OPTA agrees to a reduction of KPN’s telephone charges: Calling to become cheaper on 1 January

Phone calls are to become cheaper. On 1 January 1999 national call charges will drop by approximately 10%. Local calls are to become 33% cheaper on Sunday. The tariffs for calling 30 foreign destinations will drop between 7% and 37%. The price of a call from a landline to a mobile phone will fall by approximately 5%. Telephone subscription tariffs (standard and otherwise) and those for ISDN will remain the same. In addition, KPN will be introducing special pricing packages for all users in the course of next year. Apart from this, the cost of a new telephone connection and KPN’s relocation tariff will plummet more than 50%.

Yesterday The OPTA Commission agreed to these proposals submitted by KPN. OPTA also consents to the charges that are to be levied as part of the two discount schemes for corporate customers. Once the price-capping system comes into operation on 1 July 1999, a second tariff adjustment may follow. Whether this is adjustment occurs will depend amongst other things on the degree of competition, especially in relation to local telephone calls, and the precise way in which price capping is implemented.

OPTA recently announced that KPN may adjust its telephone charges in two steps: the first on 1 January and the second on 1 July 1999. Originally, OPTA intended to demand that KPN charge cost-oriented tariffs from as early as 1 January. OPTA will refrain from doing so because of the investment in infrastructure which KPN has recently announced, and its proposed restructuring. KPN has to upgrade its infrastructure sooner than envisaged, if it is to cope with the increase in telephone calls. KPN has announced that these investments and its restructuring will result in greater expenditure.

Implementing OPTA’s previous decision in full would have pushed down call charges even further on 1 January. Then on 1 July tariffs would probably have had to rise again because of the increase in expenditure which would then be evident. OPTA would like to avoid such a yo-yo effect. Widespread support for this approach was expressed by the telecommunications sector and users’ organisations during a consultation held by OPTA on 12 November 1998.

Smaller

The reduction of charges will be smaller than that envisaged by OPTA, when it made its decision at the beginning of September. The difference lies in the increased expenditure mentioned by KPN, which OPTA was not aware of at the time. Current legislation renders it mandatory for KPN to ensure that the capacity and quality of its network is adequate. Because of a rapid increase in telephone and Internet traffic, KPN will now be injecting additional investments into its network. Nevertheless, most subscribers will receive lower telephone accounts next year, which includes the rise in subscription tariffs scheduled for 1 July 1999.

KPN’s ISDN subscription tariffs will remain the same. Initially, OPTA wanted KPN to raise the tariff for these subscriptions by 25%, because they were being offered below cost. Since then, KPN’s figures have revealed that the number of its ISDN subscribers has increased drastically since the beginning of this year and is still growing. More subscribers means lower costs on average. Because of this, ISDN subscriptions will no longer be offered below cost in the near future based on current tariffs. For this reason OPTA does not intend to demand a price increase on 1 January. However, KPN will cease its promotional offers allowing a switch to ISDN free of charge.

OPTA has also agreed to a change in KPN’s discount schemes. These schemes are chiefly intended for its major corporate customers. Until now, KPN has not differentiated between various types of telephone calls for the purposes of its discount schemes. However, it will be doing so as of 1 January 1999. As such, KPN may offer a discount of no more than 6% for national calls, for example, and a maximum of 12% in the case of international calls.