The first telegraph line
The history of KPN can be traced back to 1852 when the govern-ment constructed telegraph lines which it intended to operate itself. Until then, the lines had been in the hands of private companies. The first line was constructed between Amsterdam and Haarlem by the Hollandsche IJzeren Spoorweg-Maatschappij (Dutch railway company). After 1852, private lines were only constructed and exploited for less important connections.
The government had two important motives for establishing the State Telegraph Service:- Connecting private Dutch lines to the national network of neighbouring Prussia was prohibited. - The telegraph network was an important instrument for the development of trade and industry and for public administration. The State Telegraph Service formed part of the Ministry of Home Affairs.
The development of the telegraph network was not a commercial success. The costs of the equipment and specially trained telegraph operators were high. At the beginning of 1870, an attempt was made to reduce those costs and the first joint post and telegraph offices opened their doors. In small towns or villages with little traffic, the postal staff also worked for the telegraph company. The results of this combination were disappointing, however. Furthermore, the postal staff often put the telegrams to one side because they were too busy sorting the letters.
Davids, Mila, De weg naar zelfstandigheid: De voorgeschiedenis van de verzelfstandiging van de PTT in 1989. Uitgeverij Verloren, Hilversum, 1998. Schuilenga et al. (red), Honderd jaar telefoon: Geschiedenis van de openbare telefonie in Nederland 1881-1981. Staatsbedrijf der PTT, 1981. (dutch only)
Private telephone companies introduced public telephony to the Netherlands in 1881. Inter-local telephone services were established when these local networks were connected to each other from 1888 onwards. The local councils and the government sold concessions, thus granting the companies a monopoly over a local network for a limited period of time.
Telegraph traffic growth
The introduction of the telephone led surprisingly to a growth in telegraph traffic. Telegrams were transmitted to and from small towns and villages using a telephone. This was far cheaper than using telegraph equipment and an expensively trained expert was unnecessary. From that moment on, the number of telegraph offices soared.
In 1870, the State Telegraph Service had been incorporated into the Ministry of Finance, which was already responsible for the postal service. This meant that the post and telegraph offices could be merged. Seven years later, the Post and State Telegraph Service formed part of the new Ministry of Water Management, Trade and Industry. This indicated how important both services were to economic development.
In 1886, the post and telegraph service were combined into one company known simply as the 'Post Office'. For more than a century, until 1989, the post and telecommunications services remained closely related.
Long waiting lines
An increasing number of private telephone networks became outdated and congested due to lack of investment by the operators. This resulted in poor connections and long waiting times. From 1896, the larger cities, such as Amsterdam and Rotterdam, decided to take over the local telephone services after the concession period had ended. Elsewhere, the operations remained in private hands.
Following the example of Belgium and Germany, the Dutch State took control of the inter-local lines in 1897. The local networks were excluded from this decision, since they required heavy investment. This turned out to be a regretful decision as the local networks were replaced by a national network with local branches. At the end of 1927, only the valuable networks of Amsterdam, Rotterdam and the Hague were still managed by the local councils. These networks did not come under the government's control until 1940.
Meanwhile, the post and telegraph organisations developed into modern communication services and increasingly distanced themselves from the Ministry of Water Management, Trade and Industry. In 1893, the first corporatisation was established: the 'Post and Telegraph Administration' (P&T). The management pushed for greater independence, but the government kept a close eye on P&T.
In 1915, the Post and Telegraph Administration became a state-owned company. This meant that the government and parliament could have greater insight into the financial situation of what was still popularly called P&T. The State enterprise remained tied to the government.
During World War I, the State could therefore decide to increase post and telegraph charges. The government was lacking in money needed to resolve problems caused to the Nether-lands by the war raging in Europe. P&T received too little money for investments and this led to complaints regarding the level of service.
Call for freedom
The war years led to the introduction of cutback measures at P&T and the call for greater freedom. For example, the company wanted to be able to put money aside so that it could continue the planned investments even in times of hardship. The government and parliament responded in 1928 with a new law which led only to a change in the name: the Netherlands Postal and Telecommunications Services (PTT).
Influence from realm
The law also introduced a Post Council whose task was to ensure that the interests of the public and business community received more attention. Practice proved otherwise. During the economic depression of the thirties, the government once again used PTT profits to fund state spending. Despite the sustained influence of the State, the PTT was allowed to carry out its policy unhindered thanks to the new law. The automation of the telephone network and the accompanying investments were therefore never discussed.
At the beginning of 1941, the German occupying forces granted the PTT corporate rights. On paper, this meant that the PTT was now an independent company with a high degree of financial freedom, but there was no question of freedom in practice. The occupier maintained a firm grip on the company. The occupation and the war brought the PTT to a virtual standstill. There were too few personnel available to keep the service firmly on its feet. Moreover, the Germans restricted the functioning of the lines to prevent the resistance from using them to their advantage.
Back to goverment
After Word War II, the discussion resurfaced as to what degree of independence the PTT should have. Parliament did not wish to maintain the 'German corporate rights'. The PTT therefore became a state-controlled company again. By restricting independence in financial management, the State was able to appropriate the PTT's revenues in order to offset fluctuations in the economy.
On the other hand, it was in the government's best interests to have a smoothly functioning communications system. It was in line with the pursuit of far-reaching industrialisation and an improved geographical distribution of Dutch business activities. The PTT received money for investments in order to meet the growing demand but the available funds remained highly dependent on the needs of the government.
Automated telephone network
As a state-controlled company, the PTT was obliged to conform to the government's labour policy. A flexible adaptation to the labour market was therefore impossible. The State enterprise had difficulty in keeping their well-educated personnel. At the same time, the demand for telephone lines increased. Here, the PTT concentrated mainly on telephone exchanges and connections and a waiting list resulted. The Netherlands was the second country after Switzerland to have a fully automated telephone network.
From 1970, the Netherlands Postal and Telecommunications Services had to make an obligatory annual contribution to the Treasury. This totalled approximately one billion Dutch guilders per year around 1980. To be able to make the necessary investments, in addition, the PTT was forced to introduce cutbacks. These were at the expense of service levels, and resulted in an increase in charges, which in turn led to a great deal of criticism, from parliament too.
Two developments in the eighties would finally give the PTT the full independence it had desired for so long. As a result of the 'telematics revolution', the boundaries between telecommunication and information technology faded somewhat. Telecommunication companies were forced to digitalise their exchanges and lines. This required enormous investments, and the PTT did not have sufficient funds. Capital could only be borrowed in the market if the company had commercial rights.
At the same time, more and more Western governments were deciding to privatise their state-owned companies. The idea behind this was that the influence of the State hampered the efficiency and profitability of these companies. It was reasoned that if a state-owned company had to hold its own in the market, it would automatically become less bureaucratic and squander less money.
Influenced by both tendencies , the government decided upon a change of status. On 1 January 1989, the Netherlands Postal and Telecommunications Services became Royal KPN Nederland NV (KPN). 1994 saw the listing of KPN on the Amsterdam Stock Exchange and, just over a year later, on the New York Stock Exchange. The State gradually reduced its number of shares in the company.
Internet and e-mail
Whilst the telegraph service, once the basis of KPN, gradually made its exit, the postal and telephone services increasingly found themselves in direct competition with each other. The emergence of the Internet and e-mail gave telephony an important role in written communication. The bond between KPN's two most important operating companies, PTT Post and PTT Telecom, was becoming ever weaker.
The companies were therefore demerged in 1998 and each went their separate way. PTT Post merged with the Australian company TNT and became TNT Post Group, and PTT Telecom became Royal KPN NV. At more or less the same time, KPN's monopoly over telecom services in the Netherlands came to an end. The exclusive concession from the State made room for the liberalisation of the telecommunications market. The Netherlands Regulatory Authority for the Telecommunications and Postal Sector (OPTA) was established to monitor KPN. Other players entered the market and were given access to KPN's fixed and mobile networks.
change of mentality
The new circumstances demanded a change of mentality within KPN. The management style changed and customer loyalty was assigned high priority. The staff were trained, more products from various sub-markets were developed, and company-owned sales channels were established e.g. Primafoon and Business Center.
The liberalisation of the European telecom markets had far-reaching consequences for KPN and the strategy the company followed. A decline in the market share in the Netherlands was inevitable but, at the same time, KPN gained access to other markets. This led to a revolutionary internationali-sation of KPN's activities and sister organisations across the border became competitors. The boundaries were becoming blurred.
The ending of the telephone monopoly had the effect of opening the floodgates; a wave of hyperactivity swept across the industry. Internet and mobile communication soon became part of everyday life. The unglamorous, slow-moving days of the monopoly made way for the exact opposite; the wild, fast-moving world of the Internet, e-business and telecommunication and lots more besides. It was a period that did not last long, just from the late 1990s until the year 2000. But it turned the world upside down
Swept along by the internet
Everybody was swept along by the Internet and all the possibilities the new medium opened up. But that was not the source of the madness, because everybody did become gripped by the new medium. The real reason for the collective madness stemmed from the setting aside of centuries-old business acumen. The prevailing mood was that the streets were paved with gold for anybody who got into the Internet business. Money played no role. Mergers and acquisitions became routine occurrences. It was part of the delusion of the day: to survive a company had to have everything under one roof. No matter how steep the bill. So telecom companies took over IT companies or purchased entertainment factories like Endemol.
Burst of the Internet bubble
One thing that is certain is that the combination of ignorance and uncertainty deceived those involved. The Internet was new. Everybody saw the medium had enormous potential. But nobody knew how it would evolve and what exactly to do with it. Yet everybody wanted to stake out a place for themselves on the worldwide web... Everything changed when the Internet bubble burst, the stock market collapsed, shareholders were left with the bill and the debt-ridden telecom operators faced the task of crawling out of a very deep ravine.
The most important lesson is that we need to listen far more to the customer. In the hype years, the industry was inward-looking and fantasised about customers (and about how much they would be prepared to spend) instead of talking to them. However, the customer is the only person who can tell you what you should or should not do.
A new CEO
KPN was among those that became embroiled in the hype years. By mid-2001, the company had a millstone that consisted of a debt of around €23 billion. On top of that, KPN had become entangled in a web of takeovers and joint ventures. The situation was anything but rosy. Doom-mongers predicted the company would go under. This was the setting in which Ad Scheepbouwer was approached about becoming CEO. The big question was whether he could return KPN to a normal, healthy company able to set its own course.
A periode of calm and money
Scheepbouwer was in no doubt about one thing: KPN needed a period of calm, and thus money. His first step was to visit a series of banks and financial institutions. He faced not just one big problem, but a seemingly endless string of problems, large and small. He saw it was impossible to solve everything in one go. You had to set priorities. Timing was crucial.
Plan de campagne
Scheepbouwer's ‘plan de campagne’ was as follows. First of all, KPN had to regain control over its own destiny. The bridging credit gave the company breathing space, but not room for manoeuvre. This was due to KPN’s entanglement in a network of international partners: Bell South, DoCoMo, Qwest, Hutchison and many more besides. They were like an octopus with tentacles around the company. KPN began dismantling alliances to break free from Bell South and integrate E-Plus in the KPN family. The next item on the agenda was the need to increase cash flow and margin and tackle the ensuing re-organisation. The business units had too many employees. It was high time to complete reorga-nisation processes that had been initiated earlier.
Only after taking these measures would the road be clear for a new public offering. This money would ease the debt burden and start to restore confidence in KPN. After dispelling the appearance of a forced sell-off, KPN was able calmly to resume disposing of activities that did not form part of its core business. To date this process has produced revenues totalling approximately €4.5 billion. The money has been used to reduce KPN’s debt burden. It cut a debt that stood at more than €23 billion at the start of 2001 to less than €8 billion by 2005. Today, KPN concentrates entirely on its most important principal task: to improve quality of service in a way that makes the lives of its customers easier and more comfortable.
In 1881, five years after the telephone was invented, the Netherlands got its first public telephone network, with 49 subscribers in Amsterdam being connected to the network. That means that the telephone service in the Netherlands has now been in existence for 125 years.
Why are we celebrating 125 years of phone services?
With its long history as a telecom company KPN has made the biggest contribution to 125 years of phone services in the Netherlands. The anniversary is a fine opportunity to make that clear. It is also a good time to show that we have not stood still. We have grown from a telecom company into a multimedia enterprise that will continue to play a big role in the years ahead. This can be seen from our new brand strategy: KPN connects you with the certainty of today to the future of tomorrow.
Fiber-optic cabling is the basis of the future-proof network KPN is rolling out in the Netherlands.By so doing KPN is putting new communication capabilities within reach, making all kinds of new services – including ultrafast Internet and interactive TV – faster and easier to use.The KPN network is an open network. This means that other providers can offer their own services via our new fiber-optic network.
Step by step
Enschede is the first city that will use fiber-optic technology on a large scale. KPN launched this initiative early 2007 together with the municipal authorities and housing corporations. Between February and April a few families of KPN employees tried out watching television, using the Internet and telephoning over a 25 MB Internet connection. In October part of southern Enschede was able to apply to KPN for a line in Glasnet Enschede and a range of services from participating service providers. The rest of the city will be connected to fiber-optic cables in 2008 and 2009. Enschede will then be the first ‘fiber-optic city’ in the Netherlands.
Initiatives across the country
Fiber-optic initiatives are under way throughout the Netherlands. Commercial gardeners at Agriport in Wieringermeer have been using fiber-optic technology since year-end 2007, for example.In Groningen, Friesland, Drenthe and Overijssel the provincial authorities called for tenders to install fiber-optic rings. KPN won most of those contracts. At present KPN is talking to numerous municipalities, companies and industrial site managers with a view to rolling out ‘Fiber to the Office’ proactively.
KPN won the International GTB (Global Telecoms Business) Innovation Award in September 2007 for the innovative strength of its new fiber-optic network. This establishes KPN as the global frontrunner in transforming an end-to-end network.
In 2008 KPN announces a new phase on its strategy: Back to growth. This signifies that the company aims to respond to the challenges that lie ahead on the ICT and telecom market. It is KPN’s ambition to maintain its position in the top echelons of European telecommunication companies.
When in 2008 the credit crisis spreads across the world, KPN is able to limit the negative effects of the crisis by introducing cost-saving measures and efficiency improvements. The effects on the consumer market are relatively slight; the business market is hit harder.
Corporate social responsibility
KPN makes a contribution towards solving major social problems, such as climate change, work/life balance, mobility and social isolation. In a world of Internet and mobile phones, not everyone is able to remain in contact. This is why KPN initiates and supports various projects to help people to get in contact with each other.
To respond to the constant changes and trends in the telecom and IT sector, the new KPN chief executive Eelco Blok introduced a new strategy in May 2011. Strengthen, simplicity and growth are the guiding principles. Everything is oriented to improving quality, service and technique, so as to become the best service provider and to strengthen the company’s market position in the Netherlands. On the international front, the focus is on continuing to increase sales and profitability.