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The German Internet Access Market
Germany is the largest Internet market in Europe with approximately 35 million Internet users and approximately 23
million Internet subscribers (defined as persons subscribing to Internet service provider contracts). According to industry
sources for the year 2003, the German internet access market was worth approximately €5.2 billion. Internet access
technology currently available in Germany includes analog dial-up modems, ISDN, DSL, wireless local loop technology,
broadband cable, fiber optic based access and UMTS (Universal Mobile Telecommunication Services). While analog dial-up
modems may be used throughout Germany to connect to the Internet, access via the other technologies depends upon the
local availability of the services.
The Internet access market offers significant growth potential in Germany, particularly in high speed Internet with just
18% of the 39.1 million households having subscribed to such services. High speed Internet services have shown growth
rates of approximately 40% in 2003 and approximately 53% in 2004. At the end of 2004, about 6.9 million (approximately
30%) of the estimated 23 million Internet access subscribers were subscribing to broadband Internet access technologies that
offer connection speeds of more than 128 kbit/s. At the end of 2004, approximately 6.7 million or 97.2% of the 6.9 million
broadband Internet subscribers, either directly or indirectly, used DSL Internet services provided by DTAG, the dominant
player in the German broadband Internet access market, which offers a range of different DSL packages based on bandwidth
and price. Only 145,000 Internet users were subscribing to broadband Internet services via cable and approximately 50,000
Internet users were subscribers to broadband Internet services via satellite or Powerline.
While broadband Internet continues to grow, cable as an access technology has a limited share of the overall broadband
Internet access market, estimated at 2% for 2004. This low level of penetration has been the result of low levels of investment
in the infrastructure and the separation of network levels in Germany. However, all of the Level 3 operators have recently
intensified their network upgrade plans and marketing efforts to promote their Internet service offerings. An advantage of
cable as an access technology is the simplicity of the technology deployed to connect to the Internet. While DSL solutions
require the installation of a series of technical devices (splitter, a/b converter, DSL modem), Internet access via cable merely
requires the installation of a cable modem between the consumer’s television wall socket and the computer. In addition, there
is no need for a subscriber to cable Internet access services to subscribe to telephony services in order to access the service, as
is the case with the majority of DSL offers.
The following chart shows the historical development of the German broadband market by access platform.
Broadband Subscribers (‘000s) 2001 2002 2003 2004 CAGR (1)
DSL 1,865 3,160 4,400 6,723 53.3%
Cable 30 45 60 145 69.1%
Other (satellite, Powerline) 2 17 53 50 192.4%
Total 1,897 3,222 4,513 6,918 53.9%
(1) Compound Annual Growth Rate for the years 2001-2004.
Source: RegTP 2004
The German Telephony Market
Historically, the provision of public telecommunications services in Germany was a state monopoly formerly
established by the German constitution. In 1989, the Federal Republic of Germany began to transform the postal, telephony
and banking services administered by the former monopoly provider into market-oriented businesses and divided the former
monopoly provider into three distinct entities along lines of business, one of which was the predecessor of DTAG. At the
same time, the Federal Republic also started the liberalization of the German telecommunications market.
The operation of networks (including cable networks) for all telecommunications services other than public fixed-line
voice telephony was opened to competition in Germany on August 1, 1996. The telecommunications sector in Germany was
further liberalized on January 1, 1998. Since then, DTAG has been required to offer competitors access to its fixed-line
network at regulated interconnection rates. Despite being forced to give access to its network, DTAG continues to dominate
the German fixed-line telephony market, worth approximately €35.3 billion as of 2003 according to industry sources with a
market share of 74% and, through its subsidiary T-Mobile, is one of the major players in the Germany mobile telephony
market with a market share of 38.5% in 2004.
The other providers in the fixed network area include: Arcor, BT Global Services (Viag Interkom), Colt Telecom, and
Versatel. The major providers of services and/or network operators in the mobile telephony sector are: T-Mobile, Vodafone,
E-Plus, O2, Mobilcom and Debitel.
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