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FREE MARKET THEORY IS FINALLY PUT INTO PRACTICE; SLOVAK CONSUMERS GAIN GREATER CHOICE AND LOWER CALL RATES

Telecom monopoly busted

SLOVAK Telecom (ST) has finally released its monopoly hold. Now, Slovaks can choose their fixed-line telephone provider, just like customers in other EU member countries.

SLOVAK Telecom (ST) has finally released its monopoly hold. Now, Slovaks can choose their fixed-line telephone provider, just like customers in other EU member countries.

The delayed liberalization of the Slovak telecommunications market, one of the last monopolies to be broken, was a thorn in Brussels' side. In April, the EU criticized that Slovakia's telecom market environment was not accessible enough to competition.

Although previous legislation has made it possible for alternative operators to provide fixed-line services in Slovakia since 2003, Slovak Telecom's refusal to negotiate interconnection contracts with alternative providers stonewalled the government's liberalization efforts.

Amtel, Dial Telecom, eTel and Slovanet are some of the phone operators now competing with Slovak Telecom. The increased competition means that Slovak customers will likely see call rates sink and service quality go up.

Each fixed-line phone operator is offering unique pricing, turning the marketplace into a battlefield where low call rates will be a major weapon.

According to industry professionals, local calls could drop by 50 percent and international calls by 25.

Slovakia has some of the highest fixed-line phone prices in Europe.

Slovak Telecom's competition is already offering peak time rates at one-third less than ST. However, the new market players are merely matching Slovak Telecom's rates on weekday evenings. ST rates remain cheaper than the competition during weekends.

Slovak Telecom claims that it has been working hard to secure the technical side of the liberalization process to allow alternative providers to interconnect with the company's fixed lines.

Roman Vavro from the Slovak Telecommunications Office (TÚ), which is the state's telecom market regulator, says that seven alternative fixed-line operators have signed interconnection agreements with Slovak Telecom. Only five companies, however, will start providing their services to Slovak customers.

Earlier this year, the Antitrust Office fined Slovak Telecom for its refusal to sign interconnection agreements with alternative fixed-line operators. The antitrust authority also fined Slovak Telecom Sk885 million (€22.6 million) for blocking access to local loops, often referred to as "the last mile", to Internet service providers. ST has sole ownership of the loops.

The fine is the heaviest one levied against a firm in the history of the Slovak antitrust authority.

ST says it is ready for competition and will gain a competitive advantage by offering higher quality services.

"Alternative operators in Slovakia have been around for awhile. The ability to interconnect with our fixed lines gives them more room on the market. It is up to them how they will use this new market opportunity to benefit their customers. Our firm is ready for the competition and we look forward to the challenge of continuously improving our services," Ján Kondáš told The Slovak Spectator.

Kondáš, Slovak Telecom's communications director, also said that ST is accustomed to competition.

"Slovak Telecom has been operating in a competitive environment for a long time. Mobile phone operators are, in fact, competitors of ours. We will simply have to react and adjust our price policies according to the pressure that this new competition brings," he said.

Customers who decide to use the services of an alternative fixed-line operator will have to register with the new company and then dial a four-digit access code before making a phone call. Customers will still have to pay Slovak Telecom for basic service.

While Slovak Telecom is aware that many of its clients will try out alternative providers, the company is confident that they will return to the fold.

"Based on what has happened in surrounding countries, we assume that our customer numbers will drop initially - by exactly how much we can hardly say.

"But experience in other countries shows that customers who seek out alternative operators eventually return to their original provider," Kondáš said.

Alternative operators still feel that the Slovak telecommunications market is restricted and does not meet liberalization standards.

Karin Kurpielová, marketing manager at Dial Telecom, told The Slovak Spectator that compared to other countries, Slovak Telecom's interconnection fees are still too high, which results in higher priced offerings from the alternative providers. "Even though real liberalization of the Slovak [telecom] market has started and customers are able to make cheaper phone calls, the final consumer price is still higher than in the surrounding countries." Kurpielová added: "We believe, however, that [interconnection fees] will gradually drop and we will be able to reduce our prices."

Petra Vagaská from Slovanet agrees that the telecom market in Slovakia is not truly liberalized.

"The Slovak telecom market does not offer standard conditions. ST still refuses access to its local loops, which prevents alternative providers from lowering the price of their voice services. And interconnection fees are too high," Vagaská told The Slovak Spectator.

"A delayed reaction by the Slovak Telecommunications Office is another reason behind the non-standard conditions in Slovakia.

In Great Britain, for example, we can see that an active state regulator can actually support the penetration of high-speed Internet," Vagaská added.

Despite their complaints, alternative operators are certain that their presence on the market will result in lower consumer prices.

"We expect ST to lower its prices, which will, of course, negate all doubts as to whether market liberalization makes sense," Vagaská said.

Dial Telecom's Kurpielová is also sure that prices will drop for the consumer. She is equally confident that the market can support several alternative providers.

"Our surveys show that there is enough space in Slovakia for alternative operators. We assume that ST customers will switch to alternative operators - just as it happened in the Czech Republic," Vagaská told the Spectator.

The challenge for alternative operators is to offer customer packages appealing enough to lure customers away from Slovak Telecom.

In order to educate consumers about their fixed-line options, the Slovak Telecommunications Office has made information about the alternative providers available online, TÚ spokesman Roman Vavro told the Spectator.

The online information contains the kinds of services provided by alternative operators, contractual terms, price lists and other necessary data. The information, supplied by the alternative operators, is available at http://www.teleoff.gov.sk/Uzivatelia/Telefon/telefon.html.

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