Information Technology Landscape in

ESTONIA

                          Privatization and Deregulation

One of the important principles of the Estonian IT policy is to support demonopolization in order to ensure competitiveness within the industry. The government approved two important acts concerning telecommunication business –Telecommunications Act and Cable Distribution Act – to ensure fair competition and avoid creation of monopolies in the market.

Beginning in 1992, Eesti Telefon was a dominant company on the market and had specific agreement with the government concerning development of the national telephone network and telephone services. In return, the company was guaranteed monopolistic rights in the market for local long-distance calls and international calls. However, as of 1 January 2001 the Estonian telecommunications market is completely open to competition. Relations between Eesti Telefon and the Estonian government are regulated by the Agreement terminating the concession agreement, which was passed on 29 December 2000.

The data communications market has always been open to competition in Estonia, and the service is offered by several companies. The most well known of these are Eesti Telefon, Uninet, Tele 2 and Microlink. Close competition between service providers has brought down data communications prices, above all the price of permanent connections.

The telecommunications market as a whole is regulated in Estonia by the Telecommunications Act. This Act, passed on February 9, 2000, facilitates the emergence and development of telecommunication market, exercises pressure on the monopoly of Estonian Telephone and those operators whose market share is above 25%. The law obligates Estonian Telephone to provide universal services for the same price all over Estonia. The main objective of the Act is consumer protection and fair distribution of restricted resource, i.e. radio frequencies and numeration. The purpose of the Act as it is put in the Act itself is “is to create favorable conditions for the development of telecommunications and to guarantee the protection of the users of telecommunications services by promoting free competition.” The Act “establishes the requirements for telecommunications networks, for the operation of telecommunications networks and for the provision of telecommunications services, and the procedure for state supervision of compliance with the established requirements.” Also, the Act “guarantees the purposeful and just planning, allocation and use of telecommunications limited resources.”

According to the Cable Distribution Act, a cable network shall not be an undertaking which accounts for more than 40 per cent of the turnover in the market of telephone services which are provided in Estonia or an undertaking which has a holding of more than 10 per cent in such company either directly or through partners, shareholders or third persons.

A company can be declared to have a significant market power (which basically means that it has too much of a market to impede competitive processes) based on many conditions, the most important of which is the company’s market share. A company can attract the government’s attention if it controls 25% of the market. Further, if a company controls more than 40% of the market, than it is governed by the Competition Act (Estonian equivalent to Anti Trust Laws)