Luxembourg Communication Profile 2012

Luxembourg as a world's broadband leader

Luxembourg's leadership in information and communications technology has been confirmed once again. For the second year in a row, Luxembourg figures in the top 5 of the Broadband leadership ranking 2010 - an annual study from Saïd Business School and Oxford University (sponsored by Cisco). The study analyses broadband quality in 72 countries and 239 cities worldwide.

Luxembourg improved its position from the 9th place in 2008 to the 5th place in 2010.

The results of this third edition of the study show that Luxembourg is an “innovation economy” , enjoying leading broadband penetration “with take-up reaching 100% of households” and able to “'comfortably enjoying today's applications".

Quality was measured by evaluating download, upload (throughput) and latency capabilities of an Internet connection combined in a single 'Broadband Quality Score' for each country.

Telecoms, IP Networks, Digital Media

The owner of P & T Luxembourg maintains a dominant position in fixed and broadband sectors that has become rare in Europe. Despite the attention of regulators in recent years, competition in the broadband market has been hampered by the very high costs for unbundling the local loop and provides shared access. For now, there are few subscribers on broadband fiber optic networks - the alternative operators do not have access to P & T fiber network, which impacts on their competitiveness in the provision of services, since an increasing number of new construction areas of Luxembourg City are equipped with only the fiber. Given the slow pace of regulation, alternative operators will be seriously disadvantaged by where the remedies are at stake, because P & T would by then have had time to consolidate itself as the leading player in the market and have therefore taken from the lion potential subscribers.

Luxembourg is one of the smallest markets in Europe, strongly supported by an influx of workers and migrants from neighboring countries. Luxembourg City is also one of the political centers of the European Union, and also attracts wealthy migrants.

Nevertheless, the government continued to push for the development of fiber to improve the connectivity of Luxembourg. Its operator of fiber in its own right LuxConnect, established in 2006 to provide dark fiber to other operators on a wholesale basis, began offering services in 2009. As part of a package of measures to counter the economic slowdown, and accelerate the development of the fiber infrastructure, the government has decreed that LuxConnect must invest € 100 000 000 2012. In addition, the State has waived its dividend, P & T for 2009 so the company could invest an additional € 74 million fiber beyond its current investments. The government aims to complete coverage FttH Luxembourg, 2018.

In common with most other markets, revenue from fixed-line sector has been declining. Indeed, since 2005 revenues from mobile telecommunications has far exceeded the income from fixed lines, while revenue from broadband sector has underpinned the total turnover.

The total investment in fixed and mobile infrastructure reached nearly € 124 000 000 in 2009, showing only one year of 2.2% growth yoy. Given the constraints of the ongoing financial liquidity, it is unlikely that the significant growth of investment should be expected until at least 2011. Moreover, investment growth was reduced by Luxembourg of general economic slump, which saw GDP fall by 4.2% in 2009. Nevertheless, economic recovery should strengthen in 2010, while GDP growth of 2.1% is expected for the year. Most investment has been in the area of fixed lines that P & T demonstrates its commitment to improving the FTTH and FTTC. Mobile operators have also focused on improvements in the network to provide mobile broadband connectivity to subscribers.

The highlights:

• Revenue in the telecommunications sector has stagnated in Luxembourg in 2009 and has little chance for significant growth until at least 2012. About two-thirds of sales come from the incumbent P & T Luxembourg, the remainder coming from alternative operators. The telecommunications sector continues to be supported by transient workers from neighboring countries as well as center-based policies of the EU.
• Despite regulatory measures taken to promote competition in the local loop, and thus allow easier access to P & T infrastructure, the cost of access to alternative operators still the highest in Europe and therefore the supply broadband services and other leaves only a very slim profit margin. This is a measure of central concern if the regulator is to encourage genuine competition in the market in the coming years.
• Luxembourg SIM mobile phone penetration continues to be the highest in Europe, mainly due to the high number of migrant workers and the popularity of the SIM card with multiple uses.
• The national network of optical fiber is encouraged by the government's financial contribution through its wholesale supplier Luxconnect. However, P & T own fiber deployment is not yet open to access by competitors, which in the long run be detrimental to competitiveness in the market as alternative operators struggle to catch up with the incumbent advantages of being the first to deploy services.