Dutch telecom KPN responds to net neutrality law with price hikes on mobile data

AMSTERDAM – The Netherlands’ largest telecommunications company announced big price hikes for mobile Internet customers on Tuesday, less than a month after Parliament approved one of the world’s strongest “net neutrality” laws.

KPN had posted weak first quarter earnings as its customers with mobile Internet subscriptions flocked to Skype and other Internet-based messaging services, undercutting KPN’s own more costly offerings.

When the company tried to add a surcharge on competing services, the move backfired. Customers protested loudly and Parliament passed a bill barring companies from hindering competitors or giving preference to their own traffic on mobile networks.

“KPN has decided not to block any services or to set separate rates for different services,” the company said in a statement Tuesday. It said its new charges “comply with the forthcoming Dutch legislation and are net neutral.”

KPN’s new deals bundle voice, data and SMS text messaging together in packages that KPN itself says increase the cost of data.

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As of September, KPN’s cheapest advertised price for one gigabyte of mobile data will be as part of a €50 ($70) per month package, compared with some packages currently available under €20 ($28) per month that include unlimited data.

Net neutrality advocates hailed the Dutch law as a landmark and said it would set an example in Europe, though the EU Commission labeled it “premature.”

The EU has ordered member countries to enact less stringent laws by May 2011, but most have yet to do so.

The EU guidelines allow telecoms to charge extra for some services, give preference to their own services, or even block rivals entirely, as long as they are open about what they are doing and consumers can easily switch providers. The EU position is that it may be in the interest of competition to allow telecoms leeway to “shape” network traffic, for instance by giving preference to people who are willing to pay more for speed guarantees so they can have reliable streaming video.

This is close to current U.S. practice, which is also under debate.

Telecommunications companies, including Vodafone, T-Mobile and KPN, lobbied against the Dutch bill, threatening to raise prices for data, as KPN has done Tuesday. They also say it may lead to a situation where networks are too slow to function properly because they are jammed with content from companies such as Netflix, Facebook, Skype owner Microsoft, and Google, which stand to profit while the telecoms are unable to fund expansion.

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The Dutch bill was endorsed by consumer groups and digital freedom activists, who are skeptical about the telecom companies’ warnings and say net neutrality will help ensure they don’t stifle competition and innovation.