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Case Study - Poland - Broadband Market in Poland - Reasons for the State Aid and the Scope of Public Intervention
 
Reasons for the State Aid and the Scope of Public Intervention
 

During the last decades Internet has became one of the most important digital media. Common and fast access to the Internet is no more a luxury but the every day working tool. Because of that the broadband penetration level is recently on of the most important indicator of the information society and the telecommunication is one of the most important factor concerning the level of the society development. It is known that the world goal for upcoming years is to provide fast roll-out of the next generation networks (NGNs). All the goals and trends mentioned above are also very visible in Poland. From the Polish perspective quick roll-out of NGNs is one of the most desired actions which need to take place.

The development of the fiber optic has a significant meaning for the future of Poland because it will demonstrate its strength in terms of competition and economy. Because the economic situation is not stable and the income is not easy to foresee private investors are not optimistic about starting the new investments. However, It is also important to remember that the infrastructure is not only about the income but as a long term investment necessity for the country.

The telecommunication authorities shall not treat the telecommunication infrastructure as only in the interest of private investors but also take some of the responsibilities. It concerns not only the financial part but the most important to provide an appropriate regulatory framework for the investors.

Taking a Stock

Before creation of new regulations in Poland the first task was trying to define what in the Polish situation the broadband access to the Internet means in fact and what kind of technologies are available to provide it.

We came into a conclusion that the broadband access to the Internet means the normal connection which prize is not dependent from the time of use and parameters larger than the normal dial-up ( transfer larger than 144 kbps in both directions (up link and down link of communication) and is performed usually through one of the basic technologies:

  1. Telephone lines (xDSL)
    The biggest advantage of the xDSL is the possibility of the use of the existing telecommunication infrastructure ( set of the copper lines) at the end part of the connection (to the client/user), which is consided as the most expensive part of the investment. Taking into consideration large penetration of the telephone service, usually the investment needed for the start-up of the xDSL lines is limited to installation in (the telephone exchange) and ensure the proper speed transfer in the backbone network. The disadvantage of this solution is the limited transfer which decreases with the distance from joint network ( exchange or dispatch point). In the practical approach if it comes to the ADSL (most popular xDSL technology), it is rather uncommon to have the offers over 10 Mbps and in the rural areas the significant distances prevent from using this technology.

  2. Cable TV infrastructure
    The similar situation appears when it comes to the cable TV infrastructure. The advantage is that they do not need additional investments as xDSL. The disadvantage of this solution is that it has a limited transfer, close to the ADSL.

  3. Fiber optic lines
    The problem of the limited transfer and the loss of the parameters with the distance is not know in the technologies based on the fiber optics (optic cables). The disadvantage include the high costs of building completely new infrastructure, which not differ from the costs of building the telecommunication connections or cable tv. The total costs of the FTTx investment differ from implementation options mentioned below:

    1. FTTH (Fibre To The Home) – is the most important solution, each separate apartment is equipted with the fiber optical cable.
    2. FTTB (Fibre To The Building) –  the fiber optic is provided to the common part of the bouilding and further distributed by the other infrastructure (for example LAN).
    3. FTTC (Fibre To The Cabinet) – the fiber optic is provided to the point on the street and than through the telephone cables ( VDSL technology) distributed into the buildings.

    The most expensive implementation option is FTTH but the new regulations were established for the purpose of this technology since the other technologies including radio lines have certain limitations, (like the coverage area, location and placement of the base station).  The high cost is not because of the fiber optical cable price which not much differ from the cost of the telephone cable but because of the higher construction costs than FTTB or FFTC (the construction costs are about 80% of all costs). On the other hand the infrastructure which has practically unlimited possibilities could be build. It is very common to think that the answer to the demand on enlarging data transfer are the wireless networks. Even with the development of the other technologies (like WIMAX) it is very important to remember that they can not substitute optical connections which offer much better quality parameters and practically unlimited possibilities. The wireless solutions should be considered as a temporary or supporting answer ( for example to the mobile devices). The passing by of the high costs of the cable networks on the rural areas can be performed by installing the fiber optic cables above the ground level.

  4. In Poland also: radio lines, which characteristic is a limited compatibility of the network.

 

 

The main purpose of the regulatory changes in the in the investment process in Poland were established for the purpose of the introduction of the NGNs. The next very important technological change, visible through the development of the fiber optic cable is the transfer of all services ( telephony or TV) and the network management to the IP protocol. This solution together with the access networks of the enlarger parameters is covered by the next generation networks (NGN), which allowed very broad scope of services unproportional to the former uses solutions- possibilities.

NGN means not only faster view of the WWW or e-mail downloads but mostly the wider scope of the services - for example HD TV, HD video conferences or the remote disc compatibility. What is very crucial, NGN also safeguard the quality parameters (QoS), thank to which the scope of tele-working not only through the call center but also for example tele- medicine and e-administration services.

Thank to the NGN it will became every day situation that people perform home working from the place situated far away from the work place. NGN will make it possible the constant   HD video communication which will significantly change the way of education and teaching possibilities. Remote schooling will be not limited to one-way video communication or internet pages but the everyday teaching will be the fully interactive classes, convent from different places in the world at the some time. The use in the fiber optic networks which include the newly develop technologies which are just being developed like communication with the 3D – which needs the very large date transfer.

Another aspect worth to mention is the possibility of using modern telecommunication infrastructure for the implementation of several improvements in the field of public administration, (for example through the possibility of communication with the Administration only by Internet).

It is very important to remember that many countries not only made a positive decision concerning the NGNs but also have already provided the necessary infrastructure. It is sure that those countries which are in delay will find themselves behind the competitive market. It may be possible that in 5 years the necessary element of the placement of the investment would be not only the road system or the labour force but also the telecommunication development or the optic networks.

 

 

Global Situation

The broadband access to the Internet is absolute standard in the most developed countries. In the EU countries the level of penetration in 2009  was at the average level of 23,9% per 100 inhabitants.

Even with the xDSL being the most popular technologies ( according to OECD 60% in 2008) and the cable tv (28%) access through the fiber optic cable (9%) became more and more significant. In 2008 in the OECD countries there was already 23 mln accesses to the Internet performed in the FTTx technology. It is important to underline that the growth in this technology was the most dynamic in comparison to other broadband access (39,6 growth in comparison to 13,6, chart 1).

The leading countries in the development of NGN are Japan and South Korea where the use of the FTTx technologies in 2008 was at the level of 45% and 38% (chart 1). It is important to underline that Europe is behind in this category. The positive examples include Sweden where through the fiber optic cable 19% of the Internet accesses is performed and Denmark with the level of 9%. The countries with the biggest economic growth like France, United Kingdom or Germany use the FTTx technology.

In total numbers the above mentioned Asian countries have a leading position and in comparison to all OECD countries 82% of access came from those countries. The next leading country is USA with over 2,5 mln accesses in the FTTx technology ( which is next 11%).

It can be predicted, that the trend of enlargement of access in the FTTx technology will remain. Japan and South Korea will keep on developing of the their networks and substituting the copper lines with fiber optic cables. The European countries like Poland, France, Netherlands and United Kingdom are building the proper infrastructure as well.

Chart  1: Broadband internet access by different technologies (%, OECD)

 

Chart 2: FTTx/LAN technologies as percentage of the total broadband access (%, OECD)

Polish Case

In 2009 the number of people using the broadband access to the Internet in Poland was increasing. But the level of penetration was still below the OECD average and unfortunately there  was a threat that the distance will be deeper every year (Chart 3).

The weak position of the broadband Internet access in Poland is the consequence of a few factors ( Chart 3), which can be categorized into 3 groups:

  1. Low knowledge about computers and Internet. Many people in Poland are not interested in having a computer and Internet access at home. This is due the insufficient computer education in the country.

  2. Too high costs for the consumer. The price of the Internet access has decreased in the resent years and is comparable to other EU countries or even lower. But taking into consideration the income range the price still remains too high to be affordable for all.

  3. Existence of the „white spots”. There are many areas in Poland (even around urban areas) where due to the technological problems it is not possible to have broadband access to the Internet.

Chart 3: The main reasons of not having the Internet access in the households according to Polish Central Statistic Office 2008 (in %)

Furthermore, the speed of the transfer significantly differ from the European average and additionally the fix operators are not offering the real triple-play, which is considered already a global standard.

The alternative operators, which in 2008, had the 16,6% share in the DSL market, are offering their services mostly through BSA, and not through own infrastructure or LLU. In fact Poland have no infrastructural competition. The alternative operators has also lower investment potential and probably it would not change significantly very soon.

The cable TV providers are creating small infrastructural competition for the incumbent operator. They have the 30% share in the market of the broadband services. Mostly in the big agglomerations they win most of the consumers. Unfortunately their coverage is limited to the big and middle agglomerations. Furthermore the TV cable providers take the advantage of the fact that they provide exclusively the triple-play service and having in fact the significant position (the  cable TV market is not regulated in the way the fix telephony is), often need the purchase of the TV cable services.

In Poland the situation of the development of the fiber optic cables is even worse. Poland is far behind the most developed countries. In the FTTx technology only the test localizations exist (Warsaw and Lublin area). According to the Polish regulator UKE at least 17 operators have the FTTx lines but none of them has started the implementation of the construction of the networks in this matter. So there were only limited chances to change this situation in the upcoming years.

The total comparison of the development of the broadband Internet access in the mentioned 3 technologies ( xDSL, Cable TV, FTTx) turns out to be not optimistic. The indicators of total penetration of services is increasing but at the slower level than in other OECD countries. Poland is also behind the newest development in the fiber optical cables. In conclusion, the level of the broadband access to the Internet in Poland is unfortunately still not satisfactory, as in comparison to the other countries and it is estimated at the level of 12,8 % per 100 inhabitants.

 

Justification and the scope of public intervention in Poland

The Internet access situation in Poland in the broadband access technologies to the Internet (and mostly fiber optic network), described above was rather not optimistic. This technology existed only as minor or test solutions. The situation was not easy to change because:

  1. None of the fix operators proposed any development plan concerning the NGN networks with any specific time frame.

  2. Local self-governments showed no interest in the development of the fiber optic networks.

  3. There was no infrastructural competition from the operator of the cable TV in the scale of the whole country.

  4. Public utility enterprises ( like energy companies) were not interested in the development of the access technologies supported by their infrastructure.

  5. The society was too poor to participate in the financing of the optical networks roll-out.

Taking the above into consideration to proper actions were introduced to improve the existing situation.

The actions included:

  • the elimination of the investment barriers;

  • clearly defining the regulations concerning the access to the fiber optic and the technical sewage system;

  • the intervention must stimulate the investment.

It was very clear that Polish budget will not be able to financially support the investments like
it was done in the Asia region ( it would not also be in line with the EU Law). This did not stop the Polish Government from introducing the regulatory solution through the act on supporting the development of telecommunications services and networks. However, the government could take the steps encouraging the local self governments to promote the development of the fiber optic networks and also to promote education of the citizens which should produce the demand for the services which need a large transfer.

It was considered that Poland needed integrated policy concerning NGNs. And it was identified that the state intervention shall include:

  1. Establishment of the clear regulatory policy concerning high transfers access.
    In this field one of good examples was the obligation to make the BSA  on fiber optic cables accessible. The operators shall share the cables ( additional fee shall apply)- but with as close connectivity with the client as possible- not at the level of the exchange or regional loop.

  2. Establishment of the regulations concerning the access to the actual teletechnical infrastructure. The operators shall have the obligation to share the access to the teletechnical infrastructure – additional fee shall apply.

  3. Encouraging the self local governments to engage into the development of the telecommunication infrastructure. It is not only to raise the potential awareness but also to provide the framework for this activity.

  4. Assigning the budgetary funds towards the support for the development of the next generation telecommunication infrastructure. The total cost shall be not less than the income from the future frequency auctions.

  5. The obligation of providing the new apartments with the fiber optic infrastructure.

  6. Elimination of the barriers concerning the Access to the buildings.

  7. Ensuring the right of way. The local self governments can not refuse the access to the right of way to develop the fiber optic infrastructure.

  8. Ensuring the possibility of using the existing public and communal infrastructure. Operators shall have the right to use the existing public infrastructure (It should be possible to install the fiber optic lines in savage (other than telecommunication) or above the ground.

  9. Providing the coordinated approach while the street constructions or other infrastructure are performed. Those works shall be notified to the telecommunication regulator to ensure that the operators could at the same time place the fiber optic infrastructure.

  10. Setting the technical standards. The newly placed infrastructure must be compatible with existing once.

  11. Use of the European Funds. It should be underlined that the use of EU funds for the telecommunication sector shall be enlarged (for example for the identification and elimination of the white spots).

It is important to notice that apart from point 4 those changes do not cause the necessity of direct spending from the budgetary funds but only shall eliminate the investment barriers.

 

ADSL- Asynchronous Digital Subscriber Line

BSA - Bitstream Access

DSL - Digital Subscriber Line

FTTB - Fibre To The Building

FTTC - Fibre To The Cabinet

FTTH - Fibre To The Home

LLU - Local Loop Unbundling

NGA - Next Generation Access

NGN - Next Generation Network

OECD - Organization for Economic Co-operation and Development

VDSL - Very High Speed DSL

WiMAX - Worldwide Interoperability for Microwave Access

 

 
Republic of Poland
 
  • International Telecommunication Union Member State since 1921
  • Member State of the European Union since 2004
  • Population of 38 million people and area of 312,000 km2
  • Located in Central Europe with borders with Belarus, Czech Republic, Germany, Lithuania, Slovak Republic, Russia and Ukraine
  • Over 500 km of Baltic Sea coast
 

 

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Updated : 2011-06-29