January 2001

Latvia Master Report

This is the final Alternative Networks report on Latvia as the ESIS project ended in January 2001. This Master Report covers the whole period of the ESIS project surveying the Countries of Central and Eastern Europe, March 1999 - January 2001 inclusive. 

1. Regulation and actors

1.1. Regulation of telecommunications and alternative networks

1.1.1. Background

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

1.1.2 Legislation process

The membership of the WTO and further European integration and full membership of the EU define the main obligations of the Latvian government. The membership in these international organisations has pushed the Latvian government to change its legislation and liberalise the telecommunications earlier than was first set in the Telecommunication Law of 1993.

Another force that has also pushed the change of legislation is the development of Telecommunications technologies. The existing Latvian Telecommunications Law is therefore out of date. The terms and definitions of services under exclusivity rights need to be up-date. It is today a great obstacle for other companies than the established to enter the market.

The Latvian Government therefore now declares that all types of telecommunications activities should be liberalised by the year 2003. This means that the current agreement with the international investor must be cancelled.

A governmental negotiation team has been established for discussions with dominant investor TILTS Communications. Its objective is to revise the mentioned clauses and to co-ordinate competition policy in nearer future. Negotiations are going on (Privatisation Agency with Lattelekom's strategic investor Sonera) about shortening monopoly status (until 2003). These negotiations have been very complicated and are now transferred to dispute resolution in the Court.

Utility Law: In September 2000 a new Utility Law was accepted by Parliament. As an Umbrella Law, the Utility Law established the National regulatory body of utility services, including telecommunications.

Telecommunications Law: A new Telecommunications Law has been drafted. The approval of the new Telecommunications Law on the Parliament was suspended until the end of the dispute resolution procedure between the strategic investor TILTS-Communications and Latvian Government.

This procedure has postponed the planned developments in legislation process.

Latvia has recently changed its government. The new government has developed a policy called "THE DECLARATION ON THE INTENDED ACTIVITIES OF THE CABINET OF MINISTERS". The cabinet of ministers points out in this declaration the following future activities in the fields of telecommunications and information technologies:

In the market liberalisation area:

• achieve that the period of monopoly status of the Lattelekom is cut shorter and runs until the year 2003
• ensure that real competition emerges in the sector of telecommunications;

In the mobile market area:

• immediately liberalise wireless communications market by setting clear criteria for issuing licenses and starting issuing licenses for new operators;

In the broadcasting services area:

• Ensure quality detection of the public television and radio programs in the whole country.

In the ISP area:

• promote the development of the Internet in Latvia;
• ensure fair competition among the Internet service providers.

In compliance with the policy on ISP the Minister of Transport has used one Direction in order to establish Working Group for drafting the following documents:’

• to create the transparent and fair competition rules between ISP;
• to develop the Concept of Internet Market supervision Rules that will be published on the Government web site.

The reduction in time for exclusivity rights of the dominant telecommunication operator Lattekom is the major issue in order to stimulate the development of alternative networks in Latvia. The end of the resolution process in the court is hoped to be the start of a boost in the development of alternative networks in Latvia.

1.1.3 Fixed telephony

In Latvia, one company, Lattelekom, has dominated the telecommunication market for a long period of time. Presently Lattelekom has a monopoly on fixed line telecommunications. The new telecommunication law in accordance with EU directives will imply that the monopoly of Lattelekom will end, probably in the year 2003. In the Declaration on the Work of the Cabinet of Ministers it is also said that Latvia shall adopt new and modern laws on telecommunication services, it is hoped that this will promote competition.

1.1.4 Mobile communication

The Latvian government will liberalize the market of mobile communications, determining distinct criteria for issuance of licenses and starting issuance of licenses for new operators. There are currently two operators in the Latvian mobile communication market. A third license will be issued during the year 2001. The introduction of the 3^rd generation of mobile network (UMTS) will take place in the coming years.

1.1.5 Internet services

The provision of access to Internet is a market generally characterized by lower barriers of entry and lower levels of regulations, than the market for fixed and mobile telephony. This has resulted in a high number of actors, so-called Internet Service Providers (ISPs), on this market. In Latvia there are more than 30 ISPs. It is not yet a mature market and the development will probably result in a decrease in the number of actors. Some ISPs have faced and will face difficulties in the pressure on prices and the pressure to fulfil the demand of increased services. The number of ISPs is in more likely to decrease than increase the future.

Consequently, the level of competition on the internet service market is very high and the prices on Internet access are falling.

1.2 Regulation and status of public utilities and public organisations regarding a potential entry in the alternative network industry

Licences for public voice telephony and public network infrastructure are not issued because exclusive rights on these are reserved 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 interconnection possibilities with public 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.

All business constraints and entry barriers exist, because of the lack of change and developments in Latvian telecommunications legislation.

1.3 The actors and their strategies

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

The powerful actors in nearest future are the Power Company Latvenergo, Latvian Railways, State Radio and TV Centre, State Information Network Agency.

Latvenergo concluded the agreement with Lattelekom about placing optical cables on 110 kilovolt power lines in 1994. Latvenergo received a share of the network capacity for creation of its own telecommunications network for the permission of placing cables. The terms were 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 plans to use the over-capacities of the exchanges for public telecommunications services. Latvenergo will invest more than EURO 6 Million in modernisation of the network; today half of these needed financing has been assimilated. Latvenergo plans to complete the creation of digital networks in 2002.

Latvian Railways (Latvijas Dzelzceļš) plans to use its optical communications network for receiving maximum benefit from the investments. Already during the time when Latvia was part of the Soviet Union Latvijas Dzelzceļš is providing telecommunications services to hundreds of subscribers of analogue network. Today this network is gradually being connected to the Lattelekom network.

There are plans to install at every railway station an exchange for 100 subscribers as minimum. This digital network between the stations was completed in the year 2000. Thus Latvijas Dzelzceļš will provide qualitative telecommunications services for 50-60 subscribers in the surroundings of each station. Latvijas Dzelzceļš plans to invest for the creation of the optical cable network EURO 19 Million.

The State Radio and TV Centre provide infrastructure for radio and TV broadcasting covering the entire Latvian territory. 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 has not yet been presented.

The State Information Network Agency has telecommunications networks in Riga and Jurmala, but are placed in the cable ducts that are the property of Lattelekom. Therefore it is not possible to use these networks in order to compete with Lattelekom.

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.

The companies that are ready to offer the network services are the same as above: power supply company Latvenergo, railway company Latvian Railways, radio and TV broadcasting company State Radio and TV Centre, mobile network operators and cable TV network operators.

Publicly available information on the plans of usage of these networks for provision of basic telecommunications services is not presented today.

Reasons why the information about plans of companies is not available are the following.

• The first reason is that companies in the telecom sector consider information about possible alliance opportunities, market strategies and business models as business secrets before liberalization of market.
• The second reason is that the organization holding the information does not have available data. This means that they would have to make special data processing for the geographical areas. In most cases the organizations would charge for this service.

2.2 Type of operators using the networks

2.2.1 Internet Service Providers

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

However, the Latvian regulation supports one important mean to raise competition. This occur if the dominant operator with exclusivity rights cannot offer the basic services that the customer demand. One example of such services is leased lines. If this is the case another organisation of company have the rights to develop their own network, based on wireless technologies.

Based on this Clause in the regulation, there are new entrants with significant market power on the Latvian market, mostly Internet Service providers.

The ISP with significant market shares are:

• Telia Latvia,
• Latnet,
• Lanet,
• Baltkom Net,
• Delfi, and other

2.2.2 "Voice over IP" Service providers

There are some new companies offering the "Voice over IP" services. Legal basis of these activities is under discussions within the Government.

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

2.3.1 Internet Access services

All types of Internet Access Services are available to day in the main Latvian cities (up to 10 Mbps access).

2.3.2 Services on the web

The typical "basket" of services contains the following measures:

• portal services,
• e-mail services,
• services on web pages,
• streaming video services,
• radio and TV programs,
• videoconferencing.

Today there are new and popular portals with access to radio and TV programs, streaming video and other services.

Portal Tvnet
In September 2000 the new portal Tvnet started the offering the content services. Today two popular TV news programs are available on the Internet. TV news are now available in all Baltic countries directly or from archive.
Source: www.tvnet.lv

Portal Delfi
In August 2000 the Internet Service Provider PARKS LVNET, a company with significant market power established the new economy enterprise-joint stock company DELFI. PARKS LVNET is a joint stock company.
The new portal www.delfi.lv was opened for information services by JSC DELFI.
Source: www.delfi.lv

2.3.2 Other services

Application Service providers
The Digital Economy Development Centre (Digitalas ekonomikas attīstības Centrs) have only recently initiated offering application services for small and medium sized enterprises.

New pre-paid cards service
Starting from September 18, year 2000 the new pre-paid card service –Baltic Economic Telephone (BET) – was available for customer of mobile network Baltkom GSM and Lattelekom. There are lower tariffs for international calls and for call from fixed to mobile network Baltkom GSM.