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

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

The classification of VoIP services shows different regulatory approaches (1-3)

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 (2)

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 (3)

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

Key regulatory challenges (1)

to ensure that consumers are aware of both 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 (2)

to ensure the most important factors for VoIP providers: allocation of new numbering ranges for VoIP services

ability to port existing numbers

interconnection issues

Regulators' stances on numbering ranges for VoIP in major European countries (Source: Analysys

Research, 2006) (1)

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) (2)

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

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 – 6Additional 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

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

Substitution of fixed telephony 1999 2000 2001 2002 2003 2004 2005 2006*

VoIP calls (mln minut)

1 655 5 954 10 147 18 045 24 519 30 121 52 768 75 746

PSTN calls (mln minut)

108 000 132 027 146 095 155 165 166 615 199 000 219 232 237 254

Total (mln minut)

109 655 137 981 156 242 173 210 191 134 229 121 272 000 313 000

VoIP calls share 1,5% 4,3% 6,5% 10,4% 12,8% 13,1% 19,4% 24,2%

Source: TeleGeography Inc. 2006, PriMetrica Inc.

Revenue from international calls

0,320,35

0,39

0,44

0,51

0,58

0,63

44

46

48

50

52

54

56

58

60

62

1998 1999 2000 2001 2002 2003 2004

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

Revenue (in mld USD)

Price for a minute (USD)

mld USD USD

Prices for VoIP calls (to mobile numbers) – Poland

0,0

0,2

0,4

0,6

0,8

1,0

1,2

1,4

1,6

national mobile France mobile Germany mobile UK mobile

Prices of VoIP calls (to fixed numbers) – Poland

0

0,2

0,4

0,6

0,8

1

1,2

gru-01 gru-02 gru-03 12.04 06.05 10.05 12.06

France fixed UK fixed national fixed Germany fixed USA

Cost of VoIP services in Poland

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)

Number of users – forecast (broadbrandtrends.com)

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

160 000

180 000

Su

bsc

rib

ers

(th

ou

san

ds)

VoIP Optimistic VoIP Intermidiate VoIP Pessimistic

VoIP Optimistic 1 264 4 977 11 787 23 820 43 612 66 162 94 209 123 341 161 242VoIP Intermidiate 1 264 4 977 11 787 21 552 38 212 57 451 80 589 104 221 134 258VoIP Pessimistic 1 264 4 977 11 787 17 398 30 701 46 320 63 988 80 895 102 308

2002 2003 2004 2005 2006 2007 2008 2009 2010

Number of users – forecast (IDATE)

0

50

100

150

200

250

300

2005 2006 2007 2008 2009 2010 2011

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

VoIP users Share of VoIP users in the number of all users of main lines

mln

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

20 000

2006 2007 2008 2008 2010 2011 2012 2013 2014 2015

Res

iden

tal

cus

tom

ers

(td

)

0

10

20

30

40

50

60

70

80

90

100

No

n - R

eside

ntal cu

stom

ers (td)

Residental customers [td]

Non - Residental customers [td]

Number of users – forecast for Poland

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.

Thank you for your attention

Monika PodplońskaV-ce Director of Retail Telecommunications Market Department/UKEe-mail: M.Podplonska@uke.gov.plTelephone: +48225349231