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Hungary: Consolidation complicates the review of broadband markets

Despite completing a new analysis, the NMHH is seeking to carry over existing remedies until the market settles down

The EC’s “serious doubts letter” signals a detailed review of the proposals

On 29 November 2024, the EC opened an in-depth investigation into the draft market analysis by the National Media and Infocommunications Authority (NMHH) of the:

  • Wholesale local access (WLA) market – Market 1 of the EC’s 2020 Recommendation on relevant markets; and

  • Wholesale central access (WCA) market – formerly Market 3(b) of the EC’s 2014 Recommendation.

The EC’s serious doubts letter communicated the launch of the investigation into these markets, which are key to shaping broadband competition at the retail level. Following some M&A activity, the country now has two principal operators: Deutsche Telekom-owned Magyar Telekom and 4iG, which has acquired the Hungarian assets of Digi, Invitech and Vodafone. There are also several smaller altnets with local coverage, mainly in less populated areas. In both WLA and WCA, which include access provided over copper, cable and fibre, the NMHH identified six geographic markets based on the two former concession areas of Magyar Telekom and 4iG. It then subdivided these six areas into three depending on the different levels of coverage and market share achieved by altnets.

The NMHH is looking to roll over existing regulation until market dynamics stabilise

The NMHH performed the three criteria test and found that in four out of six geographic markets the first criterion – i.e. the presence of high and non-transitory barriers to entry – was not met. It therefore concluded that these markets are not susceptible to ex-ante regulation. In the remaining two geographic markets, the NMHH found that all the three criteria were met, indicating that ex-ante regulation would be warranted. Here, the regulator identified Magyar Telekom as having significant market power (SMP) in one market and 4iG as having SMP in the other. However, despite undertaking a new round of market analysis, the NMHH intends to maintain the full set of regulatory remedies currently imposed by its previous review until the market situation becomes more stable, citing:

  • The ongoing corporate structuring of 4iG resulting from recent mergers and acquisitions; and

  • The planned co-investments/commercial agreements, commitments and potential creation of wholesale-only operators, which could impact regulation.

The EC has expressed concerns that the proposed regulation may be illegal or at least not address the identified competition issues

The EC has voiced serious doubts as to the compatibility of the NMHH’s draft measure with EU law and consequently opened an investigation on the following grounds:

  • The inconsistent application of the first criterion of the three criteria test to define geographic markets; and

  • Maintaining existing regulatory remedies (for an unclear and potentially significant period of time) would not address the identified competition problems, while also continuing the regulation of markets deemed to be competitive.

The EC has two months to examine the draft measures, and will be working in close cooperation with the Body of European regulators (BEREC). At the end of the investigation period, the EC may either withdraw its opposition or issue a veto decision. During this time, the NMHH would not be able to adopt its draft measures; however, the regulator appears to have pre-empted the outcome of the review, withdrawing them for both wholesale markets on 3 December 2024. That the EC has launched such an investigation is not uncommon, with regulators in the Czech Republic, Estonia and Malta facing scrutiny of their plans for wholesale broadband regulation in recent years. In Malta, the Malta Communications Authority (MCA) opted not to appeal the EC’s veto, instead informing the EC that it would notify a reassessment of the wholesale fixed access markets in due course, with the aim of consulting on a new market analysis by the end of 2024.