What is the Future for Fiber?


What is the Future for Fiber?

Four scenarios for high-speed connectivity in the Netherlands in 2030

Fiber-optic cables have become fundamental to our modern economy. They are the motorways of digital connectivity, transferring data to its destination in the blink of an eye. But who will control this critical infrastructure ten years from now? How concentrated (and regulated) will the Dutch broadband market be in 2030? To what extent will the networks and services be separated? Those are some of the questions Deloitte seeks to answer in our Future of Fiber study, which explores four potential scenarios for the Netherlands in 2030.

These scenarios are mapped across two dimensions – the degree of dominance of fiber infrastructure versus alternative technologies and the degree of separation of physical network ownership and provision of digital services (see diagram).

The possible outcomes range from super-concentration, in which broadband services are deeply integrated into widespread fiber-to-the-home (FttH) networks, to super-fragmentation, in which competing netcos1 provide a wide range of heterogeneous network infrastructures – fiber or cable and mobile – to multiple servcos2 . The other potential scenarios are disaggregation in which fiber is the dominant access technology, but is controlled by netcos that supply servcos, and network co-existence, in which integrated telcos rely heavily on co-existing future-proof networks such as fiber, hybrid fiber-coaxial or even mobile to deliver broadband. Heavy dependence on mobile is highly unlikely in the Netherlands, but could occur in countries with relatively little fixed alternatives.
In this series of blog posts, we will delve into these four scenarios and the ramifications for the Dutch market. By using scenario design to identify and explore uncertainties, we can help stakeholders to develop a robust course of action in response to different potential futures.

The shape of the Dutch market today

But first, let’s consider the underlying competitive forces driving the deployment of fiber. The Dutch telecommunications market was liberalized in 19893 . The market has since consolidated, leading to the creation of three large players: KPN, VodafoneZiggo and T-Mobile. The private equity company Reggeborgh laid the first fiber-optic cables to serve consumers in 20044 , increasing speed, capacity and stability, especially when deployed way right up to the home (FttH)5

Although FttH penetration in the Netherlands remains lower than in many European countries, it is significantly higher than in Italy, the UK and Germany, according to the FTTH Council Europe (see chart). The Netherlands’ position partly reflects the fact that the initial focus was on upgrading copper and cable networks, rather than deploying fiber.

(source: IDATE for FttH Council Europe, European FttH/b market panorama 2021) 6

Increasing competitive intensity

Between them KPN, Delta Fiber and E-Fiber, which has since been acquired by Open Dutch Fiber, owned approximately 85% of FttH at the end of 2020 (see chart below)7. Open Dutch Fiber (majority owned by KKR and Deutsche Telekom Capital Partners) is aiming to deploy one million FttH connections by 20258. T-Mobile, part of Deutsche Telekom, will be the first large customer.

(source: ACM Update marktstudie uitrol glasvezel in Nederland 2021)9

Looking to sunset its copper network and fully replace it with fiber, KPN is aiming to provide unique services (such as low latency edge computing) to B2B/B2C clients and increase revenues. Conversely, E-Fiber and other netcos provide open networks with a view to maximizing their utilization. At high network utilization, they can provide competitive pricing.

How will the Dutch fiber market evolve from here? Investors increasingly see fiber as a relatively safe investment with a positive impact on society. That appeals to private equity firms, pension funds and institutional investors.
But growing investor interest could translate into over-supply. If all the players hit their deployment targets, the number of FttH connections will surpass the number of households in the Netherlands, implying further duplication of networks (see chart below).10,11,12,13

(source: update-marktstudie-uitrol-van-glasvezel-in-nederland 2021)

Moreover, fiber has to compete with strong alternative networks in the Netherlands, using a range of technologies including HFC (hybrid fiber coax), coax, DSL and 4G/5G. Today, most broadband connections are not fiber (see chart below). VodafoneZiggo, for example, is only deploying FttH for newly built houses, while relying on HFC in other areas.14

(source: Telecompaper, 2022)

Although fiber has a performance advantage over alternative access technologies, it is also expensive to deploy. To make a return on this investment, each player in the market faces a finely-balanced judgement call on how much demand there will be over the next decade and customers’ willingness to pay. In this series of blogs, we will look to address the following questions:

  • To what extent will fiber face competition from alternative technologies, such as HFC and 5G?
  • Will the market value integration or separation of physical networks and digital services?
  • Will players in the current landscape co-exist or will the market further consolidate?
  • How will regulatory bodies react to market dynamics and changes in the market structure?

Look out for the second blog in this series, which will focus on the alternatives to fiber and the extent to which they will shape the future of broadband in the Netherlands.

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