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RR RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHWR #0688/01 0791521
ZNR UUUUU ZZH
R 201521Z MAR 07
FM AMEMBASSY WARSAW
TO RUEHC/SECSTATE WASHDC 3686
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHKW/AMCONSUL KRAKOW 1640
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS SECTION 01 OF 03 WARSAW 000688 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR EUR/NCE, EUR/ERA, EB/CIP 
EUR/NCE FOR DKOSTELANCIK AND BPUTNEY 
COMMERCE FOR 4232/ITA/MAC/EUR/JBURGESS, JKIMBALL, MWILSON 
STATE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: ECON ECPS EINT PL
 
SUBJECT: POLAND: COMPETITION INCREASING IN TELCOM SECTOR 
 
 
WARSAW 00000688  001.2 OF 003 
 
 
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SUMMARY 
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¶1.  Competition in Poland's telecommunications sector is increasing 
rapidly due to the strong new policies of the telcom regulator.  By 
forcing the monopoly telcom company, TPSA, to lease its lines to 
other telcom providers, consumers finally can choose which voice and 
internet services they use.  Now, with alternatives available, all 
telcom providers have begun to lower prices and market new services. 
 The future is in broadband internet access, which is growing at 10% 
a year.  The tough hand of the regulator doesn't come without 
drawbacks, but most agree it's what's needed to finally move the 
market toward greater competition. 
 
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BACKGROUND 
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¶2.  Telekomunikacja Polska S.A. (TPSA) is the former national 
operator and remains a major player in all segments of the market. 
TPSA was privatized in 1998, with France Telecom as a strategic 
investor.  TPSA still holds over 85% of fixed-line telcom services 
and owns most of the fixed-line infrastructure.  The telcom market 
was liberalized in 2002 and there are no restrictions on foreign 
investments across the telecommunications sector.  Additionally, 
licensing has been replaced by a simplified registration procedure 
at a nominal fee.  The new Telecommunications Law of July 16, 2004, 
which came into force on September 3, 2004, fully harmonizes Polish 
regulations with EU directives.  Although laws are EU compliant and 
the market is legally open to competition, the sector is still 
marked by invisible barriers to entry, mostly due to TPSA tactics 
designed to maintain market position. 
 
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REGULATOR SHOWING TEETH 
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¶3.  Poland's telecommunications regulator, Urzad Komunikacji 
Elektronicznej (UKE - Office of Electronic Communications), is 
responsible for consumer protection as well as increasing 
competition in the market, which leads to increased quality of 
services and a lowering of prices.  Although the telcom market was 
deregulated in 2002, there were few real changes in policy until 
2006 when Anna Strezynska was appointed as President of UKE.  Since 
Strezynska took office, the changes have been real and frequent. 
 
¶4.  UKE has shown itself to be a strong hand against the monopoly 
TPSA, not backing down as TPSA finds ways to change conditions, 
postpone implementation of new regulations, or claims that changes 
cannot be implemented due to "lack of technical possibilities." 
Alternative providers agree that they could not have gained market 
share without such tough moves by UKE and that continued toughness 
is necessary until the market catches up with EU standards. 
However, some think that UKE may be moving too fast and not thinking 
through the implications of some of its decisions, possibly causing 
prices to fall too rapidly, not enabling the new operators to make 
enough profit to finance further investments. 
 
¶5.  The most important new regulation imposed by UKE to increase 
competition forced TPSA to lease lines to other telcom providers. 
This enables customers to choose from a variety of telcom providers 
without limitations on location.  TPSA is required by law to provide 
universal coverage, therefore, every home in Poland has a TPSA line 
connection possibility.  With other telcom providers now able to 
lease those lines from TPSA, telcom companies can compete with TPSA 
for customers.  Following this recent change in law, almost 200,000 
customers left TPSA for another provider in the first month. 
 
- - - - - - - - - - - - 
UKE BATTLE WITH THE EU 
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¶6.  The EU recently filed a claim against UKE because it believes 
that UKE is overstepping its authority.  The claim is against a 
recent UKE action that would force TPSA to lower the fee it charges 
to customers to maintain a TPSA line, while the customer only uses 
the line to access alternate providers.  (NOTE:  As an example: If a 
customer uses the TPSA line into his house only to access broadband 
internet services via Netia, the customer is still charged 35PLN 
($12) by TPSA.  That is the same amount TPSA charges land line 
customers to keep a phone line functioning.  UKE believes if the 
customer is using no TPSA services, the fee should be lower.  END 
NOTE.)  The battle over this one issue has drawn a disproportionate 
amount of attention compared to its importance in increasing 
 
WARSAW 00000688  002.2 OF 003 
 
 
competition.  Competitors claim that TPSA (which is owned by France 
Telecom) is lobbying Brussels to avoid paying the huge fine imposed 
by UKE, just one of the numerous tactics TPSA is using to delay 
implementing UKE decisions. 
 
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FUTURE IN BROADBAND 
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¶7.  TPSA currently controls 85% of the fixed line telephone market. 
However, new providers are not focusing their efforts on increasing 
their share of the fixed line market as fixed line voice services 
currently have only a 3.5% annual growth rate.  The focus of new 
providers is on broadband internet, which is being provided via the 
lines leased from TPSA.  In the broadband market, TPSA holds only 
40% of the market, with cable operators holding another 18% of the 
market, and telcom competitors filling in the rest.  The leading 
telcom competitors are Tele2, Netia, Dialog and GTS Energis.  There 
is no U.S. investment in any of these companies. 
 
¶8.  The broadband internet market in Poland is experiencing a rapid 
growth spurt.  In 2002 penetration was only 1.24%, by 2004 it 
reached 3.3%, and in mid 2005 it was 4.2% using EU definitions. 
However, sector representatives believe that 25% of Poles have 
internet access in their homes, and 60-70% have some sort of public 
access.  It is estimated that 3 million households in Poland have 
broadband internet access at home, which accounts for 12 million 
people, or 25% of the Polish population.  (NOTE:  The discrepancy is 
likely due to how broadband access is measured.  The EU counts only 
those who have downstream capacity in excess of 144 kbit/s, while 
sector representatives are referring to those who have a service 
that is always on, with no dial-up needed, regardless of speed.  END 
NOTE.)  The actual numbers of those with broadband access is 
difficult to count as numerous local re-sellers of internet service 
exist.  An apartment complex or whole neighborhood may be wired 
through one local provider, who has purchased the access/line from 
one of the major alternate providers.  The major alternate provider 
would count that as only one customer, but the neighborhood 
provider/re-seller may be providing service to thousands. 
 
¶9.  According to sector representatives, the broadband market is 
growing at 10% a year, with an additional one million people gaining 
access in their homes.  Growth of the broadband market is due in 
huge part to the aggressiveness of UKE in implementing regulations 
that encourage competition, which in turn lowered prices.  But, it 
is also due to the falling costs of computers, enabling more Poles 
to have access at home.  Growth will continue as technology improves 
and customer demand for additional services (eg. video on demand, 
voice over internet) increases. 
 
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STEADY GROWTH IN MOBILE MARKET 
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¶10.  Mobile telephone services also continue to grow steadily with 
33% growth in 2004, and 26% growth in 2005, as prices continue to 
slowly fall.  A new, fourth, mobile provider will enter the market 
in March 2007 when the alternative telcom provider Netia will launch 
its mobile service "Play."  Play hopes to gain customers not only 
through competitive prices, but through the offering of new 
services. 
 
¶11.  The role of the UKE in the mobile market is much more limited, 
as the sector does not face the monopoly hurdle that is present in 
the fixed-line market.  UKE's main involvement is in offering 
tenders for new frequencies, which it handles professionally and 
fairly.  The most recent frequency tenders show that mobile 
providers now have the capacity to offer much more high-tech 
services than they actually offer, likely due to lack of customer 
interest. 
 
- - - - 
COMMENT 
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¶12.  UKE and its president Strezynska are regularly highlighted in 
the press for their efforts to increase competition in the telcom 
market.  Most Poles agree that UKE needs to have a heavy hand in 
dealing with the monopoly TPSA and forcing it to allow more fair 
competition.  UKE's struggle to stay ahead of TPSA's tactics appears 
to be working, specifically as almost 200,000 customers left TPSA 
when first given the opportunity to choose an alternative.  However, 
UKE must be careful that is does not overstep its legal boundaries 
as the EU is watching carefully (likely fueled by TPSA lobbying 
efforts).  The future in broadband internet promises to be one of 
 
WARSAW 00000688  003.2 OF 003 
 
 
competition for customers through price and services, something 
desperately needed in Poland. 
 
ASHE