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The Netherlands is a small, very flat country with a high proportion of coastline to area, and an extensive network of canals with almost a quarter of the country below sea level. It is one of the most densely populated countries in the world with a population of 16.3 million people living in 7 million households and a population density of 395 inhabitants per square kilometre.

 

GDP per capita at $37,326 was the tenth highest in the world in 2004 according to the International Monetary Fund. This compares with Luxembourg at $69,737 which is the world's highest GDP per capita, and the UK which ranked fourteenth at $35,548.

 

The telecommunications sector was liberalised in mid-1997 and is regulated by the Onafhankelijke Post en Telecommunicatie Autoriteit (OPTA); the Independent Post and Telecommunications Authority, which has taken a liberal approach to regulating the sector. However, OPTA has stated that it will exert its authority more emphatically than in the past to enforce imposed obligations via fines or legal penalties.

 

The Dutch Government has very high ambitions as regards to its broadband market. Its aim, as stated in its Broadband Paper 2004, is to be in the top position for broadband by 2010, both in Europe and in the world. In order to reach this target it has implemented many policy actions, projects and initiatives. Many of these initiatives include direct funding from the Dutch Government, including the Kenniswijk project where the Dutch Government provided 100 million guilders (€45 million) to test new products and services within an experimental environment in the Eindhoven region.

 

The incumbent telecommunications operator, KPN, is only partially privatised as the State of The Netherlands retains a 7.8% share of the listed holding company, Royal KPN NV.

 

Geographically, The Netherlands holds a strategic position on the fringe of mainland Europe which has made it a landing point for submarine cables from North America. This has resulted in a higher than expected telecommunications infrastructure build for a country of its size and has led to the Amsterdam Internet Exchange (AMS-IX) becoming one of the major European exchanges. According to theInternational Telecommunications Union (ITU), The Netherlands had the second highest level of international bandwidth per inhabitant in the world in 2004, with over 20Mbps per person. Denmark had the most at around 35Mbps per person and the UK had the fourth highest bandwidth at around 13Mbps per person.

 

A number of international operators whose backbone comes through the AMS-IX have targeted the Dutch market. In terms of the domestic market, these operators have concentrated mainly on the business sector.

 

With regard to ICT usage, the latest available figures from the OECD show that in 2004, 75% of households in The Netherlands had a PC, while 71% of all households had access to the internet. This is the second highest household penetration rate for PCs in Europe, trailing Iceland with 86% of all households, and the highest internet household penetration level in Europe. High penetration and use of ICT is seen as a precursor to demand for broadband. (fig.1)

 

 

 

At the end of June 2005, broadband lines in The Netherlands were calculated at around 3.6 million.This represents a growth of over 560,000 connections, or 18.1%, since the end of 2004. (fig.2)

 

 

 

 

 

The market growth compares favourably with the 15.2% growth reported across the OECD and the 16% growth worldwide for the same period; indicating that The Netherlands is still some way from market saturation. (fig.6)

 

 

 

 

 

Figures from Point Topic place The Netherlands as the nation with the highest broadband penetration per population in Europe and in third position in the world, with 22 broadband connections per 100 inhabitants in June 2005. Korea boasted the world's highest broadband penetration level, with 26% of the population, and Hong Kong had the second highest with 23 connections per 100 people. (fig.3)

 

 

 

 

In comparison with OECD countries, The Netherlands is far ahead of the average broadband penetration level of 11.8% of the population. (fig.4)

 

 

 

 

In terms of broadband households, The Netherlands had a penetration level of 50% in June 2005. Whilst impressive, this is still significantly lower than Korea which boasted a household penetration level of 81% at that time. (fig.5)

 

 

 

 

In terms of the business market, there are around 690,000 businesses in The Netherlands; with small and medium sized enterprises (SMEs) accounting for around 99% of them. Latest figures, in 2004, show that 89% of all enterprises with 10 or more full time employees had internet access. The figures also show that 54% of all enterprises with 10 or more full time employees used a broadband connection. These figures are in line with the OECD average. (fig.7)

 

 

 

 

 

Research agency Telecompaperpredicts that household penetration of broadband in The Netherlands will have reached 62% by the end of 2005. This compares favourably with the forecast from Datamonitor that 60% of European households will have a broadband connection by mid 2008.

 

Similarly, the high proportion of broadband households places The Netherlands in a strong position in terms of achieving the targets set by the European Commission in its i2010 strategy. These targets include the requirement for 50% of all households to be broadband-connected at 10Mbps or more by 2010.

 

As regards broadband infrastructure, The Netherlands is in a unique position in Europe; with near ubiquitous coverage of two different technologies. The incumbent operator, KPN, claims that DSL broadband was available to 99% of all households by December 2004. Similarly, almost 98% of all households in The Netherlandsare able to access the Cable TV infrastructure. (fig.8)

 

 

 

 

 

The dominant technology in June 2005 was DSL broadband; with DSL accounting for around 60% of total broadband connections and cable accounting for 39%. DSL achieved 17% growth over the first half of 2005, in comparison to the 20% growth achieved by cable. (fig.9)

 

 

 

 

 

Demand throughout the residential retail sector has been stimulated by KPN's policy of offering a wide variety of services with a range of prices and bandwidths that appeal to low, mid and high capacity users. KPN has used its many subsidiaries and brands to help differentiate these products.

 

Meanwhile, market demand has led to KPN considering introducing naked DSL to the market, allowing end-users to keep their DSL broadband subscription without the PSTN telephone line. This fixed-mobile convergence opportunity will give operators further scope to differentiate their services in an increasingly competitive market.

 

High demand for broadband services has created high levels of competition in the broadband market. The highly competitive environment has in turn resulted in the low retail share of the incumbent.Analysys Research calculated that KPN DSL lines accounted for 43.3% of all wholesale lines in June 2005, while its 31.9% share of the retail market is the second lowest incumbent retail share in Western Europe. The UK had the lowest incumbent retail share; with BT Retail accounting for just 24% of the total broadband market. (fig.11)

 

 

 

 

Nevertheless, the lack of a bitstream offering from the incumbent has meant that there is little reselling of the incumbent's wholesale lines. The regulator, OPTA, has attempted to impose an obligation on the incumbent to provide bitstream access but these efforts have so far been rejected in court.

 

As a result, the main threat to the incumbent's market share has come from infrastructure based competition; with competitors building their own infrastructure to create product differentiation and compete head-to-head with the incumbent. This has led to high levels of Local Loop Unbundling (LLU) since LLU was introduced to the DSL market in 2000. In addition, when compared to other Western European markets, the investment in the cable infrastructure has led to cable accounting for a relatively high share of the total broadband market.

 

In 2001, OPTA ruled that the broadband market could be defined as a separate market from narrowband and, as a result, cable operators could be deemed to have SMP (Significant Market Power). Due to this ruling, regulation was subsequently passed by the government – as part of The Telecommunications Act 2004 - requiring cable operators to open their networks for LLU.

 

KPN has announced plans to offer its digital TV services over its competitors' cable networks. However, although the regulator has ruled in its favour, the incumbent has yet to agree access terms with the cable operators.

 

Nevertheless, The Netherlands remains one of the most active LLU country markets in Europe. Major players include Versatel, bbned, Tiscali and Wanadoo. Analysys Research calculated that there were around 580,000local loops unbundled in June 2004; accounting for 27% of the DSL market. As such, The Netherlands had the fourth highest LLU share of the DSL market in Western Europe at that time. (fig.10)

 

 

 

Most unbundled lines are shared lines, where the broadband access is supplied by the LLU operator while the telephone services still lie with KPN. According to OPTA only 12% of end users have fully unbundled lines, where both the broadband access and the telephone service is provided by the LLU operator and these are almost exclusively business customers. The emergence of telephony and other media services over IP is likely to increase the demand for fully unbundled lines.

 

The most aggressive of the LLU operators, Versatel, has deployed an ADSL2+ network ahead of its triple play launch in August 2005. Versatel has also bought the pay TV rights to the Dutch football league in order to gain a content advantage over its competitors.

 

Furthermore, KPN is also deploying an ADSL2+ network ahead of the planned launch of an IPTV service towards the end of 2005. KPN has been aggressively pushing its own triple play in order to respond to the threat of the cable sector.

 

Nevertheless, despite the extensiveness of cable TV infrastructure, the operators have been slow to upgrade their networks to provide other telecommunications services. However, the cable operators are now responding and are upgrading their networks to compete with the high access speeds provided by ADSL2+ deployments. For example, UPC launched 20Mbps services via cable and DSL in April 2005 and is trialling 50Mbps services; whilst Multikabel began trialling 25Mbps services in July 2005.

 

Though trailing more advanced markets, such as Sweden and Italy, The Netherlands has began to deploy some FTTx networks; with municipalities and housing corporations funding their own fibre networks. Such networks are being built mainly in urban areas and in direct competition with cable networks.

 

 

In terms of pricing; basic 'first generation' broadband packages cost around EUR20-30 per month in The Netherlands; which is cheaper than many other Western European markets. Similar services in the UK and France cost around EUR25-30 per month; while in Denmark, a country with similar penetration levels and GDP per capita to The Netherlands, a similar service costs around EUR45-55 per month. This indicates that high demand, and subsequent high competition, has resulted in low retail prices for broadband services, especially when considering its high GDP per capita.

 

In contrast, 'second generation' broadband services with speeds of around 8-10Mbps are somewhat more expensive than other Western European markets; costing EUR60-80 per month. Similar services in France and the UK cost around EUR30-40 per month. Nevertheless, these services are considerably cheaper in The Netherlands than in Denmark, where an 8Mbps service costs around EUR135 per month. A reason for the relatively high cost of these services could be that operators are attempting to increase their numbers of triple-play subscribers by keeping single products at a price that creates a significant saving when they are bought in a 'bundle'. While many Western European markets have yet to see the introduction of triple-play products, competition is already high in this sector in The Netherlands.

 

In conclusion, the flat geography of The Netherlands has made it relatively easy to make broadband infrastructure accessible to the majority of the population; whilst the submarine cables that surface in the country have meant that there is a high amount of international bandwidth available. These physical factors, along with the high GDP per capita and high ICT penetration levels, have helped to create a high level of demand and use of broadband.

 

Furthermore, the high level of demand has encouraged a number of operators into the market; creating a competitive broadband market with lower than average retail prices and higher than average broadband penetration (in terms of population and households).

 

Nevertheless, the broadband market has yet to achieve tele-density levels (Analysys Research calculated that there were 79.7 lines per 100 people in The Netherlands in 2004). It is therefore expected that the broadband market will continue to grow; driven by increased use of IP-based applications and the delivery of triple-play service offerings.

 

In 2005, The Netherlands has a very competitive broadband market; with high levels of demand for broadband and a range of suppliers offering broadband across a choice of DSL, LLU, cable and fibre.

 

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Broadband

The Netherlands

FTTx

LLU

Country report

Market

Europe

Cable

Triple-play

International bandwidth

 

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