The Dutch telecommunications sector is on the eve of the fourth regulatory period. The Netherlands Authority for Consumers and Markets (“ACM”) will be making a number of market analysis decisions (“MA Decisions”) again soon. Those decisions will largely set the playing field in the telecom sector in the next three years. The dynamics on that market may change in the coming years now that the European Commission recently cleared the acquisition of Ziggo by UPC’s parent company. That acquisition is reason for KPN to plead in favour of less or even no regulation. Vodafone and Tele2, on the other hand, are in favour of at least maintaining the status quo. Moreover, the European Commission Recommendation of 2007, on which all market analyses are based, was recently amended. In the new Recommendation the number of markets that qualify for regulation has been further reduced. ACM expects to adopt the first draft MA Decision regarding Local Loop Unbundling (“LLU” (which can also be referred to as “ULL”)) on 30 October 2014.

Background

Chapter 6A of the Telecommunications Act obligates ACM to analyse (at least) the markets listed in the Recommendation every three years. If ACM establishes any lack of competition, it can impose “appropriate obligations” on certain conditions. These last few years that system has resulted in the regulation of a large number of services, such as fixed and mobile terminating access (“FTA” and “MTA”), LLU, low-quality and high-quality wholesale broadband access (“LQ WBA” and “HQ WBA”), wholesale leased lines (“WLL”), fixed telephony (“FT”) and access to private and corporate fibre-optic networks (“ODF Access (FttH)” and “ODF Access (FttO)”). However, MA Decisions of ACM are regularly overruled by the Trade and Industry Appeals Tribunal (“CBb”). To date, the appeals against MA Decisions have resulted in most cases by far in fewer or in any event less stringent regulation of KPN.

The table below provides a summary of current regulations on the telecom market:

Click here to view the table.

What’s next?

It is of course impossible to predict what the regulation will be like in the next three years. However, several provisional observations can already be made on the basis of the preceding regulatory period, the appeal proceedings that followed and their outcome, and on the basis of a number of recent investigations. Because the MA Decision on FTA-MTA is fairly recent and the appeal against it is still pending, we will not address that market below.

Regulation of FT

At this moment, on the basis of the FT Decision, only a limited number of retail markets are regulated. An important question is whether any retail markets will also be regulated in the coming regulatory period. That question is particularly relevant since the new Recommendation no longer includes any retail market or any wholesale FT market. Increasing competition from Over-The-Top-Services (“OTT Services”), such as WhatsApp and Skype, and UPC/Ziggo’s relatively strong position in relation to KPN may be reason for ACM to loosen the reins a little. On the other hand, full deregulation of the (wholesale and/or retail) FT markets may have drastic consequences for parties such as Tele2, Pretium, etc. and – it could be argued – ultimately for the end users. To address this issue, ACM could consider regulating the single call market (PSTN). ACM will in any event also have to take into account the impact of new technologies such as Session Initiation Protocol (SIP) and hosted voice: new telephony services based on IP technologies. It is conceivable that those technologies may serve as alternatives for dual-line and multi-line systems (ISDN2 and ISDN30).

LLU

Unbundled access to the connection network of KPN and, since a number of years, of Reggefiber has been regulated for some time already (MDF and SDF access, and ODF access (FttH)). Only ODF access (FttO) is unregulated, despite various regulation attempts of ACM. An interesting development is the possibility of Virtual Unbundled Local Access (“VULA“) that, like in the United Kingdom, may serve as a (provisional) alternative for ODF access also in the Netherlands. In addition to the acquisition of Ziggo by UPC, the proposed acquisition of Reggefiber by KPN is also important to this market. If that transaction is approved, KPN’s position in relation to FttH will become even stronger. It appears likely for the present that ACM will continue to regulate ODF access (FttH), MDF access and possibly also SDF access in the coming years.

Broadband/leased lines

LQWBA is unregulated at present. In light of the market shares of KPN and Ziggo/UPC on the broadband market, it would appear realistic that that situation will continue. Moreover, regulation of WBA may furthermore discourage investment in the rollout of networks based on e.g. ODF access (FttH). That may not apply to HQWBA/LL. Those services, which are particularly important to the corporate market, are in fact regulated at present. Since an appeal is still pending against the current HQWBA/LL decision, the new MA Decision is difficult to predict. It is remarkable, however, that Dialogic believes that the market shares of corporate network services will change very little in the coming years.

Cable

Cable operators are currently unregulated. In the past, ACM twice attempted to open up the cable market to competition, but the CBb each time blew the whistle on it (see the rulings of 2007 and 2010). Against that background it appears unlikely for the present that ACM will make a third attempt, even though some parties see reason to do so, now in particular.

Conclusion

The fourth regulatory period is still largely in the dark. It can be said in general, however, that the use of OTT services has increased and that new technologies have given rise to increased competition and competition opportunities on some markets, such as FT. Moreover, KPN is no longer the largest provider on the (consumer) broadband market. In the past, ACM always took the position that two large network providers is insufficient for long-term competition (Two is not enough). If ACM maintains that position, it is not unlikely that it will regulate a number of services (that are crucial to alternative providers such as Tele2, Vodafone and Canal Digitaal) also in the coming years.