Vodafone Netherlands is seeking EUR 115 million in damages from Dutch incumbent KPN on the grounds that KPN abused its dominant position with respect to fixed-line infrastructure access.
According to Vodafone, KPN’s lack of co-operation delayed the launch of Vodafone’s triple-play service, Vodafone Thuis, by 3 years, during which time household uptake of such bundles grew rapidly. The service, which includes TV, fixed-line telephone and fixed line broadband, relies on access to the largest copper telephone network and fibre network in the Netherlands – both of which are owned by KPN.
KPN had allegedly agreed to construct a virtual Internet service provider (VISP) platform to enable Vodafone to upgrade its service, but KPN reneged on the original agreement and Vodafone was forced to construct its own platform, resulting in a 3 year delay.
As a result, Vodafone was not in a position to compete on an even footing with KPN and Ziggo until 2014. Both KPN and Ziggo offer triple-play services and as such Vodafone’s best chance of increasing its market share is to offer triple-play services too.
At end Q2 2015, KPN and Ziggo were the two largest operators in the Dutch market with shares by subscribers totalling 40.7% (2.84 million fixed lines) and 44% (3.07 million fixed lines) respectively according to IHS Technology. In contrast, Vodafone reported 61,000 subscribers in the Netherlands at the end of the same quarter.
KPN refutes these allegations, but such disputes are common in markets where ISPs are reliant on access to the incumbent network.
Increasingly, ISPs are seeking to bypass incumbents’ networks by building their own networks, acquiring facilities-based operators or partnering with other players. A number of ISPs such as UK-based TalkTalk and Sky are working on constructing their own networks to support high speed services, but in order to acquire and maintain market share and increase revenues there is no getting around the fact that ISPs such as Vodafone need solid agreements with other network owners if they are to garner much needed revenue which can then be used to fund network construction. Vodafone itself has made cable acquisitions in Germany and Spain and is partnering with the electricity utility ESB in Ireland, at least in part to reduce its reliance on fixed incumbents.
Competition in Europe has always been particularly fierce, and there have been a number of high- profile complaints about markets in countries such as the UK, Ireland, Spain and Italy regarding the abuse of dominant positions by former state owned incumbents. A decision on the separation of BT Openreach from BT Group is still pending, but Ofcom may need to consider a solution that will prevent this type of legal action from taking place in the UK.
Going forward, the European regulators will need to take firm control over these situations if they want to cultivate truly liberal and competitive markets.