THE European Commission has hauled the government over the coals for lacking the political will to liberalise the telecommunications market and introduce competition.
The European Electronic Communications Regulation and Markets 2005 Report was especially damning on Cyprus, finding that innovation and growth in the telecom industry is being hampered by conditions both favouring and sustaining a monopolistic situation.
Using diplomatic language, the commission voiced concern over the incumbent’s (state monopoly) grip on the industry, saying new entrants were finding it extremely hard to compete despite the opening up of the market three years ago.
It read: “Overall, competition still appears to be very limited in the Cypriot electronic communications market, possibly partly due to both retail and wholesale pricing issues in the fixed and mobile markets. Furthermore, concern has been raised about the absence of political will to create a market environment that can introduce and consequently sustain effective competition.
“The second mobile operator [Areeba], since the start of its operations in the second half of 2004, is mostly providing services in the pre-paid market sector but is finding it increasingly onerous to obtain the various permits for erecting masts which in turn would enable it to increase its national coverage.”
More sinisterly, the report hinted that the control over state monopoly (the Cyprus Telecommunications Authority) was illusory at best. In effect, it tactfully questioned whether regulation authorities in Cyprus were independent of governmental interference.
“The legislation transposing the regulatory framework in Cyprus has conferred regulatory tasks on the Department of Electronic Communications (DEC) of the Ministry of Communications and Works, the Minister of Communications and Works, the Office of the Commissioner for Electronic Communications and Postal Regulation (OCECPR) and the Council of Ministers.
“However, the Minister of Communications & Works coordinates the ownership rights of the 100 per cent state-owned incumbent within the Council of Ministers as well as retaining some regulatory functions. This raises questions concerning the independence of the regulatory bodies which has already been addressed in an infringement proceeding in October 2005.”
Only last week government spokesman George Lillikas was insisting that CyTA was an autonomous entity with full decision-making freedom.
Since the liberalisation of the market, CyTA has on many occasions been charged of breaching competition laws by the Competition Commission and slapped with a series of fines by the OCECPR.
More recently, the telecom giant was handed down a £2.2 million penalty after being found guilty of abusing its dominant market position. However, the Competition Commission’s ruling turned controversial when CyTA was cleared of a second charge that it was squeezing mobile phone rates to thwart competition from private operators like Areeba.
CyTA was also fined £50,000 for fine for denying competitors access to directory listings in violation of the law.
Interestingly – as far as the timing goes – the organisation yesterday announced it would be paying both these fines in full.
Still, the powerful organisation has almost always managed to beat the rap by appealing to the Supreme Court and winning on a technicality.
The EU report had this to say: “Appeals against… decisions are made to the Supreme Court, which is not a specialised body with jurisdiction in regulatory affairs. This has led to concerns about the effectiveness of the appeals procedure.”
Last summer CyTA dropped a bombshell when it refused to comply with a court order to raise prices for mobile telephony. Nevertheless, no one from the organisation was arrested or jailed.
According to the Commission’s experts, CyTA has a 97 per cent share of the fixed national calls, a 91 per cent share in the fixed international calls (in terms of revenue) and 93.5 per cent of the total number of mobile subscribers. They went on to suggest CyTA was using stalling tactics against private operators.
“At present, the incumbent [CyTA] is the sole provider of broadband services, with a four per cent population penetration rate. Two contracts have been signed… but there are delays in the implementation of the process… so the new entrants have not yet been able to start offering their broadband services. This delay would seem to favour the incumbent.
“The Commission services will monitor how this evolves in the coming months… The lack of remedies, such as wholesale broadband access, seems to indicate that these delays are in particular detrimental to competition in the retail broadband market.”
The Commission also said the copper cable network – which will support the coming digital television – has not been made accessible to private operators.
In the EU’s philosophy, telecom infrastructures are considered as part of the national wealth and are not owned by any organisation(s). CyTA is therefore only the administrator, not the owner, of the cable grid.
Population-wise, Cyprus currently has the lowest number of broadband users among the 25 EU countries. While the vast majority of households have the traditional dial-up connection, the trend abroad is toward the much faster ADSL service. Critics say CyTA’s way of doing business is to blame for this state of affairs.
