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The eCommunications Consultation Task Force (eCCTF) of the European Commission has published its comments on the market analyses performed by the Hungarian regulatory authority Nemzeti Hírközlési Hatóság (NHH) with regard to the following markets:


Market 10: Transit services in the fixed public telephone network


NHH found that none of the operators considered (Matáv, Pantel, BT Limited, GTS Datanet, eTel, and Invitel) have SMP on the national market for transit services in the fixed public telephone network. In view of the absence of SMP, no remedies have been formulated. The eCCTF had no comments with regard to this market analysis.


The European Commission did however voice substantial concerns about the NHH's market analyses of Markets 8 and 9.


Market 8: Call origination on the public telephone network provided at fixed locations  


NHH found that there are five separate geographic markets for call origination on the public telephone network in Hungary, corresponding to the operating areas of the incumbent local network operators (Matáv, Invitel, Hungarotel, Emitel and Monortel). These five operators have been declared as having SMP in their respective geographic operating areas.


The remedies that the NHH has proposed for these operators are:



  • Transparency – preparation of a reference offer
  • Accounting separation
  • Obligations related to access and interconnection; and
  • Price control (cost-orientation) and cost-accounting.

With regard to the obligation of cost-orientation, the NHH proposes to allow Invitel, Hungarotel, Emitel and Monortel to set their origination charges up to 40% higher than Matáv’s origination charges (Matáv is the historic operator; the other operators were granted concessions in the early 1990s to develop networks in certain areas). Not only can they do this, they are also not subject to an obligation to prepare a Long Run Incremental Cost (“LRIC”) cost model. In addition, the four companies are also allowed to maintain origination charges in excess of this threshold, but if this would be the case, these charges must be justified by a LRIC cost model.


It is this proposal to have differentiated remedies on which the European Commission voices its comments:


“The justification given by NHH in the notified draft measure, and also in the response to the Commission services’ request for information does not effectively enable the Commission services to assess the compatibility of this proposed margin with the requirements of Article 8(4) of the Access Directive, i.e., whether this proposal is based on the nature of the problem identified, is proportionate and justified in light of the objectives of Article 8 of the Framework Directive.”


[...]


“If an NRA intends to impose different remedies on different operators within similarly defined markets, such differential treatment should be adequately reasoned. However, the appropriateness of these 40%, and even the use of this methodology of price control instead of imposing directly a cost orientation obligation on the four other SMP operators is not appropriately justified.”


The Commission invites the NHH to substantiate why it considers the 40% threshold to be an appropriate cost-control mechanism for the designated local operators and reminds the Hungarian regulator that national and most international retail charges in Hungary are higher than the EU weighted average, which causes the Commission not to be fully convinced that the setting of a margin of 40% for the four local operators concerned (and the absence of an obligation to submit a LRIC-based cost model) would effectively contribute to decreasing retail tariffs and that it would address any market failure in the corresponding retail markets.



Market 9: Call termination on individual public telephone networks provided at a fixed location 


The scope of Market 9 is defined as ten separate markets, corresponding to the network of each of the identified market players (Matáv, Invitel, Hungarotel, Emitel, Monortel, Pantel, GTS Datanet, BT, Com.unique and Primatone).


The NHH put forward that each identified network operator should be designated as having SMP in its respective relevant market, with the exception of the operators: Com.unique and Primatone.


The remedies proposed by the Hungarian regulator are twofold:


1. Matáv, Invitel, Hungarotel, Emitel and Monortel will have the obligation for:



  • Transparency – preparation of a reference offer
  • Accounting separation
  • Obligation related to access and interconnection and
  • Price control and cost-accounting

2. Pantel, GTS Datanet will be subject to a lighter set of remedies:



  • Transparency, and
  • Equal treatment (non-discrimination) 

Again, similar to its decision in market 8 the NHH stipulates that with regard to the obligation of cost-orientation, Invitel, Hungarotel, Emitel and Monortel are allowed to set their call termination charges up to 40% higher than Matáv’s charges and they are not subject to an obligation to prepare an LRIC cost model. The European Commission’s comments on this matter are identical to the comments made in this respect with regard to Market 8.


The eCCTF also commented that neither Com.unique nor Primatone should have been considered as operators active in Market 9 at all, as they do not have an own backbone network or local access network, they provide their services using only PABX (sub)switches connected to the incumbents’ lines and they did not have any call termination revenues during the period under consideration.


The eCCTF letters SG-Greffe(2005) D/201559 - HU/2005/015 on the call origination market on the public telephone network provided at fixed locations in Hungary, SG-Greffe(2005) D/201560 - HU/2005/0152 the call termination market on individual public telephone networks provided at a fixed location in Hungary and SG-Greffe(2005) D/201561 - HU/2005/0153 on the transit services market in the fixed public telephone network in Hungary have been added to the T-REGS repository of eCCTF letters, using .zip archives with descriptive filenames.


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For a discussion of telecommunications regulation in Hungary, please contact Alexa Veller.