Germany still lags behind most European countries in terms of fiber-optic expansion. But the Corona pandemic and its impact on the world of work have led to a significant increase in data traffic. This is fueling demand for fast gigabit connections, and investment in building the necessary infrastructure is seen as a future-proof investment.
By 2025, fiber optics should be rolled out in every region, every community and, if possible, directly into every home - that was the goal of the German government at the time. It is now become apparent that Germany will not achieve this goal.
Yet to compete internationally, fast fiber-optic networks are extremely important, especially for the German economy, and a lack thereof is a significant competitive disadvantage for companies. The resulting losses for companies can quickly reach a six- to seven-figure sum per year.
At least the expansion of fiber optics has picked up speed in the past year. According to figures from the Broadband Communications Industry Association (Breko), the number of available broadband connections rose from 6.4 to 8.3 million in 2020. The share of fiber-optic connections reached 17.7 percent. By 2024, the association expects expansion to 26 million available fiber-optic connections.
Still, Germany would not have reached its goal, after all, even gigabit-capable cable standards are only considered an intermediate step, explains Marco Griefahn, Director TMT Sector Coverage at ING. Only fiber-to-the-home (FTTH) connection technology, i.e., fiber optics directly to the home, is truly future-proof. Since laying FTTH connections is very costly, this presents tremendous challenges on the financing side.
For years, policymakers have been pushing for the broadest possible use of subsidies in this context. However, the industry association Breko complains that the provision of subsidies alone does not significantly accelerate the roll-out of optical fiber. Breko believes that support from tax revenue only makes sense in poorly served areas where the economic basis for expansion is not yet in place.
ING has been involved in the expansion of telecommunications infrastructure for more than 30 years, both with loans and in advising and linking companies with investors. "Currently, a lot of liquidity is flowing into this segment," Griefahn reports. ING is one of the few banks that relies on its own specialized TMT team for advisory services - an expertise that benefits companies and investors alike from the very beginning. "We can say what is feasible at a very early stage in the process and support companies when they are still small," explains Griefahn. In 2013, for example, ING was the first lending bank to contribute to the success of the then newly founded Deutsche Glasfaser Group. As a major European bank with a market share of more than 50 percent in this area, ING supports its partners in all stages, even up to major international projects.
When advising their customers, ING's TMT specialists also work closely with their colleagues from the ESG division, because the issue of sustainability is also gaining in importance in fiber optic expansion. Ultimately, supplying rural areas with fiber optics also strengthens social cohesion and reduces the infrastructural differences between urban and rural areas.