Commission opens in-depth investigation into the proposed review of the wholesale broadband market in Hungary

On 29 November 2024, the European Commission opened an in-depth investigation into the Hungarian national regulatory authority's draft market analysis concerning the wholesale local and central access market.

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Currently, due to a series of mergers and acquisitions, there are two main operators in Hungary: Magyar Telekom Group, and 4iG Group, which acquired the Hungarian assets of Vodafone, Digi and Invitech. There are also several smaller alternative providers with local coverage, mainly in less populated areas.

In its analysis, the National Media and Infocommunications Authority (NMHH) identifies in both wholesale markets, which encompass access provided over copper, cable and fibre, six geographic markets based on the two former concession areas of Magyar Telekom Group and 4iG Group, which are both further subdivided into three areas depending on the different degree of coverage and market share achieved by the alternative operators.

NMHH carried out a three criteria test and found that in four out of six geographic markets the first criterion, i.e. the presence of high and non-transitory barriers to entry, is not met. Therefore, NMHH concludes that these markets are not susceptible to ex ante regulation. In the remaining two geographic markets, NMHH found that all the three criteria are met, hence ex ante regulation is warranted. In these markets, NMHH identified as SMP operators Magyar Telekom Group in one market and 4iG Group in the other.

However, while conducting a new market analysis, NMHH intends to maintain the currently imposed full set of regulatory remedies until the market situation becomes more stable in light of:

1. The ongoing completion of the new corporate structure of 4iG Group resulting from the mergers and acquisitions;
2. The planned co-investments/commercial agreements, commitments and potential creation of wholesale-only undertakings, which could impact regulation.

The Commission has serious doubts as to the compatibility of the NMHH's draft measure with EU law and consequently opens the Phase II investigation on the following grounds:

• The inconsistent application of the first criterion, as all geographic markets defined by NMHH encompass municipalities with small and large population, to the extent that similar conclusions on the (in)existence of high and non-transitory barriers to entry could be drawn in parts of each of the identified markets. This serious doubt then extends to the geographic market definition, as it appears that in some circumstances municipalities falling within the scope of regulated markets present similar conditions to the municipalities falling within the scope of deregulated markets;
• Maintaining existing regulatory remedies does not correspond to the identified competition problems, as NMHH intends to maintain (temporarily, yet for an unclear and potentially significant period of time) regulation on markets which are deemed competitive and in spite of the significant delay in the review of the market.

The Commission has two months to further investigate the draft measures and the evidence presented therein, in close cooperation with the Body of European regulators (BEREC). At the end of the Phase II investigation period, the Commission may either lift its reservations or issue a veto under Article 32 of the European Electronic Communications Code. During this period, the NMHH will not be able to adopt its draft measures.

The Commission's serious doubts letter opening the in-depth investigation will be available online on CIRCABC.

The invitation to third parties to submit their observations is published in CIRCABC.

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