The Hungarian Communications Market Developments and ...

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Figure 4.10: Sales of ADSL services
pcs
600 000
Retail ADSL sales of mandated service providers
Country-wide bitstream
500 000
400 000
300 000
200 000
100 000
0
2003 2004 2005 2006 2007
Source: NHH
During 2004, the sale of ADSL services increased dynamically to
go beyond 240 thousand by the end of the year. The proportion of the
retail customers of ADSL service providers with their own networks
slightly increased over the previous year to exceed 63 percent. At the
same time, the proportion of end-users served by Internet service
providers (ISPs) dropped to 36.8 percent. During 2005, Internet
service providers continued to loose their retail market share to hit
34.3 percent, the lowest level ever, by the end of 2005. Nevertheless,
the entire market continued to undergo a dynamic expansion, with
the total number of ADSL subscriptions increasing to 413 thousand.
Following the trend of the previous two years, the proportion of endusers
served by service providers with own ADSL networks further
increased to 65.7 percent (307 thousand subscribers).
In 2006, the decrease in the ratio of wholesale realisations
stopped: by the end of the year the proportion of sales by ISPs
as compared to total ADSL sales increased to 36.1 percent (162
thousand). The year 2007 saw further improvement of the relative
market positions of Internet service providers, with their share in the
retail market increasing to 37 percent by the end of the period under
review. Then, the number of end-users served by ADSL technology
was 739 thousand, from which 200 thousand end-users were
customers of independent ISPs.
The number of wholesale realisations dynamically increased during
the period under review. Such growth was essentially due to the
expansion of the entire broadband market, rather than exclusively
to the effects imposed by the relevant obligation. Nevertheless, the
proportion of countrywide bitstream sales, namely the market share
of independent ISPs during 2006-2007 was not lower as compared
to the period before imposition of the obligation. Thus the regulation
has partly reached its objective, whereby competitors using wholesale
products were not squeezed out of the retail market. In the
years following the imposition of the obligation, the slow exclusion
of competitors from the retail market has stopped, with their share
again coming closer to 40 percent. It must be noted though, that the
market positions of alternative service providers, as regards their
share, did not effectively improve, so the regulatory objectives aimed
at the intensification of competition were only partly met.
Nevertheless, in certain geographical markets both the development
of the broadband ADSL market and the use of the regulated wholesale
input was attained to different extents. Broadband ADSL access
became available at the various service providers in different times, thus
justifying differences in the development right from the beginning.
In the case of Hungarotel, Monortel and Emitel (the latter has
merged into Magyar Telekom), the development and sale of ADSL
services were launched later than at the two larger market players.
Within the former areas of Hungarotel, ADSL penetration remains
significantly lower than the countrywide average as opposed to the
roughly 25 percent values of other service providers. The reason for
the very high ADSL penetration in the area of Monortel is DSL being
the only fixed residential broadband technology, as cable television
is also the interest of Monortel-owner UPC and broadband service is
not provided through the cable network in this area.
As regards the use of the wholesale input, certain geographical
markets are marked by even more differences. Competition is
most intense in the area of Magyar Telekom, where practically every
third ADSL subscriber is a customer of an independent ISP. In the
case of Invitel, the share of ISPs showed a slow decrease in the last
years, as compared to the earlier nearly ten percent. In the case of
Monortel and Hungarotel, following the imposition of the obligation,
ISPs did appear, yet their market share was significantly lower than
the one-third ratio of Magyar Telekom.
As a result of the regulation, by the end of the period (since 2006), a
retail service provider different from the former incumbent was a real
option in the area of all five services providers having DSL infrastructure.
Before the decision of the Board, alternative Internet service
providers could only be selected in the areas of two service providers
(Magyar Telekom, Invitel). The obligation brought positive changes for
consumers (especially for those living in the areas of these three service
providers) because of the expansion of the supply of retail services.
Before the decision of the Board, two independent ISPs operated
in the service area of Invitel, and 16 in the service area of Magyar
Telekom. After the introduction of the obligation of bitstream provision,
ten ISPs were to choose from the service areas of Hungarotel.
In the case of the service areas of Invitel four, in case of Emitel and
Monortel only one ISP was available for the consumers at the end of
the period under review. By the end of the period, end-users could
select from as many as 25 different service providers in the service
area of Magyar Telekom.