Discussions between workshop participants evolved around three main ideas: the emergence of competition in hard line telephony starting January 1, 2003, legislative framework and the type of institutions that should monitor the domain of telecommunications, and licences for the UMTS frequencies in Romania.
As regards hard line telephony, all specialists considered that the main rivals of RomTelecom in the wake of voice transmission services liberalisation would be the current cable operators.
Radu Moldovan admits that these companies will be the first to enter the market and compete against RomTelecom in the case of hard line telephony.
"Their advantage is that they already have a developed infrastructure. RomTelecom will lose customers, but there are domains where we can offset this loss," Moldovan specified.
In his opinion, the other competitors on the fixed telephony market will be the current mobile phone operators MobilRom and Mobifon, as well as other companies such as SNCFR, CONEL, Romgaz, which are currently investing in the development of the optical fibre infrastructure.
Nevertheless, representatives of the two mobile phone operators failed to provide a clear answer on whether they would also supply fixed telephony services starting 2003.
"I cannot specify the priorities now: UMTS licences or hard line telephony. I personally believe that for the interval 2002-2003 the issue of the UMTS licences is raised too early for Romania, but perspectives show that investments in this system are better than those poured in hard line telephony," Mobifon representative Marian Velicu maintained.
The advantage of cable operators is that they benefit from a cable infrastructure allowing them access in over 3.2 million households in Romania and therefore they have direct access to potential customers for fixed telephony services.
Aurel Costea with Astral-Kappa firm thinks that this advantage will be manifest particularly within the rural environment, where many villages have installed TV cable, but no telephone lines.
Dan Garlasu, general manager of Cisco Systems Romania, draws however attention to the fact that investments that have to be made for the cable network to be able to secure high quality services for voice transmission range between 350 and 500 million dollars at a national level.
One of the conclusions was that, at least during the first stage, there would be no competition between players on the market for household subscribers.
The former minister of Communications, Sorin Pantis, thinks that the battle on the phone market will be fought in the domain of international calls, where RomTelecom will lose monopoly in 2003, as well as in the case of large customers.
"Competitors will fight over the creme of 500 large users, which are currently securing the largest part of RomTelecom revenues," Sorin Pantis added.
All participants showed that one cannot speak about initiating the liberalisation of telecommunications services before a national regulation authority is set up to the end of establishing the legislative network in the domain. At the same time, this authority will also have to play an arbitrage role in the case of possible disputes between telecommunication services suppliers.
Sergiu Iliescu, chairman of the National Agency for Communications and IT (ANCI), specified that during the second half of year 2001 ANCI would be turned into a independent regulation authority and to this end a partnership will be sealed with the World Bank.
Telecommunications operators think that the main problem that will have to be tackled by this independent regulating agency is the issue of interconnecting tariffs.
The interconnection tax is at present levied to mobile phone operators and will start being levied, in 2003, to the future hard line telephony operators as well.
This tax is levied by the current national operator for any carrier to be able to use the RomTelecom network.
The issue of interconnection tariffs was discussed in Western countries as well when telephony services were liberalised, because high prices would harm the competitiveness of new operators.
They asked that the value of these taxes should be based only on effective costs and should not be established arbitrarily, using the monopoly position of the national operator.
"So far, interconnecting tariffs for mobile operators have been settled by RomTelecom, on more or less commercial grounds. I think that the directive of the European Union asking for the interconnection tax to take into account costs should be considered," specified Gabriel Dogaru, MobilRom representative.
UMTS licences, another point of dispute
Projected to take place in March 2001, the granting of licences for the UMTS frequencies was a highly debated subject during the workshop.
The UMTS system, which will allow the third mobile phone generation to reach a tenfold higher data traffic than at present, has proved a genuine goldmine for some Western countries, but for others results have been below expectations.
Germany has managed to derive from the sale of UMTS licences about six billion dollars. On the other hand, Spain, Belgium or Holland have only managed to cash in sums amounting to hundreds or even tens of million dollars.
In the case of Romania, two possibilities in granting these licences have been identified: the tender and the "beauty pageant". According to the tender model, the Romanian state aims to derive the highest price offered by a participant for an UMTS licence.
The "beauty pageant" establishes a minimal subscription price for companies wanting to obtain these licences and the winner is to be selected following an analysis taking into consideration several factors: the international position of the firm, its investment plans, etc.
Sorin Pantis thinks that no high sums can be derived from the sale of UMTS licences in the case of Romania.
"When Romania gets to register a value of GDP three times higher than at present, the sale of UMTS licences could bring significant gains," stated Sorin Pantis.
Under these circumstances, Pantis considers that adopting the system of direct tender might make the winning company impose extremely high tariffs for users to the end of recouping poured investments.
ANCI admits there is a long way to far away
Within the domain of telecommunications, Romania is currently coping with issues other countries such as Ireland, Greece, Portugal and Spain had to face during the '80s and the '90s when they were trying to follow the pace of their more advanced neighbours. The experience of these countries shows that no powerful competition can be instated in the absence of a stable and independent regulating organism.
The National Communications Regulating Agency will be founded by the middle of next year, as an independent, apolitical and impartial organism, and by 2002, at the latest, regulations on frequency spectrum and phone numbering will be issued, said Sergiu Iliescu, chairman of the National Agency for Communications and IT (ANCI).
Dan Cristian Georgescu, chairman of the National Wireless Broadcasting Company thinks however that regulations in this domain are way behind. "The Government will have to take into account this aspect we have rather abandoned. It is very important to build up the regulations network and arbitrage between the future competitors," Georgescu said.
Iliescu said that a series of services have already been totally or partially liberalised and in the near future the last restrictions imposed in the domain of cablevision will be lifted, followed by the opening of some post office services. Fixed telephony is the only domain where the state monopoly will be maintained until 2003.
The growth of the sector should be sustained during the following decade so that the consolidation of networks and services should be made possible, securing thus basic activities in telecommunications and taking into account challenges and opportunities generated by the development of e-commerce and Internet.
The current institutional network of the telecommunications market has the following structure:
- ANCI, which plays the role of the domain's policy and strategy drafter, as well as the role of regulating authority in communications, being able to delegate any competence to the General Inspectorate of Communications (IGC), excepting licence issuing;
- IGC, a specialised institution fulfilling several regulation functions: managing and monitoring the use of the radio-electric range with governmental attribution, authorising telecommunications equipment, as well as independent networks using a radio-electric transmission support, monitoring and controlling the telecommunications market, etc.
- The Superior Wireless Commission, a consultative inter-ministerial organism for the elaboration and implementation of the radio-electric range administration policy;
- The telecommunications Consultative Council, a consultative organism for the elaboration of telecommunications policy and regulation, made up of representatives of the telecommunications industry (authorities, operators, manufacturers, etc.)
So far, under a legislative aspect, relative progress has been registered in implementing the Community Acquis. Thus, several European Commission directives referring to the GSM band, competition on the telecommunications services market, access code for international phone calls, etc. have been implemented.
Mobifon is not afraid of liberalisation
The moment when the Romanian telecommunications market is liberalised will have a special characteristic: many customers of mobile telephony carriers will not have access to hard line telephony and it is little likely they will resort to this type of service afterwards, Marian Velicu, Mobifon representative, told the seminar "January 1, 2003, what will telecoms market liberalisation bring?" "The big fight between the new hard line operators will focus on attracting this category of subscribers," Velicu stated.
In his opinion, cable operators currently hold the best position that enables them to bring complex and complete services on the market. Over the next period, technology development will provide for new approaches to the way of accessing subscribers (by cable, optic fibre and radio), while part of the competition will even affect access networks.
According to Mobifon representative, the main issues hampering a speedier market liberalisation process are related to the huge interconnection tariff levied by RomTelecom and the limits of the current numbering system, which will shortly fail to meet demands.
"Let's not sit and wait for 2003 for making all necessary preparations in the field of regulations, otherwise the entire process will be delayed," Marian Velicu stated. He believes that the position held by the mobile telephony operators will not be menaced by liberalisation, as the high level of infrastructure development will allow them to remain on the market.
Velicu also maintains that an introduction of UMTS licences in the short term would be too soon for Romania, but, in the long term, they would hold obvious advantages over vocal telephony.
MobilRom is pondering hard line telephony
Mobile telephony will focus on services that can provide special facilities chiefly aimed at the business area, while hard line telephony will mainly consider commercial services for the largest clients, which will bring the highest volume of revenues, says MobilRom representative, Gabriel Dogaru.
It is quite difficult for a mobile telephony carrier to enter the domain of hard line telephony, but the temptation is big and MobilRom is looking into this possibility, Dogaru added.
He estimates that the penetration level of mobile telephony will reach 20% in Romania in 2003, as compared to the current 10%. This will overturn the ratio between fixed and mobile telephony users, favouring the latter.
"We believe that call tariffs would have been smaller if the GSM licence price had been lower," Gabriel Dogaru said, adding that the mobile telephony carrier paid 75 million dollars. Due to significant investments, the two leaders of the Romanian mobile telephony market, MobilRom and Mobifon, are currently posting a "deeply negative" cash-flow and this situation could last for two more years.
Speaking about ways to liberalise the market, tackled by the participants, Gabriel Dogaru mentioned the philosophy implemented in the United States, where AT&T monopoly was broken in several companies that will compete among themselves, beside private operators. On the other hand, Europeans chose to introduce a set of rules that state-owned carriers had to observe when private companies emerged, so as not to hinder the latter's development.
RomTelecom knows all about future competitors
RomTelecom does not deem the telecoms market liberalisation, on January 1, 203, as an apocalyptic moment, Radu Moldovan, representative of the national telecommunications carrier, told the seminar organised by Ziarul Financiar.
In his opinion, the comparison permanently drawn between the infrastructure and telecoms services in Romania, on one hand, and Western Europe, on the other, has several limits because, although we seem to be lagging behind, the real distance is not that big.
Romania is five years behind in the field of GSM telephony services, but the distance is double for the degree of digitalisation of hard line telephony networks. RomTelecom is not sitting back, waiting for liberalisation - the company already knows its future competitors, as well as their financial and technical capacities.
Among the future players on the liberalised telecoms market, that will also enter the hard line telephony system, will be the current mobile telephony carriers, cable operators and companies such as SNCFR, CONEL and ROMGAZ.
According to Moldovan, RomTelecom is not willing to cover the entire range of services on the telecoms market, being also aware that it could not do that. The company's strategy for liberalisation aims at good positioning on several main sectors, which should provide for a stable income flow.
RomTelecom representative says that the market's liberalisation should not be regarded as a panacea. As only 20% of the company's current clients secure 80% of revenues, liberalisation will bring better quality for services and lower tariffs only for some users.
Moldovan estimates that most subscribers will be facing substantial tariff increases levied for services that they are now using extensively and that are confined to a relatively low level for social reasons.
One suggestion submitted by specialists for Romtelecom sales strategy after liberalisation is called "the convergent service package."
This strategy stipulates that, once hard line telephony is installed, RomTelecom also provides mobile telephony services through Cosmorom, where the national carrier is the main shareholder.
The rules of the game
Commentary by Corina Vasile
In other words, representatives of companies in this field want what any businessman expects from Romanian authorities: the rules of the game must apply to everybody, without discriminations, and there should be a fair mediator.
The need to align these rules to standards applied in the entire world is greater though in telecommunications than in other fields. Because this is the most globalised - and the most globalising field, with an explosive development.
Because there are already international players on the market, because the Romanian market needs massive investments and, if they are to come, they will most likely come from "internationals."
Who have every reason to expect worldwide-accepted standards and rules. The claims of Romanian "originality" are therefore more harming than in any other industry. Both Government and Parliament need to understand how important these regulations are and to tackle them as soon as possible.
There are certain "philosophical" aspects, which stirred animosities even among the experts that attended the meeting organised by ZF.
For instance, if a politically-independent regulating authority has to be set up, or if it should be accompanied by a communications ministry with prerogatives of strategy and representation? Or whether licences for UMTS services have to be granted in a tender or in a "beauty pageant."
Unfortunately, such disputes are expected to acquire melodramatic aspects once debated by politicians and the decision-making process can be extremely long.
There are other regulations that, due to their financial implications for market players, cannot be correctly adopted unless there is an authority free from any political influences. This is the case for settling the interconnection tax.
All these have to be ready by January 1, 2003.
From the point of view of companies on the market, the moment itself is not very important, because they are already underway with their development plans. Anyway, the beginning of 2003 will mark the beginning of competition in the field of hard line telephony as well, as the other market components -very active in fact - are already totally or partially liberalised.
It is not hard to guess which RomTelecom's competitors will be after 2003. Cable televisions have several strong points: they are already present in consumers' houses, are undergoing a process of accelerated concentration (six companies are actually controlling almost the entire market) and they have a number of subscribers close to the level boasted by the national hard line telephony operator.
On the other hand, as stressed by experts in this field, it would take investments of hundreds of million dollars for these companies to be able to provide telephony services. And as they have acquired many subscribers just because the subscription is cheap, these investments, even if they are to be made, will be hard to redeem.
The national providers of public utilities (power, natural gas) and transportation companies (railways) are other potential competitors. Strong point: they have the infrastructure. Weakness: they do not have the experience of working with potential clients.
RomTelecom will continue to be a strong competitor, because it has the largest number of clients, inherited after many years of monopoly, because its has the soundest infrastructure and experience with clients (even though now, as any monopoly, it is not treating them with the greatest care).
The weakness? It will have to fight with the future competitors exactly on the segment of clients that is bringing it the greatest revenues, and it will be left with the unprofitable ones.
The company is though prepared to "counter" certain losses by new services, other than classical voice services. The mobile telephony service recently launched on the market (through Cosmorom) also contributes to the development of this package.
The two large mobile telephony carriers, Mobifon and MobilRom, which in three years attracted half the number of clients acquired by RomTelecom in several decades, are also holding a good position, so much the more as a significant shareholder, in the first case, and the main shareholder, in the second case, are highly-experienced international operators of hard line telephony.
It remains to be seen whether mobile telephony will continue the impressive development posted so far, situation in which these operators might choose to stay on "mobile," providing though more and more services, or will choose the mobile/hard line package.
Two tendencies are obvious: on one hand, the big operators will be offering more and more numerous and complex services, and the traditional division among hard line, mobile, cable TV and ISP providers will fade out; on the other hand, the small companies that will find "niches" - few services or even a single service - segments in which they are the best, more rapid and cheaper.
On the Romanian telecoms market as well, the keyword will be interconnection. From the consumers' point of view, experts are sceptical about a decrease in tariffs immediately after complete liberalisation. There is though a field where competition never fails: the quality and diversity of services.
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