The Hungarian Communications Market Developments and ...

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gated price index) above the consumer price index (CPI) established
in 2005, all service providers under review violated their obligation.
After the investigation, the Board published a notice that the service
providers should provide a solution with reference to the methods of
eliminating the violations of law and disclosed also some desirable
principles to follow. Service providers, in turn, undertook to return
such unreasonable extra revenue to those using residential subscriber
services, within the shortest time, but before the end of 2009
at latest, in the form of increasing service prices at a lower rate than
the consumer price index.
Handling of existing and new competition failures in the second
round of market analysis
During the second round of market analysis in the second half
of 2007, the Board made decisions on markets relating to fixed
telephone services. General obligations remained essentially unchanged,
however, their content and details were modified according
to professional experiences and new market developments.
In addition to its previous decision, the Board identified as new
competition failures in the retail access market, the pre-expiration
withdrawal of subscription packages under fixed term contracts
(loyalty contract) by SMP service providers and the obstruction of
changing to a new package by imposing undue requirements that
prevent subscribers from withdrawing from the contract even if the
new one provides a remarkably better alternative offer. Thus, SMP
service providers can obstruct, on the one hand, the entry of new
service providers into the market and, on the other hand, the use of
carrier selection. Subscribers choosing such packages will have an
unreasonable disadvantage as opposed to other subscribers with
subscription packages not requiring long-term commitments.
Therefore, the Board imposed the prohibition of undue discrimination
of consumers as a new obligation in the retail market of residential
and business access. In line with the decision of the Board, the
violation of this obligation can be established if the conditions relating
to the subscription packages are connected to packages to be used
exclusively under a fixed term contract and the service provider fails to
ensure this without a loyalty contract, and if the conditions are linked
to pre-expiration withdrawal or switching to another package, and if
the performance of the conditions by the subscriber is not proportionate
to the service performed until the termination of the contract, or to
the possible expenses or to loss of profit of the service provider.
Results in an international context
Following the European liberalisation of fixed markets at the end of the
20th century, competition first started in traffic markets. In those EU
Member States opening their markets in or before 1998, the market
share of incumbent service providers gradually decreased. At the end
of 2006, the incumbents in several countries owned as low as fifty
percent of the traffic market, with their revenue market share falling to
an average of 64 percent across the EU. On the contrary, Hungary has
seen a very slowly evolving competition in the first three years following
the 2002 liberalisation and the loss of share of incumbent service
providers remained below 5 percent even at the end of 2004. After the
publication of the Eht. implementing the new regulatory framework as
well as due to the effects of the renewed regulation reflected in the
decisions of the Board, the process has accelerated over the next
two years, and by the end of 2006, alternative service providers could
obtain a share of nearly 28 percent of the entire market.
Figure 4.6: Revenue market share of incumbent service providers
in the entire fixed traffic market
%
100
94,3
90
79
80
72
68,7
70
EU average
65,8
60
64,1
HU
PL
50
SK
SL
CZ
40
2004 2005 2006
Source: NHH and EU Implementation Reports 11, 12, 13
Although at the end of 2006, the intensity of the Hungarian market
competition was lower than the European average, its dynamics
exceeded it. In two years, the share of Hungarian alternative service
providers has increased by 20.3 percent, i.e. more than four times
faster than the EU average.
The comparison of the degrees of competition in Hungary and
in other Eastern European countries reveals a mixed picture. In the
Polish market, the initial value shows a significantly better picture
than in Hungary, however such difference disappeared by 2006. In
the Czech Republic, the two available pieces of data show that the
incumbent market share has decreased to the EU average by the
end of 2006. The results of the other two countries are below the
Hungarian indices. Slovenian market competition has been evolving
very slowly and in Slovakia, competition stopped and the share of
incumbent service providers increased in 2006.
We get a similar picture if we investigate the markets of different
call-directions separately. The share of Hungarian incumbent service
providers in all markets is higher than the EU average. However, the