Since the liberalisation of Malta’s telecommunications industry, the sector and consumers alike have seen a continuously changing landscape, which is reinventing the ways and means by which Malta communicates.

Publishing its Strategic Plan Update for 2007-2009 recently, the Malta Communications Authority (MCA) has noted that its work carried out over the past year has resulted in “significant progress towards the opening up of the various electronic communications markets to innovation and competition”.

Importantly, the MCA sees an opening up of the sector as having led to a trend of declining retail prices.

Competition in the sector is expected, meanwhile, to be notched up over the coming three years as more wireless access infrastructures such as digital television (DTTV), mobile 3G services and broadband wireless access come on line.

Demand-wise, 2006 has seen public uptake of mobile, DTTV and broadband services continuing to rise, while fixed telephony subscriptions has remained more or less stable. The year has seen the coming to fruition of a number of services resulting from frequency spectrum assignments distributed in 2005, with the first DTTV operation, Multiplus, starting transmissions in the second half of 2005, while Melita Cable is continuing its process of transferring its client base to its newer digital system.

Mobile operator Vodafone began its 3G services just recently. go mobile, meanwhile, has indicated it is to begin offering its 3G services this year, while Maltacom has alluded to a DTTV service beginning sometime this year.

Two new fixed line operators – Sky Telecom and Melita Cable – recently began offering services and have presented the first challenge to Maltacom’s long-held monopoly.

And while there has been a steady stream of new entrants to the industry’s various fields such as internet, mobile and fixed telephony and broadcasting, the MCA has carried out a plethora of market reviews and has imposed several obligations on incumbent players so as to create a level playing field for all those concerned.

In tandem with the entry of new market players and a cornucopia of new services that have elevated communications to new and interesting levels, the industry’s economic impact has also mushroomed.

While turnover in the fixed and mobile telephony markets had stood at some Lm83 million in 2001, the figure had risen to Lm97 million in 2004 and to Lm100 million in 2005. This year, preliminary figures indicate a total turnover of Lm90 million for the electronic communications sector – mobile and fixed line telephony, internet and digital television – for the six months from April to September alone. The industry also employs close to 3,000 workers.

Fixed line telephony

Although two new players had entered the fixed line market toward the end of last year, incumbent supplier Maltacom still holds the vast majority of fixed line subscriptions, which, as at the end of September stood at just over 200,000 – representing a consistent 50 per cent penetration rate.

The number of call minutes landing on Maltacom’s fixed line network, however, has been falling. At just over 27 million minutes being registered over the second and third quarters of 2006, according to the latest available data, the number of minutes has dropped by a considerable 9.6 per cent.

On the other hand, the period saw a 27 per cent surge in mobile telephony. It has been speculated that consumers are turning more frequently to their mobile phones for short conversations, since mobile networks charge by the second the mobile option provides for better economy for quick calls. Fixed line to mobile line traffic, meanwhile, also appears to be on a downward trend.

Mobile telephony

Mobile telephony continued to grow last year and between April and September Active-3 subscriptions (subscriptions that have been open for at least 90 days) rose by 6.1 per cent and reached 345,486. Monthly average revenue per user, meanwhile, stood at Lm10.21 at the end of September, as compared with Lm9.53 at the beginning of 2004.

But while Malta may on the surface appear to have a high mobile penetration rate, at 86 per cent, the country, despite the common perception, actually has the fourth-lowest rate in the EU, which is led by Luxembourg, Greece and Italy with respective percentages of 160, 126 and 122. The EU’s average penetration rate is of 100.4 per cent.

Another stark contrast with the wider European mobile market is in the type of payment plans selected. In Malta, 91 per cent of accounts are prepaid, while the remaining nine per cent are contract (post-paid) accounts. In the EU, however, 42 per cent of accounts are post-paid while only 58 per cent are pre-paid.

With Malta having one of the lowest SMS rates in Europe, the service continues to be immensely popular, with the three months of July, August and September having seen 161 million messages being sent. Over 14 million more SMSs were sent over the six-month period as against the comparable period in 2005, representing a 4.7 per cent rise in traffic.

The rise in messaging is partly attributable to the increase in mobile phone subscriptions, while other attributable factors include the high price differential between voice and SMS tariffs and bulk SMS promotional offers.

MMS traffic, on the other hand, seems to have had a limited take-off and the number of such messages fell by almost 100,000 over the

period.

Roaming

The cost of roaming, making mobile phone calls using a home line while abroad, has become a bone of contention between the EU regulators and the mobile telephony industry and Malta, having among the highest roaming charges in Europe, is no exception.

At 78 per cent, Maltese lead the league of EU citizens who would use their mobile phone more when abroad if the cost of roaming were lowered, according to a recent EU Barometer study published as the EU reinforces its drive to drive down pan-European costs of mobile telephony roaming. The finding is considerably higher than the EU average of 59 per cent.

The special EU Barometer survey was released recently as part of a renewed drive by Information Society and Media Commissioner Viviane Reding to see roaming costs across the EU’s 25 member states brought down closer to levels paid by mobile telephony consumers at home.

Malta has some of the highest roaming charges in the EU and Maltese MEP Joseph Muscat has been made responsible for penning a European Parliamentarian report on the proposed regulation. In the report, Mr Muscat has made it clear that the main focus will be the welfare of consumers that have been milked on roaming charges for a long time. The document has been presented following an initial exchange of views within the Internal Market and Consumer Affairs Committee.

The Council of Ministers and the European Parliament will take the final decisions on the matter and the regulations are expected to come into force at some point this year.

VOIP

The advent of Maltacom’s 1021 Voice over Internet Protocol service has practically eclipsed the previously booming business of international phone cards. Some 16 million VOIP minutes had been consumed over the year’s second quarter alone, of which almost 10 million were 1021 minutes.

Broadcasting

At the end of September 2006, there were 108,204 subscribers of analogue and digital television in Malta. The digital and analogue television markets, the MCA notes, remain buoyant despite competition from a wider availability of DVDs and satellite equipment. Despite two consecutive quarters of negative growth at the beginning of 2005, the subscriber base has been increasing consistently ever since.

At present 26.3 per cent of end-users receive analogue terrestrial television, 5.6 per cent are connected to the digital terrestrial network, while 14.9 per cent and 47.2 per cent are connected to the digital and analogue cable network respectively.

During July 2005 the first Digital Terrestrial Television (DTTV) operator, Multiplus, launched its services. Multiplus has a wide coverage however nationwide coverage is yet to be achieved in 2007. A second licensed DTTV operator – Maltacom plc. – is expected to start the full deployment of its DTTV network soon.

A survey carried out by the NSO during mid-2005 concluded that more than 98 per cent of all residential and non-residential units have access to at least one television set.

There are currently four analogue free-to air terrestrial broadcasting stations in Malta. Each broadcaster owns the transmission equipment and transmits nationwide. Given the proximity of the Maltese Islands to Sicily and southern Italy, Maltese television viewers are also able to receive Italian television analogue and digital channels with their VHF/UHF antenna.

However, the MCA explains, reception of these channels depends on the topology of the receiving site as well propagation conditions. As a result Maltese television viewers are accustomed to having a good choice of free-to-air television channels, which include major Italian television channels such as the national broadcaster RAI and commercial stations such as Mediaset.

There are one AM and 13 FM national radio stations in Malta. A number of Italian radio stations can also be received. Furthermore, a large number of local (community) very low signal radio stations are currently in operation.

There is currently one licensed terrestrial digital audio broadcasting (T-DAB) operator in Malta, but it has not yet undertaken the deployment of its network.

Internet

At the end of September 2006, the total number of broadband and narrowband internet subscriptions stood at 94,748, representing an increase of 6,553 subscriptions over September 2005.

Narrowband subscriptions, partly due to a statistical anomaly, still account for the majority at over 58,000 while broadband subscriptions account for just over 36,500 subscriptions.

The figures represent a 23.5 per cent internet penetration rate. The percentage of broadband subscriptions, however, is slightly misleading in that EU standards classify a 128kbps, always-on subscription as narrowband.

Dial-up minutes continued to plummet and fell by a further 33.4 per cent over the six month period, mainly due to an increased take-up of “always-on” internet which now includes narrowband (128kbps) as well as broadband bandwidths.

Market reviews and imposition of obligations

Over the past year MCA has worked on lowering entry barriers and placing various regulatory measures on operators, particularly those designated with so-called Significant Market Power (SMP).

Such work, aimed at ensuring a proliferation of competition, and the imposition of regulations on such SMPs has resulted in the entry of new market players in the areas under the MCA’s remit.

2006 was characterised by a number of emerging competition issues meriting closer scrutiny, as well as a distinct thrust on the regulatory treatment of issues such as the bundling of services and potential duopoly situations.

Over the coming year, the MCA is to concentrate on the application of regulatory remedies emerging from a wave of market analyses carried out over 2005 and 2006. These have included analyses of Malta’s fixed line market, the broadband market and the mobile telephony market.

Such remedies generally impose obligations such as transparency, non-discrimination, accounting separation, local loop unbundling, third party wholesale access and price control and cost accounting on SMPs in various communications sectors.

The MCA this year issued a number of reviews on Malta’s mobile telephony market. Publishing its final decision on its “Wholesale Access and Call Origination on Mobile Networks” consultation document, the MCA had found ample evidence that Vodafone Malta and go mobile, which enjoy a collective dominant market position, have engaged in coordinated market practices over at least the 18 months leading up to the review, and has imposed a number of remedies on the mobile telephony sector to counteract the state of affairs.

Such coordinated practice, the MCA has found, takes place on both the wholesale level, where coordination is focused on denying access to alternative providers, and at the retail level, where the focus is on price.

The strategy benefits the operators by enabling them to maintain a symmetric dominant position in the market, continue to make above-normal profits in the long-run, limit potential competition which would be likely lower market prices and reduce revenues, and maintain their vertically-integrated dominant position in the market.

The MCA has also found that they enjoy significant high profits not normally associated with what is deemed as a competitive market.

The two operators, according to the MCA, have high and symmetric market shares in a concentrated market, have homogeneous products and product portfolios, and enjoy sustained high profitability levels. The MCA has also found evidence of a lack of price competition in that retail prices have remained stable, the existence of high entry barriers, evidence of parallel behaviour, lack of potential competition, low countervailing buyer power; and no offer of wholesale access and call origination services.

The MCA also turned a critical eye toward Malta’s broadband market, where it found the wholesale market is “conducive to coordination” by the two main players. In its document, the MCA established that Malta’s wholesale broadband access market is “not effectively competitive” and that “as a result of the SMP enjoyed collectively by Datastream (which provides broadband through DSL) and Melita Cable (which provides broadband through its cable infrastructure) in the said market, the MCA is required at law to impose appropriate remedies”.

The MCA document stipulated that “The MCA considers that, given the similarity of broadband products and the prices at which these products are offered, the market is conducive to coordination. The lack of reductions in prices over the past two years is indicative of limited competition.

“The MCA is of the opinion that Melita Cable and Datastream have a high incentive not to engage in price competition and maintain the overall current market structure. Furthermore, Melita Cable has an incentive not to grant access to third-party ISPs in order to maintain its high market share and competitive advantage over other ISPs.”

On fixed line telephony, the MCA has proposed changes to Maltacom’s fixed line interconnection rates that would see fixed line call origination and termination rates dropping considerably from the current average of Lm0.513 per minute to Lm0.345 per minute this year.

The MCA has proposed cutting Malta’s interconnection rates by 33 per cent, following a similar cut in 2005. The new rate, however, is still 34.8 per cent higher than the EU25 average.