Most consumers continue to rely on KPN for local telephone services for the time being

No more than one quarter of Dutch telephone users will be able to choose from various telecommunications companies for local calls within two years. The rest will remain tied to KPN for the time being. This is revealed in a study conducted by OPTA. The slow development of competition is not related to the reduction of local call tariffs which OPTA has imposed on KPN. The few companies which offer local telephone services will continue to do so, even at these reduced tariffs. Other companies are awaiting the commercial launch of Internet telephone services, which could still take years. OPTA has concluded from this study that the reduction of KPN’s excessive profit on local call tariffs will not impede the evolution of competition in the case of local telephone services. In the meantime this excessive profit has shrunk drastically. Any residual profit will be covered by the price-capping system, which will come into effect in the autumn.

This study was prompted by the question as to whether any further reduction of local call tariffs would impede the development of competition in relation to local telephone services. Only those providers who have their own cable network are able to offer local telephone calls at competitive tariffs and still remain profitable. The study reveals that, of those companies which have such a network, only A2000 and United Telekabel Holding (UTH) will be offering consumers local telephone services in the next two years. Their present area of coverage includes a mere 25% or thereabouts of the approximately 6.4 million households in the Netherlands. The remaining 75% will continue to rely on KPN for the time being. Other companies which have their own cable networks do not have any plans to offer telephone services (local or otherwise) or prefer to wait until the new Internet communications technology is mature enough for commercial introduction. Changes in KPN’s local calling tariff are therefore of limited significance in relation to the development of competition. Neither have A2000 and UTH shown that the existing competing supply of local telephone services is being affected as a result.

OPTA has concluded from this that there is no reason to continue to allow KPN to earn excessive profit on local telephone calls. However, due to preliminary intervention in respect of tariffs on 1 January 1999 and the effects of increased expenditure announced by KPN, this excessive profit has since shrunk drastically, as recent figures have revealed. For this reason OPTA has decided to include any residual profit in a price ceiling regime (a price-capping system), which will start to apply to KPN’s charges this autumn.

Competition is well underway in the field of international telephony and, in principle, OPTA decided as early as 1998 to adopt an entirely hands-off approach to pricing. With regard to national telephone calls OPTA decided in the same year, that KPN needed to reduce its excessive profit in stages, because the initial competition in this subsidiary market had suffered from an excessive drop in tariffs. The first step has already been taken in this respect and subsequent measures will be taken within the price-capping system.