Real barriers to virtual networks

By Timothy Sifert

Companies wanting to penetrate the country's concentrated mobile telecom market by becoming mobile virtual network operators (MVNO) are meeting hurdle after hurdle from the country's three mobile operators and an undecided regulator.

And there seem to be few immediate solutions in sight. Already the telecom watchdog, the Office of Telecommunications and Post Regulations (URTiP), has awarded 13 firms, including Tele2, Teleplus, SM Media and Onet.pl, MVNO licenses to provide mobile services via wholesale agreements with existing mobile operators. For E5,000, they can launch virtual mobile services in the next five years.

Yet, with licenses in hand, these companies met closed doors when they called on Polska Telefonia Cyfrowa, Polkomtel and PTK Centertel - the country's three mobile operators - for the necessary agreements that would allow them as MVNOs to operate here as successfully as they do in the U.K. and Germany, for instance.

Sweden-based Tele2, which offers voice, data and Internet services, has received a "quite cold" reception from the three operators, said Johnny Svedberg, the firm's market area director for eastern Europe and Russia.

"We've been in discussions over the past one and a half years," he said. "There doesn't seem to be much of an interest. Traditionally, when we come into an area we start with fixed-line (service) and then the next step is to add mobile services."

Tele2 already provides telecom services in Poland.

The MVNO hopefuls point to a recent comment by Sławomir Skrodzki, Centertel's president, that his company does "not plan cooperation with any of the MVNOs in the near future," as a case in point.

What's more, according to some, the national telecom regulator appears to lack direction in developing the MVNO market.

Witold Graboś, URTiP president, acknowledges the apathy among mobile operators with respect to MVNO and cites his own inaction in sparking agreements between potential MVNOs and the mobile operators.

"The URTiP president can order that two networks be connected," he said. "But with virtual operators there are no networks, so I cannot order that a network be connected to a non-network."

In setting up an MVNO, companies have to reach agreements with existing operators whereby they buy airtime at wholesale prices and then resell it under a different brand name. In the U.K., conglomerate Virgin has been a successful example of this.

Graboś continued: "Polish law does not contain the definition of a network. We do not know what technical infrastructure constitutes a network. It is a problem that the URTiP, and possibly the infrastructure minister, will have to address in the near future."

The culmination of these recent signals has squelched whatever optimism potential MVNOs had. Nevertheless, Wojciech Gawęda, the president of SM-Media, believes that the market could take off in two years.

"We have a license, but we cannot begin (offering services) because we do not have an agreement, because (mobile operators) don't want them," he said.

Having thus far sold the licenses, Graboś still believes that only a few companies will be able to stake out a profitable portion of the telecom market. Despite what the potential MVNOs say, the regulator has his own yardstick for the service's success.

"I do not believe that every license will lead to the creation of a financially viable business," Graboś said. "But that doesn't need to be the ideal. If 10% of them remain on the market, I will deem it a success."

Yet some market watchers steer clear of blaming the regulator or the mobile operators, claiming that the mobile market is too underpenetrated (just over 34%) for MVNO service to bloom.

SM-Media's Gawęda said he recognized that when a mobile market reaches about 60%-70% penetration, as it did in the U.K. and Germany, virtual operators could more easily find a place on the market. But for now, he said, "operators think we are competitors."