Domestic Property - Tenants' TV expenses to face elimination of "service charge privilege"
In the coming weeks, a law will lapse that previously permitted renters to pay for their television connections through their rent. This development could leave millions of tenants in Germany in a predicament, as they'll need to sign their own deals to continue watching TV. Here's a breakdown of the situation.
What's Happening?
For almost four decades, there was the "neighborhood privilege," commonly known as the "exemption from charges." Renters paid for the TV signal of cable TV via their rent, making it convenient, particularly since the monthly payment was quite affordable, typically a single-digit euro amount.
The rationale behind this was that every renter in the building contributed to the joint contract, and the property owner received a substantial group discount. However, not all renters wanted to take part - some preferred saving on cable expenses.
What's Changing?
Starting in July, landlords will no longer be able to pass on TV costs. Renters who have been paying for TV through their rent will now need to find their own solutions. Possible alternatives to cable providers Vodafone and Tele Columbus include online services like Deutsche Telekom's Magenta TV, as well as antenna TV and satellite dishes - if their landlord agrees to accommodate them on the balcony or rooftop. The renter has to arrange their own contract or join Vodafone's new structure, where the renter can participate in the contract but is not obligated to - they pay for the TV separately.
Will My TV Go Off if I Don't Act?
Nope. The television signal won't suddenly shut off simply because the landlord's group contract is no longer legally valid. However, the providers are applying pressure.
According to Germany CEO Marcel de Groot: "We're making every effort to inform tenants about the upcoming legal change and will try to contact them multiple times." He adds, "If tenants opt against cable TV despite multiple attempts to contact them, we will disconnect the connections." The same goes for Tele Columbus with the brand Pyür: they'll make numerous attempts to reach out and only then disconnect the signal.
How Many Renters Haven't Decided What to Do?
Previously, about 12 million renters were affected by the neighborhood privilege; however, the number is likely to decrease now. Many landlords have already terminated their group contracts and informed their tenants that they must fend for themselves or join new contract structures. According to a Yougov survey conducted on behalf of the price comparison portal Check24, around 30% of renters haven't yet determined how they want to watch TV in the future. The survey was conducted at the end of April.
How Does This Impact the Companies?
Vodafone and Tele Columbus, being cable providers, are now facing keen competition. Companies like Deutsche Telekom, Waipu, and Zattoo are eager to seize the opportunity now that the neighborhood privilege obstacle has been removed. Vodafone, ahead of the pack, will have to bear some losses. In the first quarter of 2024, its TV customer count dropped by 650,000, reaching 11.8 million. Nearly two-thirds of those losses were from renters affected by the neighborhood privilege, and the rest came from homeowners and renters with their own TV contracts.
Vodafone and Tele Columbus are trying to make the most of the unfavorable situation and retain their customers by offering enticing deals. They're initiating discussions and will also sell internet packages along with TV deals. These combinations are more cost-effective for consumers than separately booking cable TV and the internet.
Is Deutsche Telekom the Sole Victor?
Indeed, Telekom is undoubtedly one of the winners in this new regulation, even though their gains so far have been minimal. In the first quarter of 2024, Telekom added 126,000 customers to its Magenta TV, reaching roughly 4.4 million. Considering Vodafone's significant losses, this increase appears relatively weak.
Telekom CFO Christian Illek explains, "Cord-cutters," or those who abandon cable, are partly responsible for the decline of the television market. These individuals have opted to no longer have TV, relying solely on streaming offers instead. Although some streaming apps are free and public-broadcaster channels like ARD Mediathek can be watched free of charge, the overall market is shrinking.
Will it Be Costlier for Renters Who Want to Watch TV?
Probably, though the increase may be minor. Vodafone's costs were around seven to nine euros per month before January 2024, and now there's a range of about eight to ten euros under a new deal that includes a specific number of participants.
Alternatively, if there's no framework deal in place, renters must pay roughly 13 euros a month to Vodafone as an individual customer. The cheapest plan at the streaming provider Zattoo costs €6.49, while at Waipu it's €7.49. To access either online service, a separate internet contract is necessary, which may already be covered by Magenta TV from Telefonica.
What Do Consumer Advocates Think?
Consumer advocates generally endorse the end of the sidecar privilege, as renters now have more independence in their television usage. However, they caution against aggressive salespeople who try to coerce tenants into signing contracts.
"Occasionally, it's made to seem that if a renter doesn't sign the contract immediately, they'll lose their TV and internet - however, this isn't accurate, as they can sign it later and gather information elsewhere," explains Felix Flosbach from the Consumer Center NRW. The consumer centers receive frequent complaints about this deceptive sales technique used by door-to-door salespeople.
Read also:
- Many tenants in Germany, currently benefiting from the "neighborhood privilege" with German Telekom's Magenta TV, may find themselves in a quandary as this exemption from charges will cease to exist.
- With the lapse of the law, cable providers like Tele Columbus and Vodafone will face increased competition from online services like Zattoo, especially since renters will need to secure their own TV contracts.
- As of July, renters who have been paying for their TV through their rent will need to opt for alternative solutions, which might include online streaming services, antenna TV, or satellite dishes, depending on their landlord's agreement.
- According to some landlords, the number of renters affected by the neighborhood privilege is likely to decrease as they terminate their group contracts and encourage their tenants to seek individual solutions.
- Deutsche Telekom, anticipating the change in regulations, hopes to capitalize on the situation by offering enticing deals, aiming to lure potential customers from providers like Tele Columbus and Vodafone.
- Regarding the impact on companies, Vodafone sustained significant losses in its TV customer count, mainly due to renters affected by the neighborhood privilege, and is now trying to retain its customers by offering attractive deals and including internet packages in its TV deals.
- The end of the neighborhood privilege also applies to renters in Munich, and while the cost might increase slightly, options like Zattoo offer affordable plans compared to individual plans from traditional cable providers.
- Consumer advocates, while approving of the end of the sidecar privilege, have encouraged renters to be vigilant against aggressive salespeople who might try to pressure them into signing contracts immediately, using misleading information about potential service interruptions.
