Commission Report (2002): Czech Republic

• Progress since the last Regular Report
• Overall assessment
• Conclusion

Chapter 19: Telecommunications and information technologies

Progress since the last Regular Report

Since last year`s Regular Report, the Czech Republic has progressed significantly in terms of liberalisation of the telecommunications market but not as regards the clarification of the regulatory framework.

Concerning liberalisation of the telecommunications market, significant, although tardy, progress was made with the introduction of the carrier selection facility in July 2002. The Czech Telecommunications Office has granted prefixes to all operators that intend to enter the market in July 2002. The legal framework for the number portability facility is set in the Telecommunications Act, but it is due to be provided only from January 2003. A general re-numbering plan was successfully implemented in September 2002.

Competition is strong in mobile services, where the penetration rate has reached 70%. The mobile sector has become a direct competitor to the incumbent`s fixed network service. There are three GSM operators and the Government has granted two out of the three available Universal Mobile Telecommunications System (UMTS) licences, so that UMTS operations can begin when market conditions permit.

Increased competition in fixed network services has been made possible by big improvements in speed of delivery of interconnection, the level of interconnection prices and access to carrier selection facilities. Fixed wireless access has been licensed for some years and is beginning now to be used more widely for broadband Internet access. Fixed network modernisation is complete but penetration peaked at 38% and is now slowly falling.

In August the government decided to privatise the state`s majority stake in the incumbent dominant operator, Cesky Telekom. This should help to improve the competitive environment.

No progress can be reported as regards the improvement of the regulatory framework.

In March 2002 the Czech Government adopted an Updated Action Plan of State Information Policy in order to bring its targets closer to those of e-Europe+ 2002. It contains, among other elements, a list of information society projects to be implemented by Public Administration bodies.

As regards postal services, no particular progress can be reported since the last Regular Report.

Overall assessment

Concerning liberalisation of the telecommunications market, the existing legal framework has not facilitated the entry of alternative operators to the market. Vital facilities for market liberalisation, such as carrier selection, have only recently become available. The market has been largely controlled by a single operator in which the State holds a majority stake. The incumbent has achieved much in modernising its network, but has been constrained by regulation to maintain a less than fully commercial approach to its business. For these reasons it has been difficult for alternative operators to compete even though the market has legally been open. The recent decision to go ahead with privatisation of the incumbent should, once implemented, help to improve the competitive environment.

Local loop unbundling remains to be achieved. Current legislation (including recent implementing legislation) does not fully transpose the acquis as regards universal service.

The amended legal framework needs to ensure that vital parts of the earlier acquis are properly implemented before moving on to reflect the updated acquis for the sector.

Cost orientation for voice telephony supplied by operators with significant market power is missing. The Czech Republic has not yet been able to evaluate the economic implications of fully implementing the universal service acquis. The Czech Republic will need to transpose the updated telecommunications acquis before accession and to complete the implementation procedures as soon as possible afterwards.

As regards the regulatory framework, the Czech Telecommunications Office has been legally established as the Regulator. However, considerable powers remain at the Ministry of Transport and Communications. The authorities have not yet responded to the EC's repeatedly expressed view that the presence of Ministry appointees in the management structure of the incumbent is incompatible with the acquis. This is a problem because of the Ministry's involvement in the enactment of implementing legislation, e.g. in relation to universal service. A clear separation between operational and regulatory functions needs to be secured and maintained.

The Regulator has some functions not required by the acquis which dominate its budget. Where its powers are sufficient, it has been effective in regulating the sector, but there remain weaknesses in the primary law, particularly concerning the timely enforcement of the Regulator`s decisions. Thus legal amendments are necessary to provide for the appropriate competencies and independence of the Regulator.

As regards postal services, the Czech Republic has made good progress with the level of alignment with the acquis, but it needs to establish an independent regulatory body. Legislation in force lacks clarity on the definition of the reserved area and some discrepancies exist regarding universal service obligations. Also, further implementing legislation is necessary in order to achieve full alignment with the Community postal acquis.

Conclusion

In its 1997 Opinion, the Commission concluded that the Czech Republic should have little difficulty in complying with the acquis in the medium term, provided that current efforts in transposition of laws and their implementation were continued. It added that the tariffs should be further re-balanced in order to enable the public operator to take up competition.

Since the Opinion considerable progress has been achieved. The Czech Republic`s telecommunications policy developed strongly along EC lines with an emphasis on competition, development of the telecommunications infrastructure and diversification of the market. However, competition in the telecommunications market was held back unnecessarily for 18 months after market opening in January 2001 The situation was compounded by the relatively weak position of the Regulator and by gaps in the Telecommunications Act. Despite these problems, the Czech Republic is now overall relatively well advanced as regards the market liberalisation. Further efforts are needed to complete the process of liberalisation. Alignment with the postal services acquis has made good progress but regulatory improvements are necessary.

Negotiations on this chapter have been provisionally closed. The Czech Republic has not requested any transitional arrangements. The Czech Republic is generally meeting the commitments it has made in the accession negotiations in this field.

In order to complete preparations for membership the Czech Republic`s efforts now need to focus on full liberalisation of the telecommunications market and on strengthening the regulatory framework, both in the telecommunications and in the postal sector.

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