Now this might seem boring to many, but I'm sure it puts telecom policy wonks on the edge of their seats. A few days ago the European Commission backed the Dutch regulator OPTA's attempt to unbundle the Dutch cable architecture.

Mind you, this will only concern analog cable signals—so no cable Internet or digital TV. Nevertheless, this is an important decision. As one of the few countries in Europe (with Portugal, Belgium and Germany the UK) the Netherlands boasts an almost 100 over 90 per cent cable penetration. This means that for most of the Dutch intermodal competition between telecom operators is a fact. Hence, there's more competition on the market, so that quality rises and prices decrease—and second to Denmark the Dutch broadband penetration is the highest in the world.

(Thanks to Chris Marsden for pointing out some errors in the paragraph above)

At the same time, cable has mainly been left unregulated. This is firstly because cable isn't such a big deal in Europe. With only 15 per cent coverage throughout the union, European regulators have opted for the De Minimis clause in EC competition law. Now, the Netherlands obviously is an exception to this situation, with much higher coverage. The Dutch market used to consist of various local monopolies, which after some recent mergers resulted in a duopoly of dominant firms (UPC and Ziggo), with two Pesky Little Brothers (Delta and CAIW).

The right thing to do here would indeed be to regulate, to prevent UPC and Ziggo from exercising market power, which inevitably leads to productive inefficiencies and pricing well above marginal costs. However, some prudence would be required since the development of digital TV and next generation infrastructures requires significant investments by incumbent operators—investments they won't make when it will become harder to recoup these because of unbundling. Indeed, the Netherlands lags behind in digital TV and fiber optics. Also, as is acknowledged in the latest expansive report on unbundling the Dutch telecom market, cable unbundling places a significantly higher burden on incumbents than unbundling of copper lines. It would be wise therefore not to place too many constraints on Ziggo and UPC.

So what this policy does, is that it allows entrance on the analog market for new players, which functions as a stepping stone for entrance in the digital market. Moreover, this will create enough competitive pressure on the incumbent duopolists to innovate their digital services  in the long run. At the same time, the harm on the incumbent operators is minimized—even though one could well expect them to scream bloody murder.

Thus, the OPTA's decision, backed by the commission, is a great example of thoughtful regulation—subtle yet effective. Let's hope other regulators will follow the lead.