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CRITICS CLAIM SLOVAKIA NOW HAS MOST EXPENSIVE INTERNET IN OECD

Telecom price rises seen as Internet barrier

Slovakia's telecom monopoly Slovenské Telekomunikácie (ST) raised tariffs for Internet use July 1 as part of a wider package of price rises for its services, drawing the ire of the information technology (IT) community and small businesses.
The rate for two minute connections - the time many businesses use for checking emails - rose 80% to 4.50 crowns ($.90). Meanwhile, the cost of using the Internet for Slovaks for one hour at off-peak times (between 7pm and 9am) rose from 18.75 crowns to 23.62 crowns, a 26% jump, while the hour rate at peak time increased by under 1% from 60 crowns to 60.52 crowns.
ST also introduced a special fee of 1.50 crowns for dialling up to the net. The rate is paid whether the user gets connected to the server or not.


Internet growth is being stifled by high prices for use, say many in business and the IT industry.
photo: Vladimír Hák

Slovakia's telecom monopoly Slovenské Telekomunikácie (ST) raised tariffs for Internet use July 1 as part of a wider package of price rises for its services, drawing the ire of the information technology (IT) community and small businesses.

The rate for two minute connections - the time many businesses use for checking emails - rose 80% to 4.50 crowns ($.90). Meanwhile, the cost of using the Internet for Slovaks for one hour at off-peak times (between 7pm and 9am) rose from 18.75 crowns to 23.62 crowns, a 26% jump, while the hour rate at peak time increased by under 1% from 60 crowns to 60.52 crowns.

ST also introduced a special fee of 1.50 crowns for dialling up to the net. The rate is paid whether the user gets connected to the server or not.

Some smaller businesses attacked the rises as financially damaging, claiming that the prices for a two minute connection will raise their costs dramatically.

"In smaller companies such as ours, an increase in prices for short time intervals might result in less intensive use of the Internet," said Daniel Blonski, co-owner of web-page design firm Štúdio 001. "And the 1.50 crown fee [for connection to the Internet] is the worst thing about the rises," he added.

IT experts also criticised the hikes, saying that they would do little to help a Slovak Internet penetration rate (defined as the percentage of inhabitants that have home Internet access) that is far below the Organisation for Economic Cooperation and Development (OECD) average - 2.3% compared to 28%. They also said that in terms of comparable purchasing power, Slovak Internet prices were now the highest in the OECD, a body which Slovakia joined last year.

"When we look at these figures and compare them with Slovakia, we see that Slovaks pay the highest rate for Internet connection of all OECD members," said Marián Ďurkovič, IT manager at the Slovak Technical University in Bratislava and a member of the advocacy group Association of Internet Providers (API).

Ďurkovič added that the cost of Internet use in Slovakia, when adjusted for the relative purchasing power of inhabitants in all countries, was seven and a half times higher than in America, which has the cheapest Internet rates of all OECD states.

The average American now pays just over $20 for 30 hours of Internet access. When adjusted for relative consumer purchasing power, Internet use in Slovakia would cost $150, while the OECD average would be just under $60. In neighbouring Poland it would be slightly over $100, Hungary $125 and the Czech Republic $140.

Nominally attractive

ST has disagreed with criticism that its rates discourage Internet use. Speaking July 11, the firm said it was too early to comment on the impact of the new connection rate on Internet use in Slovakia. "We obviously don't want to avoid this issue, but we would rather wait until the end of this month and see how much this new rate is reflected in phone bills," said ST spokesperson Gabriela Nemkyová.

However, Nemkyová denied that ST's current price policy would adversely affect Internet use in Slovakia. "Current rates for Internet connection are considerably lower than rates for local calls, and therefore ST cannot agree that current prices lower Internet use," Nemkyová said.

According to ST, Slovaks will pay $39 for 30 hours of Internet use (without the purchasing power adjustment). Thirty hours of local calls would cost $58.

Nemkyova also claimed that Slovakia's Internet rates compared favourably with the majority of European countries.

"Our real price is rather advantageous. For example, our rate at peak time is lower than in most European countries," Nemkyová said.

Data provided by ST for the price of Internet use among 15 OECD countries showed that the cost of 40 hours of Internet use in Slovakia at peak time - just under $60 - was lower than eight of those states.

Monopoly abuse

ST's policy on Internet pricing has drawn it into conflict with IT and educational groups in Slovakia in the past, and earlier this year saw the firm fined 10 million crowns by the anti-monopoly office for abusing its monopoly status. ST was fined for placing frequency filters on fixed lines, thereby inflating the cost of Internet use - a move which the office ruled was illegal.

The filters limited data transfers for Internet access, and cost users up to five times as much as original Internet connection rates on the same lines.

The recent price rises have again raised fears of ST's monopoly power. Some businesses said that little could improve before ST lost its monopoly in 2003.

"We have to accept the new rates because of ST's monopoly. It would make sense to cancel ST's monopoly," said Róbert Šajty, operation manager at water cooler installation firm Dolphin Slovakia.

Ďurkovič said that in raising its prices, ST was stunting growth in Internet penetration, as well as hurting small businesses.

OECD calling for change

The OECD has also criticised the costs of using the Internet in Slovakia, claiming it is damaging Internet penetration.

Juraj Sýkora, vice-head of the Slovak delegation at OECD in Paris, said that the new rates set by ST would have to decrease by 30% to 40% to reach the EU average and spark a significant rise in Internet penetration. The higher the decrease, the more customers ST would have, he argued.

"The question now is how much ST can decrease its rates to get new customers and increase Internet penetration," he said.

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