Mobile giants likely to dominate German wireless auction | Business| Economy and finance news from a German perspective | DW | 10.04.2010
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Business

Mobile giants likely to dominate German wireless auction

Germany is auctioning off frequencies for high-speed wireless data transfer. A similar auction was held in 2000, but this time only four leading wireless companies may bid. Smaller companies have cried foul.

A stoplight in front of a T-Mobile sign.

T-Mobile may get an unfair advantage in wireless broadband internet

The airwave frequencies which will be auctioned starting Monday in Germany give mobile digital providers an opportunity to wirelessly send data further than ever before at rates up to 100 times faster than with a conventional DSL internet connection.

But the gold-rush mentality which was evident when frequencies for wireless data transfer were first auctioned in 2000 is unlikely to emerge. Instead, several companies are crying foul and saying mobile giants T-Mobile and Vodafone are poised to corner the market on high speed mobile data for years to come.

Only four companies are being allowed to participate in the auction, which is expected to last several weeks: T-Mobile, Vodafone, E-Plus and O2 Telefonica. In the 2000 auction, the German government netted the equivalent of some 50 billion Euros; this time experts are expecting proceeds closer to 6 billion Euros.

Court complaints dismissed

Stuttgart-based AIRDATA provides wireless high-speed Internet access and had hoped to expand its access to frequencies. However, the company is being blocked from the auction, which is being held because demand for the limited number of frequencies surpasses those available. A complaint the company filed in an administrative court in Cologne was dismissed March 19, along with ones from E-Plus and O2.

AIRDATA spokesman Thomas Katz said the sheer buying power of T-Mobile and Vodafone put them in a position to dominate the rapidly expanding market for high-speed wireless Internet.

"It has nothing to do with competition anymore," he told Deutsche Welle. "If we don't have any bidding rights the market leaders will simply buy up all of the frequencies on account of their market strength."

According to Katz, other European countries such as France entitle newcomers to the market to 20 megahertz, the minimum needed to set up a functional business.

A Bavarian village.

Broadband Internet is missing in spots across the German countryside

At a later stage, mobile providers can focus on acquiring both low and high frequencies in order to stagger them. Low frequencies cover large distances and may reach into rural areas while high frequencies provide more capacity in urban areas.

"The simple fact is it's necessary to have basic provisions in order to enter the market. The point is simple: the conditions of this procedure clearly disadvantage some competitors," he said.

Rural areas to get wireless

Frequencies below one gigahertz are central to the debate. They became available in recent years when Germany digitalized its television and radio signals and are suitable for bringing high-speed Internet to rural areas. The German government hopes to eliminate "white spots" lacking broadband coverage and wants all homes to at least have a 1-megabit Internet connection by the end of 2010.

Wireless broadband test markets exist in Oslo, Stockholm and Innsbruck, and the hardware necessary to access them is already commercially available. Industry trade confederation Bitkom predicted the technology will become affordable to the average consumer by the end of this year, when it will begin to grow in Germany.

German Federal Network Agency President Matthias Kurth.

Federal regulator Matthias Kurth says demand surpasses supply

Still, those disadvantaged by Monday's auction say Germany's Federal Network Agency should foster a more competitive marketplace for the good of companies and consumers alike.

E-Plus spokesman Guido Heitmann said while his company will participate in the auction, they do not believe the "allocation is taking place in a manner which entirely conforms to free market competition."

"We are participating to get appropriate frequencies at an appropriate price in order to facilitate the further development of a cost-effective and powerful network," he told Deutsche Welle. "The demand for data transfer is growing and we need to see to it that we capitalize on that."

Author: Gerhard Schneibel
Editor: Sonia Phalnikar

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