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V oI P and its Impact on Competition in the Telecommunications Sector Monika Podpłońska

V oI P and its Impact on Competition in the Telecommunications Sector Monika Podpłońska V-ce Director of Retail Electronic Communications Market Department/UKE Geneva,15 - 16 th January, 2007. Regulatory activities in EU. Lack of concrete definitions of VoIP services in EU

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V oI P and its Impact on Competition in the Telecommunications Sector Monika Podpłońska

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  1. VoIP and its Impact on Competition in the Telecommunications Sector Monika Podpłońska V-ce Director of Retail Electronic Communications Market Department/UKE Geneva,15 - 16th January, 2007

  2. Regulatory activities in EU • Lack of concrete definitions of VoIP services in EU • IP Telephony service is analysed case by case for each service (public telephony service) • European regulators conduct public consultations in terms of regulatory remedies

  3. Country Regulator Classification of VoIP Austria RTR Two classifications: Class A are VoIP services that enable access to the PSTN and are regulated as telephony services; Class B are unregulated Internet-only VoIP services Czech Republic CTU VoIP is not considered as a public telephone service, but as a data-transmission service – no regulatory initiative has yet been undertaken Denmark ITST VoIP services are treated in the same way as other voice services. The legislation claims to be technology neutral France ARCEP Two classifications: voice over broadband (VoB), or managed IP telephony, services are considered substitutes for PSTN services and therefore subject to regulation; voice over the Internet (VoI) services are software based, with restricted availability, and so are not regulated The classification of VoIP services shows different regulatory approaches (1-3)

  4. Country Regulator Classification of VoIP Germany BNetzA There is a statutory requirement to technological neutrality: rights and obligations depend upon the services offered. VoIP services that offer access to the PSTN are, therefore, classed as telephony services Hungary NHH Any VoIP service has to be registered as a telephony service. VoIP providers must inform customers of reliability and quality issues Italy AGCOM No formal legislation in place. Consultation showed three types of VoIP service in the Italian market that are likely to act as basis for future categorisation: PSTN equivalent PATS VoIP; PATS VoIP nomadic and innovative services; non-PATS ECS VoIP Netherlands OPTA No explicit classification of VoIP, although some broadband voice services have been found to be within the defined market for ‘access to the public telephony network at fixed locations’. OPTA has decided that regulation of KPN’s retail VoIP tariffs is justified in order to protect operators using unbundled loops The classification of VoIP services shows different regulatory approaches (2)

  5. Country Regulator Classification of VoIP Norway NPT Three types of VoIP service: 1: VoIP offerings that are not any-to-any enabled, i.e. have no interconnection to traditional telephony networks; 2: VoIP offerings that are partially any-to-any enabled (one-way interconnection only); 3: VoIP offerings that are fully any-to-any enabled. Number 3 is classified as PATS if publicly available. NPT has still to decide whether types 1 and 2 are subject to existing legislation Poland UKE VoIP is not currently classified or regulated but at least some services are likely to be classed as PATS in forthcoming legislation Russia Minsvyaz VoIP is currently classified as a data-transmission service Spain CMT All VoIP services are classified as ECS Sweden PTS VoIP services are considered as telephony services under certain conditions and regulated accordingly UK Ofcom The regulator recognizes that the application of existing legislation to VoIP services is unclear and is currently reviewing the situation after a public consultation. It has proposed a flexible definition of PATS and has thus far favoured intervention on specific practical issues The classification of VoIP services shows different regulatory approaches (3)

  6. to ensure that consumers are aware ofboth the benefits and limitations of the particular VoIP services like : lack of number portability services lack of access to directory services lack of calls to emergency services Key regulatory challenges(1)

  7. to ensure the most important factors for VoIP providers: allocation of new numbering ranges for VoIP services ability to port existing numbers interconnectionissues Key regulatory challenges(2)

  8. Country Separate numbering range for VoIP Geographic numbers for VoIP Use of geographic numbers for nomadic services Austria Yes Yes No Czech Republic Yes No N/a Denmark Yes No N/a France Yes Yes Under review Germany Yes Yes No Hungary No Yes No Regulators' stances on numbering ranges for VoIP in major European countries (Source: Analysys Research, 2006) (1)

  9. Country Separate numbering range for VoIP Geographic numbers for VoIP Use of geographic numbers for nomadic services Italy No Yes No (a new range is proposed for these services) Netherlands Yes Yes No Norway Yes Yes No Poland Open to operators only No N/a Russia No No N/a Spain Yes Yes No Sweden Yes Yes No UK Yes Yes Yes Regulators' stances on numbering ranges for VoIP in major European countries (Source: Analysys Research, 2006) (2)

  10. Regulatory status of VoIP in some EU countries in 2006 11 countries with separate numbering range for VoiP Regualtions mostly in terms of retail relevant markets for calls 3 – 6 Additional separate market for VoiP services based on broadband access in Germany VoiP service is planned to be analysed together with naked DSL service in UK

  11. Impact of VoIP services on competition in telecoms markets Retail fixed-line VoIP services already pose a threat to incumbents’ fixed telephony revenues Substitution of fixed telephony Growing number of users - forecasts New opportunities created for VoIP over BWA

  12. Substitution of fixed telephony Source: TeleGeography Inc. 2006, PriMetrica Inc.

  13. Revenue from international calls mld USD USD 62 0,7 Revenue (in mld USD) 0,63 60 Price for a minute (USD) 0,6 0,58 58 0,51 0,5 56 0,44 0,4 0,39 54 0,35 0,32 52 0,3 50 0,2 48 0,1 46 44 0 1998 1999 2000 2001 2002 2003 2004

  14. Prices for VoIP calls (to mobile numbers) – Poland

  15. Prices of VoIP calls (to fixed numbers) – Poland

  16. Most of providers do not charge their clients with one off fee and monthly subscriber’s fee Certain providers assign free off charge PSTN number to their subscribers Polish providers keep similar level of prices for calls to fixed network - average price is approx. 0,1 PLN ( less than 0,1 euro) Differences are bigger when it comes to provision of calls to mobile networks – average price is between 0,61- 1,09 PLN (up to 0,25 euro) Cost of VoIP services in Poland

  17. Number of users – forecast (broadbrandtrends.com) 180 000 160 000 140 000 120 000 Subscribers (thousands) 100 000 80 000 60 000 40 000 20 000 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 1 264 4 977 11 787 23 820 43 612 66 162 94 209 123 341 161 242 VoIP Optimistic 1 264 4 977 11 787 21 552 38 212 57 451 80 589 104 221 134 258 VoIP Intermidiate 1 264 4 977 11 787 17 398 30 701 46 320 63 988 80 895 102 308 VoIP Pessimistic VoIP Optimistic VoIP Intermidiate VoIP Pessimistic

  18. Number of users – forecast(IDATE) mln 300 18% 16% 250 14% 200 12% 10% 150 8% 100 6% 4% 50 2% 0 0% 2005 2006 2007 2008 2009 2010 2011 VoIP users Share of VoIP users in the number of all users of main lines

  19. Number of users – forecast for Poland 20 000 100 18 000 90 16 000 80 14 000 70 12 000 60 Residental customers(td) 10 000 50 Non - Residental customers (td) 8 000 40 6 000 30 Residental customers [td] 4 000 20 Non - Residental customers [td] 2 000 10 0 0 2006 2007 2008 2008 2010 2011 2012 2013 2014 2015

  20. VOIP OVER BWA COULD BE AN ATTRACTIVE SERVICE FOR NEW-ENTRANT OPERATORS Bigger impact: New fixed operators, ISPs, WISPs and VoIP providers. VoIP services will significantly enhance the business case for BWA system deployment by these players. Less impact: Mobile operators are expected to deploy cellular technologies, rather than alternatives, and not to use BWA systems to compete directly with fixed DSL/cable services for Internet access. New competition from BWA service providers (e.g. WiMAX) is expected to have a limited effect on mobile operators’ voice revenues. Less impact: Incumbent fixed operators are expected to deploy fixed broadband (e.g. DSL) solutions and only to consider the use of BWA for rural areas. New competition from BWA service providers (e.g. WiMAX) is expected to have limited effect on fixed voice revenues.

  21. Thank you for your attention Monika Podplońska V-ce Director of Retail Telecommunications Market Department/UKE e-mail: M.Podplonska@uke.gov.pl Telephone: +48225349231

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