Belgian Cable Observatory

Brussels, 12 September 2017

Wholesale market

Retail TV and bundled market

Cable opening at a glance

Context and status of Belgian broadband market- A well-developed market

- Copper unbundling not a major success

- Fresh momentum for a rigid broadband market

Situation in retail standalone and bundled TV market

- Market dynamics: market evolution and market shares

- Consumer prices compared

- Service quality compared

Wholesale aspects: underlying market observations - Wholesale pricing approaches in Europe- Access prices for cable:- Quality of cable access: Cable KPIs and comparison with

BRUO/BROBA

Cable observatoryAgenda

www.idate.org © IDATE DigiWorld 2016 – p. 3

Belgium enjoys a well-developed broadband market…

NGA coverage (% of HH; FTTH, VDSL, DOCSIS 3.0; June 2016)

Share of NGA broadband in all broadband lines (% lines, December 2016)

Source: European Commission, IDATE

A European leader in coverage as well as take-up of high-speed

broadband

0%

25%

50%

75%

100%

BE NL ES LU UK DE FR IT

NGA other

Source: European Commission

Copper unbundling failed in Belgium

Opening of the copper infrastructure

SOURCE: EC Implementation reports

... but competition is weak…

… intra-modal competition has run out of steam

Source: BIPT

Competition essentially a duopoly between Proximus and local cable-co

Fixed residential BB market shares (% of subscribers) Take-up of telco wholesale products

Importance of cable opening

To create competition on the bundled offers, entrants need accessto the different components of the bundled offers

• When a component is not easy to replicate, access needs to be imposed

Economic literature shows that infrastructure-based competitionis stronger and more sustainable than service-based competition

• Entrant which rely on regulated access need to invest

But access is not easy to impose and requires a strong regulatorystrategy

Access prices

Access quality

Strong and quick regulator

Good data and market monitoring

Opening of cable may provide fresh momentum for rigid

broadband market

www.idate.org

Situation in retail TV and bundle

markets

www.idate.org © IDATE DigiWorld 2016 – p. 8

Bundling is the name of the game

Convergence is progressing rapidly

Take-up of multi-play bundles (subscriptions; end 2016)

Source: IDATE based on BIPT

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

3 000 000

3 500 000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

2-play 3- play 4-play

TV remains popular – especially if bundled with other

services

3- and 4-play bundles make up almost 50%

of TV marketCable analogue TV switch-off not

completed (TV subscriptions)

Source: BIPT

Standalone TV1 605 000

Internet+TV266 000

Internet+TV+mobile

261 000

Internet+TV+fixed telephone…

Quad-play837 000

Other bundles with TV190 000

0

1 500 000

3 000 000

4 500 000

2010 2011 2012 2013 2014 2015 2016

analogue analogue and digital digital

Market dynamics: new entrant’s steady progress shows

users appreciate choice

TV subscribers by operator

Orange Belgium making healthy progress

Voo: not availableSource: Van Dijk, operator reports

*includes SFR subscribers

*

0

400000

800000

1200000

1600000

2000000

2400000

S1 2012 S2 2012 S1 2013 S2 2013 S1 2014 S2 2014 S1 2015 S2 2015 Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017

Orange Telenet Proximus Voo & others

Quarterly TV net adds (000s)

3,0 5,2 7,115,8 16,4 14,5

-13,7-4,1 -8,4 -11,1

-21,2

65,7

26,018,0 14,0 17,0

27,017,0

-40

-20

0

20

40

60

80

Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017

Orange Telenet Proximus

www.idate.org © IDATE DigiWorld 2016 – p. 11

However, Belgian users do not enjoy most favourable pricing

conditions...

International benchmarks show prices levels are elevated in Belgium

BE

FR

DE

NL

68,19

57,19

0

10

20

30

40

50

60

70

Median offer (with line rental or cable TV subscriptionincluded)

EU28

45,16

54,03

41,15

47,72

56,9

0 20 40 60

UK 42,81

53,62

35,27

53,19

55,09

0 20 40 60

2016***2015***2014**

49,55

52,98

36,3

59,6

55,16

0 20 40 60

Source: IDATE based on BIPT

Source: European Commission, BIAC 2016

* Weighted avg., incl. VAT; ** 30-60 Mbps, ***30 – 100 Mbps

3-play subscription (EUR PPP/

month)3-play subscription* (EUR PPP/ month)

www.idate.org © IDATE DigiWorld 2016 – p. 12

… in particular the evolution of bundle prices may give rise

to concerns

Evolution of communications price indices

Source: Statistics Belgium

Long-term upward price trend for service packages

2013 avg. = 100

80

90

100

110

120

130fixed telephony mobile telephony Internet access bundles

www.idate.org © IDATE DigiWorld 2016 – p. 13

No favourable trend for consumer

- but competitive offer by cable entrant

Source: vanDijk, IDATE based on operator web sites

TV

TV

+

BB

TV

+

BB

+

mobile

56,053,7

47,0

55,0

30

40

50

60Retail price of basic TV + Broadband offer (EUR)

SFR Box white (50Mbps-150GB) + TVTelenet Basic Internet (50Mbps-150GB) + TV DigitaleVoo Toudoo TV + Internet (75 Mbps-200GB)Proximus Pack Internet comfort (100 Mbps-illimité) + Proximus TV

40

50

60

S1 2013 S2 2013 S1 2014 S2 2014 S1 2015 S2 2015 S1 2016 S1 2017 Q3 2017

Evolution of retail price of basic TV + Broadband offer (EUR)

SFR Telenet Voo Proximus

22,2

25,9 27,0

0

5

10

15

20

25

30

Retail price of standalone TV offer (EUR/month)

SFR TV Basic Telenet Digitale TV Voo Voocorder

15

20

25

30

S2 2015 S1 2016 S1 2017 Q3 2017

Evolution of retail price of standalone TV offer (EUR/month)

SFR Telenet Voo

60

65

70

75

S2 2015 S1 2016 S1 2017 Q3 2017

Evolution of retail price of TV + broadband + mobile offers (EUR/month)

Orange SFR Telenet Voo Proximus

64,071,0 68,7 69,0 71,0

0

50

100

Retail price of basic TV + Broadband + Mobile (tel&BB) offer (EUR)

Orange Love + Dolphin

SFR Box white (50Mbps-150GB) + TV+Silver

Telenet Basic Internet (30Mbps-150GB) + TV Digitale + King

Voo Toudoo TV + Internet (75 Mbps-200GB) + VOOmobile Wahoo (300 min-2GB)

Proximus Pack Internet comfort (100 Mbps-illimité) + Proximus TV

www.idate.org © IDATE DigiWorld 2016 – p. 14

Quality of Service: no provider progressing on all aspects

Source: BIPT * part of Telenet group

360

74

152 146169

128

68

152169 182

0

50

100

150

200

250

300

350

400

Average time needed for solving disruptions of the internet service ( in hours, 95% of cases)

99,0%97,3%

94,3%

96,1%

90,7%

99,8%

96,6%

93,5%94,4%

95,5%

80%

100%

Respect of arranged date for delivery of the internet service (% of cases)

8,3%

2,8%

6,2%5,8%

8,9%

5,9%

2,8%

6,6%

5,5%

7,5%

0%

2%

4%

6%

8%

10%

Frequency of service disruptions on a monthlybasis (in %)

**

**

Some progress on disruptions – but no so much on repair times

Improvements at ‘first-time right’, but three out of five players regress in respecting delivery dates

2015 2016 2015 2016 2015 2016 2015 2016 2015 2016

2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016 2015 2016

2015 2016 2015 2016 2015 2016 2015 2016 2015 2016

4,0% 3,9%

2,0%1,8%

3,4%

1,8%

2,6%2,7%

1,6% 1,5%

0,0%

0,5%

1,0%

1,5%

2,0%

2,5%

3,0%

3,5%

4,0%

4,5%

Complaints about initial functioning of service (% of installations)

www.idate.org

Wholesale aspects

Several methods to regulate access prices

• Price cap

• Benchmarking:

• difficult to find correct benchmark

• Retail Minus and Economic Replicability:

• Complex calculation of “minus” factor

• Wholesale tariff dependent on retail

price strategy, difficult to come with

“disruptive” offer

• Difficult to account for promotions

• Cost orientation

• Should ensure access and cost

orientation when costs are correctly

calculated

=> Retail minus methodology was chosen by

the Belgian Regulators

Setting wholesale tariffs

a crucial challenge for NRAs, competitors and markets

Cost-orientation is the most widely used approach in practice

Source: BEREC

Price control method used in 2016

Wholesale prices

Source: BE: BIPT wholesale price calculator, reference offers

Monthly fees (EUR/access line; BE:

bundles)

0

5

10

15

20

25

30

35

Standard -limited Standard - unlimited Boost - unlimited

Telenet Nethys (Voo) Proximus BROBA w/o voice Numéricable (FR)

Cost-orientation seems to offer more attractive conditions for

challengers

Quality of service: line activation

10

16

22

15

25

55

0

10

20

30

40

50

60

80% 90% 100%

without visit with visit

9

19

45

11

22

45

0

10

20

30

40

50

60

95% 99% 100%

without visit with visit

Threshold values are not directly comparable, but cable KPIs do not

seem more challening than Proximus’ BROBA and BRUO

Source: reference offers

Line activation (working days)

cable BROBA VDSL2

8

18

42

10

20

42

0

10

20

30

40

50

60

95% 99% 100%

without visit with visit

BRUO

Quality of service: Repair time

Source: reference offers; * assumption: working day = 8.5hrs

8,5

68

17

102

0

20

40

60

80

100

120

w/o splicing with splicing

90% 95%

8

16 17

34

17

25,5

34

68

0

10

20

30

40

50

60

70

80

80% 90% 95% 99%

degradation interruption

Repair time (working hours*)

cable BRUO/BROBA VDSL2

Conclusion of this edition…

Opening of cable market is still very recent

Encouraging start: more subscribers than any alternative operator’s TV bundle ever before in the Belgian market

But….

No tangible impact on retail price evolution

Only one single wholesale customer

Regulatory framework evolving, impact remains to be seen

For the observatory: need of more precise data on the investment in infrastructures, broken down by type of infrastructures

… it’s too early to draw a conclusion!

Q&A

We’re happy to take your questions – here are ours …

• Are the selected indicators relevant to assess the effects

of cable opening?

• Do our data give the right picture of the market

evolution?

• Could you provide us with more precise data on network

investment?

www.idate.org

Thank you!