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Paul Budde: Dutch Closer To All-IP Regulation

Dutch Closer To All-IP Regulation
From Paul Budde
PAUL BUDDE Communication Pty Ltd,

The Dutch regulator, OPTA, published its position paper on KPN’s all-IP program in October 2006, in which it supported KPN’s open network and gave the green light to the operator’s plans to phase out the traditional switched network and sell local exchanges. In detail, this involves KPN deploying VDSL2 from 28,000 street cabinets, providing voluntary access (mainly sub-loop unbundling and Ethernet VLANs) and closing (and selling off) most of the 1,300-odd MDFs where competitors currently have access to local loop unbundling. The hybrid nationwide IP network will use both FttC and VDSL2 on existing sub loops, and FttH in new housing developments. The CAPEX involved will amount to about €1 to €1.5 billion for 2007-2009, partly funded through proceeds from the sale of obsolete local exchanges - the total real estate potentially to be sold has been valued at about €1 billion.

OPTA is generally favourable to KPN’s plans, which are expected to lead to improved services, lower costs, greater investment in innovative technologies (notably in FttH initiatives) both by KPN and by competitors, and generally encourage competition between infrastructures. Yet how is this to be achieved?

On a regulatory level, OPTA is guided by the existing New Regulatory Framework, which is currently under review but will continue to be the reference legislation for the next two or three years, until new legislation enters into force. The Access Directive of the NRF defines the legal base for access and interconnection agreements, requiring Europe’s member states to ensure that there are no restrictions on access or interconnection, that operators can negotiate interconnection with each other, and that national regulators can set obligations to promote efficiency, competition, and the general benefit to end users. Regulators can also legislate to ensure that access, interconnection and interoperability are available to end-users, in the event that commercial negotiations fail. This implies that in the first instance it is up to operators to reach agreements on interconnection.

In this light, OPTA has imposed a number of restrictions on KPN: the company must ensure that competing DSL operators offering services from these local exchanges can recover investments have made in rolling out and connecting their networks (a proposed five years to depreciate the one-off co-location fees paid to KPN, and two years to migrate from MDF access to sub-loop unbundling, or unbundling the access network from street cabinets).

Specifically, OPTA is concerned with two markets: that for wholesale unbundled access (including shared access) to loops and sub loops (market 11), and that for wholesale broadband access (bitstream access and access provided over other infrastructures, market 12). In its mid-November assessment of IP progress, OPTA remained concerned at the lack of MDF-access, an important building block for competition in broadband, telephony and IP services such as TV. The all-IP network will affect market dynamics in both retail and wholesale markets because KPN’s competitors buy unbundled access to the access network (MDF access) for their broadband services, and by phasing out MDF locations KPN would end this type of access for competitors. In this respect, KPN’s IP plans can have a negative market effect, at least potentially.

At present, KPN can terminate MDF access if the company complies with specific guidelines, but in the longer term an equivalent alternative for MDF access will need to be put in place, and this will have to be based on regulating access to the replacement Sub Loop Distribution Frames (SDFs). OPTA is scheduled to decide on this alternative in mid-2007. It is likely that OPTA will follow the UK’s ‘equivalence’ model whereby BT created a separate Openreach unit, while it is also keen to regulate wholesale broadband access and bitstream access (which currently remain unregulated in The Netherlands, though KPN has proposed to provide this facility voluntarily). Although not stated explicitly by OPTA, it is clear that the regulator is looking to define a regulatory framework that gives few alternatives to competitors to using sub-loop unbundling and building backhaul infrastructure that is not supplied by KPN. It also seems that OPTA is unsatisfied with wholesale broadband access being voluntarily provided by KPN (rather than being an obligation).

The final decisions reached by OPTA will stimulate other European markets, where similar discussions are taking place but where the regulator, incumbent and competitors are not singing in quite the same harmony.

See also:
Netherlands - Broadband Market - Overview, Statistics & Forecasts;
Netherlands - Key Statistics, Telecom Market & Regulatory Overviews;
Europe - Broadband Market - Overview & Statistics;
Europe - Infrastructure - FttH, NGNs & IP ;
Europe - Regulatory Environment.

We will also look at the regulations in the Netherlands and organise presentations and meetings with OPTA during the Broadband Study and Trade mission to The Netherlands 11th-15th March 2007

See: http://www.budde.com.au/conferences/public-workshop-details/Dutch-broadband-pdf-papers.html

Please feel free to pass this information on to others who might be interested to participate in this mission.

PAUL BUDDE Communication Pty Ltd,
http://www.budde.com.au
BuddeComm operates the largest, continually updated, telecommunications research service on the Net


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