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ST accused of abusing monopoly over Internet access Internet providers say OnLine Start is forcing them out of business

After four weeks, a protest launched by Slovak Internet providers against state-owned Slovenské Telekomunikácie (ST) remains unresolved. The Internet connection service offered by ST, the providers say, abuses the state firm's telecom monopoly to force other providers out of business.
"This is a war between Slovak Telecom and private Internet providers," said Stanislav Stowasser, director of Internet provider Global Network Services and a member of the Association of Internet Providers (API).
API was formed on February 25 to protest the "Slovak Telecom OnLine Start," the ST Internet service which allows subscribers to log onto the Internet without identification for the cost of a local telephone connection - about 5 cents per 90 seconds. Private Internet providers normally charge a flat monthly rate of around $12.


Stanislav Vanek, a director in the Telecom Ministry.
photo: Chris Togneri

After four weeks, a protest launched by Slovak Internet providers against state-owned Slovenské Telekomunikácie (ST) remains unresolved. The Internet connection service offered by ST, the providers say, abuses the state firm's telecom monopoly to force other providers out of business.

"This is a war between Slovak Telecom and private Internet providers," said Stanislav Stowasser, director of Internet provider Global Network Services and a member of the Association of Internet Providers (API).

API was formed on February 25 to protest the "Slovak Telecom OnLine Start," the ST Internet service which allows subscribers to log onto the Internet without identification for the cost of a local telephone connection - about 5 cents per 90 seconds. Private Internet providers normally charge a flat monthly rate of around $12.

Calling OnLine Start "a clear example of abuse of [ST's] monopoly," API has blocked Internet access for ST subscribers and has launched an information campaign to convince the public that ST is abusing its privileged position as a monopoly telecom provider.

"We will continue with the protest until ST meets two demands: They must make Internet access prices uniform and they must end OnLine Start," said Stowasser.

ST, however, has insisted since the launch of OnLine Start on February 1 that the terms of their Internet access service are not unfair.


Pavel Bojňanský, ST's project and services manager.
photo: Chris Togneri

"We talked to the [Telecom] Ministry, we talked to the Anti-Monopoly Office and they all said that OnLine Start is OK," said Pavol Bojňanský, ST's Product and Services Manager. "This is clearly not an example of ST abusing its status as a monopoly."

The Telecom Ministry, meanwhile, has refused to commit itself to supporting either side. Achieving a compromise between the two parties will prove difficult, officials say, since neither party is willing to give quarter - ST has stated that it will not end the service, while the API will settle for nothing less.

"We have scheduled meetings with both ST and the API," said Stanislav Vanek, director of the ministry's regulatory department. "The API is right, there are some issues that need to be addressed and fixed. The current situation is creating a bad image for Slovak Telecom and for the ministry and it is important to solve the situation now and to avoid such problems in the future."

Monopoly abuse accusations

Protests of innocence aside, ST's OnLine Start has few defenders outside the firm itself. The core of the quarrel is that subscribers using private Internet providers must pay the fees charged by these companies as well as the cost of using ST's phone lines. Subscribers of OnLine Start, however, must pay only the cost of the ST connection, giving the ST service a decisive market advantage over the competition.

The ministry's Vanek agreed that ST was bending the rules, but argued that telecom regulators needed more information before they could act. "ST's monopoly is only for public voice communications," he said. "For the Internet, though, it is the ministry's duty to create a level field for all players. Maybe ST went a little bit too far. [OnLine Start] does seem to create unfair conditions [for private Internet providers]."

The API insists that the Slovak Internet playing field is far from level at the moment. "We suspect that ST could be misusing its position on the market," said Ján Vigás, director of provider Isternet SR and an API member. Vígas reported that the API had filed an official complaint with the Antitrust Bureau on March 9 following a breakdown in negotiations with ST.

"This is clearly an abuse of their status as a monopoly," added API's Stowasser. "I can honestly say that OnLine Start was a dumb thing for ST to do. It's very dangerous for private Internet providers."

Unlike the API, the ministry will not demand that ST scratch OnLine Start, but instead will require that ST stop offering cut-rate Internet access.

"Slovak Telecom must balance the prices for Internet access," Vanek said. "The [current] prices are discriminatory, and ST simply cannot discriminate against private Internet providers."

But ST defends the price differential, saying that the extra connection required to reach the Internet through a private provider costs more than direct access through ST.

"When the customer goes through ST, it is direct access," said ST's Bojňanský. "When they go through other providers, two lines are required. The customer must go through ST and then to the provider. So you can see that this is a totally unrelated issue."

Taking action

API's original February 25 protest blocked access to certain websites for clients using OnLine Start. When attempting to access such sites, OnLine Start users encountered API's information bulletin outlining the group's complaints and explaining the protest.

After some reflection, API members decided to abandon site-blocking, reasoning in a press release that "ST clients do not bear responsibility for the ill-considered solutions of their provider." Access to all sites through OnLine Start is now available, but API information campaign page still greets users.

But the strong-arm protest tactics gave ammunition to ST, with Bojňanský claiming that the API protest had been illegal. "Their information campaign has broken telecom laws and free competition laws," he said. "The Internet is for everyone. Blocking sites is a gross violation, and I personally don't understand why their customers would stay with them."

"For our part, we have no plans to stop OnLine Start," Bojňansky added. "We want [API] to mind their business and to stay out of ours."

"Dumb idea"

For API's Stowasser, the OnLine Start case is very simple - an ill-considered violation of the law. "It was a dumb idea," he said. "I think that someone in middle management probably came up with the idea and didn't really think it through. I don't think they realised how strong a reaction would result from this."

Vanek was not as outspoken, but conceded that haste could have impaired the judgement of OnLine Start's designers. "They have changed all of their top management [at ST]," he began. "I wouldn't say OnLine Start was a dumb idea, but maybe they needed more time to get all the information."

Bojňanský, however, disagreed. "I think it's a great idea, and what Stowasser said is not true. The service was discussed thoroughly with top management and with the ministry. The license for OnLine Start was granted in November but we waited until February to start because we wanted to prepare everything perfectly."

Bojňanský added that the controversy has been great publicity for ST Internet services. "Before OnLine Start, we weren't really known as an Internet provider. Now, we are very well known in that sense," he said. "Of course, that's not why we started the service, but it has proven to be beneficial in that regard."

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