Fixed broadband upgrades and increased mobile data usage continues to fuel access spending.
Mobile Internet access spending is playing catch-up with its fixed equivalent. Are we at the start of a race to the bottom for mobile network operators?
In the Netherlands, high-speed broadband internet services (i.e. >30Mbps) are delivered via cable, fibre or DSL. These high-speed access services enable digital video programming, non-linear TV (e.g. VOD TV), cloud storage and other services.
Spending on fixed broadband access is expected to increase by 1.8% per annum on average until 2021. Fixed broadband subscriber growth is limited as market penetration is already high and the fixed broadband sector is very mature. Penetration is forecast to rise from 94.4% to almost 100% over the forecast period, while the number of households is increasing by 0.9% per year. High-speed fixed broadband customers will account for 87.3% of subscriptions at the end of 2021.
KPN and Ziggo dominate the fixed broadband market with a combined share of over 80% of subscriptions at the end of September 2016. A Dutch court recently ruled that KPN must grant other parties access to its fixed network (until at least 2019).
On the mobile side, 4G (LTE) is very mature in the Netherlands and practically covers the entire country, with high speeds on average. The share of 4G in the Netherlands is expected to grow from 62% in 2017 to 89.4% by the end of 2021.
Increased competition has led to a focus on unlimited data bundles and increasing average available bandwidth, especially in dense urban areas. Four mobile operators (MNOs) with widespread 4G coverage are competing for a share of the Dutch 4G data market. Despite increased competition, the mobile internet access market is set to continue at an average growth rate of 7.1% per annum until 2021 as budgets are moving from telephony (minutes and SMS) to data.
|Access spending market (€ millions)|
|Netherlands||Historical data||Forecast data||CAGR %|
|Mobile Internet Access||1,289||1,409||1,593||1,786||1,916||2,054||2,203||2,360||2,526||2,703||7.1%|
Even though access spending in fixed broadband is increasing, the fibre rollout in the Netherlands is stagnating. In the first half of 2017, ‘only’ 50,000 homes were connected to fibre as opposed to 300,000 in the first half of 2013, as reported by Stratix research. This is especially true in rural areas, but fibre penetration is also low in The Hague and Rotterdam (9% and 3% respectively). Instead, operators focus on upgrading existing networks, thereby avoiding the need to roll out new physical infrastructure.
The mobile market has reached a point at which it is experiencing increased competition to attract and retain customers. This is a significant challenge for MNOs: they will need to defend their position in a market driven by increased data usage, putting pressure on prices but simultaneously requiring substantial investments in network capacity. The vicious circle of increased pressure on top-lines and the struggle to bring down network costs will require MNOs to diversify their businesses in the long term.
An important underlying assumption in this Outlook is that Netflix will stick to its ad-free business model. A change towards a free, ad-based model by Netflix or one of its major competitors in the Dutch market could have a major impact on total TV advertising budgets, as well as on the allocation of the total budget over the various players.
© 2015 - 2018 PwC. PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.