Leading Dutch Telecom raises rates after Net Neutrality enforcement

Regulated monopolies are causing drastic price rises in the Dutch telecommunications market. Let this be a warning to us all...

Free markets from regulation and monopolies
Dominique Lazanski
On 20 July 2011 11:40

KPN announced yesterday that it would raise its rates for Internet mobile data usage. 

The rates hikes come on the heels of the Dutch passing into law net neutrality last month, or the idea that all Internet traffic should be created equally.  

KPN has over fifty percent market share in the telecoms industry in the Netherlands.  Effectively, they have a monopoly over the delivery of Internet over fixed and mobile Internet and have invested significantly to the infrastructure in the Netherlands.  

Earlier this year, KPN decided that they would charge extra for the usage of Skype after seeing that there was an uptake in Skype and other VOIP usage and a bit of a downturn in the usage of traditional text and phone calls.  Essentially, users found that it was cheaper to use a VOIP product than incur the cost of texting and calling directly.

On the back of this decision and the fact that KPN was conducting deep packet inspection (DPI) in order to determine specific usage of its Internet traffic, the Dutch parliament rushed through a Net Neutrality Bill.  

Both blocking VOIP and deep packet inspection were both too much for the Dutch government – and in many ways that reasoning made sense. DPI is illegal if it violates the privacy of users sending the information over the Internet while blocking VOIP products isn’t ideal in an undifferentiated and monopolistic market. 

However, Vodafone said that passing net neutrality would result in higher costs to the consumers. And it now looks like it will.

The unintended consequences of regulating a monopolistic market instead of freeing up the market for more competition has now come back to bite legislators. Paying for a gigabyte of data monthly will now cost €50 in the next few months instead of the €20 rate that KPN users see today.  

Until the net neutrality regulation is repealed, the chances of any other mobile or fixed broadband provider entering the market is quite slim. Why would any telecoms company go near entering a market with forced mandates? 

In the UK we have the advantage of a choice of mobile and fixed providers as well as various options for broadband and mobile pricing.  A heavy VOIP user can choose to pay more and receive more bandwidth in return while a light email user can pay less for a perfectly good service.  

And we will hopefully see more choice, and not less, once the spectrum auction happens in early 2012.  So what is happening to the Dutch telecoms market is warning to our governments – don’t act to hastily on legislation or you will have higher prices in the Internet market.

Dominique Lazanski spent over 10 years in the Internet industry in Silicon Valley and works for the TaxPayers' Alliance in the United Kingdom.

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