Promotion of competition and construction of infrastructure in Poland

1
Promotion of competition and construction of
infrastructure in Poland

• Krzysztof J. Heller, Ph. D.
• Undersecretary of State
• Ministry of Infrastructure, Poland

2
Current status e-readiness
Source web-based survey on Electronic Public
Services in Poland Cap Gemini, Ernst Young
April 2002
3
Reasons of such situation

• Insufficient preparation of IT systems
• Governmental standards
• Security public key infrastructure
• Incomplete legal framework
• Inadequate training of employees
• Expectations of citizens
• ICT infrastructure and services

4
e-Poland action plan

• All issues are addressed - an action plan is in
  place
• Progam e-Poland- Action Plan on the Information
  Society Development in Poland for the years 2001-
  2006
• Periodically verified and adjusted
• In line with eEurope initiative
• Target 0 development of ICT infrastructure

5
Infrastructure prerequisite for other targets

• Universal service obligation
• Mobiles will not solve all problems (broadband!)
• Availability presence in all locations,
  including remote and rural areas
• Affordability service price cannot be a blocking
  factor
• Big progress in the last decade, although current
  situation still far from satisfactory

6
Current Status availability
Percentage of households that have fixed
telephone service
100
Percentage
80
60
40
20
0
BG
CY
CZ
EE
HU
LV
LT
MT
PL
RO
SK
SI
TR
CC Avg
EU Avg
Source EU Candidate Countries (December 2001),
ITU for EU Avg
7
Current status penetration
Fixed and Mobile Penetration
80
MOBILE EU
Mobiles Per 100 Inhabitants
Fixed Lines per 100 inhabitants
HIGH
97
LOW
61
N
u
m
b
e
60
r

FIXED EU
p
HIGH
78
e
LOW
42
r

1
0
40
0

i
n
h
a
b
i
20
t
a
n
t
s
0
BG
CY
CZ
EE
HU
LV
LT
MT
PL
RO
SK
SI
TR
CC Avg
EU Avg
Source ITU (2001)
0A2GB
8
ICT in rural areas digital divide
9
Service affordability - prices
3000
Fixed
Usage
2500
2000
1500
1000
500
0
UK
USA
Italy
Korea
France
Austria
Spain
Japan
Mexico
Turkey
Ireland
Australia
Germany
Poland
Iceland
Norway
Greece
Finland
Sweden
Canada
Belgium
Portugal
Hungary
Denmark
Czech Rep.
Switzerland
Luxembourg
Netherlands
New Zealand
OECDaverage
OECD Composite Business basket, Nov 2000, VAT
excluded, UDS PPP
10
Service affordability - prices
OECD Composite Residential basket, Nov 2000, VAT
included, USD PPP
11
Fixed market - status

• Densification of infrastruture requires further
  significant investment
• Western path first build from public money, then
  privatise and liberalise
• Polish incumbent is already privatised
• slows the investments down (from 1.2 M lines/year
  to 0.2 M lines/year)
• looks mainly for profitability (e.g. rural areas
  using NMT no broadband)
• State budget cannot afford subsidies

12
Golden age is over

• Overall problems with attracting investment in
  telecoms
• Backbone networks OK (technology!), access
  networks needed (broadband-ready)
• Lowering investment cost
• Alternative technologies (CATV, radio access,
  PLC)
• Utilisation of existing assets
• Avoiding overbuild cooperation
• Simplification of the network rollout process
• Increasing revenue new services

13
Attracting investors what government can do?

• Previously selling market with a company
• Long term stability needed due to investment
  lifecycle
• Stable and consistent legal framework
• Public and unwavering regulatory policy
• New entrants must have a business chance
  (competition, lower entry barriers)
• Incentives rather than obligations for
  less-attractive areas (e.g. bundling long-term
  contracts)
• Educated market open for new services

14
Competition ensuring affordable pricing and
service quality

• Financing universal service obligation
• Fund contribution from the operators
• Structural funds
• Licence fee conversion
• Creating competitive market
• Legal framework telecomm act and secondary
  legislation
• Activities of regulator
• Facilitation of actual competition

15
Stable legal framework

• Historical problems - From local to long
  distance policy (only partially succesful)
• New telecom act in force since 1 Jan 2001
• Step towards market liberalisation
• Did not resolve historical obligations (licences)
• Problems with secondary legislation
• Amendments to the telecommunication act
• Consistent with the current EU framework
• Approved by the Council of Ministers 28 May 2002
• Full competition from 1 Jan 2003

16
Stable regulatory framework

• Former regulatory practice
• In place since 1 Jan 2001
• Inactivity, long decision process
• Incumbent blocking all unwanted decisions
• New regulatory authority since 1 April 2002
• Dominant position of incumbent established
• All incumbents legal cases dropped
• Clearing the backlog

17
Facilitation of competition

• Situation of alternative operators
• Fragmented lacking critical mass (8
  marketshare)
• Debt restructuring needed
• Licence fee payments outstanding
• New entrants in better position
• Credibility for investors
• Consolidation
• Using economies of scale
• Public-private partnership
• Better utilisation of state-owned assets
• State Security issues (building public confidence)

18
Sharing infrastructure
Local loop unbundling
Service
Operator
Infrastructure
Operator-neutral infrastructure
Service
Operator
Infrastructure
19
Infrastructural operator

• Using access network ownership to gain
  competitive advantage
• Local loop unbundling - no major success so far
• Could separation of infrastructure and service
  delivery help?
• Limited usage already in place mobile operators
• Pros
• better utilisation of infrastructure
• service-neutral
• Cons major change of status-quo
• Requires further investigation

20
Next steps for 2003

• Implementation of new EU directives new
  approach to telecom law
• Resolution of the Universal Service funding issue
• Completion of the consolidation project
• Evaluation of the infrastructural operator concept