Court decision threatens Liberty Global’s homespot plans in Germany

A court in Cologne, Germany has raised a serious concern about the use of homespots across Europe, and certainly the rest of Germany, deciding that Liberty Global’s Unitymedia has to get an opt-in for each of its homespot owners. So far it has relied on an opt-out process and prior opt-in attempts led to service penetration of only 5% to 10%.

It has been well understood for some years now, ever since FON invented the idea of putting a second SSID on a home gateway, that if you have to get each user to agree to open that SSID for public use, it makes the provision of homespot services virtually impossible across a large country like Germany. Deutsche Telekom has tried it and ended up with a tiny number in active use.

Liberty Global will appeal and it certainly should, because FON-style homespots, which rely on telco networks for the most part, have one key, significant difference from those deployed by cablecos like Unitymedia (and other Liberty subsidiaries around Europe).

Because the DOCSIS channels which reach each home are dynamically allocated, and they are not on the customer premises, they belong to the cable company, and they bring together multiple channels multiplexed to reach the customer’s advertised broadband bandwidth. The home gateway can annex separate and additional channels to support a second SSID, meaning that the customer is not deprived of any bandwidth to the home.

However, a judge might additionally point out that by sharing the WiFi of a home gateway with the in-home inhabitants, passing users may deprive home broadband users of WiFi capacity. Even this is stretching it a bit as there are software protections in place in all homespot designs to stop this from happening. In many cases if the home is using WiFi, the homespot can be turned off.

Liberty Global had promised to hit 10m WiFi access points in Europe by the end of 2016, but fell substantially short, and its last released figure was 7m, out of a potential total of aboutu 21m home gateways which it has deployed in Europe. Some home gateways, in particular those designed before 2009, are too old to have enough storage and processing power to safely support a second SSID.

This week, an initial decision by the consumer protection authority of North Rhine-Westphalia was upheld in the court saying that Unitymedia is not allowed to create public hotspots from customer routers without the customers’ express consent.

The company had sent a letter to customers last year saying it would start the ‘homespot’ service and their home gateway would be activated by default, unless they opted out. This same issue has held back Deutsche Telekom from creating second SSIDs on its home gateway network, with the added concern that users would have to share their bandwidth with passers-by, because most telco broadband offers far less capacity to the consumer home, and there is no easy way to add extra capacity without an upgrade.

Unitymedia said afterwards that it does not have to make changes to its practice immediately and complained that the judge did not take into account the fact that the customer would not suffer any impact on the existing Internet connection.

Rethink’s Faultline Online Reporter analysts have, in the past, estimated that Unitymedia would convert around 2m of its 3m broadband lines into homespots, but if this case is upheld, it will place a drag in Germany on the emergence of homespots, and in turn it will kill off the liberating effects of WiFi-first mobile operator services.

Free in France was able to steal away 13m mobile customers from rival operators by using this approach, driving pricing down for consumers. But if Liberty Global is forced to cut off those 2m homes from a second SSID service, it is likely that it will be unable to compete in cellular markets in Germany, and its European homespot population would fall to around 5m.