|Europe I 2002
|Telecom Liberalization in a Transition Country: Inserting Slovenia in the Global Economy
|Dr. Pavel Gantar
|Minister Information Society Ministry
|Republic of Slovenia
Slovenia’s Information Society Ministry, and its recently created regulatory agency, have made great strides liberalizing and upgrading the country’s telecommunications sector as a pre-requisite to its effective participation in the global information economy. Generally, no authorization is needed to start any telecommunications service. Fixed operators, because of universalization requirements, and mobile service, because of the need for frequency coordination, are exceptions. The regulatory agency is expected to act shortly to reduce interconnect charges and guarantee access by new service providers.
The Information Society Ministry of the Slovenian government, elected at the end of 2000, has a strong commitment to promote and support the use of information society tools. The Information Society Ministry was established to facilitate the rapid development of Information and Communication Technology (ITC) in Slovenia. It incorporates two departments: the Department for Information Society Applications and the Department for Information Infrastructure. The rationale for this organization is as follows. The field of telecommunications and information, particularly the development of an information society, is based on increased access to knowledge and the supply of information and services through all types of networks and, as well, the fusion of different media. ICTs have gone through important changes and deserve considerably greater attention from the State because of developmental opportunities and imperatives. Some of the most characteristic world trends indicate: o The rapid development of high-capacity data transfer technologies and networks, and the combination and fusion of different digital-based media; o The development of new generations of data transfer through mobile media, and the combination of fixed and mobile telephony; o The rapid deployment of the Internet and related services in business, education, government, administrative and other environments; o The development and interconnectivity of different networks (telephone, cable, optical, satellite, wireless, radio and television, mobile telephony) and the consequent creation of a new information infrastructure that facilitates the convergence of networks and the fusion of services. Slovenia, for reasons of survival, must be a part of these global developments. Telecommunications Legislation when the Ministry was Established – Year end 2000 A peculiar interregnum was in place at the end of 2000. As a result of the 1997 Telecomm Act, the incumbent operator (Telekom Slovenije) lost the monopoly but there was no legislation in force, to regulate the market. Therefore, establishment of a legal framework for a liberalized telecommunication market was the first priority. Immediately after the formation of the Ministry, a Draft Act was submitted to parliament with a request for fast track consideration. On May 11, 2001, the new Telecom Act took effect. It was quick, but not easy. In the past the Incumbent had successfully delayed all attempts at liberalization; it expected to maintain its advantage in the new framework as well. The President of the Incumbent, a former high-level politician, used all the political Pressure available to him to minimize the impact of the liberalization. The incumbent’smain concerns were the local loop unbundling, cost-based pricing and the elimination of cross-subsidies between the services. Nevertheless, the Ministry was able to persuade the legislature that these changes were for the good of the economy and of the country as a whole. The resulting Telecommunications Law not only contains all the elements of a fully liberal legal environment, but in some areas even goes one step further than EU practice. It requires the sharing of installations and objects (poles, ducts, fibres, antenna towers, etc.), providing that fair compensation to the owners of the respective resources can be negotiated between the operators. In the case of disagreement between the operators, the National Regulatory Authority (NRA) has to intervene. The Act specifies stiff penalties for the operators and responsible managers that infringe its provisions. This should provide incentive to the operators to behave according to the new rules. “The development of an information society is based on increased access to knowledge and the supply of information and services through all types of networks and, as well, the fusion of different media” Any telecommunication service can start without explicit authorization; with the exception of the fixed and mobile telephony providers, which must only notify the NRA. In the case of fixed operators, the provision of funds for universal services must be coordinated with the NRA. Mobile operators must first get authorization because of the need to coordinate the frequencies, a scarce resource, that they will use. Subsequently, secondary legislation needed to implement the Act was prepared. The Ministry, and twenty more by the Regulator passed twenty-five decrees. Roughly 80% are now ready. The remaining secondary legislation, considered to be optional and not operationally crucial, is in the works. The Regulator The establishment of the Regulator was one of the most important elements in the liberalization of Slovenia’s telecommunication market. Its formal name is “Agency for Telecommunication and Broadcasting of the Republic of Slovenia”. It was established in July 2001, and by mid-August, the Director of the Agency had been appointed by the Government of Slovenia. The Director’s mandate, determined by the Act, is for 5 Years; he can be removed from the office only if proven that he broke the law. The Agency absorbed the staff of the former Telecommunications Office that dealt mainly with the technical regulatory issues, like frequency management and supervision, numbering space management, terminal equipment approval, etc. Today, the most important tasks of the agency are those connected with the regulation of the telecommunications market. At present, there are almost 50 people on the agency’s staff; there are plans to increase the workforce to close to 70 within the next year or so. To gain the knowledge necessary to perform their assigned roles, an extensive training programme has been set up for the staff members with the help of the friendly German Regulator (RegTp). The training courses, workshops and case studies deal with telecommunication services price calculation and supervision, cost accounting, cost- Based pricing, adoption of the German bottom up model for LRIC cost assessment, and the like. ” The establishment of the regulator was one of the most important elements in the liberalization of Slovenia’s telecommunications market” The Agency will soon have to interfere in the network interconnection charge question, presently one of the biggest liberalization obstacles. Is was reduced in the beginning of 2002, but still does not provide the incumbent’s competitors with a margin that will enable them to provide customers with a realistic alternative for long – distance fixed – voice telephony services. These past reductions were voluntary adjustments of the interconnect prices by the incumbent. In the next step the adjustments will be based upon international benchmarking, but the benchmarks for the Central and Eastern European countries are not yet ready. When the benchmarks are available, the LRIC model of the Slovenian telecommunications network will be used to determine the interconnect charges. Slovenia’s Telecommunication Market There have been encouraging results in the following areas: The leased line market has three major operators: Telekom Slovenije, ELES (an electrical power distribution company) and Slovenian Railways. The incumbent controls at least 80% of the leased line market. As a consequence, the prices are on average 30% higher than the EU average. Nevertheless, one can envisage more competition in this market fairly soon, since ELES is integrating with local electricity distributors to provide users with last-mile wideband access. “Telecommunications Law not only contains all the elements of a fully liberal legal environment, but in some areas even goes one step further than EU practice” About 100 new operators announced the commencement of their services, mainly as Internet Service Providers, or Voice over IP operators. But 12 have requested service access codes, and two have applied for fixed voice operator’s licences. As might be expected so soon after liberalization, the incumbent is quite uncooperative and the Agency will have to exercise its prerogative. Slovenia is fairly advanced in several other areas as well: Mobile telephony The first GSM 900 operator started its services in 1997. There are now three GSM operators active in the Slovenian market of two million inhabitants. In addition three DCS 1800 licences were awarded in the beginning of 2001, and one UMTS licence at the end of 2001. Two operators offer GPRS. Mobile phone penetration has already reached 75%. The fact that, due to a relatively high license fee, only one operator submitted the proposal, and only one UMTS license has been awarded, should in our opinion not hamper the competition for the 3G services. Serious discussions have started between the operators to utilize a single, physical, and 3G network. The Slovenian market can, by no means, support two or more networks in the first phase of 3G deployments without imposing a heavy price burden on the customer. “Characteristic world trends indicate the rapid development of high-capacity data transfer technologies and networks, and the combination and fusion of different digital -based media; the rapid deployment of the Internet and related services in business, education, goverment, administrative and other environments; the development and interconnectivity of different networks (telephone, cable, optical, satellite, wireless, radio and television. mobile telephony) and the consequent creation of a new information infrastructure that facilites the convergence of networks and the fusion of services” Fixed voice telephony This is another area where one can be quite satisfied with the developments. Although fixed telephone penetration, at 45%, does not seem very high, statistics show that 93% of Slovenian households own a telephone. The rapid development of telephony in Slovenia took place during the last decade. As a result, most of the equipment is very modern, with digitalization of exchanges and trunks reaching 99.5%. Roughly 30% of the access lines are ISDN based. Unfortunately, ADSL deployment started only a year and a half ago, and its penetration is still less than satisfactory. Cable TV operators in some regions, though, do provide broadband access to the Internet. The Slovenian Academic and Research Network (ARNES) ARNES has participated since the beginning in the European Internet projects devoted to the construction of fast academic and research backbone networks. ARNES took part in the TEN 34 and TEN 155 projects and is a member of GEANT, the latest pan-European Gigabit backbone, providing connectivity to 30 national R&D networks. Far from being totally satisfied with our progress so far, we still see some domains where much more intervention by the State – by the Information Society Ministry – will be required to spur further advance in the development of the Information Society, including: Wide availability of broadband Internet access A pilot project to provide every house in a village in a remote rural area with very high-speed access is about to start. A project, with a working title of “Fibre to every school and library”, is now being studied to determine which operators could provide this facility at an acceptable price. Conclusion Present development in liberalization of the telecommunications market make us believe that we are on the right track and that, with relatively small corrections in the regulatory framework and determined interventions of the agency if and where required, one can achieve the required level of development in this crucial area. 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