MODALIDADES DE VIOLENCIA DE GÉNERO:

2.1.1 OPTA: Business case for sub-loop unbundling in the Netherlands

On January 24, 2007 OPTA fundamentally revised its proposed previous position on KPN’s All-IP project following a study by Analysys (2007a) on the business case for alternative operators using sub-loop unbundling from street cabinets. The study concludes that the threshold for economic viability for an alternative operator using sub- loop unbundling from street cabinets is unlikely to be achieved by any alternative operator unless:

• it reaches a significant market share (in a market that is characterised by major presence and strong market position of cable networks) or

• can operate on the basis of sub-loop unbundling very selectively whilst having a larger global broadband market share than Dutch alternative operators currently control, and

• under the assumption of considerably increased average revenue per user. Key results of the Analysis study for OPTA are:

• Based on the interconnect and wholesale offers from KPN prevailing at the time of the study, the use of SLU by an alternative provider is not economically viable

as an alternative to continuing to use LLU, except under certain (very favourable) conditions.

• A business case for SLU with similar economic viability to that of continuing use of LLU for 60 % of the population would require both:

o a market share greater than 55 % of all broadband lines (including cable) in areas served,

o the highest estimate for incremental revenue (increase in ARPU across all broadband users of EUR 10 per month by 2016).

• For an alternative provider with a 10 % market share of all broadband lines in areas served, it may be economically viable to deploy SLU to around 1,000 of the largest street cabinets in dense urban areas (out of a total of around 28,000 street cabinets in the Netherlands), provided that:

o the interconnect and wholesale tariffs from KPN for SLU line rental, collocation and links to the street cabinets are reduced significantly (tested 50 %),

o an increase in ARPU of around EUR 9 per user per month can be achieved for the entire period (which is considered reasonable if business customers are targeted).

• The strong local economies of scale effects that are evident in deployment at the street cabinet level mean that even if such significant cuts of 50 % in KPN’s interconnect and wholesale tariffs were to be realised, the use of SLU would still not be economically viable as an alternative to LLU to reach the mass market, unless it is assumed for example:

o a market share of 25 %, together with the medium estimate for ARPU increase,

o a market share of 16 %, together with the highest estimate for ARPU increase.

• The current offer from KPN for WBA is also unlikely to be economically viable as an alternative to continuing to use LLU to reach the mass market regardless of the market share, even with the highest estimate for ARPU increase.

• Should OPTA wish to influence the prices offered by KPN to make the SLU option more viable, the prices which affect the viability of an alternative operator’s business plan the most are those for the line rental, SDF collocation and SDF–MDF link.

• Furthermore, the assessment of the cost of building a competitive network to provide backhaul to street cabinets indicates that unless very substantial revenue streams can be generated from services other than SLU backhaul, then it will not be possible for a third party to provide such backhaul at prices at the same level as, or below, the current (voluntary) offer from KPN.

2.1.2 OPTA: Business case for fibre-based access in the Netherlands

In complementing its analysis on the economics of sub-loop unbundling or the roll-out of VDSL by alternative operators, OPTA has just recently published a report1 _{on the}

economics of FTTH in the Netherlands. The report examines basically two fibre roll-out scenarios:

• KPN deploys a wide-scale FTTH network to 60% of all households;

• alternative operators offer fibre-based services using fibre LLU (FU) at the Metro Core Locations of KPN and/or WBA (wholesale bitstream access).

The KPN roll-out scenario is based on a P2P Ethernet topology with two fibres laid to each home, one for broadband and one for analogue TV. The topology choice is not further motivated but just referred to similar topology roll-outs of some fibre projects independent of KPN like the City of Amsterdam.

The study finds that KPN can profitably roll out a P2P fibre network for 60% of the Dutch population under three essential assumptions which define the break-even point:

• KPN is facing a duct cost of 30 € per metre.

• The incremental monthly net revenue2 _{per retail subscriber amounts to 13.4 €}

per month.

• KPN can maintain a 60% market share of the total broadband customer base (45% retail customers, 15% wholesale customers).

A duct cost of 30 € per metre seems to be rather low compared to the level of 50 -120 € per metre in the countries we consider in this study in chapter 5 but the conditions of deploying fibre3 _{seem to be rather attractive in the Netherlands justifying such a low}

1 See Analysys Mason (2008).

2 Net ARPU is defined as total ARPU net of any TV outpayments. Incremental ARPU in this context means revenues over and above the revenues currently received for broadband services provided via ADSL.

3 In the Netherlands micro ducts are installed in the pavement (or in the smaller roads) just underneath the paving stones in the sandbed without any trench, thus the paving stones are picked up, the ducts are simply scratched into the sandbed, the stones are layed back, all in a rolling road work manner.

level of installation costs. If duct costs even drop to 20 € an incremental ARPU of less than 9 € would be needed for a positive business case. At a duct cost of 45 € KPN breaks even at about 20 € incremental monthly revenues. The business case appears completely unviable at 100 € duct costs per metre. The study does not provide sensitivities with regard to market share.

The initial investment for the KPN P2P fibre roll-out are estimated to be 2,088 € per subscriber and 1,566 per home passed. A smaller scale FTTH deployment limited to very densely populated areas and/or mainly to large multi-dwelling buildings would require lower incremental revenues to become viable.

Without further deriving or calculating this result, Analysys assumes that alternative operators currently engaged as (copper) LLU providers cannot replicate KPN’s FTTH roll-out. The cost for deploying FTTH on their own are assumed to be prohibitive. To stay in the business two options for alternative operators are considered by which they also can offer fibre-based services:

• setting up a network based on an unbundled fibre product purchased from KPN, • purchase of a fibre-based WBA from KPN.

For the first business model the alternative operator purchases an unbundled fibre loop at KPN’s Metro Core Locations. The price of the fibre loop is calculated on the basis of KPN’s relevant costs as derived from the FTTH roll-out described above. On the basis of 30 € per metre for duct costs, the monthly cost of the unbundled fibre loop amounts to 17.99 €. This figure is the key input figure for the alternative operator’s business case. Figure 1 represents the results for five different geotypes or clusters. They are ordered by line density, a similar approach as we have taken for deriving our own modelling results in this study. Figure 1 represents all costs of an alternative operator in the access network; they include CPE, line rental, co-location, active equipment, and backhaul to the core network. Core network costs have been excluded; furthermore, only voice and broadband services are produced. For comparison the sub-loop unbundling case producing VDSL is included.

Figure 1: Average monthly cost per subscriber per genotype for the base fibre case scenario in the Netherlands

Source: Analysys Mason (2008)

The difference between the cost for (copper) LLU and the cost for the other options provides an indication of the monthly incremental revenue that are necessary to cover the incremental cost of that NGA roll-out option. For fibre unbundling (FU) the additional revenue (or costs) amount to approximately 14 € per subscriber and month in urban areas. This number would increase to 17 € if the alternative operator were to offer analogue TV besides voice and broadband. This number is close to the incremental revenue KPN needs for its viability.

Therefore, a fibre LLU based approach seems to be viable. The WBA option looks totally unviable, requiring incremental revenues of 49 € per month. This surprising result is due to the high WBA charges for high access speeds (36.32 € per month for 100 Mbps) in KPN’s current reference offer. Only if these prices were reduced significantly, the WBA option could compete with FU or if the alternative operator would offer lower speeds for WBA (which is offered at a lower wholesale price). Another interesting result, which fits quite well with our own result in this area, is that FU does not appear to be subject to strong economies of scale like those for SLU/VDSL.

A FU based business is facing fewer fixed costs than a VDSL business model. Lower fixed costs have two implications: alternative operators need a lower market share for viability and/or the cost per subscriber does not significantly increase in areas of lower density. The business case of the alternative operator has been calculated for a market

share of just 10% of the covered area of 60% of all households resulting in an effective market share of 6% of the potential customer base in the Netherlands.