KPN remains a provider with significant market power

OPTA has renewed its designation of KPN as a provider with significant power in the markets for fixed public telephone services and for leased lines. The current designation was scheduled to expire on 15 December 2000. As a result of this designation, which is based on market research conducted at OPTA’s behest, KPN’s current obligations will remain in effect. This research reveals that KPN’s share of the market for fixed public telephone services is between 85% and 95%. KPN also has a share of the leased line market varying between 60% and 70%. In addition, OPTA has expressed its concern about the European Commission’s intention to set the limit for the designation of significant market power at 50% in the future. Together with other European telecommunications regulatory authorities, OPTA advocates a limit of 30%.

OPTA anticipates that this type of designation, which is issued under the terms of the Telecommunications Act, will continue to promote competition in the relevant markets. A telecommunications service provider with a market share in excess of 25% is designated as one with significant market power. Thanks to this designation, KPN will continue to have an obligation to provide fixed public telephone services and leased lines subject to conditions and at tariffs which are the same for everyone. In addition, these charges must be cost-oriented, which is to say that they must be based on the underlying costs plus a reasonable profit mark-up. What we are concerned with here are both the charges which KPN subscribers pay and the tariffs (for interconnection and otherwise) which KPN’s competitors pay it for using its network.

Once the Telecommunications Act came into effect on 15 December 1998, KPN was designated as a holder of significant power in the markets for fixed public telephone services and leased lines for a period of two years, hence until 15 December 2000. OPTA has examined whether KPN should receive such a designation again upon the expiry of this period.

The market research conducted at OPTA’s behest reveals that competition has only increased to a limited extent in the market for fixed public telephone services (connections, local, national and international calls, and calls from landline to mobile phones). Whereas KPN’s share of this market amounted to between 90% and 100% in 1999, the corresponding figure for the first half of 2000 was 85% to 95%.

In addition, KPN is still the dominant player in the market for leased lines (constantly available connections between two fixed points). Although the degree of competition was examined in the case of each leased line category, it is the designation of KPN’s position in relation to the entire leased line market which is relevant. In the first half of 2000 KPN’s share of the entire leased line market was between 60% and 70% (1999: between 70% and 80%).

Based on market research findings, KPN has again been designated as a provider holding significant power in the two markets mentioned above. Every year OPTA will examine new market information to determine whether this designation should remain in effect.

As it happens, the 25% limit for significant market power within a European context is the subject of discussion. For the purposes of reviewing the European telecommunications legislation in 2002, the European Commission has proposed that additional obligations should only be imposed on telecommunications companies which have a market share of 50% or more. The Independent Regulators Group (IRG), the association of European telecommunications regulatory authorities of which OPTA is a member, has proposed a limit of 30%. According to the IRG this percentage is more in line with the threshold which the World Trade Organisation considers appropriate for intervention in a specific national telecommunications market. Moreover, setting a limit of 50% would mean abandoning the obligations which dominant market parties currently have and which are required to ensure competition and to guarantee compliance with the duty.