The (German) Housing Industry In Transition


V. Kaiser, A. Köhler & O. Soellner

The topic of the housing industry has been on our minds for some time now. In the following article, GUTJAHR and HPP, in cooperation, point out existing challenges for network operators, solution providers and housing industries and provide approaches for a strategic reorientation.

Based on global economic developments detached from the Corona pandemic, changed customer needs with regard to telecommunication services as well as legal innovations in the context of the German Telecommunication Law amendment “TKG Novelle”, both housing industries and telecommunication providers must strategically reposition themselves.

Increased bandwidth requirements in times of home offices, the trend of TV consumption via streaming services and the reduced demand for linear TV services form the basis for strategic realignments on the part of network operators, solution providers and housing industries. Previous business models must therefore be reconsidered and new options for action evaluated with regard to future market developments.

The upcoming changes in the Telecommunications Act on 1 July 2024, after the end of the transitional period (discontinuation of the apportionability of operating costs for in-house cable networks and basic fees for cable retransmission) pose challenges and questions for network operators and solution providers with regard to TV supply in the housing sector.

The housing industry fears a price increase due to the upcoming changes in TV supply for their tenants. Solution providers sense new opportunities to offer new products and higher-quality content, and tenants will use the new freedom in product and provider selection to find the best product and price-performance ratio for their needs.

No alt text provided for this image
Fig. 1: Tension triangle telecommunications solutions for housing industries 

As of today, the billing of TV services via the (rental) service charges in the so-called collective collection is the most common way of billing in the housing industry and affects approximately 12 million tenants in Germany. The provision of TV services as part of the basic TV supply (mostly cable TV) is mostly done through long-term contracts between service providers and the housing industry.

Many tenants are still not aware and have little transparency as to who the provider of their TV product is and what they, as tenants, pay for the service via the service charge bill. This will change fundamentally in the next 1.5 years. Until then, the costs must be made transparent to the tenant by the previous contractual partner. The tenant then has the choice of continuing to use the existing TV supply channel and entering into a direct contractual relationship in individual collection, or cancelling and switching to an alternative provider of their choice.

On closer inspection, the customer approach and future marketing of TV services in the housing sector is not trivial. Taking data protection into account, the customer approach must take place within the narrow legal framework. What is supposed to create transparency and end-customer protection raises many questions regarding customer communication and marketing (addressing tenants, contractual design, terms, …). Network operators must support their customers from the housing sector in these aspects and provide customised solutions depending on the size and business model of the housing sector in order to enable the best possible communication. In particular, cross-interface and transparent end-customer communication across the entire customer journey is considered best practice.

With regard to the product offer, it depends today on what the housing industry (housing association, housing community / administration or similar) has agreed with its network operator. What the network operator can provide technically, functionally and in terms of broadcasting rights still defines the TV offer in the property in many places. It is not uncommon for tenants to additionally book OTT products or IPTV services with their internet provider in order to be able to use TV with modern functions, access to on-demand content and pay TV.

From the end customer’s point of view, however, the usage habits and thus the requirements for a TV product have changed dramatically in recent years and often go far beyond the functional scope of a basic TV supply product.

As the current Digitisation Report 2022 (published by the German Media Institutions) shows, user behaviour is constantly changing. Whereas a few years ago programmes were almost exclusively consumed according to the programme schedule, today on-demand and streaming are much more in the focus of customer interest. Media libraries and on-demand services of the broadcasters (ARD-Mediathek, ZDF-Mediathek, RTL+, Joyn, etc.) make content available to the customer on a time-shifted basis and, in addition to the popular streaming services (Netflix, Amazon Prime, Disney+ & Co.), have ensured that by 2022 almost 1/3 of all TV content was used on a time-shifted basis. According to forecasts, the trend towards on-demand will continue in the next few years, especially among the age groups between 14 and 39, and will be reinforced by the non-linear functions now available from public and private broadcasting groups as well as the growing number of streaming services.

In addition to the trend towards on-demand use, forecasts indicate that usage is shifting more and more from the living room, where highlight events are consumed with the whole family (relevant in the future for sporting events, live events, blockbuster films), to apps on the smartphone, tablet and other streaming devices, which want to be used everywhere in the household and differently by each family member.

The change in user behaviour, the trend towards streaming services and the increasing spending on content (on average, every household nowadays uses two streaming services) is already having a noticeable impact on network operators and solution providers.

New trends and usage habits in the TV segment bring with them other aspects that require network operators to adapt their product offerings. First and foremost, there is the availability of a high-performance IP connection (e.g. via fibre optics) which, with sufficient bandwidths, makes the “new kind of television” possible at all. Depending on the number of end devices and persons in the household, the target groups must be optimally supplied. Bundle offers with bandwidths from 100 MBit/s, in combination with on-demand offers or subscriptions to the popular streaming services, offer a fully comprehensive product package that also addresses the interests of the younger target groups.

Analogue to the alignment of products to increasing customer needs, network operators should also simplify the use of various content offers in order to make them attractive for a majority of the target groups and to make advance payments with regard to content contracts/rights. Solution providers, on the other hand, face the challenge of implementing the broadcasters’ complex set of rules (which content may be made accessible when, how, where and with which restrictions), making the innovative functions easy to use and making the “content jungle” easy to navigate and experience for the end customer via search, recommendations and watch lists.

No alt text provided for this image
Fig. 2: Use of moving images by target group

The change in use is driven most strongly by the younger age groups, but is not progressing nearly as fast among older tenants. Older users already find it difficult to get to grips with a new television, a different remote control or a new operating concept. For these age groups, in contrast to younger users, continuity is more in demand, which poses some challenges for solution providers today and also in the future in order to master this balancing act between different customer requirements and to be able to serve all customer needs with a modular, flexible product concept and to be able to adapt to change.

The strategic and product-related challenges for housing associations and network operators outlined above provide an insight into current and future issues that will be of interest to all market participants in the course of the TKG amendment.

HPP and GUTJAHR have already answered a wide range of questions in this context together with our customers and would also like to help in the future so that all parties can shape the change positively for themselves.