BuddeBlog

The Danish broadband market is unique in the EU because in much of the country both the DSL and cable networks are controlled by TDC. Although its share is gradually falling, TDC still commands about 66% of the DSL market and 45% of the cable broadband market (giving it an overall broadband market share of 53%). Unlike in other countries (France, The Netherlands, Germany) TDC, as the incumbent, was not obliged to sell off its cable network.

The regulator in late 2008 found that its one-sided regulatory regime (only DSL was regulated for wholesale access) created an incentive for TDC to concentrate investment in its cable operation (YouSee). TDC thus won twice over – it could circumvent wholesale broadband access regulation and through upgrading its cable network it could provide faster services which could not be matched by DSL operators, and so shut out competitors.

To address this imbalance the regulator in March 2009 introduced measures to compel TDC’s Operations and Wholesale division to open its cable network to competitors. The regulator has thus shown itself to be in sympathy with developments elsewhere in Europe, specifically The Netherlands where its own regulator obliged UPC and Ziggo to open their cable networks to rivals. The move also forms part of a policy to open access to different infrastructure for broadband platforms, and as such fits in with the Danish regulator’s slogan since 1995: ‘best and cheapest – by way of real competition’ (Bedst og billigst gennem reel konkurrence).

Opening up the cable sector should thus shut down the uncompetitive advantage which TDC has enjoyed. Nevertheless, there are only a few significant cablecos which would be affected, including Dansk Cable, Telia Stofa, Canal Digital and a few minor entities which collectively have less than 6% market share. A+ Arrownet, once a cable competitor, was bought by TDC in June 2009.

The new regulatory regime may hit TDC’s revenue hard. Since being purchased by the Nordic Telephone Company (NTC) consortium in 2006, TDC has been heavily geared. The company remains burdened with DKK43.4 billion in interest-bearing debt. Although this debt was some DKK12.5 billion lower than a year earlier, the reduction was achieved principally by reclassifying its Hungarian business Invitel as a discontinued operation and by selling its remaining interest in the Polish mobile operator Polkomtel. Most debt facilities will mature between 2014 and 2016.

TDC’s major reorganizations (in July 2007 and again in February 2009) have also failed to address a consistent fall in revenue since 2006. In the first half of 2009, the new Nordic Business division reported a 4.9% fall in revenue. The only sector showing growth (at 8.7%) was the YouSee cable operation, which now faces stiffening competition.

The EC has also enforced a number of provisos on the Danish regulator: in addition to regulating cable access, it is obliged to ensure that wholesale costs are not exorbitant and so prevent cablecos from competing effectively. Similarly, it must extend its vigilance to the fibre access market in anticipation of imposing remedies should TDC launch extensive fibre-based retail offers. The fibre sector is clearly an important consideration for the regulator: the issue has taxed other European NRAs as incumbents have moved further into the fibre sector and threatened to swamp budding competitors through their natural advantage of scale. In Denmark, the number of fibre subscriptions increased 23% in the year to January 2009 (compared to the first recorded fall in the number of DSL subscribers in the second half of 2008). Even though in Denmark the fibre sector is characterised by the involvement of power utilities and housing associations, the regulator will be prudent to extend its ‘Bedst og billigst gennem reel konkurrence’ slogan to this area as well.

Henry Lancaster – Senior Researcher Europe, BuddeComm

See also:
Denmark – Broadband Market – Overview, Statistics & Forecasts;
Denmark – Key Statistics, Telecom Market & Regulatory Overviews;
Denmark – Major telcos – Statistics & Analysis;
Europe – Infrastructure – FttH & NGNs;
Europe – Regulatory Environment.

This entry was posted on Wednesday, September 2nd, 2009 at 3:17 pm and is filed under From Paul's Desk. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.