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In January and February O2 Germany and Vodafone Germany revealed their intention to offer subscribers specially designed boxes that provide broadband access via 3G for PCs and laptops in the home or office. Their services are respectively called Surf@home and Zuhause Web. By combining broadband with their tariffs aimed at capturing fixed voice minutes, O2 and Vodafone believe they can make fixed-lines superfluous. Although a number of end-users will seize the opportunity to use Surf@home and Zuhause to dispose of their fixed-lines completely, Pyramid Research analyst Joel Cooper asserts, “Do not expect a fixed-mobile revolution anytime soon. These services will have limited impact on the German telecommunications market” and will not lead to widespread substitution of fixed-lines for two key reasons.
Firstly, with a downlink speed of 384 Kbps Surf@home and Zuhause Web cannot match the bandwidth of DSL. Using wholesale products from Deutsche Telekom, German ISPs can offer subscribers three DSL speeds: 1 Mbps, 2 Mbps and 3 Mbps. Alternative telcos utilizing local loop unbundling, such as HanseNet, offer speeds of up to 5 Mbps. Secondly, we believe the pricing of Surf@home and Zuhause Web is not attractive enough to secure a price advantage over DSL. 2004 saw the price of DSL tariffs spiral downwards as ever more ISPs sought to differentiate on price. Price pressure has continued into 2005 and although showing some signs of slowing, on the whole looks set to continue throughout the rest of the year. In addition to competitively priced tariffs, the attraction of entry into DSL has been boosted by ISPs waiving one-off connection charges and providing DSL modems for free.
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