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The NUS Consulting Group’s 2009-2010 International Electricity Report and Cost Survey provides an annual update on what is happening in this industry, as well as comparative movements in worldwide prices.

This year’s benchmark reveals interesting developments in the world’s electricity industry as all countries in the survey, other than the USA, have reported pricing increases. This survey focuses on delivered prices, which include commodity price, transmission and distribution costs, standing charges and other taxes and imposts that a user has to pay in the delivered price.

Much of the world community has embraced the concept of deregulating electricity supplies which has led to increasing price volatility as the cost of commodity inputs to generation – i.e. coal, oil and natural gas – has risen.

Italy maintains its top position in a pricing comparison as the country with the most expensive delivered electricity price.

During the period under review there was a weak rebound in underlying demand for electricity as the fiscal stimuli took effect in Western economies but the high level of demand destruction witnessed during the preceding 12 months has provided some spare generation capacity to absorb the increasing activity.

Rising oil prices lifting power prices

Since the last survey, the price of Brent crude – the benchmark for European oil prices – rose from the low $50s per barrel in May 2009 to the high $80s per barrel in May 2010, which partly reflected a recovery to an equilibrium pricing from the lows experienced in January 2009, as well as reflecting the weakness of the US dollar during this period. In addition, the €/$ cross rate from January to May 2010 fell from around 1.45 to 1.22 in response to the European Union (EU) credit crisis. These factors explain the lift in electricity baseload prices across Europe from April 2010 after they had generally drifted down through most of the previous year.

One of the more interesting points to arise from the study is that of the 15 countries surveyed the rankings of the top nine (most expensive) and bottom three (least expensive) stayed the same, with only marginal jostling for position between Finland, Sweden and France.

Table 4- Survey of top 15 countries based on prices as of 1 June 2010

(Source: The NUS Consulting Group International Electricity Report and Cost Survey 2009/2010)

The survey is based on prices as of 1 June 2010 for the supply of 1000kW with 450 hours use. For deregulated supplies, 1 June contract pricing was obtained during the week of 26 April 2010. All prices are is US cents per kWh and exclude VAT. Where there is more than a single supplier, an unweighted average of available prices was used. Where available in each country and widely used by the consuming public, deregulated or liberalized contract pricing was used in this survey. The percentage change is calculated using the local currency in order to eliminate currency movement distortion.

In Europe, Finland experienced the largest single-year increase in electricity at over 20 per cent, while Italy had the second largest year-on-year increase at 8.7 per cent, guaranteeing its position as the most expensive surveyed country. Of interest is that most countries in Europe reported lower commodity prices for electricity, but recorded overall increases mainly because increased costs for transmission/distribution, or increased taxation for supply.

South Africa reported a 32.8 per cent rise in its electricity pricing over the past year. While their country retained its position as the lowest-cost nation in terms of electricity pricing, South Africans are now reeling from two consecutive years of rises, topping over 30 per cent per year. Most analysts, including NUS Consulting, expect this trend of price increases to continue for many years to come.

In North America, Canada remains one of the lowest cost surveyed countries in terms of electricity pricing, with only Australia and South Africa recording lower costs. The United States witnessed a slight decrease in pricing over the survey year making this the second consecutive year electricity prices have declined.

Exhibit 1 – Summary of FttH network operators

(Source: Stephen Davies)

Note: Operating model – vertically integrated (VI); open access (OA).

The ICT industry will play a key role in dealing with problems such as global warming and saving energy. Simply by making processes and systems more efficient, savings will naturally start to occur. Furthermore, by giving the end-users more control we will see an increase in energy efficiency.

Once the utilities are able to provide that level of decentralisation – with end-users increasingly taking charge of their own energy management – a large number of energy efficient devices and management tools will flood the market. Among many others, companies such as Google, Microsoft and Cisco are all vying for this market. Their products and services will be eagerly pursued by the users, partly because there is an overwhelming willingness to address the environmental issues we are facing as a community, and partly because energy prices are only going to rise and customers will be looking for products and services that will allow them to maintain the lifestyle they want, within their budget.

There is demand, but it could take years with the current level of progress before the supply side will be ready to deliver.

We are already seeing that environmental awareness is proving to be a major driver for the greening of the ICT industry. Data centres are among the industry leaders in launching a major greening campaign, not only for altruistic motives but also because they are major users of electricity which is becoming an expensive commodity.

Interestingly, desalination plants are going through a similar rapid development for the same reason, supported by R&D which is now suddenly becoming available to make their plants far more energy-efficient, a process that will be completed within the next 5-10 years.

While criticism has been levelled at countries such asIndiaandChinaregarding their enormous use of rapidly depleting (and polluting) fossil energy sources, these countries are actually among the biggest investors in alternative energy sources such as solar energy and biofuels. These countries, and most probablyBraziland perhapsRussia, are going to be key players in this market over the next decade.

Broadband will also be a major contributor to addressing the many problems we are facing as a result of a rather wasteful and inefficient period of global growth. Tele-working should become much better promoted and much better organised. E-health and e-education can (and should) now be delivered worldwide. Many services that previously required hardware products can today be supplied over broadband as software-based applications. Many of the abovementioned energy-saving applications can be delivered and managed via broadband networks. A trans-sector view regarding these developments could deliver some significant cost savings by avoiding costly overbuilds of communications networks.

It is amazing what we can do in this field once we, as a community, really focus on it. While we still have a massive task ahead of us, 2007 was the year the pendulum started to swing in the other direction. Even though the financial crisis of 2008 overshadowed the climate change challenges, at the same time the economic stimulus packages aimed at infrastructure developments could assist us in fast-tracking some of the smart grid build-outs.

With combined human effort now directed towards a much more environmentally-friendly world, massive changes can be expected over the next five years and beyond, and the ICT industry will take a leadership role in this process.

While ICT is not the solution to all these problems, there will be no solution without ICT.

Furthermore, CSIRO economic modelling shows that 2.7 million jobs would be created by 2025 ifAustraliacommits to being carbon-neutral by 2050.

InAustralia and New Zealand there are close to 200 communities that are reticulated (or planning to reticulate) with FttH. Once fully deployed, this will represent in excess of 200,000 households connected to fibre; however, as with all broadacre developments, the construction of the estate and release of lots is done in a staged approach which can take up to 15 years to achieve fully deployed status. Only one fibre community, Somerly inWestern Australia, is fully deployed with no further development.

By early 2011 there were an estimated 20,000 households connected inAustralia.

The next few years will see strong growth of approximately 200% per annum in fibre-connected homes as more developers sign on to deployment of this advanced broadband technology.

Table 1 – Homes connected to fibre – 2005 – 2010

(Source: Titan ICT Consultants)

Communities by provider

The leading FttH provider in terms of homes connected is Broadcast Engineering Services (BES) inWestern Australia, followed by Pivit inQueensland. These two companies were the pioneers in the reticulation of fibre ingreenfieldestates inAustralia, both starting deployments in 2004/05. However by 2011, OptiComm has substantial works in progress and Telstra is also involved in a lot of fibre communities.

Table 2 – FttH communities inAustraliaandNew Zealandby provider – 2010

(Source: Titan ICT Consultants)

Note: *TransACT plus one township-preferred supplier, with 6,000 projected homes in negotiation)

Table 3 – Percentage breakdown of FttH communities by provider – 2010

(Source: Titan ICT Consultants)

The Dutch telecom market has one of the most developed infrastructures in Europe, providing a solid foundation for the country’s IP-services offerings. Almost 90% of the population uses the internet, while the high broadband take-up has benefited from government support and competing cable, fibre and DSL platforms. FttH networks have become also a significant feature of the country’s broadband landscape, with an effective collaboration between national, regional and municipal governments working with the industry and with academic institutions to ensure that the Netherlands maintains its broadband lead into the fibre age.

The strong broadband infrastructure has provided a range of content and digital products, including bundled offers. There are at least a dozen operators offering a double-play package (fixed-voice telephony and broadband), while several others offer TV and broadband and full triple play services (TV, broadband and fixed voice) to more than a million subscribers. In late 2011 T-Mobile launched a quad-play offer, utilising the digital TV service from KPN’s Digitenne.

Mobile penetration is approaching 130%. The sector’s growth since 2006 has largely been due to strong competition among the network operators and the range of MVNOs which has kept consumer prices low. The recent market entry of the cablecos Ziggo and UPC Nederland has created additional competitive pressure – both operators were awarded spectrum in the 2.6GHz band, allowing them to complement their existing bundled services (based on fixed-line access) with mobile voice and broadband offers.

The DTTV sector has shown strong growth since ASO at the end of 2006. By the end of 2011 more than six million households watched digital TV, or 75% of all TV households. Most digital viewers (almost 60%) subscribe to cable, while 24% watch digital DTH and 25% DTTV.

A bill to make the Authority for Consumers and Markets responsible for telecoms regulation from the beginning of 2013 may revitalise regulatory matters, with a greater focus on consumer protection. The ACM will be the merged authority incorporating OPTA, the Consumer Authority and the Netherlands Competition Authority (NMa).

Netherlands – Key telecom parameters – 2010; 2012

(Source: BuddeComm)

Key Highlights

• The excellent cross-platform infrastructure in the Netherlands has helped to propel the country to the top of international league tables for broadband penetration. KPN’s DSL network reaches 99% of all homes while cable networks reach 95%. The DSL sector, which commands about 54% of broadband connections, is set to fall in coming years as the numerous municipal fibre networks increase their geographic reach and lead to increased customer churn to FttH alternatives.
• Fibre infrastructure is a stimulus for the country’s budding trans-sector developments, serving as a model for similar strategies in other European countries. The regulator was among the first in the world to institute an effective wholesale regime, guaranteeing other telcos with non-discriminatory access to the incumbent’s network at fixed rates.
• Mobile data revenue ha shown steady growth, though not proportionate to the far higher growth in data transmitted on mobile networks. This data traffic is straining existing networks, largely through the uptake of smartphones and applications, with the result that operators have substituted flat-rate schemes for usage-based tariffs. The recent spectrum auctions will alleviate network congestion in coming years and facilitate the development of services based on LTE.
• Mobile TV is dominated by Mobiele TV Nederland, launched by MTVNL to compete with KPN’s Mobiel TV service: KPN ended its service in 2011 following poor subscriber uptake, and to reusing the freed up capacity to improve its Digitenne DTT platform.
• In the cable TV sector the regulator has reversed its Open Cable ruling which had obliged UPC and Ziggo to open their networks to competitors. This recognised recent market developments, competition, consumer use of bundled fixed telephony, internet access and TV, and the digitisation of services such as interactive TV, HDTV and VoIP.

BuddeComm’s quarterly publication, Netherlands – Telecoms, IP Networks and Digital Media, provides a comprehensive overview of the trends and developments in the telecommunications and digital media sectors in this leading market, including regulator data to mid-2011 and operator data to September 2011.

For detailed information, table of contents and pricing see: Netherlands – Telecoms IP Networks Digital Media and Forecastse