Dutch cable operators obliged to open networks

The Netherlands has two main networks: telephone and cable. After the sales by municipalities of the cable networks to commercial cable operators, the cry for open cable networks has become stronger from the telecom operators. Paul Budde, Australian telecom consultant from Dutch descent, wrote an article about this problem.

So far cable has been a monopoly for Dutch politicians are keen on competition in the country’s telecom market. The regulator has in the past kept a close eye on KPN to ensure that its DSL network is accessible to competitors via local loop unbundling, while municipal governments were recently given legislative backing to part-finance fibre networks for their denizens. This equal access policy has now been extended to the cable operators.

The Dutch cable market has seen some radical consolidation this year, mainly due to the purchasing power of the private equity firms Warburg Pincus and Cinven. Early in 2006 they won the auction to buy the country’s third largest cable TV provider Casema. For Warburg Pincus, the deal represented a quadrupling of its Dutch cable TV business, having acquired Multikabel in 2005. In August, Warburg and Cinven bought Essent Kabelcom from Essent for €2.6 billion. As a result, Kabelcom, Casema and Multikabel are in a position to co-operate in providing cable services to the Dutch market, and extend their reach beyond the 3.3 million subscribers which they have on their books, collectively.

Although the incumbent, KPN, tried to fight the merger of Casema and Multikabel, the competition authority, the Nma, saw no market domination arising from the deal. KPN’s next move was to seek an injunction against the Dutch government on the grounds that it regulated the cable and telecom sectors unequally. In the past, cable and telecoms used to be separate sectors for the markets addressed and services offered: cable offered TV while telecom provided phone calls and Internet. Now, both sectors offer the same total package (for phone calls, Internet and TV). This has turned both sectors into competitors, but with few amendments to rules and regulations. KPN is subject to a complex system of rules and regulations and is under an obligation to provide access to competitors, while the cable sector has never been regulated.

Politicians debated cable access a year ago, and got nowhere. The Essent deal has gone some way to change their mood, and the urgency, since the country now faces a substantially more influential cable block. Given the huge amount of money spent by Warburg Pincus and Cinven on acquisitions and network upgrades, it will come as little comfort to them that after fruitless negotiations with cable operators in recent months the Dutch parliament has now voted to regulate cable on an equal basis with KPN. This will impose obligations to unbundle access for third party services, and bring in price controls. Of interest is that the vote was near unanimous across all 14 political parties (148 votes for, 2 against or abstained).

In justification, the politicians were convinced that competition would lead to lower consumer prices for services. While competition in recent years has forced KPN to increase network capacity and data rates while lowering prices, the cable networks have been able, incrementally, to increase their package charges.

Two considerations are at issue: firstly the separation between network services and access, and secondly opening access to competition. Thus. within a year the government must introduce amendments to the Telecommunications Law to separate cable infrastructure and services through the ‘standing charge model’, and also prohibit the bundling of network provision and services. In tandem, it must legally provide for mandatory, open, non-discriminatory access to all networks for all service providers.

Essentially, what has happened in The Netherlands is a local solution to the net neutrality debate that is so hotly contested in the US and across Europe. By introducing legislation that separates activities providing networks and those providing services, and opening up the networks to all services, the network owner cannot influence the type of content it transports. It merely becomes a carrier for those services. The Netherlands is the first country to attack the network neutrality issue at its heart, and to separate network ownership and services for all networks, whether copper, coax or fibre. By deciding to abolish vertically integrated telecom networks, the Dutch have again given the rest of Europe a worthwhile example to follow.

More info on Budde.com: http://www.budde.com.au

Tags: cable

Blog Posting Number: 572