UkraineUkraine

National Commission for Communications National Commission for Communications Regulation of UkraineRegulation of Ukraine ((NCCRNCCR))

State and ChangesState and Changes

Vladimir PashchukMember of the NCCR

7-8 October 2010 Vienna, Austria

Main figures of the industry activity Main figures of the industry activity (1)(1)

� Services for the amount of € 4.2 billion were provid ed to market participants, the amount of € 1.64 billion of which - for services for population

� Expenditures of ordinary Ukrainian family made up n early € 90 per year, where 50% - for mobile communication

25% - for fixed communication10% - data transfer services and Internet accessless than 3% - postal services

� Th amount of capital investment for industry develop ment made up € 750 million

� Mobile penetration – 119,8%

� Fixed communication penetration – 28,4%

� 1773 economic entities were included to the Registe r of operators, providers of telecommunications in 2009, where 1104 entities are operators and 669 entities are providers

� Computer communication was the most dynamic sector (in 2009 revenues increased by 36 % and made up € 300 million )

� Internet users made up more than 15.3 million in nu mber

� Broadband access users made up 2.1 million in numbe r that is 11.5 % of the total number of families in Ukraine

� Terrestrial digital broadcasting of DVB-T standard w ith a package of 10 TV programmes started in 2009

� Cable TV users made up more than 3.4 million in num ber or 18.7 % of Ukrainian families

� Total number of domains (of the second and the thir d level) in .UA zone amounted to 488,334 thousand

Main figures of the industry activityMain figures of the industry activity (2)(2)

LEGISLATIVE FRAMEWORK

• Law “On Telecommunications”

• Law “On the Radio Frequency Resource of Ukraine”

• Law “On Postal Communication”

• Decrees of the President of Ukraine “On the National Commission for Communications Regulation of Ukraine”and “On the NCCR Composition”

• Other Decrees of the President and the Cabinet of Ministers of Ukraine

Management in communications industry

- manages communications undertakings

- implements state policy in the area of communications

- manages use of radio frequency spectrum

- elaborates legislative and regulatory acts

- predicts telecommunications networks and services development

Cabinet of MinistersCabinet of Ministers

Ministry of Transport and CommunicationsMinistry of Transport and Communications NCCRNCCR

-- licensing and registration of the licensing and registration of the activityactivity

-- radio frequency resource allocationradio frequency resource allocation-- numbering resource allocationnumbering resource allocation-- tariff regulationtariff regulation

-- operators interaction regulationoperators interaction regulation

-- prepre --trail disputes resolutiontrail disputes resolution

-- services quality controlservices quality control

Number of licenses grantedNumber of licenses granted

Dynamics of revenues volumes for communications servic es provisiDynamics of revenues volumes for communications servic es provisi onon , , € billionbillion

2

3,04

3,62

4,19

2006 2007 2008 2009

4,21

3

Revenues for telecommunications services provision,€ Million

2008 2009 Growth rate

Total, where: 3,93 3,90

Mobile communication 2,69 2,59

Fixed communication 0,86 0,80

Broadband access 0,22 0,31

Broadcasting 0,13 0,16

Wire broadcasting 0,013 0,017

Telegraphic communication 0,005 0,005

99,2 %

96,2 %

93,2 %

125,6 %

139,2 %

132,6 %

103,6 %

Fixed telephone network,Fixed telephone network,million unitsmillion units

4

Year Total Urban network Rural network

2006 11,5 9,9 1,6

2007 12,1 10,5 1,6

2008 12,5 10,8 1,7

2009 12,4 10,7 1,7

47

Dynamics of mobile subscribers number

Density of fixed and mobile networks (100 inhabitan ts)

6

5

Dynamics of investment to communications industry,Dynamics of investment to communications industry,€ billionbillion

Monopolists in the market of fixed and mobile call terminationMonopolists in the market of fixed and mobile call termination

•• In 2010 the Antimonopoly Committee of Ukraine defin ed In 2010 the Antimonopoly Committee of Ukraine defin ed 8 telecommunications operators to be monopolists in the market o8 telecommunications operators to be monopolists in the market o f f call termination in their own networkscall termination in their own networks

•• According to the Law According to the Law ““ On TelecommunicationsOn Telecommunications ”” the NCCR sets rates the NCCR sets rates for traffic termination for monopolistsfor traffic termination for monopolists

Average Fixed Termination Tariff per country (peak time, at 01/10/2009)(local level)

0,14 0,17

0,34

0,34 0,36 0,39

0,40 0,

48

0,48 0,51 0,54

0,54

0,56 0,

60 0,62 0,

66 0,71 0,

76 0,78 0,

82

0,83

0,84

0,86

1,18

1,56

2,27

0,00

0,50

1,00

1,50

2,00

2,50

Ukrain

e

UKCyp

rus

Sweden

Italy

Slovenia

Franc

ePola

ndDenm

ark

Hungar

yPor

tuga

lGer

man

yIre

land

Spain

Belgium

Bulgar

iaNeth

erlan

dsLu

xem

bour

gEsto

niaAus

tria

Malt

aRomania

Slovak R

ep.

Czech

Rep

Lithu

aniaFinl

and

€-cents minute

Average Mobile Termination Tariff per country, €-ce nts minute

2,0

3,9

4,8 5,

0

5,6

5,6

6,0

6,0 6,

3 6,3 6,4 6,5

6,9

7,2

7,2 7,

4

7,9 8,

2 8,2

8,6 8,7 8,8 8,8 9,

0

9,4

9,4 9,

6 9,6 9,

9

10,4

11,1 11

,4

13,5

3,1

4,2

4,9

4,3

3,1

5,3

3,5

4,2

5,2

6,2

5,2

4,8

5,5

6,5

7,1

6,2

6,8

4,5

7,4

8,4 8,

7 8,8 9,

0

8,2

7,3

9,7

8,7

7,3

7,9

7,6

10,7

9,1

1,8

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

Cypru

sSwed

enUkr

aineFin

land

Polan

dTurk

eyRom

ania

Austri

aLi

thua

niaHun

gary

Spain

Slove

niaFra

nce UK

Portu

gal

Norway

Gre

ece

Ger

man

yIc

eland

Denm

ark

Belgiu

mEst

onia

Latvi

a

Luxe

mbo

urg

Italy

Nether

land

sIre

land

Malt

a

Slova

k Rep

.Cro

atia

Czech

Rep

Switzer

land

Bulga

ria

01.01.2009

01.01.2010

21,0

310

214

15,411,13,3

15,523,9

35,7

103

160

127135

191

0,01

0,17

0,13

0,160,15

0,10

0,09

0

50

100

150

200

250

300

350

Ukraine Poland Hungary Germany Italy UK France

0,00

0,02

0,04

0,06

0,08

0,10

0,12

0,14

0,16

0,18ARPU, Euro

MOU, minute

Average cost per minute, Euro

ARPU, MOU, cost per minuteARPU, MOU, cost per minute

Dynamics of changes of mutual settlement ratesDynamics of changes of mutual settlement rates

0,14

2,1

2,9

4,8

0,14

2,1

2,9

4,2

0,19

1,7-2,4

3,4-3,9

0

1

2

3

4

5

6

Local termination on the f ixed network Zonal termination on the f ixed network (business hours)

Intercity termination on the f ixed network (business hours)

Mobile Termination (regulated by the NCCR since 01.07.2010)

2007-2009

I semester 2010

IІ semester 2010

-29,

3%

-12,

5%

-13,

1%

+35,

7%

€-cents minute

Interconnection rates regulationInterconnection rates regulation

To date there is a possibility to set settlement ra tes only on the basis of Benchmarking model

Challenges :

- Telecommunications operators do not have separate accounting of revenues and expenditures according to the types of services ( there is no possibility of using FAC (Ful lallocation cost) and LRIC (Long-Run Incremental Cost) models)

- There is no unite methodic for cost calculation fo r telecommunications networks access services

- Imperfect legislative and regulatory framework for regulation ofinterconnection procedures

1. The list of markets of telecommunications services in Ukraine, defined for analysis for purpose of preliminar y regulation

2. The procedure for access to electronic communications ductwork

3. The procedure for mutual settlements between telecommunications operators for public telecommunications networks access services

Improvement of legislative and regulatory framework in the area Improvement of legislative and regulatory framework in the area of of communications in 2009communications in 2009

9

Elaboration of the draft laws on amending the Law o f Ukraine “On Telecommunications”:

1. introduction of registration basis of the activit y in the area of telecommunications (Directive 2002/20/E С on the authorisation of electronic communications networks and services)

2. ensuring independence of the National Regulatory Authority in the area of telecommunications (Directive 2002/21/E С on a common regulatory framework for electronic communications networks an d services)

3. ensuring access to universal telecommunications s ervices (Directive 2002/22/E С on universal services)

4. definition and analysis of telecommunications mar kets for the purpose of their regulation (Directive 2002/21/E С on a common regulatory framework for electronic communications networks and services)

Activities on adaptation of the telecommunications legislationto the EU legislation in 2010-2011

Activities on adaptation of the telecommunications legislationto the EU legislation in 2010

1. introduction of registration basis of the activi ty in the area of telecommunications

Most types of activities need individual licenses :- fixed communication (local, national, international ) - fixed communication with wireless access- mobile communication- technical maintenance and exploitation of telecomm unications networks- leasing of local electronic communications circuit s

The draft law foreseesThe draft law foresees ::- transition to registration basis of exercising act ivity in the area of telecommunications- removal of licensing of activity in the area of t elecommunications, except national and international fixed communications

In future it is planned to refuse from licensing of all types of activity in the area of telecommunications

StatusStatus : : -- central executive authority-- appointed and subordinated to the Government-- acts on the basis of the Statute, approved by the Cabinet

of Ministers of Ukraine-- financed from the state budget

ChallengesChallenges : : Lack of powers on:– definition of telecommunications services markets, their

analysis, defining SMP operators and imposing regul atory obligations them

– disputes resolution between operators and consumers

SolutionsSolutions :: Amending the Law Amending the Law ““ On TelecommunicationsOn Telecommunications ””– functional independence of the NCCR– mandating of required powers

Activities on adaptation of the telecommunications legislationto the EU legislation in 2010

2. ensuring independence of the National Regulatory Authority in the area of telecommunications (NCCR)

Activities on adaptation of the telecommunications legislationto the EU legislation in 2010

3. ensuring access to universal telecommunications services

STATUS Connecting consumer equipment to PSTN (universal ac cess) is included into universal service according to the Ukrainian legislation:

– fixed local telephone services (except service s with wireless access)

– emergency service and directory inquiry– payphones services

Challenges There are no mechanisms for recovery costs for univ ersal services provision in Ukraine

Solutions The draft law foresees introduction of the principle of technological neutrality– with use of wire or wirele ss access technologies

Activities on adaptation of the telecommunications legislationto the EU legislation in 2010

4. definition and analysis of telecommunications ma rkets for the purpose of their regulation

StatusStatus–– 17 markets of telecommunications services are defin ed (wholesale17 markets of telecommunications services are defin ed (wholesale and and

retail)retail)–– accounting mechanism for telecommunications operato rs is accounting mechanism for telecommunications operato rs is

elaboratedelaborated

ChallengesChallenges NCCR powers and mechanisms for exercising analysis of telecommunications markets for the purpose of their regulation are not defined by the Ukrainian legisla tion

SolutionsSolutions The draft law which foreseesThe draft law which foresees ::-- introduction of mechanisms for telecommunications s ervices

markets analysis-- defining telecommunications SMP operators-- imposing regulatory obligations on SMP operators

Thank you for attentionThank you for attention

Vladimir Vladimir PashchukPashchuk

Member of the NCCRMember of the NCCR+380 44 278 97 95+380 44 278 97 95+380 50 330 70 02+380 50 330 70 02pvlp@nkrz.gov.uapvlp@nkrz.gov.ua