Monday, 7 December 2009

Dutch Cable grows faster than DSL and KPN is in trouble

KPN is in serious trouble in the Dutch broadband market. Telecompaper published the numbers and KPN is losing customers. Cable is winning, DSL is losing.  This may be surprising to some readers because:

  • KPN is one of the few incumbents that understood it needed to share its copper network with new entrants in order to defend against cable.
  • KPN made a good strategic move by entering into a joint venture with Reggefiber, thereby securing its access to FTTH, without serious impact on it's current balance sheet.
  • KPN had announced serious investement in VDSL2 and Fiber to the Curb in it's All-IP programme. It promised that by 2011 most of the country would have 50/50 VDSL2. 
  • KPN was on my Telecom Cool Wall for all of the above reasons
Unfortunately for KPN, there is a difference between strategy and execution.
  • This blog has pointed out in the past KPN's dismal FTTH and FTTC offer. 
  • Many of you also know that KPN has postponed most of its All-IP programme and will announce at the end of this year whether it goes for FTTH or FTTC. This while both UPC and Ziggo have upgraded their networks to Docsis 3.0 and are offering much higher speeds than KPN could dream about with any version of DSL. 
  • As of next year, KPN will offer VDSL2, but only from the central office. Almost all customers will get a speed increase, but most of them will not come close to the speeds VDSL2 could offer. 
  • KPN has offered no innovation in it's double play and triple play offer. Everything is basic and there are no extras, nothing unique. KPN's offer is below par. (74 euro per month for 20mbit/s, TV and local calling) Compare this to UPC, (74 euro for 60 mbit/s down 6 up, TV and europe wide calling --> cheaper options available too) 
Telecompaper published this quarters broadband numbers (ending September 30) and here are the results, there is a more extensive report, that you can purchase from them:
  • There are 5.996.000 broadband users in The Netherlands, this is up 38.300 from previous quarter
  • Cable has scooped up almost all those new subs. 
    • Ziggo took 18000 subs
    • UPC took 14500 subs
  • Fiber grew with 17,000 subs or 12% to 160,000 subscribers, most of them seem to come from DSL. 
  • DSL lost 12.700 subscribers or 0.4% of the market to 3.542 million
    • Tele2 did increase its subs with 15,000 net adds to 390,500 DSL subs
    • KPN subsidiary Het Net lost 11,000 subs
Even though I don't have the full report yet, this does suggest that KPN lost at least 27,000 subscribers and that almost all new subscribers to broadband either take cable or fibre.

What is KPN to do? An agressive lowering of prices doesn't seem to have much impact on switchers according to Ed Achterberg of Telecompaper. It's budget offer Telfort wasn't too succesful with that strategy Introducing a Free.fr type service innovation isn't part of KPN's DNA and will take at least two years to materialize, but could help it stem the bleeding. Short term, KPN could do a couple of things, that would raise it's profile in the market.
  • Open the customers wifi access points for other customers. 2.x million hotspots potentially. Dutch cable companies never integrated wifi with their cable modems, so they can't follow KPN there. Nice thing is it requires almost zero opex and capex to realize and doesn't cannibalize other efforts. 
  • Integrate it's DSL offer with it's mobile internet offer. Cheap or free access to 3G on the go is an offer the cable companies can't counter. It may cannibalize some of the 3G offers currently on the market. 
  • Include international calling in it's telephony offer. UPC is already offering this. Ziggo isn't yet. KPN could leverage it's position in iBasis to offer better deals. This does lead to some cannibalisation.
  • Provide free online backup. KPN already has an online backup service. It's €4.95 and the first 6 months free... It wouldn't be extremely hard to copy by other's but it's one of the very few services KPN could offer straight away


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