Framework for Universal Service in Poland Eastern Partnership (EaP) workshop Vienna, October 7 th -8 th, 2010
AGENDA: 1. Telecom market overview 2. Current status of Universal Service in Poland 3. Universal Service the new concept Eastern Partnership (EaP) workshop Vienna, October 7 th -8 th, 2010
The size of the telecommunications market in Poland The total value of the telecommunications market in Poland in 2009 was 43 bln PLN. The value of the three main sectors (fixed, mobile, broadband) in 2009 was 29,2 bln PLN Mobile market The penetration rate as for 2009 was 118%, the growth of the number of subscribers between 2008 and 2009 was 880 267 roughly. The value of the mobile market in 2009 reached 18,7 bln PLN. Broadband market Overall broadband rate reached almost 21,4% as the number of all lines per 100 inhabitants in June 2010. This index for fixed access has reached nearly 15%. The value of the broadband market in 2009 approx. 4,1 bln PLN Fixed market Last year the number of subscribers as well as penetration rate in Poland continued falling. The value of the fixed market 6,4 bln PLN. Telecom market overview
Polish fixed line infrastructure is underdeveloped compared to other European countries. 74% of fixed line subscribers belongs to incumbent operator TP. S.A. Number of fixed linies per 100 inhabitants Switzerland Germany Sweden Malta France United Kingdom Greece Luxembourg Denmark Ireland Italy Spain Cyprus Netherlands Belgium Slovenia Norway Austria Croatia Portugal Estonia Finland Hungary Serbia Bulgaria Latvia Poland Czech Republic Lithuania Slovak Republic Romania pct 70 60 50 40 30 20 Telecom market overview 4 10 0
Fixed access lines in Poland During last few years the reduction of the number of fixed subscription lines has been observed. In 2009 there were 9.3 mln lines. Throughout last five years it reduced to about 22%. Number of fixed access lines in mln mln 12 10 8 6 4 2 11,84 11,48 10,49 9,73 9,28 Share of Telekomunikacja Polska S.A., the incumbent, adequately has reduced. There is the tendency of increasing market share of the alternative operators in the fixed telephony services. 0 2005 2006 2007 2008 2009 Telecom market overview
Fixed - mobile substitution in Poland Within last few years the penetration of fixed telephony services market has been decreasing 1-2 percentage points a year. It amounted to 25% in 2009. 120% 108,6% 115,2% 117,4% 100% 96,3% 80% 76,4% 60% 40% 31,3% 29,9% 26,9% 25,3% 25,1% 20% 0% 2005 2006 2007 2008 2009 Penetation of mobile telephony Penetation of fixed telephony Telecom market overview
Fixed telephony traffic, measured in billion of voice minutes, continues to decline across the EU, by 7% in 2008 and around 30% since 2005. The volume of mobile voice traffic increased in 2008 by 19% in 2008 and over than 75% since 2005 EU total voice calls by network (billion of voice minutes) 1,4 1,2 1,19 1,0 0,8 0,6 0,4 0,43 0,98 0,53 0,91 0,64 0,84 0,76 0,2 0,0 2005 2006 2007 2008 Fixed tele phony - Traffic volume s Mobile telephony - Tra ffic volumes Telecom market overview
Broadband market In 2008 almost 60% of population at least once per month used Internet Number of broadband internet subscribers (fixed and mobile) reached almost 36,7 million at the end of 2009, Penetration of broadband internet lines in June 2010 reached: 21,4% - number of bb lines per 100 inhabitants 61,2% - households with Internet access Number of operating internet service providers reached over 1 500 at the end of 2009 Penetration of fixed broadband internet lines in June 2010 reached: 14,9% - number of fixed bb lines per 100 inhabitants 42,6% - households with fixed bb Internet access In June 2010 overall number of fixed broadband lines exceeded 5,7 mln The main fixed bb players: 35,5% TP S.A. (the incumbent) 27,1% the major cable TV's 37,4% other alternative operators Broadband lines capacity: (144 kbit/s : 2 Mb/s) => 60,1 % <2 Mb/s : 10 Mb/s> => 32,7 % Higher then 10 MB/s => 7,2% Telecom market overview8
Polish fixed broadband infrastructure is poorly developed compared to the infrastructure in other European countries. 40,0% 35,0% 30,0% 25,0% 20,0% 16%17% 17%17%18%18%19% 20%20% 21% 21% 23% 24% 25% 31%31% 28%29% 28%28%28% 36% 37% 15,0% 10,0% 11% 11%12%12%13% 5,0% 0,0% SK BGRO PL EL HU PT CZ LV LT CY IT ES IE SI AT UE27MT EE DE BE FR UK LU FI SE NL DK Source: EC Telecom market overview 9
JMK7 Mobile broadband market Number of the mobile broadband subscribers - via modem connection, in the end of June 2010 - exceeded 2,5 mln users penetration rate per 100 inhabitants 6,5%. Additionally, about 15,2 million users used Internet access directly via mobile handset. Nevertheless this category is not included in overall number of broadband user to avoid double counting P4 Sp. z o.o.; 14,7% Polkomtel S.A.; 27,8% PTK Centretel Sp. z o.o.; 30,0% PTC Sp. z o.o.; 27,5% Telecom market overview 10
Folie 10 JMK7 skrócic Julia Martusewicz-Kulińska; 04.10.2010
Phone possession 2009 10,5% 40,9% 44,0% 4,60% 2008 14,3% 44,1% 38,9% 2,70% 2007 12,7% 43,4% 39,0% 4,90% 0% 20% 40% 60% 80% 100% 120% Only fixed line Fixed and mobile phone Only mobile phone No phone Fixed telephony is becoming less popular. In 2009 51,4% of Poles had a fixed line phone in the household. Users of both fixed and mobile phones accounted for 40,9% of total surveyed population, whereas 10,5% of respondents had a fixed line phone only. Telecom market overview 15
Operator selection 2009 67,9% 11,4% 7,6% 12,0% 2008 84,3% 2,9% 3,6% 4,3% 3,2% 2007 86,1% 3,5% 3,3% 3,3% 2,0% 0% 20% 40% 60% 80% 100% 120% Telekomunikacja Polska Tele 2 Netia Dialog Others Telekomunikacja Polska (incumbent operator) still has a leading position in fixed telephony market, however its customer base is decreasing over time. In 2009 less than 68% of surveyed subscribers used the services provided by this operator. Telecom market overview 16
State of market regulation in Poland End of first round market analysis 2009. Only three markets are not SMP: 10/2003 (transit services in fixed networks, 15/2003 (access and call origination on mobile networks, 17/2003 (international roaming on mobile networks). Second round of market analysis in progress: completed market analysis: 3/2007 (call termination on particular fixed networks), 7/2007 (voice call termination on particular mobile networks, 18/2003 (broadcasting transmission services); at the end of September EC accepted with comments our notifications concerning SMS termination markets on particular mobile networks; on the 29th of September UKE notified draft decision for market 4/2007 (wholesale physical network infrastructure access at fixed location); by the end of this year UKE also plans to notify decisions for market 2/2007 (call origination on fixed networks) and market 5/2007 (wholesale broadband access). Telecom market overview
Market overview conclusions: Polish fixed line infrastructure is underdeveloped compared to other European countries. 74% of fixed line subscribers belongs to incumbent operator TP. S.A. In comparison with 27 EU Member States only in six countries market shares of former monopolists are higher: Luxembourg, Cyprus, Denmark and Portugal Italy and Finland Compared to dominant operators from other EU countries, TP has one of the lowest levels of broadband penetration. According to the EC research we are ahead of Slovakia, Bulgaria and Romania only. In the majority of the Polish territory, end users have access to less than two operators (and TP always being one of them), which indicates low level of competition. Telecom market overview - conclusions
AGENDA: 1. Telecommunications market overview 2. Current status of Universal Service in Poland 3. Universal Service the new concept Eastern Partnership (EaP) workshop Vienna, October 7 th -8 th, 2010
Legal framework: EU law: - Directive 2002/22/EC of the European Parliament and of the Council of 7 March 2002 (Universal Service Directive, USD) - Directive 2009/136/EC of the European Parliament and of the Council of 25 November 2009 amending USD (Citizens Rights Directive) National law: Telecommunications Act of 16 July 2004 (with amendments) USP (Universal Service Provider) is obliged to provide all fixed public telecommunication networks users on the territory of the Republic of Poland with the minimum set of services (Universal Service) - at a affordable price and - with the minimum quality standards in place. Current status of Universal Service
Elements of USO: 1. connection of a single network termination point at a subscriber s main location, excl. ISDN 2. maintaining the subscriber line ready for providing telecommunications services 3. national and international telephone calls, including calls to mobile networks, incl. facsimile and data transmission and called-in access to the Internet 4. provision of directory enquiry services and directory of subscribers 5. provision of facilities for disabled persons 6. provision of public pay telephones. Single USP: Incumbent operator (Telekomunikacja Polska SA, FT Group) designeted for the whole national territory in respect of all USO elements until May 2011. Current status of Universal Service
Obligations fullfilled by TP in period 8 May 2006 31 Dec 2009 (UKE s report published in April 2010): 1. Offering a variety of different tariff plans 28 plans in offer 2. Offering (since June 2008) special tariff plan a social plan for low-income households 3. provision of directory enquiry services and directory of subscribers (since 2007) 4. provision of facilities for disabled persons - with exception to not enough advertising of these facilities 5. provision of minimum number of public pay telephones (1/950 inhabitants and 1/2000 inhabitants with disabilities) ratio reached at an aggregated national level only. Current status of Universal Service
Obligations NOT fullfilled, or partially fullfilled, by TP: 1. provision of connections at user s location Supply time for initial connection indicators missed (target values 20/21 days and 90% within the time agreed with the user) 2. price affordability obligation for basic plans - questioned 3. below target quality indicator Fault rate per access line 4. minimum number of public pay telephones ratio NOT reached at a local district level 5. Directory Enquiry Service obligation: - the same retail price, - information about the cost if connection provided ONLY for TP s subscribers and not for all users of public telephone netwoks Current status of Universal Service
Performance of TP as US provider from the consumer s perspective (results from the summary of the consumer poll conducted by the research company PBS DGA in Dec 2009) 0 10 20 30 40 50 60 70 80 using mobile phone 74,5 too expensive 24,6 using at work 5,1 don't need 12,2 using neighbours' telephone recently moved in living at a temporary address using public payphones awaiting connection other don't know 4,3 1,7 2,3 1,1 0,3 3,4 2,5 Question for non-users of fixed telephony - Why don t you have a fixed-line phone? (in %, n=784). Current status of Universal Service
Performance of TP as US provider from the consumer s perspective 0 10 20 30 40 50 60 70 low cost of connections 23,8 attractive add-on services handset/telephone included attractive offer/ discount other 3,6 3,4 8,0 11,5 Question for non-users of fixed telephony - What would encourage you to order a fixed-line phone? (in %, n=784). don't know 8,3 nothing 57,6 no answer 2,9 Current status of Universal Service
Trends - comparison to the results of the poll in 2006 higher number of respondents who said the use of mobile telephone is enough for their needs as compared to 2006 74.5% in 2009, 60.4% in 2006 lower number of respondents don t have a fixed telephone because it is too expensive for them - 24.6% in 2009, 31.5% in 2006 higher number of respondents resigned from fixed-line telephone because they didn t need it - 27% in 2009, 20.3% in 2006 Current status of Universal Service
AGENDA: 1. Telecommunications market overview 2. Current status of Universal Service in Poland 3. Universal Service the new concept Eastern Partnership (EaP) workshop Vienna, October 7 th -8 th, 2010
Why do we need to re-shape US mechanism in Poland? Amendments to the Universal Service Directive (USD) needed to be implemented to the national law by May 2011 Decreasing number of fixed telephony subscribers (mobile-fixed substitution effect), although there are still white gaps on the map of US Scarce interest in paper directory of subscribers in 2009 only 28% of ordered and published copies were distributed Diminishing demand for public pay phones, mainly due to high mobile telephony penetration and affordability Wide scope of the US may negatively affect market competition due to the US financing scheme (sector fund) Universal Service the new concept
New US concept main features: implements the provisions of the amended USD allows for multiple USPs limits the scope of US does not consider broadband access to Internet to be an element of USO changes the approach towards price affordability requirement
Scope of US: 1. connection (enabling functional access to the Internet) at a fixed location and maintaining this connection ready for providing telecommunications services (Art. 3 and 4 USD) 2. national and international telephone calls, including calls to mobile networks, incl. facsimile and data transmission and calledin access to the Internet and/or their functional equivalents 3. provision of directory enquiry services (Art. 5 p.1a) USD) 4. directory of subscribers (DS) in printed or electronic version 5. provision of public pay telephones. Multiple USPs: - providing different elements of the universal service - and/or in different areas of national territory, if and where possible and justified Universal Service the new concept
directory enquiry services (DES) and directory of subscribers (DS) key role of comprehensive subscriber/numbering database currently developed by NRA PLICBD aimed to be ready in 2011/2012 DES fully opened for the market competition provision of public pay telephones (PPT) should ultimately be excluded from USO because of scarce demand and availability/affordability of mobile phones services facilities for disabled persons provided by all companies offering public telecommunication services preferably - no social tariff plans direct financial support for low-income families Universal Service the new concept
Financing scheme net cost calculated as currently (Art. 12 USD) but as a result of proposed changes to the mechanism of US net cost should be minimized compensation from the public fund (obligatory for additional services not listed in the scope of US) or the sector fund companies contributing to the sector fund will have the insight to audited accounts of USP(s) applying for compensation (Art. 14 USD) Universal Service the new concept
Broadband to All Yes, but not as a part of US Why? It is assumed that market forces will not be sufficient to satisfactorily provide universal access to broadband. Broadband access to the Internet is in its initial stage of development and does not fulfill the fundamental 2 assumptions of US because it is still not available to most consumers (14,9% fixed bb penetration rate) and it may, with an adequate incentives in place, be provided by the competitive and free market. When extending the scope of the universal service to broadband the funding question becomes crucial. It would be financed from the public fund. Universal Service the new concept
Thank you for your attention More details available on the UKE websites: www.uke.gov.pl www.investors.uke.gov.pl Julia Martusewicz-Kulinska Director, Department of Telecommunications Market Analysis Telephone: +48 22 53 49 323 E-mail: J.Martusewicz-Kulinska@uke.gov.pl Renata Kowalska Deputy Director, Department of Retail Telecommunications Market Telephone: +48 22 53 49 225 E-mail: R.Kowalska@uke.gov.pl