Content: Legislation and TRE Sector overview Legal Basis and procedures for SMP Designation Mobile SMP designation Fixed SMP designation Main issues 2

Transcription

1 Market Analysis and SMP designation in Albania Hydajet KOPANI Board Chairman/Executive Director Altin RAPAJ Director of Market Regulation Telecommunications Regulatory Entity Of Albania TAIEX Workshop, Belgrade 4-5 th October,

2 Content: Legislation and TRE Sector overview Legal Basis and procedures for SMP Designation Mobile SMP designation Fixed SMP designation Main issues 2

3 Legislation and TRE Telecommunication sector is governed by Law No of June 14, 2000 On Telecommunications in the Republic of Albania (based on 1998 EC Directives). Sector policy objectives are defined by Decision No. 288 of Council Of Ministers, June 18, 1999: Development Policy Document of Telecommunication Sector in the Republic of Albania. Telecommunications Regulatory Entity (TRE) is a public independent legal entity and its status is defined by Article 8 of Law On Telecommunications in the Republic of Albania : Telecommunications Regulatory Entity (TRE) is the regulatory authority that t monitors the regulatory framework of this law and of the policy objectives defined by the Council of Ministers 3

4 TRE duties: Regulates the interconnection of telecommunication networks; Ensures that competition between telecommunication operators follow the principles p of transparency, non- discrimination and fairness; Safeguard the interests of users of telecommunications networks and services from operator s unfair practices; Supervise the compliance of tariffs of public telecommunications operators with requirements of the law. 4

5 Sector overview: : Mobile 3 licensed GSM Mobile Network Operators June 1996: : the first mobile operator, Albanian Mobile Communications (AMC) launched its services as 100% government owned company; September 2000: : privatization ation of 85% of AMC completed (sold to CosmOTE (mobile operator in Greece, part of the fixed Greek incumbent OTE); June 2001: the second license for GSM operator issued to Vodafone Albania (launch of services August 2001); March 2004: : the third mobile license issued to Eagle Mobile a subsidiary of fixed incumbent operator Albtelecom. The license given as part of the privatization package. Due to delayed process of privatization this operator still not active. 5

6 Sector overview: Mobile Mobile cont. Very high growth rate from As of end June 2007: 2.1 million users, 66% penetration rate. 96% prepaid customers No MVNO, ESP/SP. 6

7 Sector overview: fixed Network operators as of end 2006: One national fixed network operator (incumbent operator Albtelecom); 55 small rural (local/regional) network operators : alternative fixed network operators licensed only for rural areas; November 2006/April 2007: alternative fixed network operators may be licensed for up to three regions (including urban areas); July 2007: Privatization of 76% of Albtelecom completed. 7

8 Sector overview: fixed cont. Very slow growth rate and long waiting list for the incumbent operator; As of end June 2007: 290, users, 9.3% penetration rate. Rural operators only 30, users i.e. 9% market share of the fixed line subscribers; Penetration rate and waiting list varies by district 8

9 Fixed and Mobile Users Numri i perdoruesve te telefonise fikse dhe celulare Fixed Mobile Yea ar Users ('000) 9

10 Penetration of fixed and mobile services 2006 Penetrimi per 100 banore 1 Korrik 2006 Fiks Celulare BE 25 Celulare BE 25 Fiks 10 Bosnia&Hercegovina Bullgaria Croatia Rumania Mali i Zi Serbia Kosova Maqedonia Turqia Shqiperia Sh

11 Market size in terms of turnover 2006: 430 million Euro (6% of GDP) Highest growth rate: mobile operators 15% Albtelecom: -10% (2005: 2.5%) Rural operators revenues: insignificant 11

12 Revenue Market Shares Pjeset e Tregut ne te Ardhura Albtelekom Rural AMC Vodafone % 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 12

13 SMP designation: Legal Basis Article 17 of Law On Telecommunications on SMP Designation (acquis EC 1998): TRE determines whether an organisation is an Organisation with SMP... when it has a share of more than 25% of the market market share of less than 25% in the relevant market has significant market power... more than 25% in the relevant market does not have significant market power. In either case, TRE takes into account the organisation's ability to Influence market conditions Incomes means of access to terminal users, and experience. Regulation for SMP designation approved by TRE Board on 16 th of September

14 Regulation for SMP designation Procedure and criteria to be used for SMP designation SMP designation: market analysis of the relevant market Procedure: TRE publishes Market Analysis for public consultation After the consultation (normally 1 month) period TRE prepares the Final Market Analysis, that includes answers to the comments; TRE decisions on SMP designation are taken based on Final Market Analysis; Operators have the Right to appeal against the SMP decision as defined by the Code of Administrative Procedure. 14

15 Regulation for SMP designation cont. Market Analysis: I. Definition of the Relevant Market: I. Relevant Market means the market of products, which are mutually interchangeable from the point of view of the consumer related to its characteristics, price and their intended use in the area, and which are supplied and demanded by the undertakings concerned in a geographic area where the competition conditions are sufficiently homogenous and which can be clearly distinguished from neighboring areas (Law no. 9121, date On Competition Protection ) II. HM test: demand and supply side substitutes III. Common pricing Constraint 15

16 Market Analysis II. III. SMP analysis of the market defined in step I Assessment of competition and identification of competition problems using criteria that take into account the 2002 EC directives and recommendations: - market structure: market shares (dynamic and measured in volume and revenue), entry barriers, potential competition - supplier behavior in terms of price competition and profitability, countervailing buying power, - consumer benefits, etc. Market remedies based on the competition problems identified in step II and Tel. Law Provisions 16

17 SMP designation of Mobile Operators TRE has concluded two market analysis procedures: 2006 and 2007 Relevant markets in both analysis: Wholesale level: Mobile call termination on individual mobile networks Retail level: Publicly available mobile services 17

18 SMP designation of Mobile Operators cont. Mobile SMP designation in 2006: 7 th of February -7 th of March: Public Consultation on Market Analysis. 26 th of April: Final Market Analysis concluded and TRE issued decisions on SMP: AMC: SMP in mobile call termination on AMC network Vodafone Albania: SMP in mobile call termination on Vodafone Albania network AMC and Vodafone Albania: SMP on public mobile services market. MNO s contested (administrative appeal) the SMP designation in the public mobile services market, but not the SMP designation on mobile call termination. No court appeal from MNO s against the TRE s decisions on SMP. Mobile SMP designation in 2007: 18 th of June 18 July: Public consultation on Market analysis 18 th September: Final Market Analysis concluded and TRE issued decisions on SMP: AMC: SMP in mobile call termination on AMC network Vodafone Albania: SMP in mobile call termination on Vodafone Albania network AMC and Vodafone Albania: SMP on public mobile services market. 18

19 Mobile call termination Market definition 2006/2007: Mobile call termination on each network (market 16 of EC 2002 directives) SMP designation 2006/2007: 100% market share (by definition); iti No threat from new entrants Low countervailing buying power 2006: Very high levels of mobile call termination- 23 eurocent/minute (the highest in EU and SEE countries-88% higher than EU average). See graph. 2007: 43% reduction in mobile termination tariff during 2006 was due to TRE intervention through dispute resolution, not to competitive pressure. 19

20 Mobile call termination Identified problems in mobile termination: : 2004: revenue sharing mechanism. Termination fixed-mobile not less then 32 eurocent/minute (40 ALL)- detrimental to the fixed networks end users and no incentive for tariff reduction; : 2006: Price discrimination based on the origin of traffic (national originated traffic 23 eurocent/minute; international traffic 10 eurocent/minute) resulting in high tariffs for fixed to mobile and mobile off net calls; High termination charges enable leverage of market power into retail markets (price squeeze) and create barrier to new entrants (network operators and service providers) 20

21 Remedies for mobile termination Telecom. Law provisions for interconnection of SMP operators: Transparency: SMP must publish interconnection technical terms and conditions and interconnection tariffs. Non-discrimination: discrimination: provide interconnection to third parties in the same quality and tariffs as they provide for their own services Price control: o be cost-oriented, reasonable return on investment, not reduce competitiveness between operators in the telecommunication market as well as not be discriminative and provide equal treatment 21

22 Remedies for mobile termination cont. Other developments: July 2006: dispute resolution (mechanism): Fixed incumbent operator and mobile operators didn t agree on new interconnection tariffs, and the case (dispute) was brought to TRE. TRE decision: New mobile termination tariffs were set at the EU 25 benchmark level: 13 eurocent/minute (11 th Implementation Report) a 43% reduction (see graph). The decision concerned only termination charge for domestic calls. August 2006: Two MNO s and fixed incumbent signed the interconnection agreements: Termination charge for domestic calls followed the TRE decision The gap between mobile call termination of international and domestic traffic was reduced to 1.6 and then to 0 eurocent (from 14 eurocent). On-going processes: Draft-regulation regulation on access and interconnection provides rules, procedures and content of RIO Methodology for price regulation (glide path based on benchmark) for medium term Project for BU-LRAIC 22

23 Mobile call termination contd. Average mobile termination rate, July EU 25 average eurocent/minute eurocent/minut t Sweden U K Norway Latvia Czech Rep Slovak Rep Ireland Hungary Spain Average EU25 Average 30 Malta Iceland Denmark Austr ia Franc e Poland Germany Netherlands Belgiu Luxembou Portugal Greec e Switzerland Italy Estonia Slovenia Bulgaria a deri m rg Albania Albani

24 Public Mobile services Relevant Market: publicly available mobile services (access and outgoing calls) No independent service providers (SP,MVNO etc) ; Common pricing constraint (access plus outgoing calls part of the same relevant market); Strong basis for substitution of access to mobile and fixed network, but given: the different characteristics (mobility v fixed), large differences in prices and no evidence that t the consumers could switch from fixed to mobile access access to fixed and mobile network, are not in the same relevant market 24

25 Public Mobile services contd. Market shares and market size Stable market shares from Each MNO nearly 50% market share for 3 years; The decline of market share of AMC in was associated with strong mobile market(nr.subscribers) growth; Important factors affecting the demand growth: Very low penetration of fixed telephony); Long and lasting waiting lists for access to PSTN (unmet demand for access to public telephone network); High level of migration, have boosted the demand for access to public telephone network. ERG SMP Guidelines: collusion in markets with strong demand growth very likely 25

26 Mobile subscribers market shares Market Shares and number of users (000's) AMC Vodafone % 20% 40% 60% 80% 100% 26

27 Public Mobile services cont. High entry barriers at the wholesale level and lack of SP and MVNO in mobile market limit the incentive of MNO to compete, increasing the ability of operators to influence market conditions; Impact of the potential competition from the third (or other) licensed mobile operator is expected to be limited: Practice/empirical evidence has shown that sequential entry in mobile market is less effective than simultaneous entry. 27

28 Public Mobile services cont. Suppliers behavior Very high and stable prices for 5 years off-net and mobile-fixed prices constant for 5 years; Mobile tariffs the highest in the region: prepaid, postpaid (usage and fixed charges) Mobile OECD baskets 2005: Albania the highest level of expenditure for 3 baskets in SEE countries and the highest for Medium and High usage baskets in EU25; ARPU for postpaid customers (2400 euros/year) the highest in EU and almost two times higher than Ireland of second place; EBITDA high and stable at nearly 60%. ROCE high and stable : 2006: 23%-39% 39% 28

29 OECD mobile baskets (monthly) Krahasimi i i shpenzimeve per shportat t OECD: BE-Shqiperi i Min Mes Max Albania TVSH) Euro/muaj (me Low Medium High Low Medium High Shportat/Viti 29

30 Public Mobile services cont. Retail price reductions during 2006: Increase of the minimum call duration charge Applied to limited groups of consumers Applied by both MNO s after the new interconnection agreements, that resulted in increased revenue from incoming international traffic ROCE remains high and stable. 2006: 28%- 39% 30

31 Public Mobile services contd. Consumer benefits Very low minutes of use (outgoing calls) and SMS Mobile number portability not in use: high cost of switching Very low countervailing buying power: 97% prepaid customers Consumer information on tariffs for postpaid packages very low: limited number of exclusive shops that sell postpaid packages. SMP analysis has shown that there are severe competition problems in the mobile market, that have a very detrimental effect on the consumers of mobile services in Albania. 31

32 Remedy: Law on telecommunications: Prices charged by organisations with significant market power are subject to tariff control. When TRE determines that there is not sufficient competition in the market for a service or group of service to ensure reasonable tariffs, TRE proposes to the Minister for submission to the Council of Ministers the sublegal act for application of tariff control to that service or group of services and determines terms of price control. 32

33 Market analysis: Fixed 14 th of August - 28 th of September: Public Consultation Relevant markets: Retail: Access to the public telephone network at a fixed location Publicly available telephone services provided at a fixed location Wholesale l Call termination on individual fixed network Call origination on all fixed networks National transit on fixed networks International transit on fixed networks SMP: Fixed incumbent - Albtelecom 33

34 Topics of interest Incoming International and national traffic call termination: part of the same relevant market? Licensing/authorization regime for Transit service and for carriers of national and international traffic Access/interconnection under the 1998 and 2002 framework, and imposition of obligations for access. 34

35 Thank You for your Attention Hydajet KOPANI Board Chairman/Executive Director Altin RAPAJ Director of Market Regulation Telecommunications Regulatory Entity of Albania al 35