Also known as Citynet, Amsterdam's project has been under intense scrutiny from other municipal and local authorities interested in replicating this pioneering business model. The experience with Citynet has also informed Dutch FTTH regulatory policy, which is already well-established and offers a good degree of security for new operators looking to build fiber optic networks. It has been a long journey for Citynet, however. In 2001, Amsterdam authorities recognized the importance of high-speed connectivity for the city's economic well-being and launched a formal inquiry into the best way to proceed. City officials believed the network would need to be operational between 2010 and 2015, but it could take seven to nine years to build, so they needed to start immediately. The first step was to determine whether the existing operator, KPN, or the cable television companies had any intention of deploying fiber optics in Amsterdam. This seemed a possibility in 2003 when KPN published the "Delta Plan Fibre," outlining a vision to bring fiber optic cable to the entire Netherlands in collaboration with cable companies. The cable operators weren't interested (cable was fast enough, they argued), and the plan was abandoned. Following advice from Dutch and European regulators in 2004, the municipality of Amsterdam decided to create a public-private partnership (PPP) to invest solely in passive fiber infrastructure. This corporate structure was chosen to avoid contravening state aid rules, which prevent governments from making investments that distort markets and competition.
At the end of 2005, contracts were awarded for the construction and operation of the network. The physical network was to be built by a consortium of local Dutch companies. The operator BBned won the contract to handle the electronic equipment at the exchanges and provide wholesale services. The project finally became a reality in 2006 when GNA was incorporated, with three investor groups—the municipality,
housing associations, and the private sector—each investing €6 million in exchange for a one-third stake in the company. A further €12 million in financing was provided as debt financing, bringing the total investment to €30 million.
General Information
Country: Netherlands
City: Amsterdam
Population: 762,000
Network Owner: Glasvezelnet Amsterdam (GNA) *
Project Name: Citynet
* GNA was originally established with a one-third share from each of the municipal authorities, housing corporations, and private investors. The housing corporations were Ymere, Stadgenoot, Rochdale, and De Key. The private investors were ING Real Estate and Reggefiber. Later, ING Real Estate sold its stake to Reggefiber, and in February 2009 Reggefiber formed a joint venture with KPN, while increasing its stake in the GNA to 70%, with the city and housing associations now owning the remaining 30%.
Implementation
Network Size: 43,000 homes / 10,000 connected / 4,000 [end of 2009] active.
Technology/Architecture: A point-to-point fiber topology (also called a "home run") was selected because it offers complete flexibility in equipment selection—it can support any other technology, including Ethernet and PON. The technology is Ethernet with analog cable television on a second fiber.
Distribution Method: Direct buried cables and 96-fiber ducts.
Implementation Time: The first phase to connect 40,000 homes took 2.5 years, ending in February 2009. Plans to connect the rest of the city are underway.
Once construction was underway, GNA faced a new challenge: how to deploy the network in a densely populated, old city with minimal disruption. “Doing FTTH in a dense, old city is one of the biggest challenges out there, and everyone wants to know how we’re doing it,” said Herman Wagter, the former project manager and now GNA’s business development manager. Asked to single out one challenge above all others, Wagter highlighted the difficulties of cabling the fiber to multi-occupancy residential and office buildings. In dense cities like Amsterdam, roughly 90% of all buildings are multi-unit dwellings, with anywhere from two to 500 individual apartments per building. The technical challenge is getting the fibers distributed from the basement or street level to each individual apartment. “Nobody has given much thought to deploying new fiber cables inside apartment buildings, and it shows,” he says. "Most of the buildings had to be studied from the inside to get an idea of what needs to be done to distribute the fiber optic cabling to each apartment."
There is also a coordination challenge. Around half of Amsterdam's housing is owned by housing associations, but for the remaining 50%, individual agreements must be negotiated with homeowners before construction work can begin. In the worst-case scenario, where there is no access to upper floors via communal spaces, all occupants of the building must be home on the day the installers arrive.
The rollout of 10% of the city was seen as a necessary step in the process of learning how to deploy FTTH, before the entire city could be covered. However, the biggest challenges the network has faced are not in construction, but in bringing together the right partners under the right conditions for investment, taking a total of five years from the initial idea of laying the first cable. Citynet was also challenged in court twice by cable operator UPC, and it took three years to obtain regulatory approval from the European Commission. Finally, in December 2007, the Commission ruled that the investment did not constitute state aid because the terms of the market economy investment principle were met. In other words, the city of Amsterdam was allowed to invest in the network as long as significant private investment was made at the same time and under the same conditions. In terms of commercial success, Citynet found that customers prefer competitive services in a multi-operator market.
Due to limited funding from its parent company, Telecom Italia, this was something the largest operator, BBned, could not undertake on its own. Therefore, GNA reached an agreement with KPN, resulting in KPN also becoming a wholesale operator on the network in 2010. In parallel, the Reggefiber Group, a GNA shareholder, was considering joining forces with KPN to deploy fiber optics throughout the Netherlands. The Dutch competition authority, NMa, and the telecommunications regulator, OPTA, joined the negotiations because they wanted to create a framework that would guarantee equal access to competing service providers and infrastructure without hindering investment. The desire to include GNA's public-private partnership within this framework prolonged discussions with the regulators until the end of 2009, at which point Reggefiber was able to increase its stake in GNA to 70%, allowing GNA to benefit from the economies of scale that Reggefiber could achieve. An unfortunate side effect of the discussions with regulators was that many business decisions had to wait until the regulatory framework was resolved. This standstill lasted until early 2010, but implementation has since restarted in earnest, with the goal of connecting another 100,000 subscribers by the end of 2012.
Business Case
Investment: €30 million to connect the first 40,000 subscribers.
Business Model: Horizontally separated, open access network
Network Owner: Glasvezelnet Amsterdam (GNA) http://www.glasvezelamsterdam.nl/
Network Operator: http://www.bbned.nl BBned was granted exclusivity until October 2009, but the network now has several operators. http://wwwkpn.nl KPN started as a network operator in 2010.
End users of the services
: Service providers: Internet providers on the network include Alice (part of Telecom Italia), Concepts ICT, InterNLnet, Tweak, and KPN. Internet, double-play, and triple-play packages are available, as well as services from other providers, such as Internet telephony backup and online calling.
What is the cost? Alice Comfort Plus provides 20 Mbps symmetrical broadband, unlimited phone calls within the Netherlands, 39 TV channels, and 25 radio stations for €44.50 per month. InterNLnet offers 100 Mbps symmetrical broadband for only €119.95 per month [prices correct as of 06/10/2010].
Customer feedback: The Internet services are appreciated by end users. The lack of digital and HDTV offerings in the television package supplied by BBned has been a source of complaints. An upgrade to a more competitive television offering is expected in 2010.
