Launch in mini format: 1&1 releases its cell phone network

Telecommunications - Launch in mini format: 1&1 releases its cell phone network

After a significant delay in its expansion, the fourth German mobile network is finally ready to go live. Telecommunications provider 1&1 plans to officially launch its mobile services at a ceremony in Montabaur on Friday afternoon, with Federal Minister of Transport Volker Wissing (FDP) expected as a guest. The network initially only exists in mini format: at the end of September, 60 antenna sites were ready for cell phone connections, with 200 to be activated by the beginning of 2024. The network will operate in cities such as Montabaur, Düsseldorf and Frankfurt. For comparison: O2 has more than 28,000 sites nationwide - so 1&1 still has a long way to go.

So far, there are cell phone networks from Deutsche Telekom, Vodafone and Telefónica Deutschland (O2) in this country. New customers are connected to the O2 network wherever 1&1 has no antennas - i.e. in the vast majority of areas in Germany. Existing customers, in turn, are connected to the O2 network anyway, as the company was previously only active as a virtual mobile network operator. Capacities were therefore leased from the competition for the company's own business, primarily from O2.

Auction participation worth billions

In 2019, CEO Ralph Dommermuth decided to set up his own network in order to be able to compete on equal terms with the three established mobile network operators Deutsche Telekom, Vodafone and Telefónica Deutschland(O2). At that time, 1&1 bought frequency usage rights at auction for the first time for around 1.1 billion euros. In addition, there are expansion costs - all in all, 1&1 is planning to spend five billion euros on the network project by 2030.

For those who are already 1&1 customers, nothing will change initially. Although new customers will have access to the antennas when the network is launched, the existing 12 million or so contract customers will only be gradually transferred to the new network by the end of 2025. In summer or fall 2024, a Vodafone contract for national roaming, i.e. a wireless connection away from 1&1 locations, will also come into effect. In simple terms, this means that where it says 1&1 today, there is a lot of O2 inside. And in future there will be a lot of Vodafone inside.

1&1 relies on an open radio access network (Open Ran). This concept is also seen as having great potential by the competition: In contrast to the closed systems used by the industry to date, which are tied to individual manufacturers, standards and interfaces are open with Open Ran. This means that components from different companies can be used. The innovative network should have a very low response time (latency).

Positive consequences expected for consumers

Transport Minister Wissing sees the launch of 1&1's cell phone network as positive. "The market entry of a fourth network operator is very good news for consumers and companies," he says. "It means more choice, better network quality and attractive prices." He expects the expansion of mobile networks to receive an additional boost.

Consumer advocates are also pointing their thumbs up. "Although the existing networks of the three providers are constantly being improved and made more powerful, consumers are still faced with dead spots and, more recently, slightly rising prices from some providers," says Felix Flosbach from the NRW consumer advice center. "The launch of another network can lead to new competition in an established market, which can result in better networks and lower prices for consumers."

Jens-Uwe Theumer from the comparison portal Verivox says that the fourth network operator will bring a breath of fresh air and more competition to the market. For a long time, there were four cell phone networks in Germany, but O2 and E-Plus merged in 2014. Now the number of mobile networks is back up to four. "For almost ten years, there were three providers of roughly the same size who had no interest in major upheavals," says industry expert Theumer. "1&1 is now breaking that up." The market will become more dynamic, with more choice for consumers. "This is highly desirable: Germany is currently the third most expensive provider for mobile internet in Europe, with an average gigabyte price of €2.50."

Expansion has been slow so far

Network expansion has not been a success story for 1&1 so far. According to a government regulation, the company should have activated 1,000 5G sites by the end of 2022, but only five were activated. 1&1 justified this with delivery difficulties from expansion partners. The company is facing a fine from the Federal Network Agency due to the delay.

In order to comply with another regulation, 1&1 had put its few antennas for a landline replacement product into operation almost a year ago: Households near the sites were able to get mobile telephony and therefore did not need a landline contract. However, anyone walking past the antennas with their smartphone was not connected. The mobile network launch was initially planned for the summer quarter of 2023, but was then postponed. Now the time has come.

Looking ahead

After the difficulties, the expansion is set to pick up speed in the coming year. According to the requirements of the Federal Network Agency, the company's antennas must reach at least 25 percent of German households by the end of 2025 and at least 50 percent by the end of 2030. The remaining households are to receive coverage via roaming.

The question of whether another mobile communications auction will take place next year is also extremely important. This is because the company has only used frequency blocks in two radio bands to date, but additional blocks in other bands are required for an optimal nationwide network. This is why 1&1 wants to buy more. According to preliminary plans by the Federal Network Agency, however, the auction is to be canceled and existing usage rights are to be extended - 1&1 would then be left out and the current top dogs Telekom, Vodafone and 1&1 would be strengthened. These plans by the authorities are viewed very critically in Montabaur.