REPORT 3 Supply of Services in Monitoring Regulatory and Market
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REPORT 3 Supply of services in monitoring regulatory and market developments for electronic communications and information society services in Enlargement Countries 2011-2013 April 2013 The opinions expressed in this study are those of the authors and do not necessarily reflect the views of the European Commission. Enlargement countries monitoring report 3 – April 2013 Executive Summary This report is the third in a series of four study reports. It monitors the electronic communications and information society sectors in the nine countries that are currently taking part in an ongoing process of the enlargement of the European Union: Croatia, Iceland, the former Yugoslav Republic of Macedonia (Macedonia), Montenegro, Serbia, Turkey, Albania, Bosnia & Herzegovina and Kosovo*. It reports on the key developments between July 2012 and March 2013 and the progress made by each country in adopting the EU regulatory framework and aligning national ICT policies with the goals and priorities of the Digital Agenda for Europe. The slow pace of economic recovery across Europe, following the financial crisis of 2008- 2009, has hit the enlargement countries hard. The early shoots of recovery seen in 2010 were not sustained in 2011. A further contraction experienced by both the EU and most of the enlargement countries in the second half of 2012 is likely to postpone the onset of the recovery towards mid-2013. The total value of the electronic communications market in the nine enlargement countries in 2011 (the latest full year for which data is available) stood at €16.39bn, which represents a 5.8% year-on-year increase. Revenues for mobile telephony services, accounting for almost 60% of the market, returned to steady growth of 5.6% in 2011 after a period of stagnation in 2010. Revenues for fixed voice telephony services, accounting for less than 25% of the market, declined or remained stable in most countries. The strongest revenue growth was recorded by internet and cable television services. Overall investment in electronic communications in the nine countries in 2011 was €2.52bn, which represents a 4.6% increase from €2.41bn reported in 2010. The level of investment, however, diverged significantly across individual countries and sectors. The steady decline in the number of traditional fixed telephone lines in the enlargement countries has continued, and even somewhat accelerated in 2012, largely due to fixed-to- mobile substitution. The average fixed line penetration per population for the nine enlargement countries was 21.6% as of June 2012, down one percentage point from 22.6% at end 2011. There is nonetheless a significant variation between countries, with penetration ranging from 47.6% in Iceland, which is well above the EU average, to just 4.7% in Kosovo. The VoIP segment continued to grow in all countries and as of June 2012 accounted for over 20% of all fixed lines in Croatia and 27% in Macedonia. Despite the growth in VoIP connections of alternative operators, the fixed telephony market remains dominated by incumbents. Only in Iceland and Croatia is the incumbent’s market share comparable to the EU average, followed by a somewhat higher market share in Macedonia. In two countries, Turkey and Albania, alternative operators have made greater inroads in the market for international calls than in the domestic calls markets; whereas in the remaining four countries – Montenegro, Serbia, Bosnia & Herzegovina and Kosovo – there are hardly any signs of competition in the fixed voice telephony sector. In Serbia, the introduction of effective competition in fixed telephony will be further delayed following the NRA’s decision to postpone the implementation of number portability on fixed networks until 2014. The total number of mobile subscriptions in the nine countries decreased by nearly 2m in the six months to end-June 2012, to reach 92.27m, which corresponds to an average penetration rate of 94%. The decrease was mainly due to adjustments in the active subscriber figures *This designation is without prejudice to positions on status, and is in line with UNSC 1244 and the ICJ Opinion on the Kosovo declaration of independence. 1 Enlargement countries monitoring report 3 – April 2013 reported by Albania and Montenegro. The share of postpaid-to-prepaid subscriptions increased in all enlargement countries in the first six months of 2012, suggesting a maturing of market conditions. The shift towards postpaid was most apparent in Croatia, Montenegro and Turkey. The subscription-based market share of the leading mobile operator decreased in all enlargement countries, except Bosnia & Herzegovina, in the first six months of 2012. The market shares of third-placed operators continued to rise: Iceland’s Nova and Macedonia’s VIP now have market shares above 27%, MTEL in Montenegro has passed the 25% threshold and Albania’s Eagle Mobile has reached 24%. Number portability on mobile networks is now available in all countries, except Kosovo. In Bosnia & Herzegovina, after repeated delays, it was finally introduced in January 2013. The launch of MVNOs anticipated in Bosnia & Herzegovina in 2012, however, has been postponed indefinitely by the government. Particularly strong reductions in retail mobile prices since March 2012 were reported in Serbia, Turkey, Albania and Kosovo, whereas mobile termination rates were reduced in Croatia, Iceland, Macedonia, Albania and Kosovo. The fixed broadband market in the enlargement countries grew at a slower pace of just 1.4% in the first six months of 2012, compared with the growth of 10% in the full-year 2011. At end- June 2012 the total number of fixed broadband subscriptions in the nine countries stood at 10.74m, which corresponds to an average penetration rate of 11% of the population. Iceland reported the highest fixed broadband penetration rate of 34.7%, above the EU-27 average of 28.2%, followed by Croatia with 19.9%, while the seven other countries are lagging behind. In terms of technology, xDSL accounts for 80% of fixed broadband connections in the enlargement countries and plays a leading role in all countries except Kosovo, where cable connections represent over 70% of the fixed broadband market. The number of fibre-based broadband lines in the enlargement countries increased more than 40% in the first six months of 2012, to total almost 650,000 connections. In Turkey, the number of fibre connections increased by more than 200,000 in the first half of 2012 to approach the half-million mark. In Iceland, Albania and Bosnia & Herzegovina fibre connections now account for about 20% of total fixed broadband lines. Incumbents continue to dominate the fixed broadband market, retaining more than 40% of lines in all countries except Kosovo, where the incumbent’s market share is below 25%. In the xDSL segment, the incumbent’s market shares are well above 60% in all countries except Albania, where alternative operators deliver over 55% of xDSL connections over their own networks. In Iceland, following several investigations opened by the Icelandic Competition Authority against the incumbent operator Síminn, a regulatory settlement has been reached. It places binding commitments on the incumbent to implement organisational and structural changes aimed at achieving stronger separation between its retail and wholesale subsidiaries and ensuring equal access to wholesale inputs for competitors. Mobile broadband remained the fastest growing segment of the broadband market. The use of smartphones and other handheld devices rocketed in 2012, and the mobile broadband penetration rate in Iceland, Croatia and Serbia surpassed the EU-27 average of 48%. Only Croatia and Iceland have completed analogue terrestrial switchover and successfully awarded the available digital dividend spectrum for wireless broadband. The recent spectrum auction in Iceland paved the way for a new entrant operator that will have to ensure under its network coverage obligations the availability of mobile broadband services with a minimum speed of 30 Mbps to 99.5% of the population by 2020. Macedonia plans to have terminated analogue transmissions by June 1, 2013, while most of the remaining countries have given up their initial plans for early switchover dates. In Bosnia & Herzegovina the switchover has been postponed to December 2014 and in Turkey, Albania, Montenegro, Serbia and Kosovo – to the first half of 2015. 2 Enlargement countries monitoring report 3 – April 2013 All countries, except Bosnia & Herzegovina, have adopted or are currently drafting national broadband plans. The new Icelandic telecom policy adopted in November 2012 confirmed the ambitious target of ensuring the availability of broadband at 30 Mbps to 90% of the population by end 2014. Electronic communications legislation based on the EU 2009 regulatory framework is now in place in Croatia, Albania and Kosovo. However, Kosovo will need secondary legislation to implement the framework completely. Iceland and Montenegro have drafted legislation to transpose the EU 2009 regulatory framework, but no drafts have yet been prepared in Macedonia, Serbia, Turkey or Bosnia & Herzegovina. The latter is also the only country with legislation that is not based on the EU 2003 regulatory framework. In most of the monitored countries, the current institutional frameworks fall short of ensuring an adequate level of financial autonomy for the NRAs in accordance with the requirements of the EU 2009 framework. In many of the countries, notably Serbia, Montenegro and Kosovo, there has been a worrying