The Reggefiber model Key elements of Reggefiber s strategy in The Netherlands

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1 The Reggefiber model Key elements of Reggefiber s strategy in The Netherlands Wouter Wouter Burger Burger June 21,

2 Introduction Reggefiber started in 2005 as a 100% subsidiary of Reggeborgh, a Dutch private investment company. Unregulated Visionary In 2008 KPN (Dutch incumbent Telco) acquired a 41% stake in Reggefiber. KPN felt increased competitive pressure from cable and Reggefiber had proven to be able to roll-out FttH successfully KPN is a very important strategic partner for Reggefiber When KPN joined Reggefiber the Dutch NRA (OPTA) regulated Reggefiber to ensure regulated, open and non-discriminatory access for all market parties 2 7

3 FttH value chain Reggefiber active as pure passive network operator Value chain built up with strategic partners. CONSUMERS Consumer broadband subscription packages (triple play) Service Providers SP KPN XS4ALL KPN XMS SP Vodafone Lijbrandt SP Sells to consumers Deliver services to consumers Communicate to consumers Rents active connection to the home of each customer Wholesale agreements Wholesale broadband access (triple play) Active Operators Rent passive fiber for each home from the passive operator when Service Provider sells a service Enables electronic traffic from home to SP. Passive Operator Builds, owns and operates the passive fiber network Delivers open access to active operators ITNS (KPN) KPN W&O Reggefiber Operator BV (seller) ODF agreements Other active operators Management agreement Regulated ODF Access 15 average NEM (owner) Indicative monthly price ranges per rented fiber to a home 3 7

4 Products and services for the consumer Internet speed: 100Mbps, 500 Mbps or 1 Gbps symmetrical. Differentiates the fibre proposition from the old technology. Brings the future forward to today. IP TV is essential too Unlimited numbers of channels in HD quality Interactive TV in HD, local or remote DVR in HD quality Local TV channels for local sports, local churches, local festivities and events. Voice services are part of the package. Offering a wide range of packages will promote initial uptake, needed to achieve the starting minimum demand of 30% or 40% Triple play Dual play Single play Service delivery follows demand aggregation as soon as possible Preparation of areas Demand aggregation Deployment 12 months 4 months 9 months 4 7

5 Pricing strategy should enable competitive offers, but limits the investment Consumer pricing should compete with Copper DSL and Coax Docsis 3.0 Message to prospects can be: without paying more than today, you will get the same or better and you will get more in the future In the Netherlands a consumer price level of 45 for triple play translates into 15 per month for passive network access. 15 per home connected per month limits the investment we can support per Home Passed. In the Netherlands the limit is app per Home Passed. This generates an ROI that is reasonable and average for the telecom sector OPTA, the Dutch Regulatory Authority approved this financial model. 15 per month per user, requires sufficient users from the start Demand aggregation is therefore essential. The pricing strategy determines the geographic strategy: A limit of per HP, limits the areas where we can deploy. Only built-up areas fit in this financial model. 5 7

6 Financial and regulatory aspects Initial financing only by shareholders External financing only after building a track record, both in rolling out as well as in take-up rate. Separate legal entity (NEM) for each area: enables refinancing per area. External financing became possible when the revenue stream from a project becomes reliable. Initial start with 30% - 40% participation. Churn is minimal, due to high performance of network and service providers. The competitive advantage of FTTH becomes stronger every year. In 2010 EIB together with commercial banks have provided Reggefiber with a loan of 285 MEUR In 2012 Reggefiber has applied for an additional loan from EIB and banks for a similar amount Regulatory certainty of NRA (OPTA) necessary NRA has provided Reggefiber with long term regulatory certainty Giving confidence to both investors as well as parties that request access to the network 6 7

7 Summary Demand aggregation before deployment Competitive products and prices for consumers Local and regional strategy Open networks with low barriers to entry so we can maximize uptake. 7 7