Latvias electronic communications sector: accelerated development and barriers

1
Latvias electronic communications sector
accelerated development and barriers
Prof. Edvins Karnitis Public Utilities Commission
of Latvia Commissioner Baltic Sea Region
Communications Forum 20 September 2004
2
Electronic communications market preemptive
growth
Share of electronic communi-cations sector in GDP
Growth rates
3
Development of national economy and fixed
telecommunication network Correlation in Latvias
districts
4
Normative environment 2004 zoo

• Strategic baselines for electronic communications
  sector 2004 2008 (CM, March 2004)
• do not cover long-term developmental strategy
• tactic activities vs strategic issues
• Electronic communications law (CM, April 2004)
• not fully compatible with baselines
• should be approved by Saeima, more than 200
  proposals, sometimes directly conflicting
• lack of secondary legislation, indetermination on
  validity of previous regulations
• uncertainty on transition period

Premature implementation of EU 2002 regulatory
framework (16 months after market
liberalization) Market has not been prepared for
EU framework 2002
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Institutional environment imperfection

• fragmented regulation (MoT, PUC, TSI) quality,
  transparency, predictability, openness is it
  achievable?
• involvement Competition Board and Consumer
  Rights Protection Centre
• institutional separation of informatics and
  telecommunications
• reorganization of Telecommunications State
  Inspection
• more activities taken from regulator (quality of
  services, numbering)
• baselines and law reorganization in public
  agency
• submitted proposal in CM commercial undertaking
  (privatization?)

6
Competition and prices
Regulated prices, August 2004 (2000 100)
Cable TV Telia MultiCom Baltkom 15-20 price
increase
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Interconnection price regulation still in process

• Lattelekoms end users tariffs approved
  (0,5 tLTK tINT)
• interconnection tariffs movement to cost-based
  tariffs, normative problems

Interconnection tariffs 2004 (2003 100)
8
Scarce resources rational and effective usage

• numbering partial shortfall
• 8-digit numbering
• who will say YES? (CM, MoT, PUC)
• number portability fix-fix (zone- or
  countrywide?), mob-mob, data base (TSI)
• payment
• frequencies
• tendering
• payment for frequencies
• secondary frequency market
• national frequency plan reservation for
  determined purposes

What will be usage of collected fees?
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Market share of Lattelekom in fixed
telecommunications (2003) the first year after
market liberalization
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Market share of the incumbent in first year after
liberalization (local and national
calls) Comparison with the most successful EU15
countries
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Penetration of main lines () trend
12
Lattelekom financial tendencies
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Lattelekom unanswered questions

• government (the major owner) has not defined its
  basic interest
• high profit and dividends
• general availability of advanced services for
  minimum price
• tariff rebalansing vs high profitability
• darkness in the courts decision is the Umbrella
  Agreement valid today?
• network modernisation 30 (15?) Mln LVL in 3
  years
• too long term
• increased tariffs?
• universal service?

14
The second fixed network is it topic for
national strategy?

• baselines common use of infrastructure (VITA,
  Latvijas Dzelzcel, Latvenergo, State Radio and
  TV Centre), competition with Lattelekom
• Lattelekom will not be privatized government
  will compete with himself
• Lattelekom will be privatized government once
  more is becoming businessman
• investments 15 Mln LVL to decrease tariffs
  owner can decrease them today
• who will invest public budget?
• cost allocation problems for shareholders

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Penetration of mobiles () trend
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Mobile market growing profitability
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Mobile communications hot topics

• third GSM full scale operator what is the
  strategic goal?
• UMTS when it will be implemented
• CDMA
• national roaming
• subsidized mobile handsets
• crossubsidies
• destruction of markets

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Internet penetration and development of country
(EU25)
Integrated regulation vs governance
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Internet development

• competition increases
• capacity of international connection increases
• prices decrease
• penetration increases, but zoo instead of
  statistics
• more broadband connections

Internet users (thousands)
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Broadband penetration rate ( to population)