Issue: 39/08

Broadband in The Netherlands Paul Budde Report

October 8, 2008

Cable competition started the broadband campaign
For several reasons I have been reporting for more than a decade on broadband developments in The Netherlands. Notwithstanding that I was born there and therefore still have strong links to the country, the way things are done in The Netherlands is often very different to the way they are done in larger countries. So, in a practical sense, developments in The Netherlands are often more relevant.

By the end of the year six million households will be connected to broadband, giving a penetration of 90%. Either at home, at school or at work, 85% of people now have Internet subscriptions.

The dynamics of the broadband industry are mainly driven by competition, and this has more to do with good fortune than with clever policy-making. The Netherlands was among the first in the world to move to cable TV, mainly to reduce the antenna forest that was emerging in the 1960s in this densely populated country. By the late 1990s the cable TV market became a strong competitor of the telco incumbent KPN. Cable took the lead and rapidly had a larger broadband market share than KPN and its ADSL resellers.

Fibre also driven by competition
For the first five or six years cable was at the forefront of the technological advances which drove the market for higher broadband speeds. However, the telcos started to catch up and with ADSL2+ they have taken over the lead with a 60% broadband market share.

Stimulated by competition, by 2005 the first 25% of broadband users had already moved to 4Mb/s. These people are now using 20Mb/s services. This need for speed stimulated further investments in high-speed broadband networks. Where other incumbents around the world were and still are balking at business models for these high-speeds services, the Dutch are simply lapping them up.

Continuous upgrades to this process have been fine-tuned. Often it simply involves changing the modem and/or a PC card.

However, cable has been fighting back: in 2007 the cablecos collectively added more customers than all xDSL services providers, for the first time since 2002. The two leading operators, UPC and Ziggo (a merger between Multikabel, Casema and @Home) have invested 5 billion over the last five years in network upgrades and expansion. While I was in The Netherlands, UPC launched its 120Mb/s service (previously the top speed was a commendable 24Mb/s), while data rates of 160Mb/s or above are also on the cards. However, the telcos are claiming that they will be the long term winners: when GlasvezelNet (FibreNet) Amsterdam offers a commercial 1Gb/s service from 2010 onwards, fibre based competition is going to drive broadband to new heights.

Exhibit 1 - Broadband price examples
Services and monthly cost
• A 4Mb/s service from the incumbent KPN cost 17.50
• For 24.95 CompuServe offers a 20Mb/s, including free telephony
• A cable broadband service of 60Mb/s including free telephony costs around 60
(Source: BuddeComm)

Fibre penetration in 2020 at 75%
As fibre roll outs are only just beginning, the current penetration rate of 1.4% is still low. It is expected that this will rise to 8% by 2011 (700,000 subscribers), and that by 2020 about 75% of all households will be connected to fibre.

Dozens of new projects have followed the successful trial project launched in 2005 in Nuenen in the southern province of Brabant, and which BuddeComm visited in 2007 during the Broadband Mission.

However this is no longer driven by regional companies or municipalities but by the incumbent, and a competing fibre optic infrastructure company Reggefiber, which KPN recently bought a stake in. Interestingly, the major developments are taking place in the more regional eastern provinces of Gelderland and Overijssel. As soon as there is a market indication that 40% of households are prepared to move to fibre, new fibre networks are rolled out in those towns and suburbs.

ADSL is the big loser
While ADSL still holds the largest market share, it looks like that it will rapidly lag behind in coming years. The highest DSL speed is 24Mb/s and is limited to a 4.5 km radius from the telephone exchange. Because KPN is committed to its fibre rollouts, replacing ADSL with VDSL (32Mb/s) will only be an intermediate step. However, as mentioned above, KPN will take a decade or more to reach the same areas currently held by ADSL.

In trying to keep up with high-speed demand, SVDSL is now also selectively available, offering speeds up to 60Mb/s. However, these higher-speed DSL services are only available to people who live within 1.5 km of the exchange.

Apart from KPN, which delivers about 72% of all ADSL connections either directly or through wholesale arrangements, the leading ADSL providers in the country are BBned, Alice, Tele2, and T-Mobile’s Online.

Commercial drivers
It is obvious that under a commercial regime, entertainment based services are driving the roll-out of these services. As elsewhere, e-health, tele-education and smart grids are still in their infancy and it will require more concerted government effort for them to get them off the ground. Despite some early initiatives, government bureaucracy is hampering a more rapid introduction of these services.

However, because there now seems to be too many commercial operators speeding up the roll-out process, the call for these social services has diminished. But in the background there is progress: there is general acknowledgement that broadband and next generation telecoms are needed to solve some of the problems in the delivery and quality of these services, and in particular the healthcare service.

Exhibit 2 - Key service drivers of high-speed broadband
Services
• Movies
• Online Gaming
• Legal and illegal peer-to-peer networks
• Social networking
• HDTV
(Source: BuddeComm)

HDTV is becoming more popular. Last year a 25Mb/s service was needed to deliver HDTV. Now, thanks to new compression technologies, this can be provided over a 4Mb/s service.

In general the key overall user applications are:
• Searching;
• Email (with attachments);
• Maps and Music;
• Chatting;
• VoIP;
• Designing web pages.

For more information, see separate reports:
Netherlands - Broadband Market - Overview, Statistics & Forecasts;
Europe - Broadband Market - Overview & Statistics;
Benelux - Major telecom players.
Europe - Convergence - Triple play and Digital TV;
Netherlands - Convergence - Triple Play & Digital TV;
Netherlands - Digital Media Developments.
Netherlands - Fibre-to-the-home Developments;
Europe - Infrastructure - FttH & NGNs.

Comments from an INTUG member in the Netherlands on their day to day experience – access is fine but it doesn’t mean your day to day problems are over!!

In Holland is we have 95% access to simultaneously cable, the former incumbent network and mobile HSDPA. Cable is now offering 60 Mbps, twisted pairs 40 Mbps and HSPDA up to 4 Mbps. And some are talking about WIMAX!! Our NRA believes we have a perfect service!! However, we have other problems such as: - I cannot move my two ISDN numbers to the cable company. So I am stuck with ISDN although I have ADSL with VoIP on top of it! Our NRA says we have number portability but their yardstick is the single consumer number. The word “business or even SME” is something they don’t know. - When I have access to Internet via Vodafone HSPDA I cannot synchronize my Outlook e-mail (which is on a Tiscali server) - When I have access to Internet via T-mobile HSDPA I cannot synchronize my iPass account! - When I have access to my iPass account I can send/receive but not reply on e-mails! However, when I am on analogue dial-up I can do everything but very slow. So access is fine but that does not mean your problems are over! They may just start once you have broadband access. Please take my advice: inform those in Australia that do not have broadband to adopt a Google e-mail address as soon as possible and to use that for when they get broadband access. This will save a lot of problems.