Wednesday, September 28, 2005

New Amsterdam

Last night I had the immense pleasure of presenting alongside Martin Geddes at an event hosted by Citynet in Amsterdam (though using the Google IP VPN effortlessly - again from a Swisscom Eurospot - I am virtually in San Francisco). The audience was a diverse one: local politicians, telcos, consultants, journalists, and others variously involved in the increasingly complex and tense situation in this market.

This event came at an interesting time, two weeks ahead of the results of the Citynet tender process, and on the same day as national papers were splattered with stories about the industry regulator OPTA's apparent willingness to allow cable operators to cross-subsidize digital rollout with analogue subscription fees - which hasn't gone down very well with consumers already angry about cable pricing (as we have previously reported on many occasions). Today the competition authority NMa was reported to be satisfied that current cable tariffs are not excessive, though apparently this reflects a five year average figure - leaving some to question what the outcome would be if we looked only at the present situation. All this prompted a debate today in Parliament on cable pricing, and preliminary reports I have heard suggest that there is a growing political consensus to push for lower prices (recall that OPTA has identified a 19th relevant market, video, in addition to the 18 defined by the EU).

So all-in-all, it's an interesting time to be here. I'm impressed by the level of self-scrutiny and frankness I am hearing from various people I speak with, especially on issues such as whether the current function of the broadband market is sufficient to deliver the kind of services which will be integral to the future social reality of the country (aging population, strain on the social service and healthcare infrastructure [EUR275 per day to house an elderly person in a nursing home], necessity to foster new industries and economic activity [I heard one statement to the effect that the creative industries now account for 7% of economic output in Amsterdam]).

A lot of other countries are facing the same issues, but I don't hear the same level of discourse around the possibility of fundamentally changing direction - I guess because it's a scary issue. Then again, the present is pretty scary as well. In response to one question, I related my observation that KPN has halved its workforce over five years, becoming the acknowledged benchmark for others in the industry in terms of productivity measures like revenue or EBITDA per employee, yet the company has announced it needs to go 40% further. I don't think the audience had appreciated this fact from a non-Dutch perspective, and the implications for the rest of the industry: if the "best-in-class" target needs to get even more aggressive just to stabilize its cost base, what does that say about the longer term? I will be very curious to see the response elsewhere in Europe to what takes place here in the next couple of weeks.

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