Polish Market of Internet Providers – anticipating broadband revolutionPublished: 09.12.2013
Poland is facing a revolution on the fixed line internet market towards a higher share of fiber optic technology in broadband access. As an EU member, Poland is obliged to implement the European Commission’s Digital Agenda to develop a uniform digital market by 2020. Public units responsible for the construction of broadband infrastructure are local governments in cooperation with private internet providers.
Analysts point out that there are still some problems with establishing public-private partnerships in this domain, and local authorities are often unaware of the business aspect of these new investments. All of these developments will unfold as the heavily fragmented market heads towards consolidation.
Optic fiber on the rise
Analysts predict a gradual loss of popularity of copper-wired internet access to an infrastructure based on optic fiber.
“The number of xDSL (broadband technology based on copper wires – PAP) subscribers will decline – these won’t be big declines, a few percent at most. Yet the biggest growth will happen in the services based on optic fiber network. The construction of this network is related to the EU-financed projects,” told PAP Grzegorz Bernatek, the Head of Analysis Department at Audytel, telco and IT consultancy.
Parallel to that, the experts expect wider access to broadband internet and the number of users. By 2016, more than half of Poles will have an access to broadband internet (43% as of today), while the number of internet connection lines will reach 6,6 mln – PwC analysts predict. Moreover, Audytel predicts that by 2018 the number of lines will increase further to 9 mln.
Cable TV/Internet providers have quite early prepared for the upcoming investments by modernizing their network with technology that allows internet transfer of up to 300 Mb/s, Bernatek pointed out.
Market share of fixed line Internet providers in Poland 2013
Although the cable TV providers have already prepared for the changes, other big market players are facing tough questions. “Telekomunikacja Polska (TPSA, major fixed line telco company - PAP) has so far focused on copper wires, which usually offer a worse service quality and do not allow for connections faster than 10-20 Mbps. Investing in this technology does not have any financial rationale so the future of these networks is uncertain,” said Bernatek.
Difficult cooperation of local governments and operators
The local governments are required to provide the backbone broadband network, which will act as a sort of artery that will allow for smaller cities and rural areas to gain a better access to Internet. Unfortunately, problems with efficient cooperation between the local governments and private companies arise.
“The local governments are not fully aware of the way an efficient internet provider works: what are its duties and rights, how to increase market share and revenue sources, which will guarantee a proper functioning of the networks,” assessed Bernatek.
“The problem with local governments is that they don’t know how to function on the commercial market, haven’t worked out models of private-public partnerships. They are not able to write a business plan and build a network that will match the actual demand rather than their own imagination,” commented Witold Tomaszewski, the chief editor of telepolis.pl online magazine, in a conversation with PAP.
A separate phenomenon concerning the private-public partnership is the fact that small rather than large companies are chosen by local governments to build the network infrastructure, Audytel’s analyst pointed out.
“It’s interesting to observe that the public tenders announced by local governments are often won by small internet providers. They are building the network organically, by installing the access points in places where the scale of business would prove unprofitable for a bigger company,” concluded Bernatek.
Further market consolidation seems unavoidable
The whole fixed-line market, Internet, telephone and TV service, are heading towards consolidation, Tomaszewski noted. Polish market is relatively fragmented when compared with other European markets: Copper wire technology is dominated by TPSA and Netia. Cable TV (often sold with internet) big players are UPC, Vectra and Multimedia. Big local internet providers include Inea in Poznan and Toya in Lodz. The rest of the market are local-scale companies or neighborhood cooperatives.
Broadband Internet penetration in Europe, July 2012
Source: European Commission, www.ec.europa.eu
Poland together with Romania are the only EU members with more than 1000 internet providers, Audytel reported.
“Such fragmentation, rather unusual in Europe, will lead to consolidation. It will happen because it’s cheaper for bigger entities to buy equipment and big companies have a better position against so-called OZZPA (organizations of collective rights management) when negotiating the distribution of TV content,” said Tomaszewski.
“There is still a lot of micro, neighborhood internet providers. Many analysts think that they won’t survive the competition with bigger companies and step by step will be selling out. I’m skeptical about such scenario, as up till now these micro companies have managed quite well on the market,” added Bernatek.
Source - Polish Press Agency, Economic Service