Dutch wholesale fibre: another lesson for Europe

During the last few years The Netherlands’ comprehensive DSL and cable networks have been supplemented with wide-scale fibre deployment. Much of this infrastructure has been based on proven municipal involvement as towns and regions endeavour to safeguard their ‘fast broadband’ credentials and thus secure and retain an edge in the competitive market for jobs and skilled labour.

The need for fast broadband has dug deeper into society, and now manifests itself in any number of ways. National and local governments have long seen broadband as a means to develop a variety of health, commercial and educational measures, while the construction sector has used its fibre infrastructure in certain new-build estates as a potent selling point. Financial commitments from KPN/Reggefiber, BBned and a number of municipalities have pushed The Netherlands to the forefront of fibre infrastructure in Europe. Indeed, The Netherlands is currently one of the few countries where genuine FttH is installed on a serious scale. By mid-2008 fibre accounted for about 2% of all broadband connections and by 2012 about 10% of all households are expected to be connected. Given the pace of KPN’s fibre roll-out, fibre penetration could reach 90-95% by 2020-2025.

Most activity is currently in Amsterdam (the Citynet project, nearing completion), Deventer, Almere, and Eindhoven. The recent decision by KPN/Reggefiber to invest €6-7 billion in a national FttH network within the next few years with further consolidate this lead. The country will become the regional benchmark against which other European operators and regulators will be assessed.

KPN/Reggefiber has also recently proposed offering wholesale fibre for between €12 and €17.50 per month. The price difference depends on the area type and CAPEX: higher cost areas would be more expensive to compensate for increased build costs. In effect, KPN as the first to roll-out infrastructure in certain areas will secure a strong market presence since it is unlikely that other operators will build duplicate networks. Nor will there be a need for duplication, since the regulator plans to manage KPN’s fibre in the same way as its does its copper network, enforcing safeguards on prices and ‘fair’ practices, and providing other operators with regulated access. In some respects KPN’s policy is to strike first rather than lose business to new entrants, as it accepts that it cannot compete with fibre operators in areas where it does not have a fibre network in place. Indeed the company has lost customers to UPC where UPC is present, mostly due to KPN’s inability to provide a competitive TV service.

The wholesale price suggests a retail price which would bring FttH in line with cable and DSL pricing and so provide the incentive for consumers to take up the service or switch from existing cable/DSL contracts. Given these conditions, the Dutch should see a rapid migration to FttH in coming years as areas are upgraded – KPN anticipated being able to fibre-enable 200,000 annually but could push this to a maximum 600,000 annually. The move has considerable implications for existing infrastructure since KPN would be in a position to mothball DSLAMs and much of its VDSL2 network.

It also should motivate, and educate, other European regulators and telcos, many of which continue to play cat-and-mouse on the appropriate regulatory conditions needed to progress with their own fibre deployments. BT, for example, proposed several months ago that it would provide fibre (FttC) to 40% of households. This in itself was always likely to be a second-best option, but at the close of 2008 there has been little progress: the company still lobbies Ofcom for greater control over wholesale access and pricing to make its investments in fibre worthwhile, and still talks of pulling the plug on the venture altogether (now with the added justification of the current economic climate) if regulators do not show greater cooperation. The pragmatic Dutch are simply finding solutions and moving on.

For more information, see separate reports:
Europe - Broadband Market - Overview & Statistics;
Europe - Infrastructure - FttH & NGNs.
Netherlands - Broadband Market - Overview, Statistics & Forecasts;
Netherlands - Key Statistics, Telecom Market & Regulatory Overviews;
Netherlands - Fibre-to-the-home Developments;
United Kingdom - Broadband - Fixed Network Overview, Statistics & Forecasts.

Henry Lancaster
Senior Analyst Europe
BuddeComm