KPN charges to decline further gradually, OPTA introduces price-capping regime

KPN’s charges for calls within the Netherlands are to decline further gradually over the next three years. These charges will drop by 5.3% each year. Adjusted in line with inflation, this will amount to 3.3% in the first year. OPTA, the regulatory authority for the postal and telecommunications markets, made this announcement in relation to the introduction of a price-capping regime (price caps). When determining the rate reductions, OPTA took into account the major cable companies’ plans to commence the commercial operation of their own landline telephone network. For this reason there will not be an additional one-off reduction of the local call rate.

Deciding on a reduction of telephone charges over three years marks OPTA’s abandonment of the widely criticised system of profit regulation. The new type of tariff regulation will yield benefits for all of the parties concerned. Those consumers, who are still tied to KPN, will pay less. By operating more efficiently, KPN will be able to achieve larger profit margins and other telecommunications companies will be able to determine better whether they wish to compete.

Since KPN still needs to implement these tariff reductions, consumers will only be able to feel the effects on their pocket from 1 January 2000. The extent to which the telephone bills of KPN subscribers will drop, will largely depend on their calling patterns. Calculations performed by OPTA reveal that in three years’ time on average KPN’s subscribers will save between NLG 60.00 and NLG 100.00 on their domestic calls every year.

The rate reduction will apply to a ‘package’ of telephone services. This includes a subscription, local and national call charges, and the rates applicable to calls from landline to mobile phones. The services in this package are supposed to decline by 5.3% on average each year. Adjusted to take inflation into account, this represents a fall of 3.3% in the first year. Subject to certain conditions, KPN may itself determine how this tariff reduction is implemented. The local call rate must in any event become more affordable. Subscription tariffs may not increase beyond the rate of inflation but in this case the other charges would have to fall even further to compensate for this.

OPTA has declined to allow an additional one-off reduction of the local call rate. Several major cable companies recently announced that they intended to operate a national telephone network. This will improve competition in the telecommunications market – especially in relation to local telephone calls – to such an extent, that further intervention would send out the wrong signal. However, the annual drop in rates will be larger because of this, with the result that consumers will not miss out on the benefits.