What is 5G?
5G is the fifth generation of the internet revolution. Germany expects it to speed up its current standard speed about 100-fold, enabling industrial applications, such as driverless transport and telemedicine. For anyone downloading a standard-length HD movie, the time would be cut from roughly 10 minutes now on a 4G connection, to just a few seconds on 5G.
Read more: Huawei scrambles to untangle crossed lines
What’s on offer?
Germany’s federal network regulator, the BNetzA, will auction so-called spectrum (slots) in the 2.0-gigahertz and 3.6-gigahertz bands (best suited to data-intensive industrial or urban applications). Also on offer will be frequencies in the 3.7-3.8-gigahertz and 26- gigahertz ranges (suitable for local applications, such as those used for creating superfast networks).
Who are the bidders?
1&1 Drillisch recently joined Telefonica Germany, Telekom Deutschland (Deutsche Telekom’s local unit, aka NatCo) and Vodafone Germany in bidding in the auction.
How much will it cost?
The minimum bid will be between a minimum of €1.7 million ($2 million) and a maximum of €5 million, depending on frequency and availability, with 41 frequency blocks on offer. The total minimum is €104 million, but the actual sum is likely to be much higher. Finance Minister Olaf Scholz said last year he expected the 5G spectrum auctions to raise €4 billion to €5 billion, the business daily Handelsblatt reported. The big three mobile network providers say blanket 5G coverage in the country could cost a combined €60 billion.
What’s the timetable?
The BNetzA will decide in February whether the firms that have expressed an interest so far will be allowed to participate in the auction, to be held in the spring. By the end of 2022, the winners will have to supply at least 98 percent of households per state, all federal highways, the key federal highways and railways with at least 100 megabits per second (Mbps).
The upstart
1&1 Drillisch’s CEO Ralph Dommermuth said in January the move would shake up the existing oligopoly in Germany. But market watchers have expressed concerns the company would have to give up its current profitable business as a MVNO and borrow heavily to secure a license and build network infrastructure. The company has said it already has a large fiber-optic network. Drillisch was also reportedly in talks with China’s ZTE and Nokia of Finland as vendor partners and said it has prepared €2.8 billion ($3.18 billion) in financing from a European banking consortium, plus own sources.
Incumbents fight back
All of Germany’s three incumbent mobile network operators (MNOs) have filed separate legal actions over the 5G spectrum award conditions.They said they wanted legal clarity over national roaming and network sharing and the obligation to allow service providers to access future 5G networks. Some have seen it as an attempt to undermine Drilisch, add to their own leverage in any future bargaining or both. They all have the advantage that they already have their own nationwide network of radio masts, while Drillisch has yet to set them up.
Why are Huawei and China involved (again)?
Huawei already provides about 45 percent of Germany’s 4G base stations and is a leading supplier to phone companies. But some telecom companies are limiting work with Huawei as the pressure on the company grows.
Vodafone Group said last week it was suspending some Huawei equipment purchases for the core of its networks in Europe, which could be provided by other companies such as Ericsson or Cisco.
“On the upside, there would be more business for Ericsson and Nokia, who are two of the few European market leaders in the high tech ICT sectors – a very rare species of companies,” Jan-Peter Kleinhans told DW.
Deutsche Telekom said it was re-evaluating its purchasing strategy, a move that many mistakingly understood to mean it may drop the Chinese company from its list of suppliers. DT has installed Huawei systems in thousands of its wireless towers and the supplier’s technology also forms the backbone of some of its cloud products. Huawei has about one-third of the market for telecoms equipment in Europe, but supplies at least half of the equipment used by DT. Telekom, which said it would invest about €5.5 billion per year to roll out 5G.
In its most recent move, Deutsche Telekom on Wednesday proposed a series of measures to ensure that 5G networks are safe. It said all critical infrastructure should be certified before deployment by an independent laboratory under state oversight. It also called for network equipment makers to submit their source code to a trusted third party.
Germany considers Huawei ban
Germany has relatively good relations with China and DT with Huawei, and Berlin has sought to keep a distance from the US’s aggressive trade stance toward Beijing, but Washington is pushing Beijing to respect laws on intellectual property. According to the BNetzA, security is not included in the conditions for awarding a contract. But things change and Berlin said recently it was considering banning Huawei from providing 5G equipment.
German intelligence agencies were reported to have warned against the use of Huawei technology, saying there could be “backdoors” in the euqipment that might enable Chinese authorities to spy on others. The reports said there were no indications of such backdoors right now, but warned they couldn’t be ruled out and that the whole system would have to be checked again after each update.
Huawei is at the center of the ongoing and increasingly bitter US-China trade spat
Would Germany fall behind China?
Europe would fall behind the US and China in the race to install the next generation of wireless networks if governments ban Huawei over security fears, according to an internal assessment by DT, reported by Bloomberg. The company said it would delay rollout of the technology by at least two years.
The current 4G mobile communications standard in Germany lags behind many other European countries. Germany was ranked fifth in 5G readiness, after China, South Korea, the US and Japan in a study conducted by Analysys Mason on behalf of CTIA.
Competitors including Ericsson, Nokia Oyj, Cisco Systems and Samsung Electronics would have to step in if Huawei were to be banned, potentially leading to capacity constraints. If Huawei is banned completely companies are forced to rip out all of its equipment and that would cost the industry billions of euros. “From an economic perspective, limiting the field from 5 to 3, will definitely increase prices and create scarcity,” Kleinhans said.
Most carriers have Huawei equipment because its technology is seen as superior to that of its rivals. China invested heavily in the standardization of 5G because it realized that with 3G/4G it lost the battle over standards and was thus dependent on foreign, mainly US, companies.
Read more: Analyst: China has to be put in the category of a ‘rogue state’
The ties that bind
The German government is, however, intensively involved with Huawei. Huawei has opened a security laboratory in Bonn, where the Federal Office for Information Security (BSI) and representatives of telephone companies are allowed to analyze the software of the new networks.
Chinese retaliation
“Depending on how substantive and understandable the decision is, there is a very real risk of retaliation from China – tariffs, trade obstacles, you name it,” Kleinhans said.
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