Thursday, June 29, 2006

REGULATION://KPN will lose its battle (this time)

KPN is suing the Dutch state, an 8% shareholder, for unequal treatment. KPN is regulated, whereas cablecos have no open access obligation and are allowed to cross-subsidize.

KPN has a good point of course, but in the end I believe the arguments of the press release and Marcel Smits' (CFO) radio interview are flawed and sometimes even paradoxical.

1. National coverage.
KPN claims cablecos have national coverage. However, telecoms is a scale business, so KPN has a large competitive advantage. What does Casema care if there is a company outside its coverage area? This could change however if UPC would be allowed to snap up Casema and Kabelcom. Once cablecos would consolidate into one national player, would KPN have a strong argument for regulation. The Netherlands are a pretty unique case (together with Belgium), because of the range of the cable networks. Elsewhere in Europe, I believe telcos will always have this competitive advantage. Let's just not hope for the US duopoly model, because that is not good for the broadband market.

2. Line loss.
KPN complains about losing customers. However, I think it is OPTA's mission statement to make KPN smaller. If altnets are to be sustainable, they need clients. And they can only come from KPN. Mission accomplished.

3. Choice.
KPN stresses the imporatance of looking at it from the customer's point of view. There is enough competition, so KPN can be deregulated. But then, why should the cablecos be regulated at all? There is enough choice as it is, right?

4. Innovation.
KPN accuses the cablecos of cross-subsidizing in order to roll-out new services (doesn't that implie rising prices?). In the press release however, there is this statement:
The cable sector, by contrast, has never been regulated. The result is rising prices, no access to cable networks for competing providers and a halt to innovation.

5. Regulation .
KPN is smart enough to propose open access to the planned FTTN/VDSL network. Asking for a regulatory holiday, as Deutsche Telekom does, would undermine the arguments for getting cablecos regulated. However, the street cabinets are simply too small to house alnets' equipment, so (unless you would plan double street cabinets at each location) I can only see resellers, not facilities-based competitors. And a wholesale/resale model requires regulation, I believe. (Look out for Australia too, for new developments.)

6. Structural separation.
KPN points to Britain, where Ofcom is retreating. However, the creation of Openreach was imperative for this to happen. And KPN opposes structural separation.

No comments: