MILESTONES IN THE

LIBERALISATION OF THE
HUNGARIAN
TELECOMMUNICATIONS
MARKET
Dr. Ivan Schmideg
Communication Authority, Hungary
schmideg@hif.hu
PRAGUE, 1999. September

1
 SHAPING THE MARKET STRUCTURE
• operational and regulatory functions separated 1989
• Postal, telecommunications services and broadcasting
separated. 1990
• Act on Telecommunications 1992
• concession-bound services :
• public telephone service (PSTN),
• public mobile radiotelephone services,
• nation-wide public paging services,
• national and regional distribution and broadcasting of public radio and
television programs
• not concession-bound public service > license,
• other services > registration
• parties shall enter into interconnection contract within 3 months
providing local telephone service, within 6 months for other purposes

2
STEPS TOWARDS A LIBERALISED TELECOMMUNICATIONS
MARKET(92-93)
• Numbering Plan, Tariffs Regulation of Public Telephone Services,
Structure Plan of the PSTN 1994
• telephone traffic between any of the 54 primary areas, or GSM switches
should go through MATÁV back-bone network

3
 TELEPHONE CONCESSIONS
• Concessions for 25 years,
with exclusivity for 8 years,
• for telephone services in the primary areas
• MATÁV
• LTOs,
• for international and
nation-wide long distance telephone services.
• MATÁV

4
 PUBLIC TELEPHONE SERVICE
CONCESSIONS
• 54 primary areas total
• 29 primary areas (including the capital) declared as
monopoly regions of MATÁV
after a tendering process in
• 25 primary areas
5 won by MATÁV
2 no bidder, service obligation for MATÁV
18 won by 9 partly foreign-owned consortia 13 local
telephone operator companies
established

5
EXPIRE OF EXCLUSIVITY IN
TELEPHONE SERVICES
2001. December 31.
 internationalservices,
 long-distance services
 31 primary areas

2002. May 1.
5 primary areas
2002. November 1.
remaining 18 primary areas.

6
HUNGARIAN TELECOMMUNICATIONS
DEVELOPMENT (1994)

• Tender on provision of PSTN

• Concession on two GSM mobile operators
• WESTEL 900, (separated from WESTEL Ltd)
• PANNON GSM
• 94/C 379/03 Resolution on the principle and
timetable for the liberalisation of telecommuni-
cations infrastructures

7
 GSM MOBILE TELEPHONE
CONCESSIONS
• Concessions for 15 years,
with exclusively for 8 years:
• Westel 900 GSM Ltd.
• Pannon GSM Ltd.

8
HUNGARIAN TELECOMMUNICATIONS
DEVELOPMENT (1995)
• 1995
• Routing Plan of PSTN,
• Tariffs Regulation of Public Mobile Telephone Services
• Additional privatization of MATÁV
• 95/51/EC Directive (amending 90/388) abolition of
the restrictions on the use of cable television
networks for the provision of already liberalised
telecommunications services
• 95/62/EC Directive on the application of ONP
provisions on voice telephony

9
HUNGARIAN TELECOMMUNICATIONS
DEVELOPMENT (1998-1999)
• 1998
• Alternative network operator (PAN-Tel)
• Government decision on the principles of a new
Communications Act (telecommuni-cations, frequency,
post, informatics)
• 98/195 Recommendations on interconnection
pricing
• 1999
• Tender on DCS 1800 frequency band
• Two for the two incumbent GSM 900 SPs
• One for a newcomer, with a 900 MHz band
• IP telephony free

10
Main line penetration, its increase in selected
European countries
30% 60
Increase of DELs EU
Increase of DELs Greece, Portugal, Spain
Increase of DELsHungary
DEL EU
25% DEL Greece, Portugal, Spain 50
DEL Hungary
Increase of DELs to previous year

main lines / 100 inhabitants

20% 40

15% 30

10% 20

5% 10

0% 0
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

11
 Mobile penetration, its increase in selected
European countries
300% 15
Increase of mobile EU
280% Increase of mobile Greece, Portugal, Spain 14
Increase of mobile Hungary
260% Mobile penetration EU 13
Mobile penetration Greece, Portugal, Spain
240% Mobile penetration Hungary 12
Increae of mobile penetration to previous year

220% 11

Mobile subscribers/100 inhabitants

200% 10

180% 9

160% 8

140% 7

120% 6

100% 5

80% 4

60% 3

40% 2

20% 1

0% 0
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998

12
HUNGARIAN TELECOMMUNICATIONS
SERVICES
1990 1998
Number of connected main lines (000): 996 3 358
Number of registered requests (000): 657 80,3
Teledensity (%) 9,6 33,1
in Budapest 22,8 48,8
in the Province 6,4 29,6
Distribution of lines (%)
-residential 70,8 85,9
-business 26,6 12,8
-payphone 2,6 1,3
No. of residential lines per 100 households 18,3 71
Automation, local (%) 93,5 100
Digitization (%) 5,3 81,5
Manpower efficiency (main lines / empl.) 46 217
No. of mobile subscribers (000) 2 1059
No. of telex subscribers (000) 14 1,07
No. of internet host computers (000) 0 100
Population (million) 10,4 10,1
GDP/ capita (USD) 3000 4500
13
 Institutional Background of
Telecom Regulation
Parliament

National Council for

Communications and consult Government
Informatics

proposal

Telecommunications
Ministry
Engineering
of Transport, Communications and Water Management Qualification Committee

draft
appointment legal
of president issues
express opinion in
Telecommunication
frequency
Gov'nt Conciliatory Forum
management issues
Acts, decrees

President

Governmental Conciliatory Forum

Civil
Frequency Communication
freq. for Informatics
Management Authority
magmnt
Agency

supervision telecomm. policy,

ministerial decrees

Dealers
Dealers Manufacturers Service providers

14
MATTTERS TO BE SETTLED
• Full liberalization of the market
• Interconnection fee
• Universal Service
• Tariff re-balancing
• Number portability

The regulation should be consistent

15
Control of Complex Systems
“The income from the extra luxury tax imposed on
the dogs shall help to clean the Capital from the
dirt deposited by these dogs.”
(Official Daily in October)

“The harm to the valuable wild animals in the

forests surrounding the Capital caused by the dogs,
which were expelled because of the high extra tax
haunting in packs, totalled several million forints.”
(Scientific Weekly in next February)

16
MATTTERS TO BE SETTLED
(1999 plans)
• Drafting of the new Communications Act
• Amend Telecommunications Act ordering that a
telecommunications service provider being in
possession of a public telephone network and/or
operating the same, must not establish or lease a
cable network suitable for program distribution
simultaneously.

17
MATTTERS TO BE SETTLED
Full liberalization of the market
• The liberalization of public voice telephony is determined
by the concession contracts
• The EU urges and sets the year 2001 as preferable for the
full liberalization.
• The costs of shortening the exclusivity period of the
concession-holders under negotiations.

18
MATTTERS TO BE SETTLED
Interconnection fee
• Different for the GSM and for the LTOs
• For the LTOs revenue sharing (the ratio of the revenue from local
services and the revenue from long distance after revenue
sharing is intended to be 2:1 ).
• For the GSM operators yearly a fixed (traffic dependent and
traffic independent) fee is established.
• New cost accounting system is being implemented
• From the beginning of the next year cost based
interconnection fees to be introduced.

19
MATTTERS TO BE SETTLED
Universal Service
• Lack of the definition
• The funding possibilities are still under investigation.

20
MATTTERS TO BE SETTLED
Tariff re-balancing
• Public voice telephony: price-cap RPI-2%
• Ex ante set by ministerial decree based on the proposal of service
providers
• Several steps of re-balancing done
• Further re-balancing needed
• All other services: free

21
 OECD basket of residential telephone
charges USD, (1998)
600

500 Usage charge

Fixed charge

400
428
342

USD 300 327 234

318
250
200
156
168

100 173 163

147
118
93 90
58 68

0
Czech R. Hungary Poland Greece Portugal Spain USA OECD avg.

22
 OECD basket of residential
telephone charges PPP, (1998)
1000
Usage charge
900
Fixed charge
800

700

600
790
503
PPP 500
416
514
400 443 431
309
300

250
200
248 255
100 169 156 176 189
153
90
0
Czech R. Hungary Poland Greece Portugal Spain USA OECD avg.

23
 OECD basket of business
telephone charges USD, (1998)
1400

1200 Usage charge

Fixed charge

1000

800
1241
USD
982 821
600
722
890 838

400 469
580

200
216 181
124 148 126
55 56 100
0
Czech R. Hungary Poland Greece Portugal Spain USA OECD avg.

24
 OECD basket of business
telephone charges PPP, (1998)
2500
Usage charge

Fixed charge

2000

1500

PPP 2214

1000 1250 1444

1533 1492

1105 950
821

500

331
146 139 218 152 216 218
132
0
Czech R. Hungary Poland Greece Portugal Spain USA OECD avg.

25
MATTTERS TO BE SETTLED
Number portability
• already fulfilled EU regulation:
• short codes for emergency services
• 00 as international prefix
• work is still going on:
• to use 0 as trunk prefix
• to assure adequate capacity for a non-discriminatory access
• considering the demands for free carrier selection and later
the number portability

26
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