A Brief History of Everything Wireless

How Invisible Waves Have Changed the World


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The perils of being bold

2019-02-25 [Petri]

As I discussed in this blog entry, it looked very unlikely that United Internet would have entered the incoming 5G auction in Germany. The reason for their hesitation was the hard requirement for national coverage stated in the rules of the auction.

But to the surprise of many, they decided to enter the auction after all. This would be a positive move from the consumer point of view, as it would shake up the stagnant German operator space.

Unfortunately the stock market did not take this change of heart lightly: both the actual 1&1 Drillisch stock price and the stock price of the parent company United Internet have been in a classic waterfall move ever since the announcement in late January. Both have lost about 10% of their value.

The reason for this can still be found from the demanding coverage rules of the auction: 1&1 has so far been happily functioning as a virtual operator: it is therefore not investing in the actual network hardware. Instead, it “piggybacks” other operators' networks.

Although such arrangement at first may sound stupid from the underlying operator's point of view, it allows better utilization of their network equipment, especially in cases where the network has ample excess capacity that can be sold to the virtual operator. The operator that offers the physical network has already paid for all of the network elements: why not leverage it to the max by selling extra capacity out? As the network owner, it can still have the best control of the overall network performance.

But jumping from a virtual operator to a real one is the exact opposite: the expected investments for a country-wide coverage are calculated in billions of euros.

This is the simple reason why United Internet's stock is tanking in the short term: even if the transition eventually turns out to be a highly profitable one and provides full autonomy over the network configuration, it requires vast amounts of investment before the benefits can be reaped from it.

If Germany will see a new, real operator jump into the 5G game, it will be excellent news for the customers: competition is always good, both in terms of service quality and service pricing.

Permalink: https://bhoew.com/blog/en/64

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You can purchase A Brief History of Everything Wireless: How Invisible Waves Have Changed the World from Springer or from Amazon US, CA, UK, BR, DE, ES, FR, IT, AU, IN, JP. For a more complete list of verified on-line bookstores by country, please click here.


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