Cyprus broadband use growing, but short of the EU average

Broadband penetration in Cyprus had increased from 9% to 14% during 2007, which is a satisfying development, but despite the rapid growth it is still relatively low when compared to the EU average.

Eight EU member states are currently world leaders in broadband deployment with penetration rates higher than the US in 2007. Denmark, Finland, the Netherlands and Sweden have each penetration rates over 30% at the end of 2007, while United Kingdom, Belgium, Luxembourg and France had still higher rates than the US which was 22.1% in July 2007.

Over 19 mln broadband lines were added in the EU in 2007, the equivalent of more than 50,000 households every day.

The broadband sector generated estimated revenues of 62bln euros and Europe’s overall penetration reached 20%. However, there is considerable scope for further consumer benefits from a reinforced single market, strengthened competition and reduced regulatory burden for market players.

 

Growing mobile penetration
The Telecoms sector in the EU is worth nearly 300 bln euros (2% of EU GDP) and grew by 1.9% last year. 2007 was also the fifth consecutive year of increased investment in this sector, exceeding 50bln euros (similar to the US and higher than China and Japan put together).
The mobile sector continues to be the largest in the Telecoms market, with mobile revenues up by 3.8% to 137bln. Mobile penetration rose further, to 112% compared to 103% in 2006. 3^rd Generation (3G) mobile penetration doubled to 20% in 2007, now representing over 88mln subscriptions. As 3G took off, mobile data services grew by around 40%. While fixed telephony revenues declined 5% compared to 2006, with customers switching to mobile and IP services.
Cyprus mobile penetration reached 119% in 2007, which is above the EU average (111.8%). It has to be noted that mobile call termination charges in Cyprus are the lowest in Europe.

 

The Single Telecoms Market: …a lot still to do

Incumbent operators hold more than 46% of broadband lines and in 7 Member States control more than 60% of broadband connections. In Cyprus, Luxembourg and Finland, the incumbent’s broadband market share is higher than 70%.
Concentrating on Cyprus, the incumbent (CYTA) dominates the broadband market, having a handful 88% share, and broadband access is concentrated in the main cities rather than the countryside. There is as yet no real platform competition as DSL remains the main technology for broadband services. However, a new entrant, the strategic partner of the Cyprus Electricity Authority (PrimeTel) owns an island-wide fibre optic network built on the electricity network. Though it presently reaches end-users via the incumbent, it intends to roll out its own network to the end-users, in the longer term.

 

Markets not competitive

The dominant incumbent operator in Cyprus has been designated as having “Significant Market Power” with 88% of the market. A second mobile operator (MTN) has the remaining 11.2% of the market, and both already provide 3G mobile services.

The Commission has emphasised that the price of the national roaming services should be cost based, with an appropriate margin between the incumbent’s retail tariffs and its wholesale national roaming tariff (charged to its competitor). This price element is important as the second operator has not yet completely rolled-out its own network (85% in December 2007).

The incumbent operator still has a dominant position with a market share (in terms of total revenue) of 90% for all types of fixed calls and also for international calls. Alternative operators such as MTN provide voice telephony mainly through carrier selection, pre-selection and access to the internet.

 

TV Broadcasts still analogue

Users receive TV broadcasts mainly via analogue terrestrial transmission (88%) and satellite (8%). Nine television channels (seven free-to-air and two pay-tv channels) and 13 radio stations – all with nation-wide coverage – are offered via analogue terrestrial transmission. Cable and xDSL have each less than 5% end-user penetration and are in the early stages of development. This said 2012 has been fixed as the date for switching-off analogue broadcasts.

Rights of way?

In trying to rollout fixed infrastructure, market players have voiced heavy criticism of the very slow granting of the necessary “rights of way”, and the different practices employed by different authorities involved in the licence granting process. In response to infringement actions initiated by the Commission, the competent Cypriot authorities have now taken steps to ensure that applications for the acquisition of rights of way will be evaluated within 6 weeks.

Mobile operators still face difficulties in that most sites in rural areas are government owned. Approval for construction can thus be a lengthy process. Legislation in order to improve this situation is still pending as it has not yet been adopted in 2007.