FOR IMMEDIATE RELEASE

Forrester Research: The Netherlands Will Outpace Belgium In Broadband Adoption
Five Differences Separate The Low Countries’ Broadband Markets

Amsterdam, May 24, 2005 . . . With almost one-third of households in the Netherlands and Belgium connected to the Internet via broadband at the end of 2004, the Low Countries are Europe’s broadband leaders. However, Forrester Research Inc. (NASDAQ: FORR) reports that differences in PC and online penetration, market competitiveness, and competitive focus predict a two-speed future for both countries.

Lars Godell, Principal Analyst, Telecom Markets at Forrester Research says: “Intense competition, a wide range of broadband pricing packages, and innovative services will keep Dutch broadband adoption in the No. 1 spot in Europe, with 54% of all households having broadband by the end of 2010. Belgium — due to lower total online household levels — will fall back, ending the decade at 44% broadband penetration. Dominant ADSL will keep its market share in both countries steady at 60% throughout the decade.”

According to Forrester, a little more than half of Belgian households have a PC, compared with three-quarters of Dutch households. The consequence? Only 46% of Belgian households were online in 2004, 25 percentage points lower than in the Netherlands. And although Belgium will reduce the gap and close the decade at 64% online household penetration — above the European average of 62% — the Netherlands will move to 75%. By the end of 2004, broadband penetration in the Netherlands and Belgium reached 32% and 29% of all households, respectively.

Five Differences Separate The Dutch And Belgian Broadband Markets

High Internet-enabled cable density and tough early competition between cablecos and telcos have made the Netherlands and Belgium Europe’s broadband leaders. But Forrester reveals five important differences between the two countries — differences that will remain for the foreseeable future:

1. Local loop unbundling versus wholesale competition. In both countries, the telco incumbents — Belgacom and KPN — face fierce competition from cablecos, which in total hold almost 40% of each market. But within the xDSL platform, competition has emerged differently. In the Netherlands, alternative xDSL providers unbundle a quarter of all DSL lines; in Belgium, alternative xDSL providers mostly resell Belgacom’s ADSL lines.
2. Market concentration. The preference for local loop unbundling in the Netherlands versus wholesale in Belgium has led to different levels of competitive intensity in these markets. In the Netherlands, many strong players share the market; in Belgium, just two providers — Belgacom and Telenet — divide the vast majority of the market between them.
3. Competitive focus on price versus speed. Competition in Belgium and the Netherlands has been very focused on price cuts and bandwidth increases, not innovation. But the focus in each market has been slightly different. The Netherlands is experiencing intense price wars; in Belgium, high baseline speeds dominate.
4. Different triple-play strategies to escape the price and speed wars. Dutch and Belgian telcos and cablecos are expanding and bundling their services to reduce churn and give their services stickiness. Incumbents KPN and Belgacom have very different triple-play strategies — the bundling of voice, video, and data over a single line. In the Netherlands, KPN shows the benefits of an asset-light triple-play strategy; in Belgium, Belgacom is stuck with its expensive network upgrade — and no TV revenues.
5. Upgrading xDSL networks to ADSL2+ or VDSL. Incumbent telcos everywhere are under pressure to offer higher data rates than ADSL’s maximum 8 Mbps. The choice of network upgrade technology is about much more than mundane technical issues — it has important strategic and regulatory implications. In the Netherlands, KPN is going for ADSL2+, keeping both its options and the market open. In Belgium, Belgacom’s VDSL strategy reduces strategic options and hurts the competition.

Godell concludes: “The rest of Europe can learn from KPN’s cheap, asset-light triple-play and ADSL2+ strategies and its stark contrast to Belgacom’s expensive VDSL and triple-play strategies. It will be very difficult for telcos and ISPs to be more than me-too players in TV services, and KPN’s strategy of reselling digital terrestrial TV is a recognition of that.”

The research mentioned in this release, “The Low Countries' Broadband Split”, is available to Forrester WholeView 2™ clients.

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