Open Dutch Fiber, the newcomer to the Dutch optical fibre market, appears to be playing a game of bluff poker with KPN and Ziggo. It says it wants to prevent large numbers of consumers from having the choice of three super-fast networks (1x cable, 2x FTTH), but that is only possible if KPN or Ziggo cooperate.
ODF was announced on 6 April 2021 as a joint venture of KKR (majority) and DT Capital Partners. ODF aims to build 1 million FTTP lines in urban areas in five years and has a budget of EUR 700 million. It is building an open access, wholesale-only network, with T-Mobile NL as the anchor tenant. The first two cities have already been announced: Zoetermeer and Haarlem. The parties hope that T-Mobile will provide 20 per cent occupancy and other ISPs another 20 per cent.
ODF has stated that it wants to avoid 'uneconomic network duplication' and that is exactly where the shoe pinches. The consensus is that three networks (as in mobile) is too much because a minimum of 40 per cent network utilisation is required to make things economically viable. However, if there is one thing that is certain, it is that both Ziggo (2022) and KPN (2026) are building super-fast networks, especially in urban areas. In concrete terms, that means: one HFC/Docsis network (Ziggo) and two FTTH networks.
We see three possible scenarios.
1. Things are impossible until someone demonstrates that they can be done. ODF can devise an operating model that places extreme emphasis on efficiency. Think of the former MVNO Simpel: 1 million customers with 23 employees. In the case of KKR, the thought may be: even with a market share of less than 40%, it should be possible. ODF, by the way, undoubtedly applies a rental rate that is lower than that of KPN and is therefore not only interesting for T-Mobile but also for all other virtual operators.
2. If we still assume that KKR/ODF want to prevent 'overbuild', then KPN or Ziggo will have to cooperate. In the case of KPN, this means: KPN, like T-Mobile, will rent capacity. In the existing situations where KPN leases capacity from third parties (about five local FTTH networks, together about 100k lines), this is accompanied by a staggered take-over of the network - an option to buy is part of the lease contract. This would mean that KPN buys into ODF, offering KKR and DTCP an exit over time. KPN could even go further and eventually pursue a merger of KPN NetwerkNL (100%), Glaspoort (50/50 joint venture with APG) and ODF.
3. We can no longer rule out Ziggo showing interest. The reason: Vodafone Spain (like VodafoneZiggo a combination of mobile and cable) is talking to Telefonica and Onivia about access to their open FTTH networks. Ziggo could also take an interest in ODF. In addition, Ziggo is already doing fibre in new housing areas and on business parks, half-sister company Virgin Media O2 is fully switching to fibre and sister company Telenet is still discussing the matter with Fluvius.
Conclusion: ODF is going to shake up the Dutch broadband market, as a 'third digital infrastructure'. Or it plays KPN and Ziggo off each other (who buys in first, in ODF?). Option 2 above seems the most likely, in which history repeats itself (Reggefiber).
