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Digitisation stimulates competition, close supervision of business markets remains necessary

The Commission of the Dutch Independent Post and Telecommunications Authority (OPTA) today presented its view with regard to the regulation of fixed telephony, television, internet access and business network services in the period from 2012 up to and including 2014. On the basis of national and European regulations, OPTA decides which measures it considers necessary in the next three years to stimulate innovation, investment and competition in the interests of consumers.

Due to the progression of digitisation, electronic communication markets are increasingly influenced by market forces. For this reason, OPTA will impose less strict rules on KPN in the consumer segment and, for the time being, will not intervene in the developing television market. In OPTA's opinion, competitors on the business communication markets are still dependent on access to KPN's infrastructure with its national coverage to such an extent that far-reaching regulation in this area is still essential.

Digitisation - a boost to competition

OPTA notes that the consumer markets for fixed telephony, internet access and television are developing favourably. The penetration of broadband internet access has increased further. As a result, the Netherlands is retaining its position amongst the world's leading countries in this regard. The range of services on offer has also developed further. This is visible in the strong growth in the bundling of telephony, internet access and television ('triple play') and in the further digitisation of services such as interactive television, HD television and telephone calls using a digital connection (VOIP). As a result of the sustained digitisation and convergence of networks, the barriers to entry by competitors are being lowered and players are developing new services.

Opening of KPN's network is essential

KPN still has a dominant position on the markets for fixed telephony, internet access and business network services. The regulation of access through the unbundling of the copper local loops is therefore necessary to provide competing providers with access to KPN's network. This will ensure that end-users retain their freedom of choice, while OPTA will promote competition on these retail markets.

Consumer markets for telephony and internet access

The regulation of unbundled access to the local loop, in combination with the favourable developments observed on the markets for telephony and internet access, means that OPTA may ease its regulation of the consumer segment. For instance, OPTA is of the opinion that the pricing remedies which were imposed on KPN in the previous regulatory period are no longer necessary.

Business markets for telephony and internet access

In the case of the business market, where digitisation has fewer positive effects, the situation is different. In these markets, KPN has retained a dominant position, partly because of the relatively limited position of cable operators in this segment. The competition from other providers is not yet strong enough to discipline KPN sufficiently without regulation. In addition to the regulation of unbundled access to the copper local loops, OPTA finds that the obligation to provide ‘active’ access to the copper network with its national coverage is essential. With this form of access there is less of a need for providers to invest in networks and equipment. With regard to the business fibre-optic market (Fibre to the Office), OPTA will not impose remedies on KPN for the time being, because its position in this area is much less strong and alternative players are present, such as Eurofiber and Tele2.

Investments in new, high-speed networks

OPTA has also decided that the high-speed fibre-optic networks of KPN-Reggefiber (Fibre to the Home) must remain open to alternative providers in the coming regulatory period. It is expected that these fibre-optic networks will reach 16% to 24% of consumers in 2014. Maximum prices for access, for instance, apply in accordance with regulation by OPTA. With the further implementation of tariff regulation, OPTA has sought a balance between promoting competition, on the one hand, and the importance of investing in this new infrastructure, on the other hand.

Consumers have greater choice of television services

At the beginning of 2009, OPTA decided that the analogue cable networks of UPC and Ziggo had to be opened up, at least until 2012. It appears from OPTA's new analysis that in recent years the television market has become more competitive sooner than was expected as a result of digitisation. Digital television is gaining ground. Almost 70% of households in the Netherlands now have digital television. The importance of analogue television is consequently declining. In addition, KPN will be able to offer more competitive digital television through the fixed line as a result of the recently announced investments in the copper network. Alternative providers, such as Tele2, have access to these lines and can therefore offer consumers services too. As a result, OPTA expects consumers to be offered more choice. After all, they are able to choose from a wide range of television platforms and providers. In practice consumers also appear to switch providers. OPTA expects the growth in innovation and competition on the television market to continue in the coming years. On the basis of the existing regulatory framework, regulation of the cable network is therefore not necessary at present.

Consultation

The substantiation of OPTA's view of regulation is provided in the market analysis decisions and the assessment of the television market. Market parties and other stakeholders have eight weeks in which they can respond to the draft decision on unbundled access (ULL) and the draft assessment of the television market, both of which were published today. The draft decision on Fixed Telephony will be published on 14 July 2011. Shortly after the summer, the draft decisions on Wholesale Broadband Access / Leased Lines and Fibre-Optic Access for the Business Market will be published.
The Dutch Competition Authority’s (NMa) advice with regard to the decisions which have now been presented for consultation was positive.
After all the comments submitted during the consultation have been processed, the European Commission and BEREC (Body of European Regulators for Electronic Communications) will be notified of the draft decisions which have been the subject of consultation. The new measures will come into force on 1 January 2012.