Germany's dominant phone carrier Deutsche Telekom will spend 3 billion euros ($3.7 billion) on its fixed-line network in the next two years as it tries to halt a decline in market share at its cash-cow unit.
Deutsche Telekom said on Thursday it would dig up streets in Germany's 50 largest cities to bring fibre-optic cables to homes and offer transmission speeds of up to 50 megabits per second - fast enough to broadcast high-definition TV over the Web.
The new network, due to be in place in the 50 cities by 2007, is part of the group's strategy to offer "triple play" services that combine traditional phone calls with Internet access and entertainment such as television.
"Our vision is to give the customer access via one single line - our broadband connection - to the wealth of the multimedia world," said Deutsche Telekom's fixed-line boss, Walter Raizner, at the IFA consumer electronics show in Berlin.
Europe's phone carriers, including Deutsche Telekom and France Telecom, hope to lure customers to use fixed-line networks for more than just phone calls, as they lose revenue to cheaper competitors and price-cutting regulators.
"Despite the increased investment requirement of a fibre rollout, we view this as a proactive step to addressing competition in fixed line," said UBS analyst David Brundish in a research note.
Rivals, including Vodafone's and Telecom Italia's German fixed-line arms, have eroded Deutsche Telekom's lead in fast Web access over recent quarters, threatening the only growing part of its fixed-line business, T-Com.
Sales at T-Com, which still generates the lion's share of Deutsche Telekom's cash flow, fell 5 percent last quarter, partly because T-Com is forced to let rivals use its network at regulated prices that allow them to undercut the giant.
Chief Executive Kai-Uwe Ricke said the hefty investment in fibre-optics could not be recouped unless the company could keep the benefits to itself.
He called on the German telecoms regulator not to require opening the new, fatter communications pipes to competitors.
Deutsche Telekom, which is reintegrating its Internet offshoot T-Online International to improve its offering of bundled phone and Web products, will also launch a new phone that can make calls over both a mobile network and the Internet.
The "Dual Phone", available from the second quarter of next year, will work like a mobile while on the road and switch to a wireless Internet connection, to make cheaper calls, when one is available - bypassing the traditional phone system entirely.Small upstarts such as Skype have pioneered Internet calls, or Voice over Internet Protocol in industry lingo.
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