To empirically assess the labour market effects of NGA network availability, I take advantage of the fact that most of the technologies currently used for the provision of speeds of at least 50 MBit/s require the installation of a local optical fibre network. This section illustrates the structure of these networks and provides a brief overview of the technical features that are most relevant for the identification approach described in the next section.
In Germany, telecommunication operators provide access to speeds of at least 50 MBit/s in downstream data transfer rates via different types of fixed and mobile technologies.
3 In a correction of a paper by Bai [2017], Whitacre et al. [2018] come to similar conclusions.
4 For more comprehensive reviews of the literature, see Niebel et al. [2016] and the Evidence Review
According to the Bundesnetzagentur, the vast majority of connections in this speed category is currently realised via very high-speed digital subscriber line technologies (VDSL) and
signal transmission over the cable TV network (CATV) [Bundesnetzagentur, 2018a].5 In
2016, these technologies accounted for a combined market share of 45% among all fixed line broadband connections (i.e., independent of bandwidth) whereas fibre to the home/building (FTTH/B) only made up less than 2% [Bundesnetzagentur, 2017]. At least partly, these differences in take-up also reflect disparities in regional availabilities. In 2016, only 7.1% of all German households had access to FTTH/B whereas VDSL and CATV were technically feasible for 28.3% and 63.5%, respectively [TÜV Rheinland Consulting GmbH, 2016].
In terms of NGA roll-out, VDSL and CATV offer significant cost advantages. In contrast to FTTH/B, the provision of speeds of at least 50 MBit/s based on both technologies does not require that each home or building is connected via individual optical fibre lines. Instead, VDSL and CATV facilitate signal transmission along the “last mile”, that is, between the households and the interface to the next layer of the internet architecture, based on pre- existing networks. While VDSL uses the copper wires of the public switched telephone network (PSTN), CATV is based on the coaxial cables installed for cable TV. As optical fibre lines usually have to be rolled out subsurface in Germany, employing these pre-existing infrastructures implies significant cost reductions. According to a report commissioned by the Federal Ministry for Economics and Energy, covering all German households with FTTH/B is estimated to cost between 85 and 94 billion Euros whereas using a mix of VDSL, CATV, and mobile technologies would only amount to 20 billion Euros [TÜV Rheinland Consulting GmbH, 2013].
Figure 2.2.1 illustrates the architecture of the two most commonly used types of NGA networks. To provide VDSL, the PSTN has to be changed in two central ways. First, the copper wires between the main distribution frame (MDF) and the service area interfaces (SAI) have to be replaced with optical fibre cables. Second, the digital subscriber line access multiplexer (DSLAM) has to be transferred from the MDF to the SAI. In combination, these two changes substantially reduce the usage of copper wires within the access network. Thereby, line loss is reduced and higher bandwidths become technically feasible. The bottom half of the picture illustrates a hybrid optical fibre-coaxial-network (HFC). Within this type of network, a process called “segmentation” applies a similar principle to increase the diffusion of speeds of at least 50 MBit/s. To segment the cable TV network, the cable company first installs a so-called “bypass”, that is, it supplies an amplifier with an optical
fibre cable from the hub.6 Consequently, this amplifier is converted into a fibre node. As
5 VDSL is defined according to the ITU-T G.993.2 standard, that is, “VDSL2”. 6 Hubs are often located in the same buildings as MDFs.
Figure 2.2.1: Network Architecture Used for VDSL and CATV Provision
Note: This figure illustrates the architectures of two types of NGA networks. In the upper panel, speeds of at least 50 MBit/s are provided via VDSL based on a hybrid network that combines optical fibre cables with copper wires. In the lower panel, speeds of at least 50 MBit/s are provided via CATV based on a hybrid optical fibre-coaxial-network.
the bandwidth of coaxial cables has to be shared among all connected users (that is, it is a “shared medium”), adding another branch to the tree structure of the cable TV network increases available bandwidths as less users have to share the same coaxial cable [Schnabel, 2015].
In general, segmentation does not represent the only way to increase the availability of speeds of at least 50 MBit/s via cable TV networks. Once the amplifiers of a local cable TV network have been upgraded to support a return channel, the provision of Internet services becomes technically feasible as data can be transferred up- and downstream.
Depending on the transmission technologies and standards7employed, the small line loss
associated with coaxial cables allows cable companies to provide download speeds of up to 100 MBit/s and more without necessarily having to segment the network. However, if the number of customers in a branch surpasses a given threshold and the increased demand for bandwidth cannot be compensated by expanding the frequency range, segmentation may be required.