Mobile phone tariffs among the highest in Europe - EC
In its annual progress report on the implementation of the Single EU Communication Market for 2008, the European Commission complained about the mobile telephony sector’s prices in Malta remaining among the highest among all EU Member States, with the price of a minute of voice communication in Malta cost EUR 0.27, as against an EU average of 0.14 EUR (see Table 1).
“While consumers’ choice of mobile operators increased with the entry of two mobile virtual network operators, and further market entry is expected shortly, prices and penetration show no significant change so far,” the European Commission said in its report.
On the regulatory side, the European Commission noted how Malta “finally” closed the first round of market analysis in 2008, with the deregulation of the markets for wholesale broadband access, and for wholesale broadcasting services.
Malta consumer division ‘lacking expertise’
The EC report was not satisfied with the performance of the Consumer and Competition Division (CCD), which regulated competition in Malta “Operators generally found the Competition Authority to be not active enough and lacking expertise, and they agreed on the necessity to clearly delineate responsibilities in order to avoid parallel investigations.
However, they were divided on the solution they would best like to see implemented, “with some preferring a transfer of powers to the MCA, and others being of the opinion that ex post and ex ante regulation should remain in different hands,” the EC report insisted.
Mobile cashes in four times more than fixed
Total turnover for the telecommunications sector as of December 2007 was €248.74 million. The fixed market generated €46 million, while total revenue from the mobile market stood at € 140.90 million, almost four times as much. Operators invested €38 million in 2007, with mobile operators investing over €17 million, almost half of that.
Despite new players, prices remain high
“Generally the Maltese market with several ubiquitous networks in various technologies and with full national coverage is unique, which also poses regulatory challenges in creating a level playing field,” the Commission explained in its report.
The electronic communications marketplace in 2008 consisted of three large players – GO, Vodafone Malta and Melita – capable of offering triple or quadruple play, and a number of smaller players, including an alternative fixed operator, two mobile network operators (MVNOs) and a number of ISPs.
The state of development of the various markets concerned was, however, quite diverse.
On the fixed market, the cable operator “rapidly extended its market share to reach 18 per cent in terms of subscribers and 24.4 per cent in terms of originated traffic in October 2008.
“It was expected that the entry of two MVNOs” – BayTel and RedTouchFone – “and the launch of 3G mobile services by the cable operator, would lead to some price competition and a higher penetration rate,” the EC said in its report.
However, “the competitive situation in the broadband market did not improve as alternative service providers were struggling to maintain their market share and were unable to launch wireless broadband services.
“The only operator that had launched such services at the time of drafting this report had managed to attract only a small market share of some 3 per cent,” the EC lamented in its report, which was compiled prior to Euroweb and Nextweb’s cessation of operations in February this year, transferring their subscriber base to GO.
Over three per cent of the Maltese population were currently subscribed to bundled offers, with the majority choosing triple play.
“It was clear that the bundling of various services on a triple or quadruple-play basis offered by the large vertically and horizontally integrated operators could not be replicated by smaller players,” the Commission’s report highlighted.
Since number portability became available for mobile subscribers as of 1 April 2006, 45,600 mobile numbers had been ported up until October 2008, which represented about 11.8 per cent of total mobile numbers. Porting a mobile number in Malta took 1 day, less than the EU average of 8.5 days.
The EC report showed that broadband penetration continued to grow rapidly (by 41.4 per cent in the reporting period) to reach 23.9 per cent in January 2009, above the EU average of 22.9 per cent for the first time (see Table 2).
“This was a result of competitively priced, lower-tier connections, as well as a government initiative, launched in March, which allowed consumers to benefit from a free, one-year subscription,” the Commission said in its report.
Maltese consumers also benefited from further improvements in the price-speed ratio last year, “with the vast majority (94.5 per cent) of subscribers enjoying speeds of 2 Mbps or higher.
Malta also witnessed “an encouraging take-up” of mobile broadband connections, with a penetration rate of 10 per cent – below the EU average of 13 per cent – “however the penetration of dedicated mobile data service cards stood at 1.2 per cent”.
Two mobile networks – GO and Vodafone – were offering 3.5G HSDPA nationwide coverage, and a third network operator – Melita Mobile – had been on track to start offering it commercially in February 2009.
According to the EC report, “retail broadband lines in technologies other than DSL had a market share of 53.2 per cent in January 2009, overtaking DSL for the first time.
“The fixed incumbent’s market share, which in January 2009 stood at 38.3 per cent, continued to decrease steadily.
“However, the incumbent further strengthened its share of DSL lines, to reach 82 per cent in January 2009, as the market share of the non-incumbent ISPs was rapidly shrinking,” the EC said in its report.
“ISPs were being squeezed out of the market and due to a lack of wholesale alternatives, were considering exiting the market altogether,” the Commission’s report warned.
The mobile operator that launched wireless broadband services as of July 2007 (Vodafone) “managed to attract almost 3,000 subscribers and held approximately 3 per cent of the market.
“However, due to technology limitations, it was not able to replicate the higher speeds available on DSL and cable,” the EC report claimed.
On 17 November 2008, the MCA adopted final measures on the wholesale broadband access market. “It found competition on the market, following the entry of the wireless broadband access operator, and improvements in the price-quality ratio.
All obligations, previously imposed on the fixed incumbent (GO) and the cable operator (Melita) which were “not enforced – were removed. The Commission, in its comments, invited the Maltese NRA to closely monitor the market and to re-analyse it should competitive conditions change.
A number of ISPs expressed concern about the removal of wholesale access obligations. “They expected to find themselves in a very weak bargaining position vis-à-vis the fixed incumbent once obligations were to be removed in July, despite the fact that their current contract was automatically renewable every year,”
“According to the ISPs, the current contract did not allow them to freely structure its offering, since it was limited to a resale service. Moreover, they could not find a wholesale alternative, since no wholesale broadband access products were available on cable,” the EC highlighted in its report.
The effective roll-out of the three broadband wireless access (BWA) networks in the 3400 –3600 MHz frequency band, licensed in 2005, remained an issue. The two licence holders who, at the time of drafting this report, had not launched services, were paying sanction fees due to missed roll-out licence requirements.
While one (the fixed incumbent) had achieved 93 per cent coverage as of October 2008 and was on track to meet its roll-out obligations, following some early problems with the mobile standard, “the other (a consortium of ISPs) had not managed to obtain the necessary finance,” the EC explained in its report.
The 2G mobile licences will expire in 2010. Operators would like to have more information as to whether these will be extended to cater for remaining 2G users, or whether they will be ‘re-farmed’ for 3G services. The MCA is planning to publish a consultation paper on the subject in early 2009.
Competition “became keener” in the Maltese mobile market following the entry of two mobile virtual network operators (MVNOs) in October 2008. “The two MVNOs were trying to attract niche groups, for instance TV viewers, or to appeal to young users with original marketing,” the EC explained in its report.
The situation was set “to improve further” with the launch of a third 3G network operator – Melita Mobile – in February 2009.
“It is expected that this will, in the future, have a positive effect on prices which are still among the highest in the EU,” the EC said in its report. Penetration grew substantially last year “but, at 94.5 per cent, remained below the EU average of 118.9 per cent.
The two mobile network operators until last year, with 100 per cent 3G coverage, “each held approximately half of the market, with market shares of 52.99 per cent and 47.01 per cent”.
While consumers could benefit from “slight decreases in retail tariffs especially for on-net minutes, they found it very difficult to compare offers and choose among the various plans and bundles,” the EC warned.
“A minute of mobile voice traffic costs €0.27 in Malta, compared to € 0.14 on average in the EU,” the Commission’s report explained. “Given the high tariffs, the average revenue per user, at €367.89, is, unsurprisingly, amongst the highest in Europe,” it insisted.
Most subscriptions - 87 per cent - continued to be pre-paid.
The imposition of obligations on mobile networks, to provide mandatory access in order to facilitate entry of Mobile Virtual Network Operators (MVNOs), resulted in a Mobile Virtual Network Enabler (MVNE) eventually concluding a commercial agreement with a mobile network operator (Vodafone Malta), and led to the first of two service providers launching operations in October.
Mobile termination rates at the end of 2008 stood at € 0.096, following a decline in January 2008 in accordance with the MCA’s glide path of December 2005.
As from this year, following the analysis of the mobile call termination market, “a new remedy will be established in the mobile termination market, which will follow the extent of the reduction observed in the rest of the EU”.
Maltese subscribers were concerned about still being charged more for their international mobile calls than roaming customers. “One Maltese mobile operator was still charging on a ‘per minute’ basis, while the other had switched to per second billing from the second minute onwards,” the EC said in its report.
While fixed-to-mobile substitution continued on the traffic level, with a further decrease of some 87 million fixed minutes between 2006 and 2007, Malta held the second highest share of fixed traffic in Europe (at 70 per cent of all traffic), and even noted a further increase in fixed subscriptions.
“This can be attributed, to some extent, to the differences in fixed and mobile tariffs, as well as double subscriptions with both the fixed incumbent and the cable operator,” the EC explained in its report.
The cable operator, who entered the fixed market in 2006, was “rapidly gaining market share and, in October 2008, held 18 per cent of the market in terms of subscribers, and 27 per cent in terms of originated traffic”.
It was competing with the still strong fixed incumbent at 62.2 per cent, and two other nationwide service providers. In July 2008, 19.8 per cent of subscribers were using one of two alternative providers for fixed voice services.
The alternative operator, which had been operating on the basis of carrier pre-selection since 2006, “started providing services on the basis of the wholesale line rental offer of the incumbent in the first half of 2008.
“It was concerned about low margins and the fact that it was not able to replicate certain offers of the incumbent, due to a low customer base. The MCA for its part was reviewing all retail offers of the incumbent, and testing for margin squeeze,” the report highlighted.
On 5 December 2008, the MCA launched national consultations on its analysis of the fixed retail calls markets. The review proposed to define separate markets for national and international calls without distinguishing between residential and non-residential calls.
The authority conducted the three-criteria test and determined that regulation was not warranted. It proposed to withdraw existing obligations on the incumbent, 30 days after adoption.
Throughout 2008, the MCA was actively attempting to improve wholesale access to the fixed market by a number of regulatory decisions and as part of dispute settlements.
Fixed number portability was also being taken up, and increased to 6, 607 from 1,488 a year ago. Portability takes 5 days for fixed, which is below the respective EU average of 7.5 days.
According to MCA figures, 81 per cent of Maltese households had access to some form of pay service to receive their TV broadcasts in 2007. “While the cable operator held a majority market share of some 86 per cent, split between its digital and analogue services, the digital terrestrial television (DTTV) operator, a subsidiary of the fixed incumbent, held some 14 per cent of the pay market,” the EC said in its report.
Some 16 per cent of households had access to satellite TV reception, while interestingly there were no registered satellite television operators in Malta. Analogue terrestrial transmission was carried out by the four national broadcasters themselves.
The basic TV packages are inexpensive, and often offered in bundling. In addition, set-top boxes were being offered for free in exchange for longer-term contracts.
In October 2008, the MCA notified its analysis of the wholesale broadcasting transmission services market. “It did not find evidence of ineffective competition, and proposed to withdraw all existing obligations on the cable operator. The Commission issued no comments and final measures were adopted in November,” the European Commission said in its report.
The MCA has been collaborating with the Broadcasting Authority in drawing up an implementation strategy for broadcasts classified as meeting general interest objectives, in the context of the transition to digital terrestrial broadcasting scheduled for 2010.
“While the situation will change following switch-over, the must-carry obligations, which include all four national channels, are currently being applied to DTTV operators, thereby raising the issue of compatibility with the regulatory framework,” the EC said in its report.
“According to the Universal Service Directive, imposition of must-carry should be limited to cases where a certain network is used by a significant number of end-users as their principal means of receiving radio and television broadcasting,” the Commission warned.