Archive for October, 2012

KPN begins wholesale migration of DSL subscribers to fibre

Wednesday, October 31st, 2012

Telecom market overview

The Dutch telecom market, boasting one of the most developed infrastructures in Europe, supports the highest regional fixed-broadband penetration as well as high mobile penetration. The success of the mobile sector since 2006 has largely been due to strong competition among MNOs and the range of MVNOs. The regulator has encouraged further competition though allocating three blocks of spectrum to new entrants in the forthcoming multi-band auction. This will offer a significant boost to LTE, which will further develop commercially as operators secure additional spectrum.

Broadband market

The market has benefited from cross-platform competition, contributing to the country having one of the region’s highest penetration rates. Overall growth has been stable since 2007, with a continuing trend for DSL subscribers to migrate to cable or FttH. The main competitive driving force is now between FttH and cablecos looking to capitalise on their extensive DOCSIS3.0 footprint while planning for the developing 3.1 upgrade. KPN, which has abandoned FttC in favour of FttH, has in some areas begun to migrate remaining DSL subscribers to FttH, thus aiming to forestall the potential churn of customers to rival cablcos.

Key telecom parameters – 2010; 2013



2013 (e)

Subscribers by sector (million):
Fixed broadband subscribers 6.43 6.79
Mobile broadband 5.6 10.2
Mobile phone 21.85 23.5
Fixed-line telephony 7.23 6.8
Penetration by sector:
Fixed broadband 39% 50%
Mobile 129% 134%
Fixed-line 51% 46%

(Source: BuddeComm)

Market Highlights

  • In May 2012 the Dutch Parliament passed the world’s first net neutrality legislation, affecting mobile and fixed internet networks.
  • Pending legislation will make the ACM, the merged authority incorporating OPTA, the Consumer Authority and the NMa, responsible for telecoms regulation from the beginning of 2013. The ACM will be run by a three-member board focussed on consumer protection, industry-specific regulation, and competition oversight.
  • Overall average realised download speeds have risen from 2.8Mb/s in 2006 to 5Mb/s in 2008 and 16Mb/s in early 2012. This jump in data speed is largely the result of the growing number of subscribers on fibre networks and the increased speeds from cable operators.
  • The overall number of SMS continued to fall in 2011 as consumers migrated to other applications such as Skype and WhatsApp.
  • The government’s plans to auction spectrum in the 800MHz, 900MHz, 1800MHz, 1900MHz, 2.1GHz and 2.6GHz bands later in 2012 will include 60MHz of paired spectrum from the Digital Dividend. The new licences, to will run until 2030, allow for two new players to encourage market competition.
  • The Netherlands in mid-2012 became the first country in Europe to adopt net neutrality legislation. This blocks ISPs from throttling or blocking traffic to specific websites or services, and from charging extra for access to certain websites or applications. Given the importance of internet access, ISPs can only disconnect users in a limited set of circumstances, such as for fraud or no payment of accounts.
  • In mid-2012 KPN announced a major overhaul of its mobile networks to 2014, involving an upgrade of most of its 3,900 base stations.

This report is essential reading for those needing high level strategic information and objective analysis on the telecom sector in the Netherlands. It provides further information on:

  • Market liberalisation and regulatory issues;
  • The impact of the global economic crisis;
  • Telecoms operators – privatisation, acquisitions, new licences;
  • Mobile data market developments in coming years in light of spectrum auctions and new license awards;
  • 3G developments, regulatory issues and technologies including HSPA and LTE;
  • Broadband migration to an FttH architecture;
  • Historical and current subscriber statistics and forecasts;
  • ARPU statistics and forecasts.

BuddeComm’s annual publication, Netherlands – Telecoms, IP Networks and Digital Media, provides a comprehensive overview of the trends and developments in the telecoms and digital media sectors in this leading market. The report includes the regulator’s market data for Q1 2012; telcos’ operating and financial data to September 2012; market developments to October 2012.

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




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Is the NBN Co business model flawed?

Tuesday, October 30th, 2012

NBN Co’s 2012 annual reports again highlight the issues that BuddeComm has been alluding to since the very first NBN plans were announced between 2007 and 2009.

The annual report highlights the peculiar financial situation of NBN Co, especially in relation to the uncertainty of costs and early uptakes of the service. Analysts have continuously warned of significant budget blowouts.

The key reason that this is an issue, and will increasingly become a bigger one – if those analysts are right – is that the NBN Co business model is a flawed one. All of this could have been prevented if the NBN Co business model was based on sound economic foundations.

The government continually talks about the national interests of the NBN in relation to, for example, the economy, healthcare, education and so on, but in reality it has based NBN Co on a traditional telecoms model, on traditional telecoms revenues. The company’s current business model does not take those other benefits into account.

Since the NBN was started the UN, OECD, World Bank and 119 countries around the world have now embraced policies based on the fact that broadband infrastructure will have a significant positive economic effect, and that it is essential in addressing some of the complex problems that their societies are facing in environment and energy management, economic revival, new job creation, healthcare, education and so on.

Also, since that time a development that had been lingering in the background for years started to emerged, this time known as ‘big data’. This concept relates to the fact that, in order to manage the many complex issues in our society, large amounts of data need to be collected from very large and diverse sources (M2M) – we are talking about billions of devices and sensors. This will require networks that can handle large capacities, are robust and reliable, have a low latency, and provide high levels of security and privacy protection. Residential internet access remains another important element of this infrastructure, but, longer-term, far more important elements need to be taken into consideration.

Increasingly a much smaller part of the NBN will be linked to old-fashioned telecoms income, on which the NBN Co business model is based. This, of course, is asking for trouble now and in the future. BuddeComm believes that in the end NBN access income will be less than 10% of the cost of the services that are going to be available over this infrastructure. This makes the narrow definition of telecoms income as the basis of the business case for NBN Co rather weak and potentially politically explosive.

None of those social and economic benefits are taken into account in the business models of the NBN, and unless that is changed the government and NBN Co will forever be chasing their tails and – rightly so – will forever be attacked by the financial analysts.

It needs to be recognised in NBN Co’s business model that future developments have significantly less to do with telecoms and much more to do with national infrastructure.

And so BuddeComm stands by its view that the business model in which the financial future of NBN Co relies on traditional telecoms income is unsound – that the ROI of the NBN has far more to do with social and economic benefits, and that significant productivity gains in other sectors that can only be achieved if this national broadband infrastructure is operated on a trans-sectoral basis. The real economic value of the NBN comes from other sectors using the infrastructure and many of these benefits will not show up on NBN Co’s balance sheet.

As important organisations such as the OECD have indicated, if measured solely in terms of telecoms output the productivity gains of high-speed broadband are rather low. At the same time this global economic organisation also maintains that the real economic gains of broadband are in the development of new markets, lower transaction costs, improved supply chain efficiencies and facilitated research. Key sectors mentioned by the OECD include the health, education, energy and transportation sectors.

While the NBN Co plan could, in principle, be changed with the stroke of a pen, the reality is that the NBN is a political football, so the current government will be very reluctant to make any changes to their NBN Co legislation. Behind the scenes both the Department of Broadband and the Digital Economy and NBN Co are directing significantly more effort into the development of those trans-sector services, so it is not that these social and economic benefits are not recognised or are being ignored. They are most certainly being pursued, and they are also politically supported by the government’s National Digital Economy Strategy. The problem is that they are not taken into account in the business model.

The Opposition could obviously use this to make changes to the NBN if they were to come into power. However so far they have not made any announcements regarding their digital economy policies, and in their comments about the NBN they have, to date, totally ignored the social and economic benefits. The problem for them is that if they recognise those social and economic benefits they will have to change their stand on their NBN policies, and so, like the government, they also have painted themselves into a political corner.

One would hope that somebody in the not-too-distant future will have enough courage to make the right decision for the country and be prepared to rise above political posturing.

Isn’t that what government is all about, the national interest?

Paul Budde

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Lithuania still showing the fastest FttX penetration growth in Europe

Tuesday, October 30th, 2012

Lithuania’s impressive FttX infrastructure has resulted from a combination of sympathetic regulatory policies and the forward-thinking business strategy of the incumbent TEO.

TEO’s decision in early 2007 not to upgrade its DSL network but instead to invest in fibre has paid dividends for the country: its fibred network is now available to about 100 towns, covering almost two-thirds of all households. The company is committed to delivering fibre to 80% of companies by the end of the year. The network has also been scaled up to TEO’s FttH network has been scaled up to 300Mb/s, one of the fastest rates available in Europe.

The investment required for this infrastructure has been helped by government policies, specifically related to tax relief on investments in new technologies which saved the company about LTL21 million since 2010.

Regulatory policies have also been crucial: the government has supported fibre through tapping into EU funding to build a fibre backbone network across the country while promoting a wholesale access regime to encourage competition. The RAIN project, completed in late 2009, financially assisted public institutions to connect to the network and also created a wholesale infrastructure for the country 100 or so ISPs. There are now about a dozen main providers competing against TEO in the market.

As a result of these efforts, Lithuania has the highest fibre broadband penetration in Europe, and ranks sixth in the world. During 2011, fibre penetration also grew at the fastest rate in Europe. These impressive results highlight the dithering which is still common among some of Europe’s larger markets, to their cost.

Henry Lancaster
Senior Analyst

For more analysis on Lithuania’s telecom market, see the updated report Lithuania – Digital Media and Broadband Market Insights Statistics and Forecasts

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Telcos and the science of big data

Tuesday, October 30th, 2012

In assessing the future of the telcos BuddeComm remains very sceptical about the potential of these companies to move up the value chain and become more active in the over-the-top (OTT) services. The level of innovation and speed to market of the current players simply cannot be matched by the ISPs and telcos. It is also important to realise that this is the customer software market rather, not a core telco engineering market. We have seen attempts from the telcos to move into this market ever since the dotcom boom more than 20 years ago, and they have failed again and again to take a lead here. So, while some analysts continue to argue that this is the area the telcos should move into, we don’t believe that this is realistic.

We have always maintained that we see the future of the telcos in what we call the value-added infrastructure, and this is comprised basically of the combination of the telco infrastructure and the IT infrastructure needed to run the digital economy. We have highlighted services such as data centres, cloud computing, content data networks, storage and, increasingly, M2M. This last market in particular offers great potential for the telcos. They started with connecting premises (fixed telephony) then moved to connecting people (mobile), and now the next connection exercise is devices and sensors – and here we are talking about literally billions of such connection points.

The reason M2M becomes so important is that it is needed to more effectively address the many societal and economic problems that people are facing – the environment, energy supply, traffic and people movement, healthcare and so on.

First of all, such an M2M network requires a very robust and high capacity infrastructure, with low latency, high reliability, and the capability of providing the highest level of security and privacy protection. At the same time it must be priced at levels that do not deter investment in the communications services and in the business processes which use it.

The other critical element for the future of telecommunications and for the relevance and viability of the industry is to use the network with all of the M2M devices connected to it in such a way that it collects the data from these devices, process that data and then delivers executable real-time analyses to the users of the M2M services. These users can be residential people using smartphones, companies managing their organisations, or government authorities involved in the management of the city, state or the country. This development is also known as big data.

It has become clear that our complex societies and economies are, to a certain extent at least, grinding to a halt. We are unable to manage them in an effective and efficient way.

One of the elements that is lacking here is data science. Wikipedia describes this as follows: Data science is a discipline that incorporates varying elements and builds on techniques and theories from many fields, including Math, Statistics, Data Engineering, Pattern Recognition and Learning, Advanced Computing, Visualization, Uncertainty Modeling, Data Warehousing, and high performance computing with the goal of extracting meaning from data and creating data products.

Obviously M2M is fairly useless without data science and there certainly is a role for telcos to become the experts in this. IT companies are not sitting still here either.

Gartner recently mentioned that 4.4 million IT jobs will be created globally by 2015 to support big data. It further estimates that in addition, every big data-related role will create employment for three people outside of IT, totalling nothing less than over 12 million new jobs.

Many of these will be extremely high-quality jobs and the question is whether the western countries can deliver the people for these jobs. As education stands at the moment it is more likely that the people who will be taking these jobs are currently studying at universities in India and China.

Wherever these people might come from it is up to the organisations involved to position themselves for these developments, and at the moment there is no reason why the telcos could not take a leadership role in this.

Paul Budde

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Norway’s MNOs prepare investment strategies for spectrum auctions

Tuesday, October 30th, 2012

Telecom market overview

Mobile services now make up more than half of telecom revenue and about two-thirds of voice traffic. Fixed-line traffic fell 12% in 2011 as increasingly communicate via mobile networks or different types of social media. Revenue for fixed telephony fell sharply in 2011, while broadband revenue growth has fallen steadily during the last few years in line with the slowdown in the growth of new broadband subscribers as the market penetration increases.

Mobile market

The mobile sector is attracting a significant portion of telecom investment as operators continue to upgrade networks for LTE. An imminent auction for spectrum in the 2GHz band will further extend the availability of LTE in rural areas and help the government fulfil its ‘Norway Digital’ programme for broadband. MNOs have focussed on mobile data services, which are set to develop swiftly in 2013 as LTE services become a dominant feature of the mobile landscape.

Key telecom parameters – 2010; 2012



2012 (e)

Subscribers to telecoms services (million):
Fixed broadband 1.72 2.15
Fixed-line telephony 1.65 1.40
Mobile phone 5.36 5.54
Mobile broadband 5.65 5.82
Market penetration by sector:
Fixed broadband 36% 41%
Fixed-telephony 66% 55%
Mobile (SIM) 117% 123%

(Source: BuddeComm)

Market Highlights

  • MNOs during 2013 will be able to take advantage of spectrum in the 2GHz band which has been set aside for mobile broadband based on LTE. This development will significantly enhance network capabilities and allow operators to extend their services to rural areas with lower capex.
  • Smart grid infrastructure is developing rapidly, with a view to replacing all electricity, gas and water meters with smart meters by early 2017.
  • The strong growth in VDSL connections during 2011 is set to continue into 2013, though VDSL still makes up a small proportion of the declining DSL subscriber base.

 BuddeComm’s biannual publication, Norway – Telecoms, IP Networks, Digital Media and Forecasts, provides a comprehensive overview of the trends and developments in the telecommunications and digital media markets in one of Eastern Europe’s more progressive countries. The report includes the regulator’s market data for 2011, smart grid updates; telcos’ operating and financial data to September 2012; market developments to October 2012.

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


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