KPN's All IP project is one of the most radical
transformations anywhere in the world being planned by a
And that's radical in the real sense of the world: KPN is
replacing all of its network in the Netherlands, right down to
the roots. Its core network, its telephone exchanges and its
local loops are being replaced in a project that will take
until 2010 and cost an estimated €1.5 billion.
Some of that sum will come from the sale of the real estate
currently used for those telephone exchanges. Instead of a
conventional presence at the centre of each community, KPN is
building an infrastructure of kerbside boxes: the network will
be fibre-to-the-kerb nationwide.
That means KPN needs to build a new relationship with the
alternative providers that today use unbundled local loops.
They are normally defined as the lines that run from telephone
exchanges to the customers: with no exchanges any more, the
definition becomes meaningless. KPN is aware of that, and so is
the Dutch regulator Opta.
The All IP network will give KPN and the alternative operators
that will use its network capacity of 30-50 megabits to each
customer. The company believes that 10-12 megabits, the limit
of current technology with ADSL 2+, is just not enough.
Eelco Blok, 50 next year, is the person in charge of the All
IP project, as managing director or CEO of KPN's fixed network.
He reports directly to group CEO Ad Scheepbouwer and is one of
the five members of the company's board of management: the
others being CFO Marcel Smits, Stan Miller who heads mobile
operations worldwide, including E-Plus in Germany, and consumer
market chief Baptiest Coopmans.
Lucent — now Alcatel-Lucent — was named in
the middle of 2006 as the overall systems integrator and KPN
later published a list of the main vendors it is using for the
All IP project — see panel.
It's been a memorable year for KPN. Not only has it begun its
All IP project in earnest, but the Dutch state has sold the
last of its shares in the company — from 70% in 1994.
And KPN bought the local operations of Tiscali for €255
million, giving it an extra 276,000 broadband customers.
What are the drivers behind KPN's decision to move from a
fixed network to a next generation all IP network? "We have a
very competitive environment in the Netherlands," says Blok.
"We have aggressive cable operators with 95% coverage and
state-of-the-art networks. They are able to deliver broadband
internet and voice over IP with their analogue and digital
He's aware that "the future of a wireline operator is not
fixed telephony, but is broadband internet, voice over IP and
IPTV in the consumer market and IP VPN, ethernet and value
added services in the business market".
In order to have "a real answer available to the aggressive
cable TV operators you need the bandwidth". With traditional
networks "it's only possible to upgrade your network with ADSL
2+ to 10-12 megabits a second per connection". And "that's not
enough to deliver all the new world services as broadband
internet, IPTV and voice over IP together", he says.
That means there's only one solution. "That is to move to
fibre-to-the-kerb VDSL 2. Then you are able to upgrade the
bandwidth of your network to 30-50 megabits and you will be
able to deliver all the new world services." Then KPN will be
able to compete with the cable operators.
"From a services perspective we really believe that we need to
upgrade the wireline network to a bandwidth of 30-50 megabits,
given the services that are currently in scope to be offered to
the average consumer in the next two, three, four, five years,"
"The pressure is really high," he adds. "The cable TV
operators and the alternative DSL operators are also competing
with us for the same consumers. The broadband internet
penetration in the Netherlands is really, really high.
Currently 65-67% of households in the Netherlands have a
broadband internet connection." He expects penetration to reach
80-85% in the next two or three years.
Stay in business
"We have to upgrade the network to stay in business," he says.
That's his measure of the pressure.
There's a second driver though: "the opportunity to decrease
our cost level through implementing a next-gen all-IP network".
When the new network is rolled out it will be possible "to
phase out a lot of the traditional platforms, such as the
PSTN/ISDN platform, the SDH platform, the ATM and Frame Relay
platforms", he says.
"That will give us the opportunity to reduce maintenance and
operations costs and also downsize the operations part of the
wireline organisation with an enormous amount of
The company expects top reduce its staff by 5,000 between 2005
and the end of 2007, when the first phase of the All IP project
ends, and then a further 3,000 by the end of 2009 in phase two.
Cost savings will reach €450 million a year by 2007 and
€850 million a year by 2009, says KPN.
Is this is similar argument to the one BT is using for its
project, called 21st Century Network: reducing costs and
collapsing many legacy networks into one? "We have added the
services side," says Blok. "We really believe that we need to
upgrade the access network for the services growth we expect in
In the UK, 21CN is the responsibility of BT Wholesale and
stops at the main distribution frame in the telephone exchange
— at which point the local loop, run by Openreach,
begins. That's a separate organisation, though still part of
In the Netherlands KPN is able to plan the transformation of
the whole network, end to end.
Upgrading the backbone
Where is KPN in the rollout of the All IP project? "We started
two years ago with our backbone. We are migrating to a full
ethernet backbone, from SDH and ATM to ethernet."
A total of 80% of the backbone has been upgraded so far. He
defines the backbone as the network through to the local
exchange. "It's all optical and ethernet technology."
The timetable for upgrading the rest of the backbone will be
decided in 2007, he says. "The other 20% will be driven by
ethernet VPN customers in the business market and the IPTV
rollout. We are not just rolling out the new infrastructure. We
have to roll out a certain part of the network infrastructure
but the commercial decision will drive the roll out."
On the services side, "we have implemented a voice over IP
platform, based on pre-IMS", says Blok. "We have rolled out an
IPTV platform." That is being built by Siemens as the systems
integrator and was featured in an interview in the
September-October 2006 issue of Global Telecoms Business.
So core and services are being covered. What about the last
mile? "We have decided to do three pilots in the Netherlands in
our network of fibre-to-the-kerb VDSL 2, to really test in a
live environment our full new infrastructure. We plan to
evaluate those three pilots in Q1 of next year, and then we
will make the decision to roll out in the rest of the country,
based on the evaluation."
The VDSL 2 trials are taking place in the cities of The Hague,
Diemen and Enschede. In each area, KPN will replace over 100
junction boxes and connect the new boxes with fibre. Each box
can connect between 200 and 400 houses. The existing copper
wire will remain, working at up to 30 megabits a second.
KPN has decided that the network trials are completely open to
other competitors to enable them to test the technology and to
try out their own broadband services with customers.
KPN has a 42% share of the country's consumer broadband
business and is moving its analogue telephone service over to
voice over IP. "We are very aggressively selling our own voice
over IP product and at the end of Q2 we had already installed
156,000 voice over IP connections. We have continued to grow
Shortly after the interview, KPN published its Q3 results,
which showed a sharp rise to 270,000 connections — a
rise of around 1,250 a day.
They are replacing analogue connections: "First line voice
over IP," says Blok. "The voice over IP product fully replaces
the PSTN and ISDN service."
We go into the cost of the All IP programme: "Between €1
billion and €1.5 billion, and we will spend that in the
period from 2006 to 2010," says Blok. "We will fund that out of
the sale of our real estate that will become available for sale
because we are moving all our active equipment from the local
exchanges to the street cabinets."
Thanks to the migration to an all-IP infrastructure "we will
be able to sell almost 80% of our technical real estate that is
still on the balance sheet of KPN".
The company still owns its exchange buildings —
unlike some operators, which reduced their debts by selling and
leasing back the real estate. "BT did a transaction like that,
a sale and leaseback, and so did Deutsche Telekom and Telecom
Italia. Luckily we did not have to sell off our real estate to
clean up the balance. We had some other opportunities to clean
up our balance sheet."
The real estate transaction will raise "probably around
€1 billion", thinks Blok. "It will not fund 100% of the
investment in the All IP network but it will be between 75% and
BT plans to phase out all its legacy network over time through
21CN. Does KPN have the same ambition?
"We really believe that we will be able to phase out all the
legacy platforms. It's needed or we will not be able to reduce
the cost as much as we really believe that we have to reduce
the cost. In the network, costs and platforms are directly
connected to each other — maintenance and operations
are directly correlated with running platforms." It's "really
essential" to shut down the legacy, he emphasises.
Closing the legacy networks
How will this be phased? Will KPN be able to start closing
networks before the All IP programme is completed? "In the
business market we have already made a move from ATM and Frame
services to IP VPN and ethernet VPN, based on a new
With a "very aggressive" service offering the company was able
not to close down ATM and Frame Relay services but to stop
investment two years ago, says Blok. "We haven't made a final
decision to migrate the last customers, but that decision will
be made in the next six to 12 months. Shortly after that we
will be able to phase out the ATM and Frame network." Leased
line services will be subject to a similar schedule, he
Let's turn to KPN's changing wholesale relationship with its
competitors in the Netherlands. How will KPN manage the
From the point that the All IP network is in place "we will
offer access to that network on a wholesale basis and we have
made the decision not to start a fight with the regulator and
the other operators in the Netherlands as, for instance,
Deutsche Telekom did", says Blok.
The German incumbent is fighting a battle — which has
now become a controversy at pan-European level — for a
"regulatory holiday" if it goes ahead with VDSL investment, as
it wants to prevent competitors having access to the broadband
local network. Deutsche Telekom was initially supported by the
previous German political leader, chancellor Gerhard
Schröder, who lost office in the 2005 election, but the
company is opposed by the European commissioner in charge of
telecoms, Viviane Reding.
KPN has set its face against the idea of a regulatory holiday.
"We think that it's better for not only ourselves but also for
the growth of the new world services to open up our network
from the start," says Blok. "Therefore we have announced that
we will come up with wholesale broadband access services on a
But the network topology will be different. Fibre to the kerb
means there will be no main distribution frame in the
exchanges. If KPN sells its exchanges, there will be no central
building for competitors to put their DSLAMs and terminate
their core networks.
"The regulator has asked us — well, forced us, but
I'd rather say asked us — to offer street cabinet
co-location access," says Blok. "We have announced street
cabinet co-location services. That's now in the public domain.
We are about to announce a wholesale broadband access service,
and shortly after that we will announce our street cabinet
It will be possible for other operators to build their own
VDSL service using co-location in KPN's street cabinets and
backhaul, or they will be able to use KPN's wholesale
How will KPN manage the transition between existing local loop
unbundling arrangements and the future network topology?
"Currently the unbundling starts at the exchange. The
alternative DSL operators that are making use of unbundled
local loops will have to migrate to the All IP network," says
Blok. "The regulator recently announced that we have to give
the other operators a window to make that change."
The window will be from two and a half years to five years.
"The regulator thinks that is a reasonable period, and that
almost matches our current roll-out plan."
How will KPN manage the relationship with the altnets? They
will need to work with the incumbent on detailed questions of
services, interfaces and timing. "We started discussions with
the alternative DSL operators at the end of last year and,
based on what they have told us, we have designed the wholesale
service and we have invited them to join us in the three pilots
we are running from November."
Those pilots will be used to test "not only our own processes
and ideas but also the ideas of the other operators", and the
operators will be seeing if it is possible "to define a set of
wholesale services that can meet most of the requirements of
the alternative DSL operators".
How will these ideas be extended to business services.
"There's very intense competition in the business market," says
Blok. "There's Tele2 Versatel, but also BT and Colt have their
own infrastructure in the Netherlands." And there's Verizon
Business and Orange Business Services: "They are really
targeting the large multinationals that are in the Netherlands.
It is really tough, but we are doing really well."
Does KPN expect to provide local access services as part of
the All IP project to these operators? "In some parts of the
Netherlands they have their own infrastructure end-to-end and
in some parts they don't, and we deliver services to all the
other operators in the Netherlands. They have the possibility
of buying the All IP wholesale service from us."
Is KPN applying its new network strategy in its operations
outside the Netherlands? "We have a backbone infrastructure in
other parts of Europe and we have already upgraded this to
DWDM. We will roll out the ethernet network to the rest of
Europe, where we have our own infrastructure, in 2007," he
"We are implementing techniques that are based on
international standards. Sometimes when you are one of the
frontrunners it is impossible to connect all the new services
to the networks but my experience is that this is just a matter
of time. We have a partnership with Telefónica and we
offer services on a wholesale basis to Telefónica in
some parts of Europe where we have infrastructure —
and the other way round. And the same with SingTel in the Asia
Pacific area and Sprint for the US."
We turn to the relationship with Alcatel-Lucent, as Lucent has
now become following its merger this year with Alcatel: it is
in overall charge of the All IP implementation process. "We
went through a very tough selection process," says Blok.
"Lucent came out the best for the system integration and the
IMS, and Alcatel for the ethernet and — together with
Huawei — for the VDSL 2." It was after KPN made the
decisions that Alcatel and Lucent decided to merge.
How will the process work? "It's a joint effort of the KPN
team and the Lucent team. At the end, you need one responsible
person or company for the rollout, and Lucent Global Services
have a lot of experience in running complex projects like
this." Not only IP transformations, "but there are several
large projects that they have run".
There are very few telecoms operators around the world that
have contemplated something on this scale, a complete
transition from legacy networks to an all IP infrastructure
— indeed, a closing down of the legacy networks.
There's BT with 21CN and there's KPN with All IP. Any
"Complete transitions?" says Blok. "It's very hard to find
another wireline operator that has made the decision to fully
transform its current infrastructure to an all next-gen, all-IP
infrastructure. Recently Telekom Austria announced a similar
programme to the one we are currently running."
But we agree that there are not many others that have decided
— or at least announced a decision — to do a
"I believe the competitive situation and the pressure we face
are the important drivers behind the decision we have
Of the two companies that are in the vanguard, Blok's team in
KPN meet for discussions with their opposite numbers in BT, he
One of the big differences with BT is that KPN has a mobile
business, not only in the Netherlands but also in Belgium,
under the brand Base, and in Germany, where it operates as
E-Plus. BT has a virtual mobile network, but owns no
infrastructure. How does KPN's mobile business affect decisions
on the All IP project?
"They are involved, especially in the backbone part." The
rollout of the All IP programme is being coordinated with the
3G network, both UMTS and HSDPA, he says.
"The rollout, especially the fibre-to-the-kerb investments, is
planned closely with mobile operations." As from January 1 2007
network operations for fixed and mobile in the Netherlands will
be integrated, he adds.
In particular this means that the fibre to the street cabinets
will "a smart rollout", so that the operation takes into
account the base stations for the mobile network.
Much of that €1.5 billion is accounted for by the fibre,
says Blok. "The cost of fibre is digging the holes."
At the same time KPN has decided to stop all investment in
copper. "In areas where new houses are built we will directly
move to a fibre-to-the-home infrastructure." Copper, it seems,
is now truly at the end of its life. GTB
Member of the management board of KPN and managing
director of its fixed division since June 2006
Joined KPN in 1983 and has held various management
positions, including director of carrier services,
corporate networks and fixed net operator, and was
responsible for corporate strategy and innovation
Most recently he was chief operating officer for KPN
| Selected suppliers for KPN
All IP programme
|| Source: KPN
| Overall systems integration
|| Lucent (now Alcatel-Lucent)
| IP core network and IP edge
|| Juniper via Lucent (now
| IP aggregation
| Next generation ethernet
|| Alcatel (now Alcatel-Lucent)
| Next generation DSLAM
|| Alcatel (now Alcatel-Lucent) and
| Emulated voice
|| Lucent (now Alcatel-Lucent)
| VoIP consumer and IPTV
| VoIP business interconnect
| Trouble ticketing
| Fault management
|| Micromuse (now IBM)
| System integration IT demand
|| Atos Origin
| Network activation and
| Inventory management
|| Cramer (now Amdocs)
| Service activation and
|| Staffware (now Tibco)