At the end of June 2024, Germany will witness the termination of the 'Nebenkostenprivileg', a policy of the German Telekommunikationsgesetz (TKG), that has long allowed landlords to include cable TV costs in the additional expenses (Nebenkosten) tenants pay alongside their rent. Although planned since 2021, the deadline for tenants to arrange for their own cable TV contracts is now (right in the middle of the Euros!).
Here’s what to expect:
Increased Consumer Choice and Competition
The abolition of the 'Nebenkostenprivileg' will alter the dynamics of how broadband and cable TV services are offered and consumed. Tenants will no longer be automatically signed up for a specific cable TV provider chosen by their landlord. Instead, they will have the freedom to select their own providers. This shift will foster a more competitive market as providers vie for individual customers rather than securing bulk agreements with landlords.
Cable TV providers that previously relied on the bulk billing model might face challenges as the market adjusts. As brought up by the ‘Verbraucherschutzzentrale’ (a German consumer protection agency), Cable TV providers were opposed to this change and fear for lost revenue (source: https://www.verbraucherzentrale.de/wissen/digitale-welt/fernsehen/nebenkostenprivileg-das-bedeutet-die-abschaffung-fuer-ihr-kabeltv-53330).
These companies will need to rethink their business strategies, potentially shifting focus towards standalone internet services or bundling TV with broadband to retain customers. The end of 'Nebenkostenprivileg' could accelerate the ongoing trend of cord-cutting, as consumers opt for streaming services over traditional cable TV subscriptions. Alternatives like DVB-T2, IPTV streaming, satellite television but also the growing number of FTTP network operators are likely to see a boost.
Lack in Consumer Awareness
Consumer awareness for the change, despite the early announcement period, seems to be limited. A recent poll by streaming provider Zattoo and YouGov shows a worrying 34% of consumers unsure whether their TVs will remain switched on in July.
34% of German consumers are afraid their screens will go black in July. Source: https://zattoo.com/de/company/press/umlage-schwarzer-bildschirm
Unfortunately, such lack of awareness is common, as Point Topic (our parent company’s) own survey showed similar numbers in a poll on awareness with regards to “full fibre” tariffs (https://www.ispreview.co.uk/index.php/2023/03/do-you-have-full-fibre-broadband-a-third-of-uk-consumers-dont-know.html).
A sizeable market segment
According to Eurostat, Germany sits at the bottom end of the ladder when it comes to residents living in self-owned property, with 50.9% of residents being tenants. Of these, a large majority are living in so-called Mehrfamilienhäusern (apartment buildings).
A lot of Germans live as tenants. Source: https://ec.europa.eu/eurostat/cache/digpub/housing/bloc-1a.html
With 19.9m households in Germany and a standard Vodafone Cable TV package costing between EUR 6.99 and EUR 12.99 per month, we estimate this could open up a market worth EUR 722m and EUR 1.34 billion annually.
Standard Vodafone cable TV package, advertised on a Vodafone site raising awareness on the upcoming Nebenskostenprivileg change. Source: https://www.vodafone.de/digital-fernsehen/nebenkostenprivileg.html
Conclusion: A Catalyst for Innovation and Growth
The termination of the 'Nebenkostenprivileg' marks an important moment for Germany’s broadband market. While it poses challenges, particularly to traditional cable TV providers, it also opens up substantial opportunities for innovation and fairer competition.
For tenants, this change represents a step towards greater autonomy and better service quality. As the broadband market evolves, the ultimate beneficiaries will be the consumers, who can look forward to a more dynamic and customer-centric broadband ecosystem.
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