April 2000

Latvia Master Report

1. The interaction between business and regulatory constraints

1.1 The regulatory background

The development of Latvia’s regulatory regime started by the Law on Telecommunications in 1993 and by an Umbrella agreement made in 1994 between the Latvian government, Latvian incumbent telecommunications operator (Lattelekom) and the international investor. The 1993 Law on Telecommunications gave Lattelekom exclusive rights until 2013 on all basic telecommunications infrastructures and services.

The membership of the WTO and further European integration and full membership of the EU will define the main obligations of the Latvian government to liberalise telecommunications markets by January 1, 2003.

A new Telecommunications Law has been drafted. It foresees to be approved by Parliament in year 2000.

1.2 Concept of Alternative Infrastructure

The Latvian Telecommunications Sector Policy (accepted by Government) declares, that the competition and new entrants on the market are allowed, based on the existing alternative infrastructure.

The nature of the Statutes is the following:

a) Private companies- Public Mobile service operators

There are two private companies in the public mobile service sector: LMT and Baltcom. These two companies the Ministry of Transport has granted licences.

b) State owned power and railway companies

There are two state owned companies in the power and railway sector: Latvenergo (power) and Latvijas Dzelzceï (railway comp.) Privatisation of Latvenergo Company is foreseen in the nearest future (by 2002).

In compliance with new draft telecommunications law, companies will be permitted to offer public services in these two areas using the general authorisation procedure.

c) Private companies- Public Internet Service providers

There are as minimum two private companies with significant market power: Latnet service and Telia Latvia.

The Ministry of Transport (using the general authorisation procedure) has permitted the two companies to offer public services.

d) State owned companies - Provision of distribution and data services for state owned and government institutions (non-public). There are two state owned companies: LVRTC (State Radio and Television Company) and VITA (State Information Network Agency)

The Ministry of Transport granted the Permission to offer the distribution and data services for state owned and government institutions. Privatisation of these companies is not planned.

1.2 Business constraints and entry barriers

Licences for public voice telephony and public network infrastructure are not issued due to exclusive rights on these to Lattelekom for 20 years (until 2013) under the Law on Telecommunications.

Telecommunications services can be provided without any authorisation on private telecommunications networks, but only for an organisation’s own needs and without any transmission to Lattelekom’s network or from any foreign telecommunications network.

Under Article 16 of the Law on Telecommunications, an individual licence from the Ministry of Transport is needed for the establishment of a public mobile radio telecommunications network.

Legal entities may provide value-added services by using Lattelekom’s basic telecommunications service (leased lines). Other telecommunications services, again built on Lattelekom’s basic services, can be offered without a licence from the Ministry of Transport, under a regime of permission.

1.3 Attitude of the incumbent operator towards alternative network providers

The attitude is very negative. According to such attitude potential service providers avoid to present publicly available data on their plans to take part into the public telecommunication services business.

1.4 On-going regulatory developments concerning alternative networks

Latvian Government declares that all types of telecommunications activities should be liberalised by the year 2003. A Latvian governmental negotiation team has been established for discussions with TILTS Communications. Its objective is to revise the mentioned clauses and to co-ordinate competition policy in near future. Negotiations are going on (Privatisation Agency with Lattelekom's strategic investor Sonera) concerning shortening of the monopoly status (until 2003).

The development of Telecommunications technologies point out that the existing Latvian Telecommunications Law is out of date to day. The terms and definitions of services under exclusivity rights need to be up-dated. There are many challenges for entrants to open their own business.

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

2.1 Types of companies offering networks

Lattelekom only has the right to offer its network for public services. Nevertheless there are several institutions in the country, that potentially can become the public telecommunication network owners and offer their services after cancelling the Lattelekom's monopoly.

Latvenergo concluded the agreement with Lattelekom about placing optical cables on 110 kilovolt power lines in 1994. Latvenergo received a portion of the network capacity for creation of its own telecommunications network for the permission of placing cables. The terms included that the network must be exploited only for needs of Latvenergo. Latvenergo is the full owner of the access network to the optical backbone. Optical communications network will be spread to 182 transformer substations, high-capacity exchanges could be installed at the substations. Latvenergo is planning to use the over-capacities of the exchanges for public telecommunications services too. Latvenergo will invest more than EURO 6 Million in modernisation of the network; a half of these means has been assimilated. Latvenergo plans to complete the creation of a digital network in 2002.

Latvian Railways (Latvijas Dzelzcelš) plans to use its optical communications network for receiving maximum benefit from the investments. Since the Soviet era Latvijas Dzelzcelš is providing telecommunications services to hundreds of subscribers of analogue network. They are to some extent, connected to the Lattelekom network. There are plans to install an exchange for 100 subscribers as a minimum at every railway station. The digital network will be completed in 2000. Thus Latvijas Dzelzcelš would provide qualitative telecommunications services for 50-60 subscribers in the surroundings of each station. Latvijas Dzelzcelš plans to invest for the creation of the optical cable network EURO 19 Million.

State Radio and TC Centre have an infrastructure for radio and TV broadcasting covering the whole territory of Latvia. Mobile communications and cable TV operators also have their own infrastructure. Publicly available information on the plans of usage of these networks for provision of basic telecommunications services is not presented or available nowadays.

State Information Network Agency has telecommunications networks in Riga and Jurmala, but they are placed in the cable canals that are the property of Lattelekom. Therefore it is not really relevant to consider these networks as a mean for competition with Lattelekom.

2.2 Type of operators using the networks

All data transmission service providers and mobile service providers use the Lattelekom's infrastructure.

2.3 Type of services offered by the operators on the networks.

The vertical structuring of telecommunications market is not accepted (for example "dark fibber "services). All basic end-to–end services are under exclusivity rights.