The Hungarian Communications Market Developments and ...

The Hungarian Communications Market Developments and Regulation between 2004 and 2008
Figure 4.4: Revenue market share of incumbent service
providers in the relevant traffic markets
%
100
90
80
70
60
Residential international
Business international
Residential domestic
50
Business domestic
40
2003 2004 2005 2006 2007
Source: NHH
Competition in all geographical areas was intensified, yet with
significant differences between the individual geographical markets.
It was primarily the three largest incumbent service providers that
suffered significant losses of market share, while competition was
much less marked in the geographical markets of the two smallest
SMP service providers. This is partly attributable to the fact that these
markets did not prove to be attractive for alternative service providers
because of the small size of these markets and/or the inadequate
solvent demand. In addition, alternative service providers were to have
concluded separate interconnection contracts with every incumbent
service provider on the basis of slightly different reference offers. It
must also be noted that both smaller service providers are 100 percent
owned by big players active in the fixed market (Magyar Telekom
in the case of Emitel and UPC in the case of Monortel), which, on the
territory of their affiliated companies, obviously do not compete.
The development of competition in the traffic markets is not only
due to the strengthening of carrier selection alternative service providers,
because carrier selection traffic has no longer increased from
the end of 2005, as indicated above. It was at that time that cable
television service providers launched their services, providing fixed telephone
services using VoIP technology through their own infrastructure
with increasing success. Therefore, from 2005 on, the development
of traffic market competition was also increasingly affected by
the competition of service providers using different infrastructures.
Fixed retail access market
As regards the intensification of competition in the access market,
regulation did not produce the same results as in the traffic market.
In spite of the fact that retail offers as regards local loop unbundling
appeared in the market (which essentially brought the DSL service
into the focus) and that the use of local loop unbundling remarkably
increased, its effects on the fixed access market are considered
marginal. By the end of 2007, alternative operators provided fixed retail
services based on loop unbundling using slightly over 0.3 percent
of all fixed (PSTN) lines.
In spite of this, the fixed retail access market has taken a step
toward competition. Instead of local loop unbundling, however,
this was attributable to the launch of alternative technologies and
infrastructures, primarily telephone services provided through cable
television networks.
As a consequence, incumbent service providers began to loose
their original typical market shares of around 100 percent back in
2004. Alternative service providers continuously increased their
market shares to reach ten percent in the residential and business
markets by 2007. However, certain relevant markets have seen
considerable differences also in this respect. The residential access
markets of the two smallest SMP service providers were hardly affected
by competition, probably due to the reasons (small market,
large communications service provider owner) as described with
reference to the traffic markets.
Figure 4.5: Market share of incumbent service providers as per
the number of lines in the retail access markets
Residential access
%
Business access
100
95
90
85
80
75
70
65
60
2003 2004 2005 2006 2007
Source: NHH
Due to the lower intensity of access market competition, an
important task was to enforce compliance of SMP service providers
with the obligation of retail price regulation. In September 2006 the
Board of NHH initiated an official control procedure to investigate
the adequate performance of the obligation relating to the prohibition
on setting unreasonably excessive prices. The investigation
revealed that the service providers only partially fulfilled their obligations
specified in the decisions of the Board. By effecting an extra
increase in the prices of residential subscriber access service (aggre-