German Court upturns Homespot rules, Unitymedia ponders options

A court in Cologne, Germany has raised a serious blocking 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 lead to only 5% or 10% service penetration.

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 say it’s okay, 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 of Community Hotspots or Homespots.

Interestingly Liberty Global will appeal and it certainly should, because FON spots which rely on telco networks for the most part, and those delivered over cable, have one key, significant difference.

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 most instances. In many cases if the home is using WiFi, the Homespot can be turned off.

Liberty Global had promised to hit 10 million WiFi Access Points in Europe by the end of 2016, but fell substantially short, and its last released figure was 7 million, out of a potential total of Home Gateways in Europe, of around 21 million. 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 last year saying it would start the ‘homespot’ service and their home gateway would be activated by default, unless customers opted out. Ironically this same concern 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, frequently less than consumers have been promised, and there is no easy way to add extra capacity to what is currently delivered.

Unitymedia said afterwards that it does not have to make changes to its practise 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.

At Faultline Online Reporter we have, in the past, estimated that Unity Media would provide around 2 million of its 3 million broadband lines operating as hotspots, and 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. Ironically Free in France was able to steal away 13 million mobile customers from rival operators by using this approach, driving pricing down for consumers. There it is seen to be a good thing.

If Liberty Global is forced to cut off those 2 million homes from a second SSID service, it is likely that it will be unable to compete in cellular markets there, and its European Homespot population would fall to around 5 million.

In our opinion this legal challenge would be unlikely to work in most countries in Europe, but it is not entirely peculiar purely to Germany, as Austrian and Swiss law is very similar. We also suspect that the European Commission might be convinced to intervene on behalf of Liberty Global on the basis of promoting cellular competition in Germany.

Already in Germany other operators including Vodafone, and its cable operator Kabel Deutschland as well as Tele Columbus and Primacom have all used the same opt out process to build Homespot communities and if this court decision persists, it will severely disadvantage users throughout Germany.