Federal Network Agency extends frequency usage rights by 5 years, provide negotiation requirement for 1&1
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The Federal Network Agency has confirmed that it is extending frequency allocation by 5 years.
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The extension provides a negotiation requirement for shared use of frequencies between established operators and 1&1.
“The Federal Network Agency has stipulated a negotiation requirement for the so-called cooperative, joint use of frequencies below 1 GHz in favor of 1&1 Mobilfunk GmbH . Wherever 1&1 Mobilfunk GmbH expands its network, the established network operators will in future be required to negotiate with 1&1 to a certain extent regarding the shared use of the crucial frequencies below 1 GHz,” the Federal Network Agency statement reads.
“These negotiations are to be conducted in a non-discriminatory and technology-neutral manner. The Federal Network Agency provides the parties with a benchmark in the form of specific provisions that serve as guidelines for effective negotiations,” said the statement.
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1&1 said that if it’s not granted access to the frequencies by January 2026, the Federal Network Agency reserves the right to enforce access, adding that only the three competitors will be at advantage position when it comes to the subsidy. It added that it’s reaching out immediately to established operators in order to avoid unnecessary delays in the negotiations.
“We are confident that this will be achieved and trust in fair offers as well as the support of the Federal Network Agency,” said CEO Ralph Dommermuth.
“However, it should not be forgotten that extending large portions of frequency licences effectively amounts to a one-sided subsidy for our three competitors. This must be offset, at the latest, in the next frequency allocation round with equivalent conditions for us as the fourth network operator, ensuring sustainable competition on a level playing field,” Dommermuth added.
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German Broadband Communications Association (Breko) criticized the negotiation agreement, saying the Federal Network Agency should have just introduce service provider obligations.
“Instead of practically useless ‘guard rails’ for the unsuitable negotiation requirement, the authority should have introduced a service provider obligation,” said Sven
Knapp, head of Breko -
According to a paper published at Wirtschaftsdienst (Economic Service) in November 2024, the negotiations will likely be tedious and lengthy and could lead to inefficient results. This include the fact that Federal Network Agency has not defined the fair price (hence parties have no incentive to reach an agreement at an early stage), asymmetric bargaining power (1&1 has special power since the frequency extension can be reversed if there is no agreement), and information risks.
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The Federal Network Agency says that if there is a dispute between 1&1 and incumbent operators, the ruling chamber will provide a resolution subject to Section 212 of the Telecommunications Act (TGA). § 212 TKG stipulates that the ruling chamber must decide on the dispute within a maximum of four months.
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Telefonica welcomed the extension but said it “lacks any factual and legal basis”. Deutsche Telecom said it’s disappointing that there are once again special rules for service providers and MNOs.
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According to Tagesspiegel Background, the guard rails introduced to help the likes of 1&1 are now stricter and more specific than in January i.e. it states that demanding excessive price is a violation of the obligation to negotiate and rigid contracts that don’t provide for conditions to renegotiate contradicts the principle of fairness and appropriateness.
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Freenet chief commercial officer Rickmann von Platen said the guard rails is an improvement of the original negotiation requirement but it doesn’t eliminate all of its short comings. He also notes that while the law provides for disputes to be determine within four months, they have often taken longer.
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1&1 shed around 2% following the news but later recoup the losses.
Assessment
The fact that Telefonica and Deutsche Telecom criticized the special rules for 1&1 indicates that they could be reluctant to negotiate. Even though the guard rails appear stricter and more defined, they still lack objective metrics like what constitutes a “fair price”. An offer price that is higher than the one deemed as fair could create negative consequences for the incumbent while a price that is too low will make the process unprofitable. As such, it is highly likely that the incumbent operators could derail the negotiations in order to use the offer price given by the federal agency. Given that the Federal Network Agency will first have to examine the terms of the offer and come up with what they term as fair, the process will likely be lengthy. Eventually 1&1 is likely to get access, but the path is unlikely to be smooth unless the Federal Network Agency intervenes early and decisively, which hasn’t been the case in the past.