OPTA’s Chairman: ‘Danger of new monopoly developing in the communications sector – Outlook for the telecommunications and postal markets in 2003

The telecommunications sector did not have an easy time of it in 2002 either. Whereas economic growth stagnated overall, the telecommunications sector did manage to expand as a whole. The most recent figures published by the Netherlands Bureau for Economic Policy Analysis (CPB) reveal that there was an absolute increase in turnover of 3.25%, whereas the corresponding figure for the entire ICT sector was a drop of 2% in 2002. ‘We are doing better but we are still a far way off,’ said OPTA Chairman, Jens Arnbak, this morning when presenting the organisation’s Market Vision.

The telecommunications sector covers a good deal more than telephony alone. Stagnation is occurring in traditional market segments. Yet the sector as a whole is still growing mainly due to the Internet (broadband and other access) and other data transmission services (including SMS). Many providers are now focusing their attention predominantly on large companies. A trend towards greater concentration is becoming more visible. These developments underscore the need for strict, decisive regulation and the development of real competition, also with regard to the level of service.

The uncertainty experienced by market parties is exacerbated by increasingly lengthy court cases. In 2002 the turnaround time of OPTA cases before the Court of Rotterdam increased by seven months to 20. The administrative tribunal assesses the substance of OPTA’s rulings and requires a lengthy period of time to consider them. An effective objections procedure is crucial for appropriate regulation, consumer and public interests, and the investment climate. OPTA is calling for the abolition of the objections stage and the introduction of a specialist board of appeal.

Consumer uncertainty is exacerbated by a lack of transparency in the range of services offered by competitors and doubts concerning the certainty of supply and the reliability of communications services. It is imperative that these uncertainties can be eliminated by incorporating appropriate rules in new legislation and through the strict regulation of the market by OPTA.

Fixed network

The expansion of traditional fixed telephony services is levelling off. In the last six months of 2002, competition intensified in the broadband markets especially in respect of services aimed at corporate users. KPN’s share of the local telephone market declined slightly from more than 95% in 2001 to between 85% and 95% in 2002.

The introduction of local carrier preselection for service providers in the telecommunications market in 2002 represented a major step forward. Now consumers actually have a choice of a larger number of providers for all of their telephone calls. Prior to this they depended on KPN for local calls. Since CPS will have the effect of boosting competition, OPTA anticipates that there will not be a structural increase in prices in the years ahead.

Internet traffic is increasingly being carried by data networks instead of the telephone network. Consumers are purchasing a growing number of services for a flat tariff instead of metered use. These developments are also having an effect on competition especially in relation to the provision of Internet services. It is anticipated that providers will start bundling more services together and will package telephone and data services to generate more earnings.

Broadband

Where the provision of broadband services is routed through KPN’s telephone network, OPTA is employing a wide range of tools to cope with the accompanying difficulties in relation to competition. Where the provision of broadband services is routed through data networks, OPTA does not yet have the tools available to enforce fair competition. For instance, there are already difficulties in the wholesale ADSL market: discrimination against new providers, tied sales and complaints about a price squeeze in the retail market.

What is particularly striking in the consumer and SME markets is the concentration of Internet service providers (ISPs) around only several