|Issue:||Europe II 2002|
|Topic:||Powering Poland – Telecommunications Fuels Growth|
|Organisation:||Office of Telecommunications and Postal Regulation|
Poland’s telecom market, despite major liberalization, is still not fully competitive; the incumbent, TPSA, controls 93% of the fixed telephony market. Further liberalisation and the complete privatisation of TPSA are needed. Regulatory policies to foster wireless, broadband, the growth of Internet usage, VoIP, rural telecommunications, the modernization of interconnection agreements, the sharing of infrastructure, mobile communications and competition among services and technologies are high priorities. Poland’s Telecommunications Law must also be amended to conform to the EU’s regulatory framework.
The telecommunications sector in Poland is of vital importance to the country’s economy, modernization of the economic and social structure, overall growth of productivity and improved living standards. Modern telecommunications is decisive for the competitive strength of the Polish economy in the European Union. Information society services require easy Internet access at reasonable prices. However, at present, the telecommunications sector suffers serious difficulties following the country’s economic slowdown, the collapse of capital markets, the heavy burden of license payments and uncertainty concerning the demand for new services. The state of development of the telecom market mirrors the achievements and failures of the liberalization and regulatory processes of the last 10 years, as well as the general economic situation of the country. Polish telecommunications has been analyzed in a series of reports that give a comprehensive view of the telecom market . Therefore, it is not the main purpose of this paper to concentrate on the description of Polish telecommunications but rather to set out the general lines of development and concepts for the future. The general task of the state administration is to increase the share of telecommunications sector in the creation of GDP by enhancing the importance of telecommunications in Poland’s economy. The operational tasks vary depending upon the specific situations of existing infrastructure and service markets. Poland’s telecom market shows significant variance between basic infrastructure and services in terms of concentration, penetration and pricing. In fixed telephony, the market share of the incumbent, dominant, player Telekomunikacja Polska S.A. (TPSA) is still greater than 93%. The number of fixed lines per 100 inhabitants in Poland is now 29,6 . The tariff structure is far from being balanced. The charges for long distance and international calls are significantly higher than those of other countries of similar GDP levels. Today, after several years of substantial growth in fixed network penetration, growth of new subscriber lines is stagnant. The liberalization process in fixed telephony started almost ten years ago at the local level. Unbalanced tariff structure with relatively low local tariffs and the concept of licensed duopoly in all regions resulted in restricted competition and inadequate investments in networks. Local operators did not benefit from the high long distance tariffs. Furthermore, operators competing with the incumbent, TPSA, were burdened with high license fees, which significantly lowered their investment capability. The license payments helped to finance various social programs, but significantly deteriorated the situation of the alternative operators. At present, because of overdue license payments some operators face extinction. The government is planning to resolve this problem by exchanging the overdue payments for investments obligations as a way to bring new impetus to the fixed telephony market. Three long distance telephony operators were licensed in 2000. The initial market success of new entrants, based on call-by-call operator selection and competitive tariffs, didn’t last long. Their present market share is limited due to the regulatory problems concerning collecting subscriber payments via TPSA bills. The international telephony services will be liberalized as of January 1, 2003. The opening of the international telephony market and the lifting of all remaining restrictions for foreign investors complete the process of liberalizing the Polish fixed telecommunications market. The need for regulatory policy that creates conditions for the growth of fixed telephony has risen dramatically. In the short term, the main regulatory task is to support the existence of the alternative operators by resolving the license payment problem and the privatization of TPSA needs to be completed. The state administration should, together with operators, work out new strategies for fixed networks that facilitate the growth and use of wireless access and broadband technologies. Telecommunications in rural areas requires new technologies and financing concepts. The modernization of the interconnection agreements between the incumbent and new entrants, based upon the incumbent’s true cost structure, is a high priority. The instruments of asymmetric regulation embedded in Telecommunications Law should be used to the fullest possible extent. As concerns the regulation of retail prices of the dominant operator, the rebalancing of tariffs should be the primary task. The unbundling of the local loop, which was not mandated in Telecommunications Law 2000, should be initiated following the amendment of the Law, which is now under discussion in the Parliament. The mobile sector is growing rapidly. Analogue mobile services have been available since 1992. In 1996, three GSM licenses were granted, and subsequently extended to DCS /1800 services. In 2000, three GSM/DCS operating companies were awarded UMTS licenses. The number of mobile lines per 100 inhabitants was 25,9 as of 1st January 2002, and according to the latest data should exceed the fixed line penetration by the end of 2002. The development of the mobile market helped to close the supply gap in fixed telephony services, which at least partially explains the rapid growth of subscriber numbers when the service began. Retail markets competition between mobile and fixed network operators is widening. Although the success of mobile telephony has been beyond all expectations, the mobile market will require closer attention by the regulatory body in the near future. The prices for mobile services are relatively high. The charges for fixed to mobile require immediate intervention. The evaluation of the market power of mobile operators should soon result in imposition of regulatory obligations on operators having significant market power. The roll-out of UMTS networks has been postponed due to the well known technical and economic problems that have plagued it worldwide. Nevertheless, licensed operators are obliged to start UMTS services by 1st January 2005 at the latest. The tender for the fourth UMTS license is scheduled for 2003. It is expected that the new operator will bring more competition to the mobile market. To introduce a new mobile operator certain regulatory problems, such the access of a new entrant to domestic roaming on reasonable terms and conditions, must first be resolved. Licensed Mobile Virtual Network Operators are trying to find their place in the mobile market. It is expected that the rising cost of new customer acquisition will soon induce network operators to conclude agreements with MVNOs allowing them to develop this type of market activity. Alternative infrastructure capacity is helping to overcome some of the deficiencies of the existing market structure. The cable television market is the least concentrated market in Polish telecommunications. Since TPSA did not operate within the CATV market, it was left for small and medium-sized companies. Cable operators now reach 4.15 million of Poland’s 13.6 million of households. A consolidation process that accelerated in the late nineties strengthened the investment capabilities of CATV operators and facilitated the introduction of Internet services through the utilization of cable networks. The most important problem to be resolved concerns the usage of shared TPSA infrastructure (ducts) for data transmission and telephony services, and not solely cable television. Two operators of competing satellite television platforms, with close to 0.8 million subscribers, are widening their Internet access and e-commerce services. The voice transmission over IP networks is a significant phenomenon. Despite the unclear legal status of voice public services over IP networks the market share of VoIP operators in specific segments such as terminating and, recently, originating international traffic, as well as business voice communications, is rising significantly. The telecommunications administration has refrained from regulating VoIP services, which are, at this stage, considered to be data services. The lifting of all restrictions upon international telephony removes some legal obstacles to the development of VoIP services and should bring more legal certainty to this segment of the market. Although the data on Internet access is merely indicative, it is estimated that 14,3 per cent of Poland’s population now has access to the Internet. Although Internet access is provided by hundreds of Internet Service Providers, the most popular service among residential users is dial-up access provided by TPSA. The access costs are well above the average prices in other Central and East European countries. The prices for Internet dial-up access are, for the most part, based on local call charges, except during holidays and off-peak hours. Optional flat rates for periods ranging from 15 to 60 hours were introduced in 2001. Residential broadband access is provided mostly via cable networks. Business users employ various transmission platforms. Broadband access using ADSL technology is available only in some locations with high user concentrations. The lack of stable interconnection conditions between Internet Service Providers and telecom operators, limited access to infrastructure and high access costs are major problems requiring immediate solutions. The underdeveloped state of today’s telecommunications infrastructure might well provide an opportunity to develop a modern, effective, market structure in the future. It is evident that the major telecom operators are reducing the plans they had for the fixed voice communications network. The deteriorating economic situation in the sector and the weakening demand for new fixed connections is stimulating the search for new technologies and services. There are no regulatory restrains regarding the deployment of new technologies; the telecommunications administration will support all technological and economic solutions that promise to strengthen Poland’s telecommunications infrastructure. The new licensing policy, based on the Telecommunications Law 2000 encourages new entries at all levels of the telecom system, ranging from local to countrywide networks. In 2002, the new telecom law removed the remaining licensing restrictions and eliminated exaggerated license fees. Almost 30 new licenses were granted or extended for countrywide network and service operations. Numerous local access networks can be found at the municipal community level. It is expected that local authorities will get involved in supporting telecommunications initiatives as far as construction permits and the rights of way are concerned. The broad scope of the general authorization system enables the immediate start-up of data transmission, Internet access and other types of service activity using the networks of other operators. Conclusion Poland’s telecommunications policy will follow the regulatory patterns of the European Union directives. The discussed amendment of the Telecommunications Law should bring domestic telecommunications law fully in line with the EU’s existing telecommunications regulatory framework. The transposition of the new EU directives on electronic communications into domestic law is scheduled for 2004.