SMP Regulation
Infrastructure-based Competition
Licensing Regime
Rules for LTOs
Price Regulation
Cable Services
Regulatory Authority
The new Communications Act (Act 40 of 2001) was recently adopted by the Hungarian Parliament and will take effect on December 23 2001. Its aim is to open up the telecommunications market by the end of this year. The act, in accordance with current EU directives and regulations, provides the framework for the liberalized telecommunications market in Hungary for the next decade. It regulates telecommunications services, frequency management, cable services and postal services in one unified act, and it also authorizes the relevant ministries to enact further detailed rules with respect to approximately 20 regulatory issues.
The new regulation follows the EU concept of asymmetric regulation by applying different rules for new entrants to the market and for the ex-monopolists. The act uses the concept of significant market power (SMP) in accordance with current EU legislation. Service providers that enjoy SMP will be obliged to:
- cooperate with other players in the market so as to provide access to their networks;
- interconnect their networks with those of other service providers;
- prepare a reference interconnection offer; and
- convey their local loop, in whole or in part, to other service providers under the same technical, legal and economic terms.
In addition, SMP providers are now subject to a universal service obligation.
Infrastructure-based Competition
The act generally favours infrastructure-based competition rather than service-based competition, with an aim to accelerate network development in Hungary. However, recognizing that new entrants may not have the necessary resources to develop their own networks, the act prescribes the right of interconnection as a general rule and also as a special obligation for service providers that own or control a network.
A new (EU-compatible) licensing regime has been introduced, the most important provision of which is that it removes almost all administrative barriers for entering the market. New service providers need only notify the relevant authority that they intend to commence provision of communications services and are permitted to start providing the service after 30 days from the date of such notification. Licences will only be required for construction of telecommunications infrastructure and for utilization of scarce resources (ie, frequencies and identifiers).
Under the act, local telecommunications operators (LTOs) are subject to special rules. In Hungary, under the former concession regime, local telephony was provided by various operators in so-called 'primer districts' (ie, regions of Hungary), where the LTOs enjoyed monopolist rights. However, the LTOs were not allowed to enter into the market of national and international voice telephony (due to MATÁV's monopoly with respect to national and international voice telephony services). As a result, the local loop is currently characterized by a number of LTOs in the primer districts. (MATÁV, in addition to its role as the national and international voice service provider, has been the local telephone operator in several primer districts as well.) The act states that the LTOs will be required to convey any local loop, in whole or in part, for each service provider so requesting. However, the LTOs are not required to open the local loop to service providers that have significant market power and enjoy considerable advantages compared to the LTOs on a national level, or if the conveyance is technically not feasible (ie, if there is a risk that the integrity of the network cannot be maintained). Although this regulation is intended to avoid 'cherry picking' by telecommunications service providers, it is unclear how it will be applied in practice.
With respect to price regulation, the act follows the principle that no price regulation is needed as long as there is effective competition in the market. Therefore, under the act, only universal services and SMP providers are subject to price regulation. The price regulation is based on the long-run incremental costs model price cap regulation, and is cost based (ie, the service providers are required to calculate their prices in a cost-oriented way). The provision of dial-up internet access services will also be subject to price regulation.
The provisions of the act concerning cable television services are still subject to dispute. Under the current text of the act, MATÁV, as the former monopoly telecommunications operator, is excluded from the cable television market until the end of 2003. In addition, the act preserved a hotly debated restriction introduced by the 1996 Media Act, according to which any single cable service provider is only allowed to provide cable television (so-called 'programme distribution') services for a maximum of one-sixth of the population of Hungary.
The Hungarian Communications Authority (HIF) has been designated as the entity responsible for market regulation. The Communication Decision Board, as a part of HIF, is responsible for various tasks, including identifying service providers with SMP, mediating between telecommunications operators and deciding legal disputes regarding cooperation of telecommunications operators. In matters involving competition law issues, the Competition Office remains the exclusive regulatory body.
For further information on this topic please contact Balázs Fazekas, István Réczicza or Szabolcs Koppányi at Réczicza Law Firm White & Case LLP by telephone (+36 1 488 5200) or by fax (+36 1 488 5299) or by e-mail ([email protected], [email protected] or [email protected]).
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