Dutch competition regulator NMa has raided the offices of the three mobile network operators KPN, T-Mobile and Vodafone. The raids follow statements from two whistleblowers on the Nieuwsuur show of Dutch public broadcaster NOS. The whistleblowers are a former director and current manager at telecom companies, a civil law notary has confirmed. The mobile operators confirmed the visit from the NMa and said they are cooperating with the investigation. According to KPN, the NMa is looking at "concerted practice with regard to mobile telecommunications offerings on the Dutch consumer market" and the "division of independent sales channels".
The NMa also confirmed the investigation, but stressed that no charges have been brought yet. The whistleblower statements suggest that there could be violations of the Competition Act, such as price-fixing and dividing markets. The aim of the investigation is to collect information and establish whether there truly were any violations. If sufficient evidence is found, the resulting procedure can lead to the regulator imposing sanctions on the operators.
A similar case started in 2001 ended only just in October. At the time, KPN, Vodafone, T-Mobile (Ben), Dutchtone and O2 Netherlands were also accused of fixing prices. The three companies still in operation in October all were fined, although less than the NMa originally demanded. KPN had to pay EUR 7.9 million, T-Mobile NL 4.6 million and Vodafone NL 3.7 million.
It’s clear that the NMa will first have to find evidence of price-fixing and that the companies followed each other’s price changes. The prices at all three have followed a similar pattern recently, one that has not always worked to consumers’ advantage. This is of course not illegal. See for example our commentary ‘T-Mobile follows Vodafone, KPN with new data pricing’. Still, it’s remarkable that the three companies are not denying the allegations. In the worst-case scenario, they can cooperate, lay the blame with a few bad apples and receive lower fines under the NMa’s clemency programme. If the NMa does find evidence of wrongdoing though, then the mobile market is doing itself a disservice. The mobile operators have already generated a great deal of bad publicity about their prices in the past year, as seen by the swift reaction from lawmakers earlier this year when KPN suggested it may have to start charging customers extra for data services such as instant messaging or VoIP. Other issues such as coverage and customer service have also suffered in the press. Politicans in The Hague are also calling harder than ever for new entrants on the market, and the latest developments will only strengthen their case.
Even if not enough evidence is found, the damage is already done. Parliament has already ensured that the spectrum auction planned for next year will be set up so that new players can join the market. The question is whether in a small, saturated market like the Netherlands new players stand any real chance, even with the help of a generous spectrum allowance. The outcome of the NMa investigation, including any appeals by the operators, will only be known well after the auction is completed. But the arguments coming out now will serve as an extra stimulus to come with additional measures to support newcomers. The addition of a fourth, and possibly even fifth, player could solve the problem of insufficient competition. Guilty or not, three operators does not appear to be enough to ensure healthy competition and dynamics on the mobile market.
Still, illegal price-fixing does not seem an obvious choice for the operators. First, it would be a PR disaster if found out. But more to the point, there is a simple, clear reason why the three operators’ prices seemed to move up in line with each other this past summer. As petrol prices go up when the oil price increases, mobile prices go up when traditional revenues start to decline. Changes in consumer behavior, such as over 50 percent of smartphone users having WhatsApp installed, are having a significant impact on traditional revenues from SMS and voice services. Operators don’t mention this, but instead point to the disputable claim that the cost of providing mobile data is rising. Whatever the case, it’s clear around the world, from the US to the UK, that ‘unlimited data’ is increasingly a thing of the past, and operators are moving towards data caps and tiered pricing.
In the end, we will have to wait and see if the operators are guilty. By the time the investigation and all the appeals are completed, the tariffs under discussion will already be a thing of the past. In the mean time, the operators are in a bad light, and this isn’t the first time. Last time they got off relatively light, but this time the political wind may be against them, as a number of parties look to open up the market to new players.
