2006-2007 Eastern European Broadband and Convergence Markets

Although broadband has been available for sometime in Eastern Europe, the advent of full scale fixed-line competition has boosted subscriber levels as incumbents in liberalised markets execute survival strategies centred on offering broadband and convergence services. The results are now being witnessed as convergence services are rolled-out. The need for more broadband speed has driven deployment of new high-speed broadband networks centred on ADSL2+ and FttH while wireless has been utilised to rapidly deploy alternative networks and extend connectivity into remote areas. The number of ADSL2+ deployments is expected to increase during 2007 as triple play services grow in popularity. Public and private sector initiatives, an accommodating regulatory environment coupled with broadband proliferation has led to the emergence of the Internet economy, a nascent trend that will become increasingly visible as the prerequisite factors fall into place. The Eastern European annual reports have been designed to offer extensive coverage of the region, highlighting regulatory and market developments, introducing the major players and the services on offer, as well as providing a wealth of insightful statistics and forecasts, no doubt making essential reading for anyone holding an interest in the region’s telecoms sector. Data in the reports are the latest available at the time of preparation and may not be for the current year

Central Eastern Europe (CEE)

• The developing broadband market is becoming increasingly sophisticated, with ADSL2+ services launched in Czech Republic, Hungary and Slovenia.
• Scenario-based broadband forecasts for all five CEE nations is provided, providing a guide as to where broadband penetration is headed.
• IPTV services have been launched in the Czech Republic, Hungary and Poland, giving telecoms operators their much anticipated triple play services. Polish incumbent’s triple play offering is based on the Livebox device from France Telecom.
• The satellite-based digital pay TV market is becoming increasingly crowded as a Romanian digital pay TV operator has commenced offering services in Slovakia, Hungary and the Czech Republic, recording strong growth in subscriber levels. A new satellite platform was launched in Poland, shaking up the previous duopoly, with satellite-based HDTV services.
• WiMAX services are growing in visibility as services are rolled out. However the delay in launching services in some countries will be to the detriment of wireless operators as incumbents continue their charge into the broadband market.

Baltic

• Much anticipated broadband TV (IPTV) offerings are now available from the incumbent operators in each country, and brings the incumbent operators into direct competition with the cable-based operators in the consumer telecoms market. The resulting competition between the two parties is expected to heat up in 2007 and beyond, which will benefit consumers with increased variety and lower prices.
• Increasingly affordable ADSL offerings have been launched in conjunction with broadband TV offerings, stimulating broadband market growth. Speedier ADSL2+, required for a quality broadband TV experience, was launched by the incumbents in Estonia and Latvia, with Lithuania’s incumbent deploying ADSL2+ infrastructure. The need for broadband speed has also spurred Fibre-to-the-Home (FttH) network deployment in all three countries, most predominantly in new housing projects and apartments.
• Wireless broadband has become increasingly prominent. Estonia has deployed WiMAX networks to extend broadband connectivity to rural areas while CDMA 1x EVDO based offerings are widely available in Latvia. WiFi in widely available in each country, with Lithuania’s incumbent in particular making an effort to expand its WiFi network to approximately 1,000 hot spots by 2007. We believe wireless broadband will become increasingly prominent in 2007 and beyond due to greater availability of portable and mobile wireless broadband services, as well as the growing popularity of laptop computers, with approximately 65,000 laptop computers expected to be sold in Estonia in 2006 alone, up from 44,000 in 2005.
• Estonia has had the most success in fostering an Internet economy, developed in recognition of the ability of Information Communications Technologies to improve social wellbeing. E-commerce and e-government services are widely available, allowing the country’s citizens to access services and carry out commercial and government-related activities online. Growing familiarity of such services, coupled with increasing broadband access will encourage usage among new users, generating efficiencies for both the providers and consumers of such services.

Balkans

• As seen in the Central European markets after they underwent liberalisation in 2004, the incumbents in the more liberalised markets are driving ADSL take up. The untapped financial potential of underdeveloped broadband markets offers a new revenue source for incumbents suffering from competition in low-growth potential fixed-line voice markets. We believe broadband uptake is most likely to expand in two phases; in the first phase due to the incumbents who wish to catch the benefits of first-mover advantage, with serious competition only expected from the cable operators, and the second phase, when alternative operators are able to gain better access to LLU-based services once suitable interconnection and access regimes are in place and enforced. The big question hangs over the impact wireless will have on markets and in particular, technologies such as WiMAX.
• WiMAX networks have been deployed in Serbia and in Croatia by the incumbent and an alternative operator, which has deployed a WiBRO network. A mesh WiFi network that will provide nationwide broadband connectivity is under construction in Macedonia, with all of the country’s schools already connected. NGN/VoIP deployments are underway in Croatia by both the incumbent and alternative operators, in Greece by an alternative operator, in Macedonia by the incumbent operator, in Romania by the incumbent operator and in Bulgaria by the incumbent operator. The desire to offer broadband and convergence service is driving NGN/VoIP deployments, with more deployments likely as the strategy of focusing on broadband and convergence becomes more common.
• Triple play services are offered by the cable operators, with Croatia’s fixed-line incumbent announcing plans to offer services. An alternative operator has launched a competing triple play offer to that of the incumbent in Cyprus, based on its ADSL2+ network. ADSL2+ networks have also provided the base for triple play services by a Greek alternative operator.
• Romania has seen four digital satellite pay TV operators enter the market, with the largest and most successful player expanding services into Hungary, Slovakia and the Czech Republic, with plans to enter Serbia and Croatia.

CIS

• The Syvazinvest companies and alternative operators in Russia and Ukraine are generating increased revenue through mobile and Internet services, with plans to further grow revenue through broadband and IPTV.
• Plans to offer the aforementioned convergence and broadband-based services has driven the need to upgrade infrastructure, with numerous network upgrades and NGN deployments underway.
• Russian WiMAX deployment activity is continuing, with new deployments including mobile WiMAX underway. Operators involved in WiMAX developments include Start Telecom, Enforta, Internafta, MetroMAX, Infoseti, Synterra, Golden Telecom, Peterstar and Sibirtelecom. Services were launched in Ukraine in late 2005 by alternative operator UHT, with plans to expand coverage nationally and offer mobile WiMAX service, while services in Belarus are offered by the fixed-line incumbent.
• Broadband services in Russia are becoming increasingly popular and available due to increased infrastructure investment, with a large portion of the residential market continuing to be served by large informal LANs in Russia, with a similar situation in Ukraine. Deployment of faster broadband services such as ADSL2+ and FttH is underway in Russia.
• Cable broadband services are experiencing a surge in popularity in Belarus and Moldova, although the phenomenal growth rates recorded have been based on a small initial user base. The growing popularity of broadband in Belarus is reflected in the country’s growing Internet user penetration, which rose by 36% during 2005.
• WiFi continues to be popular despite heavy WiMAX activity; Golden Telecom has deployed 3,000 access nodes out a total of 5,000 planned for its mesh WiFi network in Moscow.
• Competing IPTV services to that of Comstar-UTS are available in Russia, with other deployments planned both in Russia and Ukraine.