But why couldn't DB Netz do both people and freight, if both are profitable (after subsidies for passenger traffic)? i.e. why does it have to be a choice?
Germans, in my experience, tend to be pretty rational folks. As much as the public likes to ream the decision makers for poor choices while armed with the perfect clarity of hindsight, my guess is they've gotten to this point because all the other choices seemed worse at the time they considered them.
However, other comments suggest that freight needs _slow_ speed and must avoid tunnels. Maybe that's the reason?