The Hungarian Communications Market Developments and ...

The Hungarian Communications Market Developments and Regulation between 2004 and 2008
The situation in Hungary is similar, with T-Mobile realising only
a minimal drop in market share (slightly more than one percentage
point) over the past three years. Vodafone having presented dynamic
growth in the first years of its operation cannot, for the time being,
considerably exceed the twenty percent market share. Moreover,
during the last two years, its share has somewhat decreased. Consequently,
the structure of the Hungarian market and the dynamics
of market shares are very similar to the EU average.
In a European comparison, the prices of Hungarian mobile service
providers were significantly lower in nominal terms in 2007 than the
EU average. Hungarian service providers are cheaper than the EU
average 34 in the case of the small consumer basket (30 calls, 33 SMS
monthly) by more than ten percent, while in the case of the medium
consumer basket (65 calls, 50 SMS) and the large consumer basket
(140 calls, 55 SMS monthly) by twenty percent. This indicates a high
level of competition in the Hungarian market and makes it unlikely
that regulatory problems will arise in the retail market.
4.4 Regulation of leased line markets
Leased line service is the most frequently used service producing
the highest revenue in the domestic data transmission market. In the
market of leased line services, competition started in the early 90’s,
with alternative service providers appearing in the market already at
that time. However, competition intensified in the second half of the
90’s, with lower and lower prices and increasingly larger share of
alternative service providers.
Numerous services can be added to retail leased lines, which the
leased line retail service provider provides for customer on the basis
of the leased line service. These output services for instance include
transmission services using ATM (Asynchronous Transfer Mode)
and Frame Relay, VPN (Virtual Private Network) services or IP-based
services. The conditions of competition in and the regulation of the
leased line market may also influence the sale of these added data
transmission services.
The growth rate of the different segments of the leased line retail
market varies according to the bandwidth of digital services. The
market of services with broader bandwidth showed more dynamic
growth in the past years than that of services with smaller
bandwidth. The retail sales revenue resulting from services with a
bandwidth of more than 2 Mbit/s has seen a sixfold increase from
2004 to 2007, with a growth of fifty percent in the case of services
with a bandwidth of less than 2 Mbit/s in the same period (although
net revenue was still about three times higher than in the higher
bandwidth segment). By 2007, the sales revenue of the whole retail
market reached HUF 20 billion.
In many cases, service providers providing retail services have
only certain own segments of the claimed leased line. Consequently,
for the provision of leased lines offered, such service providers must
also use leased line trunk or termination segments of other service
providers, to be obtained through wholesale transactions.
The leased line trunk segment is a leased line section between
two points of presence of the operator, while the leased line section
expanding from the network end-point situated at the location of
the subscriber to the nearest point of presence of the other service
provider is called the leased line termination segment. The volume of
the service provider sales revenue realised in the wholesale markets
(leased line termination and trunk segment) was close to HUF 17
billion in 2007.
The competition in the different segments of retail leased line services
is different to some extent. In general, in the case of services
with higher bandwidth (above 2 Mbit/s), alternative service providers
provide their retail services through the rollout of individual networks,
so in this market competition is more intense than in the market of
services with lower bandwidth, where alternative service providers
are often forced to use the wholesale services of the incumbent
service provider.
Regulation of leased line markets
In the first and second rounds of market analysis, the Board performed
the analysis of three leased line markets, in accordance with
the relevant Decree of the Ministry of Informatics and Telecommunication
(and in conformity with the recommendation of the European
Union).
In its decisions of 2005 and 2008, the Board identified the trunk
segment market (market 14) as a country-wide market susceptible
to ex-ante regulation and established that no service providers with
significant market power could be identified in this market, therefore,
it did not impose any obligations. Also in 2005 and 2008, the Board
made decisions as regards the country-wide markets susceptible
to ex-ante regulation of retail (market 7) and termination segments
(market 13). Then it established that the competition was ineffective
and Magyar Telekom had significant market power. In order to
restrict its market power, the Board imposed obligations.
Minimum set of leased lines
The analysis of the Board established that in the retail leased line
market it was the SMP service provider that had a network capable
of providing the most extended service. Duplication of this network
in the short term is unrealistic, therefore, there is a risk of the SMP
service provider refusing the provision of services. Taking advantage
of its role as market-leader, the service provider may, in some cases,
provide low quality services for the same prices; consequently, there
is a risk of low-level services and quality reduction.
The main objectives of the Board was to prevent the SMP service
provider from abusing its market power and ensure customers’ access
to an adequate supply and quality of leased line retail services.