Price wars shake up telecom competition

FOR MORE than two months now, Slovak Telecom has had to compete with other businesses to provide customers with voice services.
Alternative telephone provi-ders are gradually growing their customer base and loosening the former monopoly's tenacious hold on the telecommunications market.

FOR MORE than two months now, Slovak Telecom has had to compete with other businesses to provide customers with voice services.

Alternative telephone provi-ders are gradually growing their customer base and loosening the former monopoly's tenacious hold on the telecommunications market.

Despite the fact that Slovakia's telecom market was liberalized several years ago, a long delay in securing interconnection contract agreements between Slovak Telecom and alternative providers meant that the public did not reap the rewards of liberalization until this summer.

The interconnection deal eventually hashed out between Slovak Telecom and alternative providers is not ideal. Some alternative providers contest that competition on the telecom market is not yet what it should be.

However, the interconnection contract agreements that are currently in place enable alternative providers to access all local loops. This allows them to connect phone calls from all public networks, including those that are owned by Slovak Telecom.

Today, eight alternative operators hold interconnection contract agreements with Slovak Telecom: Amtel Slovensko, Dial Telecom, eTel Slovensko, Globaltel, GTS Slovakia, Nextra, Slovanet, Železnice SR.

Radoslav Bielka, spokesman for Slovak Telecom, told The Slovak Spectator that the interconnection contracts level the playing field.

"By interconnecting our fixed public phone networks with their systems, [alternative operators] have new opportunities. It is up to them how they will take an advantage from these opportunities to benefit their customers," he said.

Bielka added that alternative providers represent a challenge for which Slovak Telecom is prepared.

"Based on what has happened in neighbouring countries, Slovak Telecom expects a certain amount of our customers to use alternative providers but it is impossible to specify how many. But we also expect that after a certain time many of those customers will come back," Bielka said.

Each customer interested in using an alternative provider must pay for a fixed phone line service through Slovak Telecom. Slovak Telecom has set a condition so that customers cannot sign up for the cheapest phone programme (ST Mini) and use an alternative provider. A customer must select at least a standard level of service (ST Standard) to be eligible to use an alternative provider.

ST Standard consists of 30 minutes of "free" phone calls through Slovak Telecom. A customer must pay for the 30 minutes of calls even if the calls are not made.

"Liberalization has not gotten to the stage where alternative providers have a chance to provide services without being tied to Slovak Telecom," Roman Pamula, product manager of eTel Slovensko, told the Spectator.

Petra Vagaská, PR manager of Slovanet, added: "Conditions on the telecommunications market are still not standard. A more active approach on the part of the Telecommunications Office [the body in charge of enforcing liberalization] could be helpful."

On the other hand, Slovak Telecom argues that it owns and services the fixed line circuits and loops. Alternative operators do not have any costs connected to administering the lines. A customer using an alternative provider may use services provided by the alternative company but actually relies on hardware supplied by Slovak Telecom.

According to Bielka, a customer should thus pay a basic fee to Slovak Telecom for the service. He defended the condition of requiring customers interested in alternative providers to sign up for ST Standard saying that, according to Slovak law, Slovak Telecom is obliged to provide access in conjunction with a service.

How does an open market affect the consumer?

According to industry professionals, market liberalization should reduce the cost of local calls 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 Slovak Telecom. However, the new market players are merely matching Slovak Telecom's rates on weekday evenings. Slovak Telecom rates remain cheaper than the competition during weekends.

The Slovak Spectator spoke with alternative providers to get their views on how market liberalization is affecting the consumer. This is what they had to say.

The Slovak Spectator (TSS): Although it has been only a short time since you started providing voice services in what was a former monopoly market, what is your experience so far in terms of the development of the market?

Roman Pamula (RP), product manager of eTel Slovensko: August 2005 represents a starting point for launching voice services for individual customers. Based on our experience, we were able to estimate the situation on the market. The way we see it, the situation is developing as we expected.

Karin Kurpielová, marketing manager, Dial Telecom: Until Dial Telecom signed an interconnection contract with Slovak Telecom, business clients made up 90 percent of our overall customers.

We started providing voice services on July 28, 2005 to households and small firms.

So far, we are content with the market development and we believe that we will be able to fulfil our goals. We plan to attract 5,000 new clients.

Petra Vagaská, PR manager of Slovanet: We started providing services at the end of July.

Our results so far suggest that we will fulfil, even surpass, our plan in attracting new customers. Slovanet reached our goal of 1,000 users at the end of September.

TSS: What advantage do you have compared to your competition?

RP, eTel: Transparent terms under which eTel provides its products.

Products of the former monopoly consist of a system of discounts and that is why it is not possible to tell what the final price will be at the end of the month. On the contrary, with eTel products, we can tell you exactly what price you will pay.

KK, Dial Telecom: Our price is definitely the main benefit. It is the most visible compared to the national telecommunications carrier. There are smaller differences when talking about other alternative operators.

PV, Slovanet:For sure, price is our biggest advantage. Inter-city calls can be cheaper through our programmes by 56 percent compared to standard services of the national carrier.

When calling to mobile nets, Slovanet's customers can save 31 percent, and when calling abroad, they can save 38 percent of the price.

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