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ALTERNATIVE OPERATORS HAIL NEW LAW, BUT ST WARNS IT WILL NOT HAVE TIME TO CALCULATE REFERENCE PRICE

Telecom liberalisation draws closer

A REVISED telecom code has again passed parliament, as Slovakia works to complete what has been a long and bitter process of liberalising the country's telecom market. President Rudolf Schuster must still sign the bill before it becomes law, however, and the country's dominant operator, Slovak Telecom (ST), is complaining that it cannot comply with some requirements on time.
Although ST's fixed-line monopoly expired at the beginning of this year, the company has not yet been required to open its local loops - the final connection to telephone users - to competition. Because of this, say the law's backers and alternative telecom providers, ST still holds a de-facto monopoly, as it is not required to openly negotiate connections with competing networks.

A REVISED telecom code has again passed parliament, as Slovakia works to complete what has been a long and bitter process of liberalising the country's telecom market. President Rudolf Schuster must still sign the bill before it becomes law, however, and the country's dominant operator, Slovak Telecom (ST), is complaining that it cannot comply with some requirements on time.

Although ST's fixed-line monopoly expired at the beginning of this year, the company has not yet been required to open its local loops - the final connection to telephone users - to competition. Because of this, say the law's backers and alternative telecom providers, ST still holds a de-facto monopoly, as it is not required to openly negotiate connections with competing networks.

A nearly identical law passed by parliament last year would have required ST to open its network when the monopoly ended in January this year, but a Schuster veto killed the measure.

"The liberalisation of the telecom sector should have been fulfilled in January 2003; it is now May 2003 and there has been absolutely no liberalisation in Slovakia," said one of the authors of the bill, Jaroslav Baška, from the opposition party Smer.

"The purpose of [the new telecom law] is firstly to remove the serious insufficiencies included in the present telecom law - [obstacles] that the liberalisation of the telecom sector cannot overcome," said Baška.

Besides requiring the opening of local loops, the new bill also strengthens the powers of the market-regulating Telecom Office (TÚ), increases the level of fines the TÚ can levy, and changes licensing procedures. The increased level of fines, up to Sk50 million (€1.2 million), was the reason given by Schuster for his veto of the measure last year.

Officials from ST complain that the higher fines are only applicable to their company as the dominant carrier. They also complain that the law does not give them enough time to calculate a reference price - the basic rate at which ST will charge competitors to use its network.

"The amended [telecom law] that has been presented includes very important and interesting changes, but unfortunately it is not possible to implement these changes under the given conditions," said ST president Miroslav Majoroš in an interview with Slovak Television.

"We are not going to prepare for things that we know only from verbal statements, and invest billions to prepare for conditions that we know nothing about," he said.

The law would require ST to come up with a reference price within 60 days of the law being signed, but company officials say they need at least six months to work out the cost details associated with connecting different networks.

"In surrounding countries, the preparation of a reference price took 10 to 14 months; we are not in a position to prepare it in [the time that] the amended law requires," said Ján Kondáš, vice-president of ST's communications department.

"None of the MPs who voted for the revision have any experience in drawing up a reference interconnection offer," he said.

These claims, however, have been rejected by the Association of Telecom Operators (ATO), which holds that ST has known for several years that liberalisation was coming, and has had plenty of time to work out connection rates.

The TÚ has already given out 15 fixed-line licences requiring their holders to begin offering service within six months - in most cases, by this July. But providers say they cannot begin offering services until ST's rates are fairly and transparently set.

"Everybody with an interest [in telecoms] has known that it will be necessary to fulfil these conditions and offer these services," said ATO head Vladimír Ondrovič.

"If this [telecom law] passes, we will presume that in the second half of this year the TÚ will exercise its authority and its responsibilities as a regulator, and create pressure on interested parties to close connection contracts," said Ondrovič.

Critics have long been accusing ST of deliberately blocking the liberalisation process to consolidate its market dominance, and some suggested last summer that intense lobbying by ST and an alleged secret clause in the privatisation contract with German giant Deutsche Telekom (DT) convinced enough lawmakers not to override Schuster's veto.

Although the existence of the clause has never been confirmed, it is rumoured to guarantee DT, which owns 51 percent of ST, a significant market share in Slovakia. In the last year, however, more than 8 percent of ST's customers have cancelled service.

The European Commission also recently fined DT €12.6 million for overcharging rivals for access to local loops in Germany.

Representatives from the ATO say that the present and past behaviour of ST and its German parent show that strong regulatory authority must be applied to secure a truly open telecom market.

"As several verdicts of the Antitrust Office have clearly shown, ST, when carrying out telecommunications activities, tends not to abide by laws in serious matters and directly endangers the operation, and even the very existence, of alternative operators," said ATO officials in a written statement.

Although market regulators welcome the new authority the TÚ would have, they point out that while the law mandates the office to approve a reference price and interconnection contracts between telecom providers, it does not allow the TÚ to be involved in crafting the deals.

"The revised law would solve a number of problems," said TÚ spokesperson Roman Vavro, who has long complained that the office is under funded, understaffed, and dependant for its budget on the Ministry of Transport, Post, and Telecom.

"But the law is not perfect - it doesn't give TÚ, as a regulator, the opportunity to participate in upcoming negotiations on [network] connection," said Vavro.

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