Overview (April 2000)

Telecommunications
Television and Radio Broadcasting

Telecommunications

Market players
The major players in the telecommunications market include the following:

• Matáv, the fixed-line telephony operator (which legally succeeded the Hungarian Postal State Company in the communications field in 1993), which has a monopoly in domestic and international long-distance telephony until the end of 2001;
  
  
• the local fixed line telephone operators (LTOs), which have a monopoly in their service areas until various dates in 2002 (the service is provided by Matáv in 36 of the 54 primary areas).
  
  
• Westel 900 GSM (since 1994), Pannon GSM (since 1994) and Vodafone (since 1999), the digital cellular GSM 900/1800 mobile operators, which collectively have a monopoly over the 900/1800 band until the end of 2002;
  
  
• Westel 450, the only analogue cellular mobile operator; and
  
  
• alternative communications service providers (eg, PanTel, NovaCom and GTS). Subject to meeting the requisite licensing criteria, these service providers will be entitled to enter the public fixed line and public mobile communications market once the above monopolies expire.

Legal framework
In Hungary, telecommunications services are governed by the following legislation:

• the Communications Act (Act LXXII of 1992);
  
  
• the Frequencies Act (Act LXII of 1993);
  
  
• the Concessions Act (Act XVI of 1991); and
  
  
• several government and ministerial decrees that relate to, for example, (i) the role and powers of the Communications Authority, (ii) interconnection, (iii) subscribers' tariffs, (iv) subscribers' agreements and (v) numbering.

Authorities

The minister of transport, communications and water management
Pursuant to the Communications Act, the minister of transport, communications and water management is responsible for communications in Hungary. The minister's duties involve establishing the legal environment for communications in Hungary by way of decrees. This includes establishing the conditions of implementation, commissioning, modification and termination of telecommunications structures, as well as technical conditions. The minister also specifies the criteria for approval of terminal models connected directly or indirectly to public telecommunications networks, and the procedure for the certification of conformity of communication equipment.

Communications authority
The Communications Authority supervises the communications sector in Hungary. The Communications Authority is a central government agency, with local branches that serve as local authorities, under the control of the minister of transport, communications and water management. The organization, responsibilities and competence of the Communications Authority is established by Government Decree 232/1997 (XII 12). This decree gives the Communications Authority the following duties:

• routinely inspecting the communications service providers' fulfillment of the obligations assumed in their respective concession contracts;
  
  
• inspecting the fulfillment of the provisions of licences issued to the service providers by the Communications Authority;
  
  
• ensuring that communications services conform to laws, regulations and national standards, and implementing regulations; and
  
  
• coordinating and ensuring quality control within the communications sector in Hungary, based on data obtained from the communications service providers. To assist the Communications Authority in its quality control procedures, the communications service providers must provide certain data related to telecommunications. With this information, the Communications Authority can prepare the technical requirements for concession tenders, plan networks nationally and determine the terms and conditions of interconnection contracts.

Concession regime
Certain activities may only be performed by concession companies, which enter into concession contracts with the Ministry of Transport, Communications and Water Management to provide the service, or by companies with majority state ownership established to provide the service. These activities include provision of the following services:

• public fixed-line telephone services;
  
  
• public mobile cellular telephone services;
  
  
• nationwide public paging services; and
  
  
• nationwide and regional distribution and broadcast of public service radio and television programmes, with the exception of specialized programmes.

Concession tender procedure
Before inviting concession tenders for telecommunications services, the minister must first publish a tender announcement in two national and one regional newspapers. Professional organizations in the industry and local governments affected may submit written comments on the announcement within 30 days of the announcement's publication. The minister must issue the tender invitation within 60 days of the tender announcement's publication.

The tender invitation must include the main terms and conditions of the public concession service that will be provided by the concession winner. The bids must be submitted within 60 days of the invitation's publication. Submitted bids are examined by an independent evaluation committee which is established by the minister. At the end of the concession tendering process, the minister enters into a concession contract with the concession company established by the winner of the tender. Concession contracts are concluded for a definite term (usually 15 to 20 years). The term may be extended once by half of its original duration, without an invitation to a new tender.

Non-concession services
The provision of public communications services that do not require concessions are subject to a service licence, which is granted by the Communications Authority. These services are included in the List of Services issued by the Central Statistical Office of Hungary. Licences for national services are issued by the Budapest Communications Authority, and for regional services by the relevant regional communications authority, at the applicant's request. The Communications Authority must grant a service licence if the request submitted by the applicant meets all formal and substantial requirements. In order to receive a service licence the applicant must:

• supply the name and address of the applicant;
  
  
• identify the geographical area covered by the service and the time schedule of roll-out;
  
  
• refer to the applicable Hungarian technical requirements, European directives and standards;
  
  
• submit the terms and conditions under which customers will use the service;
  
  
• submit its deed of foundation, in which the service to be provided is listed;
  
  
• prove that it has no outstanding payment obligations towards the state budget, including tax payment obligations;
  
  
• prove that it has not filed for bankruptcy or is not undergoing liquidation proceedings;
  
  
• provide the Communications Authority with all required government permits or quality assurance certificates; and
  
  
• have at least one employee with a professional degree in the area of the given service.

If the applicant intends to provide a service using frequency and there are more applicants within the same frequency range, the Communications Authority will (i) hold an auction, if the amount of frequencies is insufficient to fulfill each application, or (ii) hold a lottery, if the amount of frequencies is sufficient but there are quality differences within the frequency range to be distributed among the applicants.

The service licence may be granted for a period of 10 years. It may be extended for another five years upon the request of the service provider, as long as this is submitted at least 60 days before the expiry of the initial period.

Communications equipment
Under Hungarian law, all telecommunications equipment imported into, distributed and/or installed in the Republic of Hungary must be licensed by the Communications Authority. Pursuant to a 1998 amendment of the relevant laws, all radio communications equipment which is EU compatible (ie, which meets the Comité Europeen de Normalisation, European Committee for Electrotechnical Standardization or European Telecommunications Standards Institute standards and has the Conformite Europeenne mark), is not subject to licensing procedures, as long as the distributor or importer submits a declaration regarding this compatibility. Nevertheless, the authority is entitled to examine the compatibility of this equipment at any time and may impose sanctions on the manufacturer, importer or distributor if the equipment is in violation of applicable standards.

Interconnection
Under Hungarian law public telecommunications operators (including service providers operating either under concession or a service licence) must enter into an interconnection agreement with any third party willing to be connected to the service operator's public network, as long as the purpose of interconnection is to provide public services. Government Decree 158/1993 (XI 11) outlines the substantial requirements for interconnection requests and the principal terms and conditions of interconnection agreements. The principal conditions are as follows:

• The request for interconnection must contain all relevant technical and traffic data necessary to evaluate the request.

• The deadline for negotiating an interconnection agreement is (i) three months after receipt of the request for interconnection for public local fixed-line telephony services, and (ii) six months after receipt of the request for interconnection for any other services. If the parties fail to enter into an interconnection agreement within the specified time frame, then the Communications Authority may pass an official resolution which determines the terms and conditions of interconnection between the parties at request of the party requesting interconnection.
  
  
• The interconnection contracts must be concluded in written form, and must define (i) the purpose of interconnection, (ii) the location of the network service access point, and (iii) the conditions of traffic and technical cooperation between the interconnected communications networks. The cooperation between the interconnected operators includes the mutual provision of information and the disclosure of technical data in order to allow (i) proper interconnection of the parties, (ii) the system of measuring relating to the operation, (iii) the coordination of maintenance systems, and (iv) the elimination of malfunction resulting from the interruption of services.
  
  
• Either party may terminate the interconnection agreement upon three months' notice, if the other party (i) fails to utilize standard network components and other equipment permitting proper interconnection in accordance with the applicable laws, (ii) breaches its obligation to cooperate with the other party, (iii) does not have the necessary licences and permits for the operation, or (iv) fails to pay the applicable fees under the interconnection agreement.

Numbering
Ministerial Decree 7/1999 (II19) KHVM sets up the numbering plan in accordance with the Communications Act. The numbering plan contains the numbering structure used in relation to the following:

• public fixed-line communications;
  
  
• numbers used nationwide;
  
  
• special numbers;
  
  
• area codes; and
  
  
• area codes for public mobile communications.

The numbers to be used by public fixed-line telephone services, public mobile telephone services and nationwide public paging services are distributed by the Communications Authority at the request of a public service provider. The Communications Authority sets out only the first digit for nationwide public paging services. Directly dialable special numbers are authorized by the Communications Authority upon request of the public service provider. All numbering regulations are intended to conform with the European Agreement of 1991, as well as with EC Directive 91/396.

Subscribers' agreements
Ministerial Decree 29/1997 (XII 20) KHVM sets out the terms and conditions of the public service providers' subscribers' agreements, in order to protect subscribers' interests and the quality of the service. The decree establishes the following requirements:

• The services must reach a minimum quality in accordance with specifications set forth in the decree;
  
  
• There must be no interruption to the services;
  
  
• The service provider must establish proper channels to deal with the subscribers' comments on the quality of the service;
  
  
• The service provider must repair any defects within a time frame specified in the terms and conditions for provision of the service; and
  
  
• The service provider must pay adequate compensation to the subscriber for service interruption. Upon default, the service provider must pay penalties of one third of the monthly subscription fee per day.

The decree provides that the subscriber may turn to the Communications Authority if the service provider fails to fulfill its obligations under the decree or the terms and conditions for the provision of the service. In these cases, the Communications Authority may issue a resolution on the issue, which is binding for the service provider.

Pricing
According to the Pricing Act (Act LXXXVII of 1990), fixed-line telephony services are subject to price regulation. The minister is entitled to determine the highest and the lowest tariffs applicable for these services. Other concession services (eg, public mobile communications services) and non-concession communications services are not subject to price regulation.

The Pricing Act provides that the price for the service must be determined in a manner that covers the expenditures of an efficient service operator and includes a normal profit, taking into consideration any subsidies and any withdrawals applied for a given service. The fixed price must be determined and made public in the form of a decree. In case of Matáv and the LTOs, the formula for calculating the tariffs is defined in the concession contracts. This calculation results in a range of tariffs, which forms the basis for further negotiations between the minister and the telephone operator. Tariff negotiations are important for both parties, due to the tariff level's effect on the profitability of the operator and the annual inflation rate. The fixed-pricing strategy for fixed-line public communications services is also expected to be liberalized by 2001-2002.

Competition issues
The general rules relating to competition in the Hungarian communications sector is regulated by the Competition Act (Act LVII of 1996). However, both the Communications Act and the concession contracts contain further regulations on competition issues. For example, the concession contracts of the public mobile operators prohibit a Hungarian mobile operator or a major shareholder of a Hungarian mobile operator from having direct or indirect shareholding in another Hungarian mobile operator.

Liberalization
Since 1990, Hungary's EU accession has always been kept in mind. Therefore, an attempt has been made to keep Hungarian communications laws and regulations compliant with EU standards, as required by the European Agreement concluded in 1991 between the European Union and Hungary. However, as the date of EU accession draws closer, existing laws and regulations will need to be adjusted to reflect the latest EU standards and new laws must be passed.

The Ministry of Transport, Communications and Water Management is currently drafting a new Communications Act, which will introduce a fully liberalized communications market in Hungary. The new Communications Act will cover all areas of communications, including communications services, frequency regulation and postal services, which are currently regulated by separate laws. The existing concession regime is expected to be replaced by a liberalized licensing regime, compliant with the EU's Licensing Directive.

It is still uncertain as to how the new Communications Act will affect the provision of communications services, including cable television services and internet-related services. Until then, the opportunity for new entrants is based on the previously noted regulations.

The market
The major Hungarian public service broadcasters are:

• Magyar Televízió (Hungarian Television), with two channels;
  
  
• Duna Televízió (Duna Television), with one channel; and
  
  
• Magyar Rádió (Hungarian Radio), with three channels.

Since 1998, two major commercial television broadcasters have operated nationwide in Hungary. RTL Klub, which is owned by CLT-UFA, Pearson Asia Pacific Ltd and Grundy International Holdings, and TV2, which is owned by Scandinavian Broadcasting System and MTM Communications Rt. Both of these use the national terrestrial broadcasting network.

Legislative framework
Broadcasting is governed by the following legislation:

• Act I of 1996 on Radio and Television Broadcasting;
  
  
• Act LXII of 1993 on Frequency Management;
  
  
• Act LVII of 1996 on the Prohibition of Unfair Market Practices; and
  
  
• various ministerial decrees which regulate certain provisions of the Radio and Television Broadcasting Act.

The Radio and Television Broadcasting Act governs both commercial and public service broadcasts, but it is unclear if it governs broadcasting via the internet.

Regulatory authority
The National Radio and Television Board is an independent legal entity supervised by the Hungarian Parliament and is the primary regulatory authority with jurisdiction over broadcasting. Its main duties include the following:

• to enforce the content restrictions as set forth in the Media Act;
  
  
• to break down broadcasting monopolies and prevent the formation of new ones;
  
  
• to enforce shareholding and other restrictions related to existing broadcasters; and
  
  
• to license and register new broadcasters.

Restrictions
The following restrictions apply to all broadcasters:

• Broadcasting rights may not be transferred or assigned;
  
  
• A telecommunications service provider may not acquire broadcasting rights in the same area in which it provides telecommunications services until December 31 2002;
  
  
• A broadcaster can provide a maximum of (i) one national broadcasting service, two regional and four local broadcasting services; or (ii) twelve local broadcasting services. However, this restriction does not apply to specialized broadcasting, where 80% of the programme is devoted to a single topic (eg, music, science or sport);

• A non-profit broadcaster may acquire more broadcasting rights on a non-profit basis only; and
  
  
• If a broadcaster is operating as a joint stock company, then shares must be registered shares.

There are strict cross-ownership restrictions between broadcasters and other aspects of the media.

Licensing and registration
To operate in Hungary, the proposed broadcaster must be licensed by or registered with the National Radio and Television Board, depending on programme distribution.

Licensing
A broadcaster that distributes its programmes by means of a terrestrial system or government-owned satellite must be licensed by the board, which grants licences only on the completion of a public tender process.

The tender process includes an obligation on the winner to provide news broadcasts on a regular basis. It must include a minimum amount of the broadcasting fee, below which the broadcasting rights cannot be awarded to any party (other than a non-profit oriented broadcaster).

The bid must include:

• a declaration relating to any direct/indirect shareholding in Hungarian news publishing and broadcasting entities or entities that have applied for a broadcasting licence;
  
  
• basic data relating to the proposed broadcast, such as type and method of broadcast and planned programme structure;
  
  
• technical data in the case of satellite broadcasting;
  
  
• the broadcaster's business plan; and
  
  
• any other data required.

Bidders must pay a tender fee of 5% of the minimum published annual broadcasting fee. The tender process usually takes about four to six months, depending on the type of service to be provided.

In accordance with the Frequency Management Act, the Communications Authority assigns a frequency to the selected broadcaster for the term of the licence. A television licence is valid for up to 10 years, and a radio licence for up to seven years. This may be extended once at the request of the broadcaster, for a period of five years, without issuing a new tender.

Registration
A broadcaster that distributes its programming exclusively by means of a broadcast transfer system (eg, cable) or a non-government satellite must register with the board at least 30 days before any broadcasting activities.

Broadcast transferring activities
Telecommunications companies that provide broadcast transfer services are regulated by the board in accordance with certain provisions of the Radio and Television Broadcasting Act and are subject to the provisions of the Telecommunications Act (Act LXXII of 1992) and related decrees.

The reception area of one broadcast transfer network cannot exceed one-sixth of the population of Hungary (calculated on the basis of 'homes passed'). Strict cross-ownership restrictions apply between broadcast transfer entities and other aspects of the media, including newspapers and publishers.

For further information on the above topic please contact István Réczicza or Balázs Fazekas by telephone (+36 1 488 5200) or by fax (+36 1 488 5299) or by e-mail ([email protected] or[email protected]).