On 1 August 2023 the chief economist of the Netherlands Authority for Consumer and Markets ("ACM") Mr. De Bijl published an article in which he reflects on the current state of the market for fast internet access. Although he applauds the current state of the market; he warns that telecoms is no ordinary market, and that there are challenges and uncertainties that remain. In his statement, he indicates that it is important to respond adequately to these challenges and uncertainties by using the competition law and regulatory tools at our disposal.
The article starts by referring to the ACM's market analysis on local internet access which was offered to the public for consultation in July this year. The conclusion from the provisional market analysis is that the Dutch market for fast internet access is sufficiently competitive. The main reason for this is the effective and swift roll-out of fiber networks, which now cover most of the territory of the Netherlands. In addition, the roll-out is often done by independent parties and all telecom operators have or can get access to the infrastructure which is beneficial to consumers.
A history lesson
Traditionally, the Netherlands has offered relatively favourable conditions for competition in relation to network access. Generally, almost every home has a cable in addition to a telephone connection, which, in principle, is also suitable for internet. Nevertheless, Mr. De Bijl distinguishes three periods in which the telecom markets in the Netherlands have developed.
Telecom 1.0 (until 1997)
Until 1997, the Dutch market for networks was still closed and was dominated by state owned monopolists. There was no real competition in the market and the costs for roll-out and maintenance of these networks were high. At the end of this period there was a call for efficiency, innovation, and investments, which led to the privatization of the market.
Telecom 2.0 (1998 – 2007)
The EU telecoms regulatory framework came into effect. Based on these rules, the Dutch authority at the time was able to grant other providers access to the incumbent telecom provider's infrastructure. The new players in the market rolled-out their own networks. However, the promise of large-scale rollout and a self-sufficient market had not yet materialised. New market players shifted course to business segments or fell apart, and many cable companies indicated that they needed more time to develop a competitive telecoms proposition.
Telecom 3.0 (2008 – 2022)
This period is best described by the coming of age of the new generation of networks. All connections became faster, either by fiber roll-out or by improvements to the existing networks. The merger of UPC and Ziggo forming a national cable company promised further improvements to the speed of internet. That promise was not delivered. Until 2012, KPN repeatedly bought back its own shares and paid attractive dividends to its shareholders, instead of investing that money into fiber roll-out. In 2014, the ACM approved the acquisition of a majority stake in Reggefiber by KPN. This gave KPN control over a player that had previously paved the way in rolling out fiber.
Only years later, with the roll-out by new players offering voluntary access to the network, consumers had more to choose from, resulting in faster internet access as well as lower prices.
The current state of the market
The telecom market, which is characterised by technological innovation and changing business models, is difficult to control. Besides for favourable conditions for competition in terms of the infrastructure, new players have had to further encourage the roll-out of fiber. It is anticipated that the whole of the Netherlands will soon have access to fiber. Once this happens, it is anticipated that the telecom market will enter a new phase in which we do not know where investments will be made.
The fact that there is sufficient competition does not suddenly make telecoms an ordinary market. Affordable, high-quality connections for all is of great importance. That goal cannot be met if the current picture were to turn. Because of scale effects and the prospects of higher margins, players may be encouraged to merge, as we have previously seen between mobile operators. Small acquisitions below the relevant turnover thresholds could also slip past merger control. Alternatively, fiber network providers could also decide to step away from open access internet. It is the task of the ACM to properly use the tools at its disposal to ensure the future well-functioning of the telecom markets.
Mr. De Bijl's article provides a general but thorough overview of important developments in the market for fast internet in the Netherlands. Of interest is the view of the chief economist of the ACM as regards to the future development and expansion of the market, that small acquisitions below the turnover threshold could avoid merger control and that the ACM should exercise its task as the competition authority by properly using the tools at its disposal. Is the ACM hinting to the so-called 'Dutch clause': Article 22 EU Merger Regulation? Article 22 allows a Member State to request the European Commission to examine a concentration (merger or acquisition of control) that (i) affects trade between Member States, and (ii) threatens to significantly affect competition within the territory of the Member State or States making the request. So far, the Article 22 EU Merger Regulation has mainly been a topic of discussion for tech and pharma related acquisitions. It will be interesting to see how this market (and the ACM's assessment thereof) develops in the coming months. Since mr De Bijl also clearly stated that even the fact that there is sufficient competition does not suddenly make telecoms an ordinary market. It will always be a market of a specific nature and hence, increased interest (or even scrutiny) from a competition law perspective.
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