The Hungarian Communications Market Developments and ...

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stimulation regarding the development of infrastructure. Yet, the
quick increase in penetration shows that the regulation carried out
by the Board had no such effect. The growth rate of DSL coverage
did not slow down at all. Moreover, it is presumed that a faster
growth of penetration, which was partly attributable to the sales
of alternative ISPs, provided incumbent service providers with the
advantages of economies of scale.
In 2004, broadband coverage only extended to the environs of
Budapest and typically to towns and more densely populated areas,
making broadband access available for slightly more than half of the
population. During 2005, through the mass-scale spread of broadband
applications and owing to the network developments of service
providers, the proportion of areas with no broadband considerably
decreased and by the end of the year services were not accessible
by only fifteen percent of the population.
By mid-2008, coverage further increased (94 percent), with
the proportion of those areas with no broadband Internet access
becoming marginal. Typically, these areas are situated in rural areas
of small villages with significantly lower effective demand than the
countrywide average. In addition to the spread of fixed access,
mobile broadband access also became available in the majority of
the country by the end of the period under review, which may play
a key role in further increasing the intensity of competition between
independent infrastructures.
Handling of existing and new competition failures in the second
round of market analysis
During the period under review, the bitstream obligation has reached
its goal as to making the entry of alternative service providers and
the access of consumers to alternative offers possible in the entire
territory of the country. Independent ISPs were not squeezed out of
the market. Instead, they could come up with a real alternative to
former incumbent service providers. The competition launched in
the ADSL retail market, however, only produced limited results. In
areas with lower effective demand, alternative service providers did
not rush to convince end-users either, resulting in slower increase
and a differently developing wholesale market in these regions. In
spite of an advantageous regulatory environment, alternative service
providers could not establish strong positions, did not move toward
higher investment levels (use of LLU and local bitstream access), so
with a few exceptions, their business model is continued to be built
essentially on regulated IP level input.
In December 2007, in the second round of market analysis, the
Board made a decision taking also these problems into account. According
to this decision, the scope of general obligations remained
unchanged, however their content and details became significantly
more rigorous.
Figure 4.13: Geographical coverage of broadband access (2007)
No broadband
Only fixed broadband
Only wireless broadband
Fixed and wireless broadband
Source: NHH