Fibre project refits Dutch 'ground zero'

By PETER GRIFFIN

NETHERLANDS - The Dutch town of Enschede, nestled near the German border, has its own "ground zero".

In May 2000, a massive explosion at the Roombeek fireworks factory near the city centre ripped through an area of dense housing. The blast and ensuing fire destroyed 2000 houses and killed 22 people.

Four years on, rebuilding is well under way and while the town is struggling to put the tragedy behind it a positive economic side-effect of the tragedy now has the eyes of the international telecommunications industry focused on Enschede.

The disaster allowed a venture to get off the ground that is changing the way telecoms, internet and pay TV services are provided to residential households.

For Peter Kamphius, chief technology officer at CasaNet, the company behind Enschede's fledging fibre-optic project, the blast created a "big greenfields opportunity".

The local housing corporation was given the task of rebuilding thousands of homes.

It decided to supply each of the new homes with high-capacity fibre-optic cabling and backed a venture in which CasaNet would become a utility broadband infrastructure provider, leasing "dark" fibre to internet and phone companies wanting to supply services in opposition to Dutch telecoms incumbent, KPN.

Under a five-year plan the scheme will supply 25,000 households with fibre cabling allowing a "triple play" of communications services - pay TV, internet and telecoms, over a single cable.

The service has only just gone live with service provider Concepts ICT using the network to reach a small number of customers.

For €60 ($109) a month, a subscribing household receives flat-rate internet access at 2Mbps (megabits per second). Thrown in is basic telephone line rental, 35 pay TV channels and 16 radio stations. Kamphius said calling discounts of up to 35 per cent on KPN's pricing were also being offered.

The contracts refer to 100GB monthly traffic limits, unheard of in New Zealand for residential broadband plans.

An upgrade to 70 TV channels, internet access at 4Mbps can be bought for €20. For an extra €30, internet access at up to 10Mbps, rivalling the speeds provided to corporate offices, can be brought straight into the home.

The fibres are fed into the homes to two small modems handling video, voice and data feeds. Regular telephones can then be plugged straight into the fibre network.

But the CasaNet economic model has a single major advantage. Around half of Dutch homes are owned by housing corporations, which are wealthy but run their operations like public services. Houses are rented out at reasonable rates.

Two housing corporations have backed CasaNet, something a private firm was unlikely to have stumped up for.

"It's designed to become a utility, shareholders aren't asking for big returns," said Kamphius.

They were happy with a projected return on investment of about 4 per cent. And what type of investment are we talking about?

The housing corporations will put up about €30 million ($54 million) to reach the 25,000 houses over the next five years. CasaNet, based on its progress, will then consider expanding to privately owned homes in the region. A network reaching 55,000 houses would cost about €60 million to build. The venture aims to be cashflow positive in three to four years.

"One of the major issues in our business plan is capital expenditure. We need 15,000 houses connected to run it profitably," said Kamphius.

But there's a long way to go. So far there are just 150 houses on the tiny network, with 1500 expected to be connected within a month.

Where CasaNet has extended its network, 43 per cent of those covered have taken up the service, a statistic that may soon worry competitors KPN and Essent.

The CasaNet model is to outsource everything. The company has only three employees. Swedish equipment telecoms equipment maker Ericsson is building the network and managing it day to day. Service providers run their offerings over the network independently.

Kamphius said it was too early to determine how KPN would respond to the fibre competition, but there were early signs that it might endorse CasaNet's business plan.

While KPN started out claiming CasaNet would not be able to deliver the service, Kamphius said the financially troubled telco was now negotiating to run its services over the fibre network.

The fibre to the home scenario has telecoms equipment vendors excited.

Ericsson Australia's head of broadband marketing, Colin Goodwin, said US experience showed fibre could now be laid at the same price as copper wires.

The problem in New Zealand and Australia was finding a critical mass of households to build out fibre to.

Goodwin said he was approached regularly by property developers seeking to build fibre into their developments.

"In general they have 100 apartments they want to build. We say 'can you put together 10,000?' Then it would be interesting."

* Peter Griffin visited Enschede as a guest of Ericsson.