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Telecom law fails again

The Slovak Spectator | 14.07.2003

Slovak parliament unable to override presidential veto on law that would liberalise telecom market

By Dewey Smolka
Spectator staff

THE LIBERALISATION of Slovakia's telecom market was again set back with parliament's failure in early July to pass a revision to the country's telecom law over the veto of President Rudolf Schuster.

The lack of a new telecom law effectively preserves the de facto fixed-line monopoly enjoyed by dominant carrier Slovak Telecom (ST) and blocks competing operators from providing fixed-line services through ST's network, say representatives of the Association of Telecom Operators (ATO).

"The saddest part is that [the bill's failure in parliament] happened immediately after the announcement of Slovakia's signing the contract on EU accession," said ATO head Vladimír Ondrovič.

Although the law passed parliament in May with the support of 68 out of 118 members present, the bill needed an absolute majority of 76 votes in the 150-member assembly to pass over Schuster's veto. However, only 59 legislators supported the bill on July 1.

Potential ST competitors and EU officials have long been critical of the slow pace of telecom liberalisation in Slovakia.

At a June telecom conference in Bratislava Erkki Liikanen, the European Commissioner for Enterprise and Information Society, criticised the fact that rates for the interconnection of existing fixed-line and mobile networks are still kept as confidential information in Slovakia.

Alternative operators complain that ST has not yet published its 'reference price' - the basic rate competitors would pay to use its network, and that without the reference price, they are unable to negotiate openly on connecting different networks.

Although 13 companies have so far received licenses to operate fixed-line telecom networks in Slovakia, none have yet concluded an interconnection deal with ST.

"It is sad to hear that the revised telecom law, which could have improved the situation, was returned to parliament," said Liikanen at the conference.

The rejected law would have required ST to open its local loops - the final connections with end users - to competition, and come up with a reference price within 60 days of the law's signing. The law would also have strengthened the authority of the market regulating Telecom Office (TÚ) and changed licensing procedures.

A nearly identical law failed to pass parliament last summer, also following a Schuster veto. As a result, ST was not required to unbundle its local loops when its monopoly status expired in January 2003.

Although Schuster cited the increased levels of fines that could be levied by the TÚ as his main reason for rejecting the law last year, the revision was sent back to lawmakers this year over concerns that some revised measures in the bill may be in conflict with unrevised portions of the law, explained Schuster's spokesperson Ján Füle.

Schuster also objected to measures that would shift some of the costs for state wire-tapping activities from the telephone companies to the state budget, Füle said.

The bill's failure brought angry reactions from TÚ regulators, who have long complained that their office is under funded, understaffed, and dependant for its budget on the Ministry of Post, Transport, and Telecom.

"The text of the [currently valid] telecom law does not give TÚ enough authority, and without fault, the office has become the target of criticism," said agency spokesperson Roman Vavro.

"The TÚ will have to go on making decisions according to deficient legislation, and consequently will run into avoidable problems," he added.

According to the ATO, Slovakia's inability to create an open telecom market is forcing skilled workers to seek employment abroad.

"Experts, whose educations were funded by Slovak taxpayers, are losing opportunities here and are leaving for neighbouring countries. [The solution] depends on the creation of a competitive space in the area of telecoms," said Ondrovič.

Critics have long been accusing ST of deliberately holding up the liberalisation process in order to consolidate its market dominance. After the law failed last summer, some suggested that intense lobbying by ST and an alleged secret clause in the privatisation contract with German giant DT convinced enough lawmakers not to challenge Schuster's veto.

Although the existence of the clause has never been confirmed, it is rumoured to guarantee DT, which bought 51 percent of ST in 2000, a significant market share. In the last year, however, more than 8 percent of ST's customers have cancelled fixed-line contracts.

Alternative operators suggest that the state, which holds the remaining 49 percent of ST, may also be seeking to delay full market liberalisation in order to keep ST's market dominance.

"I absolutely do not regard the telecom law's revision as a political problem. If parliament doesn't pass it, it will only be from selfishness," said Ondrovič to SITA news agency before the July parliamentary vote.

While acknowledging that the law's failure was a minor setback for market liberalisation, Telecom Minister Pavol Prokopovič remains confident that the market will be open before Slovakia's accession to the EU next May.

According to the minister, the EU still requires Slovakia to adopt and implement a law on electronic communications that will supersede the current telecom law before the country's accession.

"The ministry has undertaken all steps so that the law on electronic communication, which contains all the terms that were in the [rejected] revision to the telecom law, is completed as soon as possible," said Prokopovič.

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