundesnetzagentur has stipulated as a condition of the auction, which will start by the end of March, that 98 percent of households and all main transport routes have 100 megabit-per-second network coverage by the end of 2022.

Essentially, the agency is asking carriers to frontload investment in the networks, rather than feathering in the deployment of 5G antennae in response to demand. That runs against the technology's most immediate benefit, namely, that it can deliver more data more cheaply than 4G networks. In other words, it's not about latency, or the speed of delivering that data, it's about volume.

A year ago, it seemed as though augmented and virtual reality, as well as connected, autonomous cars might create demand for superfast mobile Internet around the turn of the decade. Since then, a healthy dose of realism has tempered that technological optimism. It increasingly looks as though those gizmos won't be mature enough for widespread consumer adoption for at least five years.

Governments see 5G as a key driver of innovation, and Germany, with its leadership in industrial machinery and luxury cars, recognises that particularly acutely. But forcing the carriers to invest well before demand for the capacity is likely to materialise saddles them with unnecessary excess costs. Besides, carriers will surely do everything they can to match deployment to customer requirements.

The auction rules also outline the possibility of allowing new entrants to the market who could lease network capacity from existing operators. It's understandable that the carriers are bristling: not only are they expected to invest heavily in the new networks, but fostering new players could stoke further price competition which makes it harder to generate a return on those investments.

The Bundesnetzagentur needs to make the terms of the auction better, because spending faster is unlikely to make the nation's mobile carriers any stronger.

© 2018 Bloomberg LP

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