Saturday, March 17, 2007

Aussies and Kiwis sampling Dutch broadband (4)

On March 13, 2007 the Australian and New Zealand trade delegation had a day full of lectures. One of the lectures was about the future All-IP network of KPN and the regulatory challenges for the telecom watchdog OPTA.

The Netherlands is on top the listings concerning broadband penetration in the homes. And at a reasonable price due to the competition. Cable networks cover 94 percent of the country, while the telephone network covers 99 percent. The telephone network infrastructure is run by the incumbent KPN telecom company. Some DSL operators have their own networks, but 50 to 70 percent of the DSL operators have to rent local loops. There are 5 million broadband connections in the Netherlands of which 60 percent are DSL connections, of which 10 percent is non KPN, and 40 percent cable connections. There are about 40+ local initiatives with Fibre to the Home (FttH). There are now half a million homes connected with FttH, mostly student houses.

The environment in The Netherlands has grown competitive. KPN lost 0,56 million access lines last year. Voice over broadband overtook the plain old telephone system. Digital television is already in 25 percent o the 6,9 households. Triple play offers are made by the telecom companies like KPN and Tele-2, by the cable companies and by private FttH operators. Unbundling (ULL) has been operative since 2000 based on the principles of access, prices, transparency, non-discrimination, accounting and separation.

So you might think that the Dutch have it all under control. But KPN surprised the telecom, cable and FttH market in 2005 by announcing a national All-IP network. This would entail that the layer of all exchanges, including the rented spaces and equipment of the DSL operators, would be taken out and the fibre network will be linked to 28.000 street cabinets. The bandwidth would be upgraded to 50Mbps and up to 100 Mbps for business. KPN would make an investment of 0,9 billion euro. But the exchanges/MDF locations would give KPN a return of 1 billion euro. The roll out will start in 2007 and the network needs to be finished by 2010. For KPN it means that it can phase out the present technology, which is at the end of its cycle, and start competing with the cable operators.

The challenge for the regulator is of course in the fact that KPN start to dominate the playing field and starts changing the business cases of the DSL and FttH operators. The New Generation Network (NGN) requires another regulatory environment than the good old legacy regulation. Of course the NGN might also move to a duopoly.

The NGN is now under study with the telecom watchdog OPTA. Basic principle is that KPN has the freedom to upgrade the network and terminate the exchanges and MDF model. Replacing the MDF model would be a sub loop unbundling (SLU). But KPN has not yet suggested any rules or prices. OPTA hopes that the draft decisions are available by the second quarter of 2007.

The question was put in by some delegates why KPN would put in an All-IP network. Was it just replacing technology at zero cost or was it to shake up the competition in the telecom and sector? Not a few delegates and visitors were inclined to guess that it was the competition argument.

Blog Posting Number: 695

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