1. VoIP and its Impact on Competition in the Telecommunications Sector Monika Podpłońska V-ce Director of Retail Electronic Communications Market Department/UKE Geneva,15 - 16 th January, 2007

2. Regulatory activities in EU  Lack of concrete definitions of VoIP services in EU  IP Telephony service is analysed case by case for each service (public telephony service)  European regulators conduct public consultations in terms of regulatory remedies

3. The classification of VoIP services shows different regulatory approaches (1-3) CountryRegulatorClassification of VoIP AustriaRTRTwo classifications: Class A are VoIP services that enable access to the PSTN and are regulated as telephony services; Class B are unregulated Internet-only VoIP services Czech RepublicCTUVoIP is not considered as a public telephone service, but as a data-transmission service – no regulatory initiative has yet been undertaken DenmarkITSTVoIP services are treated in the same way as other voice services. The legislation claims to be technology neutral FranceARCEPTwo classifications: voice over broadband (VoB), or managed IP telephony, services are considered substitutes for PSTN services and therefore subject to regulation; voice over the Internet (VoI) services are software based, with restricted availability, and so are not regulated

4. The classification of VoIP services shows different regulatory approaches (2) CountryRegulatorClassification of VoIP GermanyBNetzAThere is a statutory requirement to technological neutrality: rights and obligations depend upon the services offered. VoIP services that offer access to the PSTN are, therefore, classed as telephony services HungaryNHHAny VoIP service has to be registered as a telephony service. VoIP providers must inform customers of reliability and quality issues ItalyAGCOMNo formal legislation in place. Consultation showed three types of VoIP service in the Italian market that are likely to act as basis for future categorisation: PSTN equivalent PATS VoIP; PATS VoIP nomadic and innovative services; non-PATS ECS VoIP NetherlandsOPTANo explicit classification of VoIP, although some broadband voice services have been found to be within the defined market for ‘access to the public telephony network at fixed locations’. OPTA has decided that regulation of KPN’s retail VoIP tariffs is justified in order to protect operators using unbundled loops

5. The classification of VoIP services shows different regulatory approaches (3) CountryRegulatorClassification of VoIP NorwayNPTThree types of VoIP service: 1: VoIP offerings that are not any-to-any enabled, i.e. have no interconnection to traditional telephony networks; 2: VoIP offerings that are partially any-to-any enabled (one-way interconnection only); 3: VoIP offerings that are fully any-to-any enabled. Number 3 is classified as PATS if publicly available. NPT has still to decide whether types 1 and 2 are subject to existing legislation PolandUKEVoIP is not currently classified or regulated but at least some services are likely to be classed as PATS in forthcoming legislation RussiaMinsvyazVoIP is currently classified as a data-transmission service SpainCMTAll VoIP services are classified as ECS SwedenPTSVoIP services are considered as telephony services under certain conditions and regulated accordingly UKOfcomThe regulator recognizes that the application of existing legislation to VoIP services is unclear and is currently reviewing the situation after a public consultation. It has proposed a flexible definition of PATS and has thus far favoured intervention on specific practical issues

6. Key regulatory challenges (1)  to ensure that consumers are aware of both the benefits and limitations of the particular VoIP services like : lack of number portability services lack of access to directory services lack of calls to emergency services

7. Key regulatory challenges (2)  to ensure the most important factors for VoIP providers: allocation of new numbering ranges for VoIP services ability to port existing numbers interconnection issues

8. Regulators' stances on numbering ranges for VoIP in major European countries (Source: Analysys Research, 2006) (1) CountrySeparate numbering range for VoIP Geographic numbers for VoIP Use of geographic numbers for nomadic services AustriaYes No Czech Republic YesNoN/a DenmarkYesNoN/a FranceYes Under review GermanyYes No HungaryNoYesNo

9. Regulators' stances on numbering ranges for VoIP in major European countries (Source: Analysys Research, 2006) (2) CountrySeparate numbering range for VoIP Geographic numbers for VoIP Use of geographic numbers for nomadic services ItalyNoYesNo (a new range is proposed for these services) Netherla nds Yes No NorwayYes No PolandOpen to operators onlyNoN/a RussiaNo N/a SpainYes No SwedenYes No UKYes

10. Regulatory status of VoIP in some EU countries in 2006  11 countries with separate numbering range for VoiP  Regualtions mostly in terms of retail relevant markets for calls 3 – 6  Additional separate market for VoiP services based on broadband access in Germany  VoiP service is planned to be analysed together with naked DSL service in UK

11. Impact of VoIP services on competition in telecoms markets  Retail fixed-line VoIP services already pose a threat to incumbents’ fixed telephony revenues Substitution of fixed telephony Growing number of users - forecasts  New opportunities created for VoIP over BWA

12. Substitution of fixed telephony 19992000200120022003200420052006* VoIP calls (mln minut) 1 6555 95410 14718 04524 51930 12152 76875 746 PSTN calls (mln minut) 108 000132 027146 095155 165166 615199 000219 232237 254 Total (mln minut) 109 655137 981156 242173 210191 134229 121272 000313 000 VoIP calls share 1,5%4,3%6,5%10,4%12,8%13,1%19,4%24,2% Source: TeleGeography Inc. 2006, PriMetrica Inc.

13. Revenue from international calls 0,32 0,35 0,39 0,44 0,51 0,58 0,63 44 46 48 50 52 54 56 58 60 62 1998199920002001200220032004 0 0,1 0,2 0,3 0,4 0,5 0,6 0,7 Revenue (in mld USD) Price for a minute (USD) mld USD USD

14. Prices for VoIP calls (to mobile numbers) – Poland

15. Prices of VoIP calls (to fixed numbers) – Poland

16. Cost of VoIP services in Poland  Most of providers do not charge their clients with one off fee and monthly subscriber’s fee  Certain providers assign free off charge PSTN number to their subscribers  Polish providers keep similar level of prices for calls to fixed network - average price is approx. 0,1 PLN ( less than 0,1 euro)  Differences are bigger when it comes to provision of calls to mobile networks – average price is between 0,61- 1,09 PLN (up to 0,25 euro)

17. Number of users – forecast (broadbrandtrends.com) 0 20 000 40 000 60 000 80 000 100 000 120 000 140 000 160 000 180 000 Subscribers (thousands) VoIP OptimisticVoIP IntermidiateVoIP Pessimistic VoIP Optimistic 1 2644 97711 78723 82043 61266 16294 209123 341161 242 VoIP Intermidiate 1 2644 97711 78721 55238 21257 45180 589104 221134 258 VoIP Pessimistic 1 2644 97711 78717 39830 70146 32063 98880 895102 308 200220032004200520062007200820092010

18. Number of users – forecast (IDATE) 0 50 100 150 200 250 300 2005200620072008200920102011 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% VoIP users Share of VoIP users in the number of all users of main lines mln

19. 0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000 20 000 200620072008 201020112012201320142015 Residental customers (td) 0 10 20 30 40 50 60 70 80 90 100 Non - Residental customers (td) Residental customers [td] Non - Residental customers [td] Number of users – forecast for Poland

20. VOIP OVER BWA COULD BE AN ATTRACTIVE SERVICE FOR NEW-ENTRANT OPERATORS  Bigger impact: New fixed operators, ISPs, WISPs and VoIP providers. VoIP services will significantly enhance the business case for BWA system deployment by these players.  Less impact: Mobile operators are expected to deploy cellular technologies, rather than alternatives, and not to use BWA systems to compete directly with fixed DSL/cable services for Internet access. New competition from BWA service providers (e.g. WiMAX) is expected to have a limited effect on mobile operators’ voice revenues.  Less impact: Incumbent fixed operators are expected to deploy fixed broadband (e.g. DSL) solutions and only to consider the use of BWA for rural areas. New competition from BWA service providers (e.g. WiMAX) is expected to have limited effect on fixed voice revenues.

21. Thank you for your attention Monika Podplońska V-ce Director of Retail Telecommunications Market Department/UKE e-mail: M.Podplonska@uke.gov.plM.Podplonska@uke.gov.pl Telephone: +48225349231