Skip to main content

Telecommunications Modernization Act - New Regulations For Building Networks and Implications For The Real Estate Industry

On April 22, 2021, the German Parliament (Bundestag) passed the “Telecommunications Modernization Act” (TKMoG), which will have a significant impact on the provision of telecommunications services to buildings and the connection of real estate holdings to modern telecommunications networks in Germany. Following approval by the Federal Council (Bundesrat), the Act is scheduled to enter into force on Dec. 1, 2021, with longer transitional periods for individual provisions.

The following provisions are particularly relevant for the real estate industry:

1. “Previous world” – abolition of Bulk invoicing, special termination right and opt-out

  • The apportionable charging to tenants of the running operating costs of communal antenna systems and cable-based coaxial cable or fiber-optic systems – including, in particular, the monthly basic fees for broadband connections – as operating costs under applicable tenancy law currently in force (so called Sammelinkasso“bulk invoicing” or “principle of apportionability”) is only possible until June 30, 2024. From July 1, 2024, only the electricity costs for these systems can be apportioned and charged as operating costs.
  • There is a special termination right for all existing concession agreements (Gestattungsverträge) or those still to be concluded by Dec. 1, 2021. The special termination right can be exercised for the first time with effect from July 1, 2024, but does apply if the parties to a concession agreement have not reached a separate contractual agreement covering the abolition of bulk invoicing.
  • Tenants additionally have an opt-out right for all telecommunications services provided under the respective lease. However, insofar as the costs for the respective services are currently invoiced as operating costs, the opt-out right does not apply until July 1, 2024. As a result, the opt-out right has no separate significance due to the simultaneous abolition of the principle of apportionability.

2. “Apportionability 2.0” – new options for refinancing fiber-optic investments

In order to promote the construction and financing of new fiber-optic networks, two new financing options are created: 

  • Fiber deployment fee: Building owners and network operators can agree on a so-called “fiber deployment fee” (Glasfaserbereitstellungsentgelt) to refinance the costs of deploying fiber networks. This fee is payable by the building owner to the network operator, may not exceed EUR 60 per year, and may be charged for a period of five years, in exceptional cases up to nine years. If a fiber deployment fee is agreed, the network operator that builds the network must make such networks available to other network operators free of charge.
  • Modernization levy: If the building owner installs a fiber-optic network within the property for the first time, this constitutes a modernization. The investment costs incurred for this can be passed on to the tenants as a modernization levy (Modernisierungsumlage) at the current annual rate of 8%. 

3. “DigiNetzG 2.0” - Statutory access Rights and new fee Standards for access to building networks 

For access to and shared use of building networks, the TKMoG contains a number of new obligations and fee standards that supplement or modify the access regulations introduced since 2016 by the so-called DigiNetzG:

  • Provision of building networks at the additional cost of use: The charges for shared use of existing building infrastructures and cabling are to be determined based on the additional costs incurred by the respective building owner or network operator as a result of shared use. This includes, for example, one-time costs for connection and disconnection, but not investment costs.
  • Consideration of investments for newly constructed building fiber networks: In contrast, a different cost scheme applies to newly constructed fiber building networks. Here, in addition to the additional costs, the investments made and the effects of shared use on the business plan of the building owner or network operator are to be considered. However, this extended cost scheme does not apply to newly constructed fiber-optic networks built by companies that are affiliated with the building owner. For these companies, only the pure additional costs (mentioned above) are to be considered; investment costs and interest are to be disregarded.

4. Initial assessment of the new regulations

With the TKMoG, the legislature has set the goal of promoting both service competition and fiber-optic roll-out. However, whether these goals will actually be achieved in the provision of services to buildings is doubtful, because the Act contains a number of legally and economically problematic provisions: 

  • Effective June 30, 2024, the politically controversial abolition of apportionability will require not only renegotiations and possibly also new tenders for a large number of existing supply contracts, but also extensive construction work within the next three years (e.g., in cases of a provider change or the construction of new networks). Not least because of the scarcity of construction capacity on the market, this short transition period could make it more difficult to construct new networks. On the other hand, the special termination right, which makes it possible to terminate existing concession agreements and thus avoids foreseeable legal uncertainty for many thousands of concession agreements, is welcome from the perspective of the real estate industry.
  • Whether the new fiber deployment fee will provide the desired investment incentives for the roll-out of in-building fiber networks is uncertain. For many network operators, the associated fee and time restrictions as well as the free-of-charge shared use option may be a reason not to agree on the fee.
  • In addition, there are considerable doubts as to the constitutionality of the regulations regarding the charging standards for the statutory shared use of building networks – here, the main requirements seem geared more to the interests of large telecommunications companies in using building networks as free-of-charge as possible than to practice-oriented differentiation and the necessary protection of investments.