1. TELECOMMUNICATION SECTOR IN THE REPUBLIC OF SERBIA - REGULATORY DEVELOPMENTS AND MARKET OVERVIEW – TELECOMMUNICATION SECTOR IN THE REPUBLIC OF SERBIA - REGULATORY DEVELOPMENTS AND MARKET OVERVIEW – Milan Janković, Ph.D.EE Director 1 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

2. Facts about RATEL (1) The Republic Agency for Electronic Communications (RATEL) is an independent regulatory authority established in line with the Law on Electronic Communications which came into effect in July 2010, replacing the former Republic Telecommunication Agency, established in accordance with the 2003 Telecommunications Law. Aim: to ensure optimal and realistic conditions for further development and application of electronic communications (information and communication systems - ICS) and services and therefore accelerate the realization of all benefits and advantages of the Information Society, in accordance with the Digital Agenda of the Republic of Serbia and the European Union. 2 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

3. Facts about RATEL (2) The Law on Electronic Communication is in compliance with the EU 2002 Regulatory Framework and enables:  an increased transparency within the sector of electronic communications and ensures legal predictability with the aim of increasing investments in the sector;  the continuation of the operation of the national regulatory authority;  the implementation of the concept of ‘general authorization’ with the aim of further liberalization of the electronic communications sector;  parameters for the identification of relevant markets susceptible to ex ante regulation, the criteria for the designation of operators with significant market power (SMP operators) as well as imposing the so-called ‘regulatory obligations’ on such operators;  the protection of rights of users of electronic communications networks and services;  non-discrimination in the process of allocation of addresses, numbers and radio frequencies as scarce resources; and  the implementation of the principle of technological neutrality with the aim of ensuring further development of the electronic communications in the Republic of Serbia. 3 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

4. to create the conditions for further development of electronic communications through cutting-edge ICSs, as well as the balanced development within the whole territory of the Republic of Serbia to create the conditions for the equal and non-discriminatory operation of all market participants in both technological (network neutrality) and economic (market economy) terms to ensure further development of electronic communications through mechanisms for enhancing competition (ex ante) and where necessary, market regulation as well (ex post) to ensure overall protection of rights of all market participants, end-users especially, with the aim of providing modern, high- quality and cost-based services. Facts about RATEL … mission 4 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

5. adopting bylaws which govern the issues falling within RATEL’s competencies; keeping record of public communications network and service operators; issuance of certificates confirming that operators are registered with the Agency’s database of electronic communications operators; issuance of individual permits for the use of radio frequencies and numbering; identification and the analysis of relevant markets, as well as imposing obligations on SMP operators; price control and the application of cost-accounting principle control of leased lines and usage of infrastructure; interconnection, LLU universal service, radio frequency spectrum management; monitoring the compliance of operators with the imposed regulatory obligations Facts about RATEL … competencies Facts about RATEL … competencies 5 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

6. The Republic Telecommunication Agency became operational and began working on 19 December 2005 and following the enforcement of the Electronic Communications Law on 8 July 2010, continued to work as the Republic Agency for Electronic Communications 3 Depatments (Regulatory Affairs, Economic Affairs and Market Analysis, Logistics), At the moment, RATEL has 102 employees + 6 trainee Having the regulation of the electronic communications market as its aim, RATEL adopted and published most of the required bylaws adopted in accordance with the Telecommunication Law:  planning, usage, control and monitoring of frequencies  technical inspections  standards and certificates  service provision (Internet + data, CATV + DTH, VoIP…)  bylaws on numbering  Rules on Interconnection RATEL adopted set of 20 Bylaws under the Electronic Communications Law. Facts about RATEL … organization Facts about RATEL … organization 6 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

7. (1) Overview of Bylaws (1) Title of the bylaw Electronic Communications Law (hereinafter: the Law) Status Rulebook on radio-frequency usage fees (Official Gazette of RS, no. 93/10) Article 29 of the LawAdopted Rulebook on fees for the performance of electronic communications activities (Official Gazette of RS, no. 93/10) Article 29 of the LawAdopted Rulebook on application forms for the issuance of individual licences for the use of radio frequencies (Official Gazette of RS, no. 8/11) Article 86 paragraph 5 of the Law Adopted Rulebook on general terms and conditions for performing electronic communication activities under general authorization regime Article 37 paragraph 3 of the Law Adopted Numbering Plan Article 72 paragraph 3 of the Law Adopted Rulebook on the form of the request for address and number assignment Article 73 paragraph 3 of the Law Adopted Rulebook on the amount of annual fee for the use of numberingArticle 29 of the LawAdopted 7 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

8. (2) Overview of Bylaws (2) Title of the bylaw Electronic Communications Law (hereinafter: the Law) Status Rulebook on the amount of fees for the provision of services within the competencies of the Agency Article 29 of the LawAdopted Rulebook on the application of cost-accounting principle, separate accounts and reporting of an operator with significant market power in the electronic communications sector Article 68 paragraph 7 of the Law Article 71 paragraph 4 of the Law Adopted Rulebook on number portability on public telephone networks at a fixed location Article 79 of the LawAdopted Decision on designating relevant markets susceptible to ex ante regulationArticle 59 paragraph 2 of the LawAdopted Decision on the scope and manner of publication of information pertaining to the Universal Service offer by the operator Article 56 paragraph 3 and 4 of the Law Upon adoption of the Rulebook on the Universal Service by the Ministry – in preparation Rulebook on the method for determining the amount of cost compensation for the universal service provision Article 57 paragraph 3 of the Law Upon adoption of the Rulebook on the Universal Service by the Ministry – in preparation Rulebook on the minimum content, level of detail and manner of publication of standard offers Article 64 paragraph 6 of the LawAdopted 8 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

9. (3) Overview of Bylaws (3) Title of the bylaw Electronic Communications Law (hereinafter: the Law) Status Rulebook on the scope and contents of the minimum set of leased lines Article 69 paragraph 2 of the LawAdopted Rulebook on manner of amateur radio station usageArticle 85 paragraph 2 of the LawAdopted Rulebook on the manner of radio stations usage on the national and foreign aircrafts, locomotives, ships and other vessels Article 85 paragraph 2 of the LawAdopted Rulebook on the manner of radio frequency usage according to the general authorization regime Article 96 paragraph 3 of the Law Upon the adoption of the new Allocation Plan by the Government Rulebook on the manner of monitoring the radio frequency spectrum usage, technical inspection procedure and protection from harmful interference Article 98 paragraph 7 of the LawAdopted Rulebook on the contents of notification on the terms and conditions for unilateral modification of terms and conditions and termination of agreement Article 107 paragraph 3 of the Law In preparation Rulebook on obligations of value added services provider Article 108 paragraph 2 of the Law Adopted Rulebook on quality parameters for publicly available electronic communication services and monitoring of electronic communication activity Article 109 of the LawAdopted Rulebook on the terms and conditions for access to and usage of the data from a public directory Article 121 paragraph 4 of the Law Adopted 9 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

10. Adopted by the relevant Ministry at the proposal of RATEL (4) Overview of Bylaws (4) Title of the bylaw Electronic Communications Law (hereinafter :the Law) Status Rulebook on analogue to digital switchover in TV broadcasting and access to multiplex in terrestrial digital broadcasting (Official Gazette of RS, no. 12/11, 55/12) Article 104 paragraph 1 of the Law Adopted Draft Rulebook on technical requirements for electronic communications equipment of office and residential buildings ** Article 44 paragraph 1of the Law Adopted (in force as of 1 June 2012) Draft Rulebook on the manner and conditions for the determination of the zone of the electronic communications infrastructure and associated facilities, protected areas and radio corridors and obligations of construction and buildings investors ** Article 45paragraph 2 and Article 46 paragraph 4 of the Law Adopted Draft Rulebook on the Universal Service ** Article 55 paragraph 3 of the Law Adopted Draft Rulebook on electromagnetic compatibility of an electronic communications network, associated facilities, electronic communications equipment and terminal equipment** Article 47 paragraph 3 of the Law Draft submitted to the relevant Ministry for adoption Draft Rulebook on the issuance of authorizations for measuring and testing the operation of electronic communications networks, associated facilities, electronic communications equipment and terminal equipment** Article 136 paragraph 2 of the Law Draft submitted to the relevant Ministry for adoption **In line with the Law, the relevant Ministry adopts the bylaws drafted at the proposal of RATEL 10 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

11. INVESTMENTS IN THE SECTOR Source: RATEL EU - RATEL Workshop, Belgrade, 12-13 June, 2012 11

12. SECTOR REVENUES - GDP share of the telecom sector Source: RATEL EU - RATEL Workshop, Belgrade, 12-13 June, 2012 12

13. Creating the conditions for competition in fixed telephony (BB): no more monopoly ! License issued to: TELENOR (February 2010) TELENOR began operating in February 2011 Telecom Networks and Services (1) Telecom Networks and Services (1) 13 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

14. Mobile: All necessary regulations in place Conditions fulfilled for introducing 3G mobile telephony, which enables high-rate Internet transmission and TV signal transmission, Significant cut down in prices for mobile services, plus new services for end-users – direct consequence of competition Result of the open market: Vip – Vodafone exclusive strategic partnership Rules on number portability in public mobile telecommunication networks adopted (start 1 January, 2011), Number portability service is in operation from 1 July, 2011. Telecom Networks and Services (2) Telecom Networks and Services (2) 14 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

15. Opening of fixed and mobile telecoms markets Following regulations were adopted: Numbering Plan for Telecommunications Networks, Rules on the Amount of the Annual Fee For Usage of the Assigned Numbers and Addresses from the Numbering Plan, Rules on General Terms and Conditions for Interconnection of Public Telecom Networks,  Pursuant to these Rules, SMP operators Telekom Srbija and SBB published the Standard Interconnection Offer (SIO),  Full tariff rebalancing in done (local call and interconnection) performed on the cost-accounting principle. Telecom Networks and Services (3) Telecom Networks and Services (3) 15 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

16. Stimulate competition through regulation and by launching the procedures for introducing new technologies and services : 1. Universal service (public voice service and low-quality Internet)  Adopted Frequency Allotment Plan for CDMA – PAMR and FWA radio stations in the frequency bands 411-416/421-426MHz,  registration of those interested in providing services in these bands completed,  Rules on the number of licenses, period for which the license is issued, minimum conditions and minimum amount of one-off license fee payable at the issuance of the license for public telecommunications network in the frequency band 411.875-418.125/421.875-428.125 MHz (Official Gazette of RS, no. 15/2009),  2 Licences issued to: Telekom Srbija & Media Works (May 2009) Telekom Srbija, TELENOR and VIP have agreed on the distribution of the localities covered with the mobile signal, with the aim of the Universal Service provision: In the first phase the US will be provided to 712 localities (1Q 2012) In the second phase the building costs for each of the 43 localities lacking the appropriate infrastructure will be calculated and distributed among the operators according to their respective market shares Telecom Networks and Services (4) Telecom Networks and Services (4) 16 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

17. Telecom Networks and Services (5) 2. Possibility of free provision of telecom services of non-guaranteed quality  Rules on types of radio stations for which license is not required (Official Gazette of RS 26/07), in frequency bands 2.4 and 5.5 GHz,  more than 130 providers registered for this type of Internet service provision. 17 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

18. Telecom Networks and Services (6) Telecom Networks and Services (6) Introducing competition in wholesale services: 1. Principles on cable ducts sharing - adopted and published 2. Adopted bylaws (December 2008):  Rules on conditions and procedure for the issuance of authorization to a public telecom operator to interconnect national telecom network with a telecom network in another country (51 authorizations)  Rules on conditions for the issuance of authorization for public telecom networks and the contents of the authorization (75 authorizations)  Rules on conditions for VoIP service provision – defining the conditions for VoIP communication without using the numbers from the Numbering Plan (48 authorizations)  Article 38 of the Law: 301 authorizations 18 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

19. Telecom Networks and Services (7) Telecom Networks and Services (7) With the purpose of adopting necessary regulations for the application of new technologies in cable distribution systems, (applying satellite telecommunications for TV signal transmission): -DTH (Direct-To-Home television), (3 authorizations) -MMDS (Multichannel Multipoint Distribution Service), -LMDS (Local Multipoint Distribution System) 19 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

20. Telecom Networks and Services (8) Telecom Networks and Services (8) European Telecommunications Standards Institute (ETSI 1. In 2007 RATEL became a full member of the European Telecommunications Standards Institute (ETSI) – direct implementation of ETSI standards in RATEL’s work enabled 2. Standardization:  Design instructions and the set of technical requirements for fixed and mobile telecom systems and facilities were adopted  Over 9540 technical permits – certificates were issued (cca. 5374 issued in 2010) 3. Radiation protection:  over 1729 approvals for import of goods granted, following the verification, mostly mobile phones, radio stations, broadcasting transmitters, receiving antennas and GPS devices (cca. 1692 approvals for import of goods granted in 2010). 20 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

21. Broadcasting (1) Broadcasting (1) 1. Objectives:  Resolving the issue of the limited number of broadcasters  Significant increase of broadcasters 2. Initiative: joint work of the following institutions:  Ministry of Culture  Ministry of Telecommunications and Information Society  Republic Broadcasting Agency  Republic Telecommunication Agency. 3. Activity: Prepared and adopted Strategy for ASO (4 April, 2012 ) New date ? (16 June, 2015) point 3, subpoint 3.1, question 2 21 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

22. Broadcasting (2) Broadcasting (2) Following the Public Tender carried out by the Republic Broadcasting Agency (RBA) licences were issued to: 5 TV and 5 radio networks (257 transmitters) with national coverage, 6 TV and 18 radio stations for the area of the city of Belgrade, 1 TV and 1 radio station for area of Vojvodina, 27 TV and 29 radio stations with regional coverage, 115 TV and 296 radio stations with local coverage. As of 1 September 2008, RBA and RATEL have been in the process of switching off all TV and radio stations operating without licence 22 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

23. Spectrum Monitoring (1) 23 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

24. Spectrum Monitoring (2) 24 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

25. Spectrum Monitoring (3) 25 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

26. KEY SPECTRUM MANAGEMENT CHALLENGES AND ACTIVITIES IN THE COMMING FEW YEARS EU - RATEL Workshop, Belgrade, 12-13 June, 2012 26

27. Graphic Of The Measured Level Of Signal For LTE 1800 Base Station 27 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

28. Graphic Of The Measured Level Of Signal For LTE 2600 Base Station 28 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

29. After July 2010 Market Analysis (1) After July 2010  RATEL submitted the following for public consultations : Decision on relevant markets susceptible to ex ante regulation Market analyses. 29 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

30. Market Analysis (2)  The following markets have been analyzed: Market 1 - Access to the public telephone network Market 2 - Call origination on the public fixed network at a fixed location Market 3 - Call termination on the public fixed network at a fixed location Market 4 - Wholesale unbundled access (including shared or fully unbundled access) to the local loop at a fixed location Market 5 - Wholesale broadband access Market 6 - Wholesale terminating segments of leased lines Market 7 - Call termination on public mobile telephone network Market 8 - Media content distribution Market 9 - Publicly available telephone services provided at a fixed location Decisions on designating SMP operators in all relevant markets were adopted on 30 November 2011, SO for all markets in place from June 1st 2012. 30 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

31. SERBIA OVERVIEW Population: 7.12 million inhabitants (excluding Kosovo and Metohija) Total area: 88,361 km² GDP for year 2011: ca. RSD 2,883 bn. (ca. RSD 2,837 bn. in 2010) Average monthly net salary in December 2011: RSD 43,887 (ca. € 430) (ca. €383 in 2010) Total income in telecommunication market in year 2011: ca. € 1.6 bn. (ca. €1.45 bn 2010) Share in GDP: 5.66% in 2011 (5.29% in 2010) Average EUR exchange rate: RSD 102.127 in 2011 (RSD 103.47 in 2010) EU - RATEL Workshop, Belgrade, 12-13 June, 2012 31

32. Serbian Telecom Market Overview Serbian Telecom Market Overview 32 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

33. 33 EU - RATEL Workshop, Belgrade, 12-13 June, 2012 Fixed Telephone Network 20072008200920102011 Number of subscribers 2.854.5503.084.8723.105.7003.110.3393.030.432 Penetration (%)38,0041,1441,4241,4842,56 Digitization rate (%)93,3195,5296,9597,8598,54 Revenues from telephone services (EUR million) 414,10413,00360,07421,00446,00 Investments (EUR million) 165,9064,7098,6475,2956,71 Source: RATEL, on December 31, 2011

34. 34 EU - RATEL Workshop, Belgrade, 12-13 June, 2012 Mobile Networks 20072008200920102011 Number of subscribers 8.452.6429.618.7679.912.3399.915.34810.182.023 Penetration (%) 112,73128,27132,20132,24142,99 Number of postpaid subscribers 1.689.193/2.609.5262.983.1533.358.912 Number of prepaid subscribers 6.763.449/7.302.8136.932.1956.823.111 Number of 3G network subscribers 257.379750.026862.9351.291.8872.550.038 Revenues (EUR million) 839,60913,43826,74769,15846,74 Investments (EUR million) 210,00240,27148,68132,99138,67 Source: RATEL, on December 31, 2011

35. 35 EU - RATEL Workshop, Belgrade, 12-13 June, 2012 Cable Distribution Systems 20072008200920102011 Number of subscribers 694.600922.3001.080.9001.247.1921.331.279 Penetration (%)9,321214,4216,6318,7 Number of cable operators 7274788082 Revenues from cable distribution services (EUR million) 20,3060,7072,3786,0186,0196,4 Source: RATEL, on December 31, 2011

36. 36 EU - RATEL Workshop, Belgrade, 12-13 June, 2012 INTERNET (1) 20072008200920102011 Number of subscribers (3G subscribers included) 1.201.2011.629.3871.705.7162.407.3903.828.721 Penetration (%) 16,9221,622,7532,1152,92 Number of ISPs 159197199192232 Revenues from Internet services (EUR million) 59,3107,58117,56130,66145,93 Source: RATEL, on December 31, 2011

37. INTERNET (2) Source: RATEL (Annual reports submitted by the operators on 31 December for each of the respective years) EU - RATEL Workshop, Belgrade, 12-13 June, 2012 37

38. Electronic Communications Sector ALLOCATION OF REVENUES in 2011 Total revenues amounted to ca. €1.60 bn. Source: RATEL (Annual reports submitted by operators on 31 December, 2010) 38 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

39. ICT DEVELOPMENT INDEX – IDI This Index combines 11 indicators divided into three sub-indices: ICT infrastructure and access ICT use (primarily by individuals, but also households and undertakings) and the intensity of use ICT skills (or human capacity necessary for the effective use of ICTs) Year IDI Index value for SerbiaRank (total of 159 countries) 20084.2353 20105.11 50 Source: RATEL 39 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

40. The Republic of Serbia has signed: Declaration on Principles and Plan of Action, World Summit on the Information Society (WSIS), Geneva 2003 – Tunis 2005, Stability Pact Electronic South Eastern Europe Initiative, Based on that, the Goverment of the Republic of Serbia adopted: The National Strategy for Economic Development of the Republic of Serbia 2006-2012. The Strategy for the Development of the Information Society in the Republic of Serbia till 2020, Strategy for the Development of Electronic Communications in the Republic of Serbia from 2010 to 2020 (new Action Plan is yet to be prepared) Future work 40 EU - RATEL Workshop, Belgrade, 12-13 June, 2012

41. Republic Agency for Electronic Communications Višnjićeva 8 11 000 Belgrade Republic of Serbia Phone: +381 11 3229 970 Fax: +381 11 3232 537 www.ratel.rs milan.jankovic@ratel.rs Thank you 41 EU - RATEL Workshop, Belgrade, 12-13 June, 2012