0 Fiber regulation and competing access networks 2 December 2008
Fiber to the home in The Netherlands WIK Conference FTTB/H in Europe 23 March 2009
Agenda Market update Consumer and roll out approach Ftth Open access Ftth
Market Developments Netherlands Broadband and Voice Broadband penetration 69% 73% 75% 58% 45% 27% 15% VoIP penetration 45% 36% 28% 9% IP-VPN penetration 5% 51% 57%60%65% 38% 24% 2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 2005 2006 2007 2008 2002 2003 2004 2005 2006 2007 2008
Single Access Market: TV Is Main Differentiator TV offer is leading consumers choice The Netherlands: consumer preference* when choosing a multi-play package service provider: 20% 4% 3% TV provider Internet provider Telephone operator *) Source: Ernst & Young market research: Bundle Jungle, October 2007 Strong position of analogue cable TV High Definition TV is coming A B C Advantages analogue cable TV No In house hassle (equipment en wiring is already there) incremental pricing of Digital TV No additional costs for additional TV sets. Cable companies sponsor HDTV of public broadcaster Start in spring 2009
Bandwidth Becoming Differentiator Too
Single Access: FTTH Provides Long Term Competitive TV Offer Development alternative TV platforms in NL 3) IPTV via FTTH Long term competitive offer High quality (HDTV) Multiple TV sets including analogue TV Grow % 2) IPTV via xdsl in house hassle Limited user experience with HDTV Maximum penetration technically limited at?? 2004 2010 2017 1) Digital terrestrial Short term TV proposition for mass market Growth will slow down Often complementary to analogue cable
Agenda Market update Consumer and roll out approach Ftth Open access Ftth
Cautious Approach to Ftth Phases Operational testing, commercial testing, scaling Local marketing Create appetite, work with stakeholders Spread the word: local information centers Visibility: digging in streets, sales push Goals Regain lines from cable Raise ARPU Raise customer life time value
Choices: Ftth Cooperation With Reggefiber Planned Joint Venture of KPN and Reggefiber for selective FttH- deployment 41% share Approved by Competition Authority Open network model in FttH KPN as active operator WBA; Reggefiber/KPN as passive operator Unbundled Fibre access
Choices OR? KPN Choice: P2P
Choices: Commercial Testing In 2x5 Cities Before Scaling FTTH city 1 Almere - Haven Commercial targets: 2 Son en Breugel Uden 3 Elburg 4 Homes Ordered Penetraton A D B 1 E 4 E 3 4 2 C 5 Haaksbergen 5 FTTC city A Zoeterwoude B Oosterhout NB- Centrum C Hengelo OV- Centrum D Roosendaal E Apeldoorn-Zuid ARPU Operational targets: First time right Process time
Agenda Market update Consumer and roll out approach Ftth Open access Ftth
Choices Made By KPN And Key Regulatory Decision KPN: pro-competitive access policy P2P technology Passive infrastructure provider functionally separated from active operator and Service Provider Open access model Key Regulatory Decision Where access is mandated, the pricing should take into account any higher risk and the need for the investor to recoup its investment through its revenues on the retail markets
Open network philosophy versus CATV businessmodel End user service provider service provider service provider Wholesale Broadband Access White Label services Active (wholesale) operator 1 Active (wholesale) operator 2 CATV operators Unbundled access Passive P2P FTTH network
OPTA policy guidelines Regulatory Principles are not limited to regulatory period Business case of SMP provider (including approved access tariffs) determines initial price cap Price cap will be corrected for inflation Internal Rate of Return will be judged by permitted WACC over all FTTH projects WACC takes account of additional FTTH risk and asymmetric regulatory risk Specialties: Strong incentive to keep on rolling out fibre in new areas Complicated access tariff structure creating some economies of scale, e.g., one off fees per customer, fees per area and per monthly rental fees
Regulation of fibre unbundling in NL 3 years regulatory period Commission (draft) recommendation for NGA access OPTA (draft) decision: SMP assignment and access obligation OPTA (draft) policy guidelines: long term principles for price regulation OPTA (draft) decision: approval of current tariffs of Reggefiber NMa judgement of Joint Venture KPN/Reggefiber
Summary Netherlands has fixed infrastructure competition Wireless development as yet unknown Ftth real option However, commercial success not yet proven Regulation acceptable risk for the time being KPN sponsors open access policy KPN very cautious going forward Managing expectations,
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