2018 was a turbulent year in the Dutch telecom sector. After a lengthy investigation, the European Commission (“Commission”) at the end of November unconditionally approved the acquisition of Tele2 by T-Mobile. The Commission’s decision is a radical break with its assessments of earlier four-to-three mergers of mobile operators. In a more consolidated mobile market, the mobile operators can prepare this year for the upcoming multiband auction. The opening up of the cable network will soon shake up the fixed-line markets in the Netherlands. It is now clear that KPN and especially Vodafone are bringing out the heavy artillery to challenge this regulation. The Netherlands Authority for Consumers and Markets (“ACM”) also recently stated its intention of analysing the market for wholesale high‑quality access. This blog addresses the main developments in the fields of telecom and media in the past year and looks ahead at likely developments.
Mobile markets: consolidation, multiband auction and 5G
The greatest surprise this past year was probably the outcome of the T-Mobile/Tele2 case. After imposing drastic remedies in three-to-four mobile mergers in Germany and Ireland and even prohibiting the merger between Hutchinson and Telefónica UK, the Commission found that the acquisition of Tele2 by T-Mobile would not impede competition. In the Commission’s opinion, the Dutch case is different because of the small joint market share (25%) and the relatively small increment (5%). The Commission also appears to have taken into account the specific characteristics of the Dutch market, such as KPN and VodafoneZiggo’s fixed-mobile strategy and the relatively strong market positions of MVNOs.
After the acquisition, the fourth mobile network operator (“MNO”) will disappear from the Dutch market. Although ACM stated that it supported the Commission’s approval decision, the acquisition of Tele2 is controversial. Tele2 entered the market several years ago after government intervention in the multiband auction in 2012. In neighbouring countries Belgium and Germany, however, the telecom authorities are pleading in favour of the arrival of a fourth MNO. It is probably not entirely coincidental that the acquisition of Tele2 by T-Mobile takes place on the eve of a new round of licence auctions. ACM has opened public consultations on its new multiband auction draft recommendation. ACM does not consider it necessary to reserve space within the frequencies to be auctioned for a new, fourth MNO. The auction is currently scheduled to take place in late 2019. Several licences (700 and 1400 MHz and 2 GHz) will be auctioned. The Ministry of Economic Affairs intends to auction off part of the 3.5 GHz band in late 2021 (the other part will probably not yet be available at that time). Both 700 MHz and 3.5 GHz licences can be used for 5G. T-Mobile/Tele2 has promised under the terms of the acquisition to offer 5G nationwide as from 2020.
Fixed markets: joint market power, “open cable” and sports channels
On the fixed markets, VodafoneZiggo’s cable network is particularly in the limelight. In its Wholesale Fixed Access (“WFA”) market analysis decision, ACM considered the strong (symmetrical) market positions of KPN and VodafoneZiggo reason to designate them as having joint significant market power. This cleared the way for regulation of the cable network. To comply with its access obligation, VodafoneZiggo published its reference offer at the end of last year, to which it recently added various (temporary) wholesale rates.
Several new entrants have already expressed an interest in VodafoneZiggo’s wholesale offer. Telecom operators that have already invested in KPN’s wholesale offer may also have good reason to consider cable an interesting alternative, such as the roll-out of Docsis 3.1 (1 Gbps), which will be available as from 2020. The extent to which use is made of the reference offer will ultimately depend on whether the Trade and Industry Appeals Tribunal (“CBb”) upholds the WFA decision.
VodafoneZiggo also played a key role in several European cases. In May 2018, for instance, the Commission again gave it the go-ahead for the acquisition of Ziggo by Liberty Global. The Commission’s earlier approval decision from 2014 had been annulled by the General Court in response to an appeal filed by KPN on the grounds that the market for premium sports channels on which Liberty Global operates together with Ziggo Sport, and possible competition problems on that market, had been insufficiently investigated. Even though the Commission stated the reasons for its findings at length in its new decision, KPN again appealed the approval decision. KPN’s appeal against the Commission’s approval of the joint venture between Vodafone and Ziggo in 2016 is now also pending. Also in that case, KPN is arguing that the reasons given by the Commission regarding Ziggo Sport are inadequate.
KPN is also targeting sports channels at a national level. KPN and regional cable operator Caiway/CAIW have appealed ACM’s refusal to take enforcement measures against the manner in which the FOX Sports channels are distributed. The last word has therefore not yet been said on the operation of sports channels in the Netherlands.
Media and content: OTT and cross-border content
In the field of media, the shift from linear TV to non-linear media services (Over-The-Top and Video-On-Demand) in particular is having a major impact on the competitive landscape. In addition to the significant growth of international providers of streaming services, such as Netflix and YouTube, Dutch broadcasting organisations (Videoland and NLziet) are also gradually increasing their share of the Dutch OTT video market. The number of traditional TV subscriptions, on the other hand, is decreasing. The increase of non-linear streaming services will most likely continue, particularly with the large US films studios also increasingly entering that market. Walt Disney, for instance, appears to be increasingly focusing on OTT services since the acquisition of 21 Century Fox’ film and television studios.
The ever expanding position of foreign content providers calls for measures, according to the Council for Culture in its Audio-visual Sector Advice. The discussion was reason for the Ministry of Education, Culture and Science to investigate whether statutory turnover tax or obligatory investment in the Dutch audio-visual sector by major foreign parties is possible. On the basis of the revised Directive on audio-visual media services, Member States may obligate the providers of streaming services to invest in European or national content. Member states must furthermore guarantee that at least 30% of the content supply of (foreign) content providers consists of European audio-visual works.
The Commission is meanwhile continuing its content policy with regard to the Digital Single Market. In addition to the Satellite and Cable Directive and as part of the modernisation of the copyright regime (see our earlier blog), the European organisations reached agreement at the end of 2018 on the introduction of the country of origin principle for supporting online TV services. Finally, after Paramount and Disney, Warner Bros, Sony and Sky have also offered to give the Commission commitments to remove restrictions on cross-border use of licences.
Further deregulation and European harmonisation
The CBb passed judgment last year in the Fibre-to-the-Office (“FttO”), Fixed and Mobile Termination (“FTA-MTA V”) and Fixed Telephony (“FT”) market analysis decisions. In the first case, the CBb subscribed to ACM’s analysis, as a result of which FttO will definitively remain unregulated. In the second case, the CBb upheld ACM’s decision to impose tariff regulation on the basis of the Pure BULRIC cost allocation system. With regard to FT, the CBb found that the only obligations that ACM had imposed on KPN (regarding dual call services) ended on 1 April 2019. According to the CBb, ACM had insufficiently demonstrated that KPN still had significant market power. Consequently, the number of regulated telecom markets is currently limited to three (WFA, high quality wholesale broadband access, and FTA-MTA, see this blog). It remains to be seen what ACM will make of the new High-quality Wholesale Access (“HWA”) market analysis decision after the withdrawal of the previous draft decision on the grounds of misgivings of the Commission and BEREC.
Market analysis decisions will become an increasingly ungrateful source of work for lawyers in the future. Not only is the number of regulated market steadily decreasing, the European Electronic Communications Code that is currently in the pipeline provides for regulation periods of five rather than three years. Also, certain regulation powers will be transferred from the national authorities to a European level. For instance, the Commission will be given the power to set one uniform maximum rate for (fixed and mobile) call termination. This power is in keeping with the European wish to harmonise intra-EU telecom services. After the introduction of the Roam-Like-at-Home legislation in 2017, the rates for calling telephone numbers in other EU Member States will be capped at 19 cents per minute as from 1 May 2019.
The future of telecom regulation
The decreasing importance of ex ante regulation does not mean that the (national) competition authorities are sitting idly by. The focus of the supervision sooner appears to be shifting to symmetrical obligations. In December 2018, for instance, ACM published the 5G and the ACM paper, in which ACM explained the role it assigns to itself regarding the supervision of 5G from the perspective of competition law, consumer law and net neutrality rules. In addition to ACM, BEREC recently also stated that it was consulting market parties on 5G and sharing mobile infrastructure for 5G.
Another interesting file for ACM is T-Mobile’s data-free music streaming service. The court recently ruled on the appeal filed by Bits for Freedom against the rejection of its enforcement request to ACM. The Rotterdam district Court confirmed in that case ACM’s finding that T-Mobile’s zero rating service is not in breach of the net neutrality rules. At a European level, BEREC recently found that the application of the zero rating provision required further clarification.