4 Jul 2011Bulgaria Broadband Overview

The Bulgarian Internet market is experiencing rapid changes resulting from the emergence of new relatively cheap technologies (cable, Ethernet, wireless) and foreign investment. As there are no regulatory barriers and no barriers for entry into the retail segment (no licence is needed), new alternative ISPs have started entering the market making Bulgaria's telecom sector a rather competitive arena.

However, the incumbent Vivacom (formerly BTC) owns Bulgaria's fixed telecommunications network. Although officially the incumbent’s monopoly over fixed telephony services ended with the liberalisation of the telecoms market at the end of 2002, Vivacom is still the dominant player in the fixed line and DSL markets. When BTC was privatised, the underground tunnels that contained its cable network became its private property. Requests from ISPs to roll-out their cables in the BTC-owned underground network were often rejected, despite the fact that this was allowed by law. BTC responded to these requests by saying that access was ‘technically not possible’.

During 2006, BTC was put under increasing pressure to shed its market dominance in the light of the country's planned accession to the European Union in 2007. Although the telecoms sector has been liberalised, it remains one of the most uncompetitive in Europe. Even though 10 companies have received licences to build and operate networks for the period of 20 years, the incumbent continues to serve about 98 per cent of fixed voice traffic. BTC has been accused of most forms of anti-competitive behaviour, but rival providers are particularly unhappy about the incumbent’s failure to provide them with bitstream access and the high interconnection rates.

BTC’s monopolist behaviour delayed the introduction of digital services over analogue networks for several years. As a result alternative ISPs skipped that stage and started providing digital services over digital networks. Some are now installing optical cable networks. However, both the incumbent and some alternative operators have complained about insufficient or ineffective measures against LAN (Local Area Network) operators, who distort competition by not paying taxes or licence fees or by having illegal cable installations, which enable them to offer disproportionately low-price products of average quality. In particular, a number of fixed broadband operators have allegedly deployed overhead cables in urban areas or illegally accessed the incumbent's ducts. Recent amendments to the law gave the regulator the authority to issue fines to ISPs that deploy overhead cables within certain urban areas. Thus optical networks are now constructed underground. However, the replacement of the airborne networks with underground networks could take 3-5 years.

One of the distinctive features of the Bulgarian broadband market is the separation of Bulgarian and international broadband traffic, using different pricing. This separation emerged when ISPs introduced LAN technology for broadband access. LAN created the demand for cheap local content, initially mostly pirated films, music and software. As data consumption grew and demand for bandwidth increased, the price per unit of data came down. This resulted in cheaper and more accessible broadband services. This phenomenon is quite common in Eastern Europe, especially in countries like Russia where there is a lot of local content and local traffic. Currently, the difference in volumes between local and international traffic in Bulgaria is about five to one. Since local traffic consumption is still significantly higher than international, the pricing differentiation is still applied.