Fiber optic operators prepare consumers for rising prices

Fiber optic operators prepare consumers for rising prices
Written by insideindyhomes

Access to fast internet connections is likely to become more expensive in the coming months. The days of continuously falling prices in the telecommunications market are largely over, not only because of the general inflationary pressure, bosses and leading employees of fiber optic network operators and investment companies agreed on Tuesday at the Fiberdays 22 of the Federal Association of Broadband Communication (Breko) in Wiesbaden, which combined the trade fair and conference.

If the market continues to develop from the input costs, there will be no way around a price increase, 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 it.” The inflation could also be an opportunity to explain the technology change from copper to fiber optics and the associated added value such as applications in the smart home. This is similar to the switch from 4G to 5G in mobile communications.

Fortunately, the cost of materials in the telco industry is not that high at 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 nets will no longer be sustainable.” Small city carriers, for example, are “not viable”. The sales expert also has the great concern that “in overzealousness” a “tsunami wave” of subsidized broadband expansion will hit the industry. The shortage of skilled workers on the construction and official side is already great, which could lead to further delays.

Everyone in the industry is currently planning for the next year, when capacities will be tight and prices could go up, added Thorsten Dirks, head of German fiber optics. 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 infrastructure such as cable. It is necessary not only to always talk about bandwidths, but also about short response and latency times and the new applications that this enables, for example for the home office in times of a pandemic.

Inflation is already having an impact on construction costs and general end customer prices at currently 7.9 percent, emphasized Jürgen Hansjosten, Managing Director of the infrastructure fund Infrafiber. In the construction sector, the rate should reach double digits next year. The investor sees this as a “compulsion” to increase the prices for fiber optic connections. In addition, there is the “uncertainty in the funding situation”, since the federal government’s gigabit strategy is not yet in place. Therefore, no one is making a decision in the communities at the moment, even if fiber optics now have priority there, at least in principle.

“Dear ISPs, have the courage to raise the prices,” said Jens Prautzsch, head of Our Green Fiber Optic (UGG), directly to the provider. “We’re going to 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 question of price can no longer be so important.

“Inflationary pressure isn’t affecting us that much yet,” revealed Stefan Holighaus, a member of the management board at fiber optic provider DNS:NET. “We shopped early.” However, he fears that the development will “catch up with us massively next year” and “fall on our feet”. Then the maximum would probably be “scratched at the margin”. The increase in energy costs alone had not even been imaginable up to now, which has a particular effect on the parallel operation of data centers by the company, in which the British investment group 3i Infrastructure holds a majority.

For Holighaus, turning the screw on end consumer prices is only a matter of time: The first person who dares to come out of cover “everyone will beat up,” he predicted. Three months later, the entire industry will follow suit.

“We are beginning to overbuild each other in the glass fiber market,” the head marketer of DNS:NET also referred to the new excesses of state-sponsored gigabit expansion. Effective instruments are needed to counteract this. A “funding tsunami” would eventually destroy the model. If network operators expand independently, state funds should no longer be used for parallel projects.

On this front, Prautzsch from the UGG advocated at least freezing the subsidy if an operator was already operating locally and opening up its network to competitors via the open access model. Some kind of investment protection is needed here.

Breko President Norbert Westfal used the opportunity to urge the countries that are pursuing their own agenda to “develop ways for an efficient dovetailing of self-financing and subsidized expansion in constructive dialogue with the industry”. This is the only way to achieve the goal of being able to offer gigabit fiber optics nationwide by 2030.


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