LIBERALISATION AND (DE)REGULATION OF SLOVENIAN

TELECOMMUNICATIONS MARKETS

Presented by

Matej Švigelj

Montpellier, November 2004

2

INTRODUCTIONSlovenian electronic communications market

• General indicators for Slovenia (2003):– 2 mio inhabitants– 685,000 households– 12,273 EUR GDP per capita (17,090 EUR according to

the PPP)• Slovenian electronic communications market:

– 782 million EUR (2003) – 3,2 % of GDP– Electronic communications market segments by

revenues (2003)• Mobile services (44%)• Fixed telephony (28%)• Network interconnection (11%)• Internet (7%)• CATV (3%)• Leased lines (1%), Switched data services (1%)• Others (5%)

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INTRODUCTIONReview of regulation

• Changes in Slovenian legalisation– Regulation of SMP operators– Telecommunication Act

• Complied with old EU legislation

– Electronic Communication Act (April 2004)• Adopted new EU regulatory framework

• Regulatory authority– APEK was established in second half of 2001– Performs all regulatory duties stipulated by the EU law– Sector approach to financing– Problems in regulator operations: (education structure, at

enforcing its discretional right)

• Methodology of regulation– Price cap is statutorily used (in practice: benchmarking)

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MOBILE TELEPHONYMarket structure

• Technology development of mobile telephony in Slovenia (1991-NMT, 1996-GSM, 2003-UMTS), 90% penetration rate

• Four companies: – Mobitel (operator)

• 1991 NMT, 1996 GSM, 2003 UMTS, Market share (2003): 73%

– Debitel (service provider)• Since November 1998, Market share (2003): 4,7%

– Si.mobil (operator)• Since March 1999, Market share (2003): 20%

– Western Wireless International: Vega (operator, national roaming)

• Since December 2001, Market share (2003): 2,2%

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MOBILE TELEPHONYNumber of GSM users

50

148

552

905

5 32

62 75 82 85

35

130

270 35

0

361

4

64 40

1,12

5 1,21

2 1,27

6

0

200

400

600

800

1,000

1,200

1,400

1997 1998 1999 2000 2001 2002 2003

Num

ber o

f cus

tom

ers

(in to

usan

ds)

Mobitel

Debitel

Simobil

Vega

6

MOBILE TELEPHONYPrices

0

20

40

60

80

100

120

Jul.9

6

Oct

.96

Jan.

97

Apr

.97

Jul.9

7

Oct

.97

Jan.

98

Apr

.98

Jul.9

8

Oct

.98

Jan.

99

Apr

.99

Jul.9

9

Oct

.99

Jan.

00

Apr

.00

Jul.0

0

Oct

.00

Jan.

01

Apr

.01

Jul.0

1

Oct

.02

Jan.

02

Apr

.02

Jul.0

2

Oct

.02

Jan.

03

Apr

.03

Jul.0

3

Oct

.03

MOBITEL DEBITEL SIMOBIL VEGA

Average real price of a minute of call by companies (in SIT per minute)

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MOBILE TELEPHONYProblems and regulators activities

MAIN CHARACTHERISTICS OF THE MARKET• Concentrated market structure due to:

–Late granting of licences to competing firms–High call termination prices between operators (high difference between off-net and on-net calls caused tariff mediated network externality)

• Competition leads to low prices• Anomalies at granting UMTS licence

–Brings back monopoly position at the market for 3G services

MAIN ACTIVITIES OF THE REGULATOR• In July 2002 appealed to operators to set prices based on the cost of efficient service provision •Assigned status of SMP operator to Mobitel and Si.mobil (Nov 2002 and Dec 2003)•Introduction of asymmetric model of call termination prices at the end of 2003

–Accepted by Mobitel and Si.mobil–Vega rejected the model and persists at its standpoint that ATRP should regulated end-user prices

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FIXED TELEPHONYIncumbent

PSTN ISDN Centrex Total

31.12.1996 615 7 622

31.12.1997 663 23 686

31.12.1998 726 46 772

31.12.1999 704 82 21 807

31.12.2000 664 132 66 862

31.12.2001 642 180 70 892

31.12.2002 580 232 111 923

31.12.2003 563 276 130 969

Number of fixed lines of Telekom Slovenije (in 000)

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FIXED TELEPHONYIncumbent’s tariffs

Source: 4th Report, 2003 and 9th Report-Annex I, 2003.

•Monthly subscription is increasing

•The call prices are decreasing in real terms since 2002

Slovenia EU average Monthly rental - residential (€)

10.99 14.20

Local call - 3 minutes (c€)

8.09 13.5

International call to near country - 10 minute (c€)

1.8 2.12

International call to the USA - 10 minutes (c€)

1.8 2.12

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FIXED TELEPHONYFixed-to-fixed interconnections

• Phase One: Benchmarking (August 2003)

–charges were set on EU average level

Source: APEK, 2004

– Local call 2.2 c€/min

– Positive difference was introduced

• Phase Two: Cost based (when?)

Slovenia EU average Local level (c€/min) 0.75 0.77 Single transit (c€/min) 1.05 1.09 Double transit (c€/min) 1.67 1.74

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FIXED TELEPHONY Competition

• New legislation

• Removal of all administrative barriers to entry

-fixed licences for free since 2003

• Reference Interconnection Offer (RIO) since 2004

• Number of operators offering fixed voice telephony: 2

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BROADBAND

Number of connections (000)

• Market share of SiOL-incumbent (2003):–99% (DSL), 7% (other broadband technologies)–66% (all broadband technologies)

•At the end of the 2003 additional price model for ADSL was introduced

DSL Cable 2002 17.000 16.000 2003 38.000 22.000

mid 2004 53.000 25.000 (est.)

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CONCLUSION

PROSPECTS•Fixed Voice Telephony

–From monopoly to competition (international calls)

•Broadband

–From competition (dial up) to monopoly (DSL)

•Mobile services (Voice)

–From monopoly to competition

•Mobile services (Data) and 3rd generation

–Monopoly?

•Service competition

–Fixed telephony

•Infrastructure competition

–Mobile services

–Data/Broadband