The Association of Internet Providers (API) has said that a "temporary agreement" reached with the state run Slovenské Telekomunikácie (ST) over an Internet access squabble has not even begun to address the larger dispute between the bodies. In fact, API representatives say, private Internet providers will continue their protest against ST and even attempt to strip the state provider of its monopoly in a national referendum.
During a March 17 meeting attended by ST, the API, the Telecom Ministry and the Anti-Monopoly Office, the API agreed immediately to discontinue its protest against ST's Internet access service "OnLine Start" on two conditions - that ST take steps to address security issues and balance Internet access prices for ST and non-ST customers, and that these measures be completed by the end of March.
API had originally launched its protest of OnLine Start on February 25, alleging that ST was charging ST customers lower prices to use the Internet access service than customers who used the services of private Internet providers. This was unfair, they said, because ST as a monopoly telecom provider controlled all fixed line access to the Internet.
The API also protested what it called "misleading advertising" from ST, as well as "serious security flaws" in OnLine Start.
Frank Petro, the founder of API and the director of Internet information company Wizzard Systems, said that far from being satisfied with the March 17 agreement, the API will continue and even intensify its protest against ST. "OnLine Start is only one of many issues of dispute we have with ST," he said. Pointing to ST's plans to change all analog lines to digital, the API accused ST of attempting to render private Internet providers obsolete.
As a result, the API has begun a petition that could end in a national referendum allowing Slovak citizens to vote on whether ST should be stripped of its voice communications monopoly. If citizens voted in support, analysts said, it would foil the state's plan to find a strategic foreign partner for ST.
Analog versus digital
Over 67% of Slovak Telecom's phone lines are still analog, said Pavol Bojňanský, ST's Product and Services Manager. In an attempt to conform to international standards, Bojňanský said ST decided in 1997 that all lines should be changed to digital by means of installing 'pulse-coded modulation modems' to the existing analog lines. Analysts have said that the change will bring Slovakia up to western standards, but the API says it is a ploy to run them out of business.
"This is the most dangerous action that ST is planning," said Stanislav Stowasser, API member and director of provider Global Network Services. "OnLine Start does not carry the serious potential implications that the change-over to digital does."
API's Petro agreed, saying that the "[private Internet providers] must fight this change because digital is two to four times more expensive than analog. We will have to pay higher prices for the lines which will force customers to pay higher prices. We will lose customers as a result and, in the end, it will kill private Internet providers."
Juraj Toma, president and CEO of finance company JKM Group International, explained that the transition to digital began on the first of the year and has already resulted in price hikes. Toma has been following the API dispute for his firm.
"At the end of '98, an analog line cost one to three thousand Slovak crowns per month, depending on the number of local exchanges," Toma said. "As of January 1, the prices for these analog lines were raised to 4,000 crowns ($100). Now, ST wants to change to digital and charge providers between 8,500 crowns ($220) and 17,000 crowns ($440) per month, possibly seventeen times the amount they were paying three months ago."
But analysts are not convinced that the move to digital has the ulterior motive the API claims it does. Boris Kostík, a research and sales analyst with Slavia Capital brokers in Bratislava, said that analog lines are simply outdated and that the digital installation is a standard step aimed at advancing Slovakia's deficient technological development.
"All developed countries have digital," Kostík said. "This is not an attempt to run private Internet providers out of business, this is simply a global trend."
ST, too, thinks that it has been victimised by small private firms who do not have what it takes to stay in business and are looking for a scapegoat. Bojňanský called the API's allegtations that ST was trying to corner the market "patently false," and said "the market is too small for the number of private Internet providers which currently exist. They are looking for anyone to blame for their inability to survive. It is easy to blame a monopoly."
The API, however, is sticking to its guns and has launched plans to end the voice communications monopoly currently enjoyed by ST. Under Petro's leadership, the API has begun a petition drive in an attempt to collect the 350,000 signatures required by the constitution to force the government to call a national referendum that would let the voters decide whether or not ST should retain its monopoly status.
"In meetings I have had with ST representatives, they have said that they expect over 50% of all private Internet providers to go bankrupt once a strategic partner is found for ST," Petro said. "We currently constitute 70 to 80% of the market, but they are trying to kill us off. Obviously, we cannot allow this to happen."
As a result, Petro explained, the API feels the only solution is the petition. Having secured 10,000 signatures in a little over a week, Petro said the petition has a long way to go and added that governmental support is unrealistic.
"The anti-monopoly office is a joke, the coalition cannot be counted on for support, and Prime Minister Mikuláš Dzurinda, who promised to aid Internet providers during the elections, has apparently gone back on his word," Petro said. "If we can find the resources, we will get the signatures but it is impossible to predict when it will be completed."
Bojňanský laughed outright when he heard of the petition. "It's impossible for the petition to succeed," he said. "The government said that ST would have a monopoly, and this is still state policy. This monopoly will be manitained because it is in the national interest."
For his part, Slavia Capital's Kostík, said that if the petition were to succeed, the results for ST would be devastating. "It would be very bad for Slovak Telecom," he said. "The price for a foreign investor would drop drastically. ST needs to be a monopoly because they need money for systems restructuring."