The Hungarian Communications Market Developments and ...

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years. This year one of NHH’s focus areas is to increase consumer
awareness, which – after revision of the EU regulatory framework – will
become a key issue at a European level, too.
With Hungary’s accession to the EU in 2004, market definition and
market analysis conducted pursuant to the Act on Electronic Communication
and the EU Framework Directive became the very basis
of regulation for NHH. Along precisely defined rules of procedure,
we commenced analyses in 18 markets, mapped market anomalies,
identified service providers with significant market power and established
the commitments to remedy market failures. We have already
conducted two comprehensive market analyses involving the entire
market and in both cases were one of the first European authorities to
complete such analyses. At the end of 2008, we were at the stage of
the first decision regarding a third round of analyses. It is of symbolic
importance that this decision involves the termination rates of mobile
service providers, an item provoking heated debates both in the EU
and ERG of European regulatory authorities.
With its decision aiming to create a predictable situation for three
years, NHH committed itself as early as in 2006 to the symmetry and
significant reduction of termination rates. Mobile termination rates
fell by some 40 percent since 2004 to universally become as low as
HUF 16.84 per minute by 1 January 2009. Our goal is to maintain this
reduction rate also in the years to come. Although our decisions on
termination rates and other key market issues were welcomed by the
market as a whole, they were understandably not always appreciated
by the service providers thus affected. Their objections led, in many
cases, to court procedures. Nevertheless, not a single court decision
of legal effect has been made to date to dispute such decisions of the
Board of NHH.
Perhaps some readers remember the 2004 introduction of third
generation mobile services, also known as the UMTS tender in Hungary.
As a result of the tender procedure administered by NHH, all of the
three former mobile telephone service providers obtained the required
rights to frequency use, with the state making a profit of nearly HUF
60 billion, which was beyond expectations. A few years later, upon
the extension of the GSM concessions in 2007, both Pannon and
T-Mobile/Magyar Telekom undertook broadband development worth
another HUF 20 billion each within two years, in addition to their HUF
10 billion budget payment. The promotion of the spread of broadband
Internet is one of the key issues at authority, state and user levels,
both in Hungary and in the EU. It is of enormous significance for the
competitiveness of individuals, the country and the continent to bridge
the still existing digital divide and to enhance digital literacy.
While third generation mobile services have given boost to the
Hungarian market and a fierce competition has developed in the
market of wireless Internet between the three domestic service
providers, an important reason behind the announcement of the
current tenders is that the intensity of such competition has recently
somewhat declined. Market shares did not change much for months,
and even prices stopped to decline. According to our expectations,
a potential fourth service provider and the introduction of a
new business model would give another boost to the otherwise well
performing mobile market. In addition to enhancing competition in
the mobile market, the promotion of the spread of broadband Internet
is also important. This field is currently characterised by three
competing technologies – traditional DSL, cable modem access and
wireless – which is a favourable situation.
As a result of a number of regulatory measures, there is competition
in the DSL market in the area of all incumbent service providers, with
efficiently operating alternative service providers becoming increasingly
more serious competitors to former providers with monopoly.
Cable television service providers with very high penetration rates in
Hungary have also engaged in this competition and grown to be major
challengers of fixed-line service providers in the field of both voice and
Internet services. Such competition was further strengthened by wireless
service providers, including the three mobile service providers,
with all this leading to a fast increase in Internet coverage and an even
faster reduction of prices. Today, no further significant increase in Internet
penetration is hindered either by coverage or price factors. We
have also taken several regulatory measures to increase the coverage
of the few still unserviced areas.
A tender procedure is aimed at re-introducing the 450 MHz frequency
range to the market, as this range is perfectly suitable for establishing
efficient broadband coverage in sparsely populated areas.
By using the 26 GHz frequency range, we also intend to facilitate the
cost-effective development of service providers’ own infrastructures.
The cooperation between service providers already in the market and
those striving to enter the market must definitely be improved. The
invitation to tender expressly encourages existing service providers to
assist new ones in their entry into the market, which therefore allows
new service providers to submit part of the frequencies awarded
to any incumbent service provider in exchange for the possibility of
domestic roaming. We expect this model to give a new impetus to the
market and to contribute to the efficient and cost-effective utilisation
of the country’s frequency spectrum.
Besides electronic communications, NHH’s activities also extend
to areas such as postal services, IT and, to a certain extent, the
media. In 2008, we were successful in managing the tendering
procedure required for the launch of terrestrial digital free-to-air
broadcasting. Terrestrial digital television and radio services are being
launched these days, with their success becoming measurable