April 2000

Czech Republic Master Report

1. The interaction between business and regulatory constraints

1.1. The regulatory background

The former Federal Ministry of PTT of Czechoslovakia had prepared and in April 1992 the Federal Parliament approved the Amendments of the Telecommunications Act, dating from 1963. In accordance with the EC GREEN PAPER, the Amendments of the Telecommunications Act provided the changes as follows:

• De-monopolizing and liberalization of telecommunications;
• Start with the privatization of telecommunications; and
• Separation of the state administration from economic activities.

The Amended Telecommunications Act separated the regulatory and operator functions and created the possibility to open the telecommunications services for the competition.

The Amended Telecommunications Act also opened the possibilities for the private sector access to the providing of telecommunication services for the public in the environment of the Czech market.

In accordance with the decision of the Czech Parliament, the Amended Telecommunications Act was accepted for the Czech Republic, too. The regulation of telecommunications was divided between two ministries. The Ministry of Transport and Communications [MTC] regulates an entrance of competitors into telecommunications. Prices for providing of national services are regulated by the Ministry of Finance.

The state administration in the area of broadcasting, including the corresponding parts of the frequency spectrum, is ensured by the Council of the Czech Republic for Radio and Television Broadcasting. The Council, appointed by the Czech Parliament, particularly participates in the application of the Principles of the State policy relating to broadcasting, exercises the supervision on the observance of corresponding legislation, and together with the Czech Telecommunication Office [CTO] works out the plans of frequency spectrum utilization.

The responsibilities within the Ministry of Transport and Communications have been divided as follows:

The Czech Telecommunication Office

• Determines the basic conditions for the system of the state regulation in telecommunications and the rules of the licensing policy;
• Represents the Czech Republic in international organizations;
• Prepares international agreements;
• Determines the principles for the frequency spectrum management;
• Manages the preparation of national plans for the telecommunications networks, i.e. Numbering Plan, Noise Plan, Transmission Plan, Synchronization Plan; etc. And approves these documents;
• Determines the set of standards for telecommunications;
• Organizes the tender procedures for the public networks and services;
• Issues the authorizations for public networks and services;
• Approves prices for international telecommunication services;
• Issues licenses for the private networks and services;
• Issues licenses for other commercial activities in telecommunications;
• Issues permits to establish and operate transceivers;
• Works out the draft prices for the telecommunication services on the basis of the price regulation concept;
• Approves technical characteristics of telecommunication equipment and certificates their acceptability;
• Manages the frequency spectrum;
• Monitors the observance of parameters and licensing conditions of broadcasting radio-communication facilities;
• Performs the state administration and the state inspection in the field of telecommunications;
• Investigates cases of breaches, interference and jeopardizing of telecommunication networks and equipment;
• Makes decisions in administrative proceedings, concerning disputes involving users and operators of telecommunication networks and services;
• Deals with appeals against decisions made in the early stages of administrative proceedings.

Department of Telecommunications

• Determines the strategy of the State Telecommunication Policy,

• Accomplishes the activities of the state administration, concerning loans and governmental guarantees.

On August 10, 1994 the Government of the Czech Republic approved the Main Principles of the State Telecommunication Policy. The fundamental ideas were as follows:

1. to increase the number of main telephone lines more than twice until 2000,
2. to maintain the integrity of the operator SPT TELECOM, a.s,
3. to enable the entry of the strategic partner to the joint-stock company SPT TELECOM a.s.,
4. the tender for the strategic partner will be carried out until March 1995
5. the State share in the equity of SPT TELECOM, a.s. will not fall down under 51%
6. the State regulatory framework will be fully completed by the 30 June 1995
7. the tariff policy predicated on a tariff formula based on the development of the inflation and the correction coefficient will be completed by the 30 November 1994
8. SPT TELECOM, a.s. will obtain the exclusiveness for providing long distance and international telephone services up to the year 2000
9. In so called local networks the entry into business will be enabled also to other subjects
10. Three licenses for mobile telephone service in the GSM will be issued.

The practical implementation of the Main Principles of the State Telecommunications Policy, i.e. the current state of liberalization, is presented in the following table:

Source: Czech Telecommunications Office, http://www.ctu.cz/english/ts_seco.htm, latest update from http://www.isss.cz/sbornik/telekomunikace/stadnik.doc

1.2 Business constraints and entry barriers

All alternative operators wishing to offer telecommunication services must obtain a license from the Czech Telecommunications Office, or need to register with the CTO (in the case of services covered by the so-called general licenses, issued by the CTO). Registering with the CTU is the case with offering Internet access services (among others).

In areas where competition is allowed, obtaining a license (or registering) does not seem to pose a barrier or constraint. This can be documented by the following table, showing the number of individual licenses issued for offering telecommunication services (excluding registering with the CTU):

Source: http://www.isss.cz/sbornik/telekomunikace/stadnik.doc

1.3 Attitude of the incumbent operator towards alternative network providers

The incumbent is obliged to reach interconnection agreements with alternative operators by 6 months after being presented the agreement. This obligation is not contained in the currently valid Act on Telecommunications (dated 1963 and later amended), but comes from the license he obtained from the Czech Telecommunications Office. Mobile operators are similarly obliged (by their licenses) to reach interconnection agreements in # months.

During the last quarter of 1999, the incumbent operator (SPT Telecom) and operators of mobile phone networks (Radiomobil, EuroTel and Cesky Mobil) opened talks concerning their interconnection tariffs. The issue was to lower currently very high tariffs when calling mobile networks from the fixed phone network (now at 10 CZK per minute, approx. 0,3 Euro).

1.4 On-going regulatory developments concerning alternative networks

In December 1999, the Ministry of Transport and Telecommunications published a strategy document concerning the introduction of UMTS third generation networks. By publishing this document, the ministry wants to open public discussion on the issue of introducing UMTS, and wants to generate valuable feedback from all relevant players on the market.

In November 1999, the Czech Telecommunication Office issued Unified Rule no. 10/R/1999 concerning the allocation of frequencies in the 26 GHz band for FWA (Fixed Wireless Access, point-to-point and point-to-multipoint). The effectively usable bands are 24.5 - 26.5 GHz, and the Czech Telecommunications Office intended to issue licenses both for Point-to-Point (P-P) and Point-to-Multipoint (P-MP), with a country-wide or regional scope. But the demand fairly exceeded expectations and the available frequency range, so in March 2000 the CTU decided to open a public tender and issue countrywide licenses to only 3 FWA providers. Rules of the public tender were published on March 20th, 2000.

Source: Czech Telecommunications Office, http://www.ctu.cz/26ghz-01.htm

2. Inventory of the major " public " utilities with a potential for use in IS applications:

2.1. Aliatel

Aliatel was founded in May 1996 as a joint telecommunication project of Czech regional distribution power companies REAS. In April 1998, an international partner - RWE Telliance AG - joined the company and acquired 40%. The remaining 60% of shares are divided equally between 7 regional power distribution companies.

Aliatel operates a backbone infrastructure based on optical cables. The length of the optical cable network is currently 5,500 km. The network of optical cables is using the routes and protected corridors of existing long-distance energy lines. Out of town, the optical cables are located in the grounding cables of overhead lines, while in towns, they are laid in underground power channels.

The topology of Aliatel's SDH transmission network consists of several interconnected circuits of high-capacity transmission networks, covering the whole of the Czech Republic's territory. The transmission capacity of the backbone network circuits intersecting the major cities of the country is 2.488 Gbps (STM-16). Regional networks are connected to backbone circuits and they serve major towns of the individual regions. The technology of regional circuits is SDH at a transmission capacity of 622 Mbps (STM-4) or 155 Mbps (STM-1).

The access network between the customer's site and the access point of the company Aliatel is implemented mainly using wireless access links.

Currently, Aliatel offers the following services:

• digital circuits,
• data services,
• Internet access services,
• global Infonet services
• voice services for closed user groups.

Aliatel was the first telecommunication operator in the Czech Republic to offer a guaranteed service quality (SLA).

Source: http://www.aliatel.cz

2.2. Ceske drahy and CD Telekomunikace

Ceske drahy (Czech railways) started building an X.25 network for its own internal use in 1989. Later it started using TCP/IP protocols over this network, and by 1999 the network had the following size:

In 1993, Ceske drahy gave exclusive rights to lay cables along the rails to CD - telekomunikace, a private company. CD-Telekomunikace searched for a strategic partner and investor to help finance its activities. After unsuccessful attempts for an alliance with Mannesmann a.g., CD-Telekomunikace was sold in January 2000 to the Italian company Tiscali S.p.A.

Tiscali plans to lay up to 2300 km of optic fiber cable along CD rails before mid 2001, and more then 4000 km by the end of 2001.

Currently, public services are offered neither by Ceske drahy, nor by CD telekomunikace.

2.3. Ceske Radiokomunikace

CESKE RADIOKOMUNIKACE a.s. is a telecommunication company specialised in wireless signal transmission and data networking. It has a dominant position on the Czech telecommunication market in the field of wireless transmission of telephone, data and other types of signal via the national network of microwave radio-relay and satellite communication resources.

In February 2000, CESKE RADIOKOMUNIKACE finished implementing a new high capacity optical based DWDM (Dense Wavelength Division Multiplexing) technology in its backbone network, as the first telecommunication provider in the Czech Republic and as one of the first providers in Europe.

CESKE RADIOKOMUNIKACE a.s. have been transformed from the company Sprava radiokomunikaci s.p. into a joint-stock company on 1 January 1994 on the basis of a government-approved privatisation project.

The most important shareholders in the company CESKE RADIOKOMUNIKACE a.s. are the Fond narodního majetku CR (National Property Fund of the Czech Republic) with 51 %, Tele Danmark A/S with 20.8 % and The Bank of New York International Nominees (GDR depository) with 24 %.

Ceske Radiokomunikace offer the following services:

• Data services
• Nation-wide, regional and local distribution and broadcasting of television and radio signal for holders of the relevant licenses
• Broadcasting of radio signals abroad
• Diffusion of additional information in the television signal via the teletext system
• Diffusion of additional information in the radio signal RDS (Radio Data System) via ultra short wave broadcasting networks
• International and domestic relay of television and radio signals via fixed and mobile radio-relay microwave communication resources
• Ensuring satellite services for fixed and mobile services for the transmission of telephone channels, television, radio and other signals
• Performing the function of a signatory of Operational Agreements of the international organisations INTELSAT and EUTELSAT
• Interconnection in the systems EUTELSAT, INTELSAT and INTERSPUTNIK
• Construction and assembly work and special manufacturing activity in the radio-communication field

Source: http://www.cra.cz/

2.4. Kabel Plus and Kabel Net

Kabel Plus and Kabel Net are two cable TV operators with approximately 470 000 subscribers. Both companies have a common owner and share the same management: 98% of shares in Kabel Plus, a.s. and 100% of stakes in Kabel Net are owned by Amsterodam-based United Pan-Europe Communications (UPC).

In November 1993, KABEL PLUS a.s. was granted a permission to construct a pilot telephone network in designated localities in Northern Bohemia. This permission represented the first break in the monopoly position of the national telecommunication operator SPT Telecom. KABEL PLUS a.s. thus became the first cable operator to be permitted to enter the telecommunication market in the Czech Republic. After general evaluation of the development of the pilot telephone project, the Ministry of Economy of the Czech Republic in October 1995 granted to KABEL PLUS a.s. the authorisation for operation of basic telecommunication services in selected localities in the Liberec region. Nowadays, KABEL PLUS a.s. provides telephone services to more than 3,500 customers in Liberec and the speed of connecting other customers to its ever-extending network is high.

The aim of the joint companies (Kabel Plus and Kabel Net) in the near future is to become the operator of wide variety of the most modern communication services - from the cable television and telephones to high-speed data transmission and the Internet access. All these services should be transmitted via one multifunctional (multipurpose) broadband cable network.

Source: http://www.kabelplus.cz

2.5. Pragonet

The Pragonet Project has been started in 1994 when the Prague City Council approved the financing of the installation of backbone fibre optic cables in the metro tunnels in Prague. The installation had been completed by the end of 1996 and the network has been transferred to the newly founded PRAGONET JSC, together with the responsibility for the operation, further development and financing of the network.

PRAGONET JSC is providing broadband telecommunications services to the public sector and to large corporate clients. Services are provided over PRAGONET JSC’s state-of-the-art fibre optic network, PRAGONET, which now connects together all districts of Prague.

The principal users of PRAGONET services are municipal and state administration institutions, city utilities, including security, other telecommunications operators and service resellers, cultural, academic, finance and banking institutions and other commercial organisations. PRAGONET JSC is currently focusing its marketing efforts on increasing its business with large corporation where the greatest development opportunities lie.

PRAGONET JSC started with offering dark fibre, and only later started developing services with increasing added value. The ultimate goal is to become a fully-fledged local telecom company (so-called "CLEC") capable of offering a full portfolio of standard telecommunications services but focusing on providing its clients with non-standard, fully customised services tailored to the customer specific needs.

The principal services currently provided by the company are:

• Leased digital circuit services
• Services relating to the connection of local networks
• Providing access to the Internet using fixed (leased) lines and dial-up. Additional services such as the creation of WWW pages, Web Hosting, Server Hosting, domain registration and administration, etc. are also offered.

Source: http://www.pragonet.cz

2.6. BroadNet

BroadNet Czech s.r.o., a subsidiary of Brussels' based BroadNet Europe, entered the Czech telecommunications market and applied for a licence in the 26 GHz band. The new alternative operator wants to start offering high-speed access to the Internet and multimedia services, based on the Fixed Wireless Point to Multipoint Access (FWPMA) technology. In 2001, when the voice telephony market will open, Broadnet wants to offer voice services.

Source: http://www.broadnet.cz/

2.7. Callino

Callino, a wholly owned subsidiary of Formus Communications, entered the market in 1999 and applied for a license in the 26 GHz band. Callino wants to offer high speed Internet access, VPN a VOIP services, and plans to use Local Multipoint Distribution System (LMDS) technology.

Source: http://www.isdn.cz

2.8. Alternative local operators

In 1996 six operators of alternative telecommunication services in 16 regions of the Czech Republic obtained a license to offer public voice telephony services in limited regional areas. This was meant as a pilot project for testing competition in local networks.

Currently, only Cabel Plus, Dattel, Factcom and Telecom 21 operate their networks and offer services. Opatel has returned its license in February 1998.

Source: Czech Telecommunication Office, http://www.ctu.cz