Commission Report 2002 (Hungary)

• Progress since the last Regular Report
• Overall assessment
• Conclusion

Chapter 19: Telecommunications and information technologies

Progress since the last Regular Report

Since last year`s Regular Report, Hungary has made major progress in terms of both liberalisation of the telecommunications market and implementation of its regulatory framework.

Concerning liberalisation of the telecommunications market, Hungary opened the main fixed voice market in December 2001 with some temporary exceptions. In a few primary areas liberalisation will begin only from November 2002 on the expiry of local telephone concessions with exclusive rights. As regards the regulatory framework, with the entry into force of the new Communications Act in December 2001, the Hungarian telecommunications market is opened up for competition and the harmonisation of primary and secondary law with the acquis is almost completed.

As regards the institutional and administrative framework, the National Regulator is the Communications Authority (HIF), which is a central public administration agency with nationwide jurisdiction, independent of market players and functioning under the guidance of the Government and under the supervision of the relevant Minister.

With the new Government, responsibility for telecommunications has been shifted to the new Ministry for Information Technology and Communications. The only division remaining under the responsibility of the Prime Minister`s Office will be the Division of Electronic Government. A National Information Society Strategy has been elaborated with the aim of promoting the development of the information society. An important implementing instrument of this strategy is the development of the Information Society and Economic Development Programme, which takes into account the priorities of the eEurope+ Action Plan.

As regards postal services, postal liberalisation is proceeding in line with the acquis. Only those services which are permitted by the EC Directive remained in the reserved category. The Communications Act of December 2001 is also aimed at ensuring universal service funding for postal services. The incumbent operator, Hungarian Post, which provides universal services and is entitled to the provision of reserved services, has started to introduce a cost-based price system and separate accounts.

Overall assessment

Hungary will need to transpose the updated telecommunications acquis before accession and to complete the implementation procedures as soon as possible afterwards. Some important adjustments are still needed in the field of carrier selection and transparency of the implementation of the interconnection acquis. In particular, it is important for the National Regulatory Authority to exercise its powers in a clear way in order to reduce the number of barriers to market entry that new entrants face. Also, the universal service provisions are not yet entirely in line with the acquis. Hungary still needs to implement several items of secondary legislation by the end of 2002 and has committed itself to do so in time. Amended implementing legislation will also have to be adopted for the Universal Telecommunications Service Fund. Hungary has not yet been able to evaluate the economic implications of fully implementing the universal service acquis, so as to achieve affordability. A decision on this point remains outstanding.

The Communications Authority has been established on a reasonably independent basis and seems to be adequately staffed. However, more attention should be paid to universal service issues. Full co-operative working relations with the Competition Authority are important to effective implementation of the acquis.

Much progress has been made in the telecommunications sector over the last few years and the infrastructure's size and degree of modernisation is a welcome achievement, particularly in terms of the penetration of mobile and Internet services. Penetration in mobile services has exceeded 50%. There are three GSM operators but UMTS licences have yet to be issued. Fixed network modernisation is complete, but penetration peaked at 37% and is now slowly falling. Price rebalancing still has some way to go, and more emphasis on fair competition is needed. Universal service provisions still have to be fully enforced and aligned with the acquis. Hungary has not yet been able to evaluate the economic implications of fully implementing the universal services acquis so as to achieve affordability and a decision on this point remains outstanding.

As regards postal services, Hungary has made good progress but needs to complete the transposition and implementation of the acquis. New legislation has still to be adopted on the Universal Postal Service Fund.

Conclusion

In its 1997 Opinion, the Commission concluded that Hungary should have little difficulty in adopting the EC model of telecommunications liberalisation in the medium term because it had already implemented most of the acquis. It added that if foreign investment continued at its current pace and if a tariff-rebalancing scheme was introduced, the sector should be able to face full competition.

Since the Opinion, Hungary has made considerable progress, particularly in terms of liberalisation. The present level of alignment is good, however, Hungary will need to transpose the updated telecommunications acquis before accession and to complete the implementation procedures as soon as possible afterwards

Negotiations on this chapter have been provisionally closed. Hungary has not requested any transitional arrangements in this area. Hungary is generally meeting the commitments it has made in the accession negotiations in this domain.

In order to complete preparations for membership, Hungary`s efforts now need to focus on ensuring an affordable universal service, on continuing the enforcement of the regulatory framework for telecommunications and on completing alignment in the postal services sector.

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