OPTA fines KPN EUR 1.6 million for contravening the Telecommunications

KPN’s disclosures to OPTA are incomplete

The Commission of the Dutch Independent Post and Telecommunications Authority (OPTA) has imposed a fine of EUR 1.6 million on Koninklijke KPN N.V. The reason for this is that KPN had not requested or received permission from OPTA for two discount schemes for business end users in the form in which KPN implemented them in practice. KPN had also failed to give market parties notice of these discounts in the appropriate manner. In addition, KPN had also wrongly granted two identical discounts to business callers. This is not the first time that KPN has not been transparent enough in relation to its discount schemes. OPTA has been impeded from performing its regulatory duties as a result.

These discount schemes are known as the ‘Collectieve WorldLine-kortingsregeling’ and the ‘WorldLineXL-kortingsregeling’. These discounts were unlawfully provided in 2004 and 2005. In total KPN granted excessive discounts of more than EUR 3 million by offering these two schemes. The contraventions were revealed after a competitor lodged a complaint in the autumn of 2005. OPTA launched an investigation partly because KPN had previously failed to disclose the existence of discount schemes. Chris Fonteijn, OPTA’s chairman, has this to say about the matter: “As a company holding significant market power, KPN bears considerable responsibility. In view of the fact that the legislature has explicitly opted for a system of preventive instead of repressive supervision, the timely receipt of relevant information is a prerequisite for proper regulation. KPN has failed to exercise due care in this respect.”

KPN’s duties

As a party holding significant market power in the fixed telephony market, until 2006 KPN was only allowed to provide discounts once OPTA had approved them beforehand. This duty followed from the Telecommunications Act of 1998 and the ONP Leased Lines and Telephony Decree [Besluit ONP huurlijnen en telefonie]. The purpose of this duty was to make it possible to determine in advance whether a discount could have an effect on competition in the market. OPTA would not simply have approved the two discount schemes, if they had been presented to it beforehand.

Under the terms of the amended Telecommunications Act of 2004 and the Fixed Telephony (Retail) Decree [Retailbesluit voor vaste telefonie] issued pursuant to it, which came into effect on 1 January 2006, KPN is no longer required to request OPTA’s consent for its tariffs. Now KPN conducts its own assessment of the services which it provides, in order to determine whether they comply with its obligations in relation to retail tariff regulation (with regard to both the regulatory upper and lower limits), non-discrimination and transparency. However, KPN is required to report all new services and relevant tariffs to OPTA. The latter’s role is now predominantly focussed on monitoring coupled with enforcement, where necessary. The discount schemes also fail to comply with the duty to be transparent under this new regime.