February 2001

Slovenia Master report

1.1 Regulation of telecommunications and alternative networks

Slovenia has been opening its telecommunications market relatively slowly. The Law on Telecommunications (Law on Telecommunications, Official Gazette (OG) of the Republic of Slovenia (RS), No. 35/97) grants exclusive rights (a monopoly) to Telekom Slovenije until 31 December 2000 for the provision of public telecommunications services of voice telephony and telex, and for the construction and management of the public telecommunications network intended for the provision of public telecommunications services, data telecommunications and global wideband and multimedia telecommunications. That means that the alternative infrastructure continues to be only partially liberalised. As exclusive rights for the construction and management of the public telecommunications network intended for the provision of public telecommunications services are granted to Telekom Slovenije until 31 December 2000, the alternative infrastructure may only be used for a limited set of commercial services (a licence is required). Having imposed such restrictions by the legislation, the situation is rather absurd. For example, although alternative networks are liberalised for the provision of leased lines, their provision is prohibited if intended for Internet access or services and data communications services. In fact, alternative networks are liberalised for the provision of leased lines if they are intended e.g. for private networks, transmission of alarms or cable TV.

Conditions for the construction and management of the public telecommunications network are further regulated by the Decree on the Mode of Providing Public Telecommunications Services of Voice Telephony and Telex and on Management of the Public Telecommunications Network (O.G. RS, No. 11/98).

The Law on Telecommunications regulates three categories of networks: public networks, closed networks and networks of state bodies. A closed telecommunications network is defined as a telecommunications infrastructure which as a closed user system is used for providing of telecommunications required to assure the carrying out of its own activities, as a complement or a substitute to the public telecommunications network. Alternative networks fall into the category of closed networks. It should be noted that a closed network defined in the Law stands for a so called private network.

There have been almost no restrictions for building private networks. Only provisions of the Law on Telecommunications concerning electromagnetic compatibility, protection of telecommunications networks and radiocommunications shall be applied to the construction and management of private networks.

According to Articles 24 and 64 of the Law on Telecommunications, the alternative networks are closed until 31 December 2000 for the provision of public telecommunications services of voice telephony and telex as well as data communications and global wideband and multimedia telecommunications. For the infringement of regulations on constructing or operating the public telecommunications network, the Law in Article 55 sets the penalty clauses. After 1 January 2001, the Government might grant more concessions for the provision of public telecommunications services in accordance with Article 4 of the Law on Telecommunications and in conformity with the Law on Public Trading Services (O.G. RS, No. 32/93) – also to alternative network operators. The procedure is rather complicated. A public tender is required and the number of concessionaires might be limited.

The current Law on Telecommunications has liberalised alternative networks intended for the provision of leased lines (for private networks, transmission of alarms, cable TV, etc.) Although the Law seems to be clear about the status of alternative networks, there are open issues concerning, as an example, the provision of leased lines intended for Internet access and services. As the Law on Telecommunications does not specifically define the Internet, there are different interpretations of the Law and a vivid public debate has been going on for some time.

By 31 December 2000, Telekom Slovenije will have had a monopoly on the construction and management of the public telecommunications network intended for the provision of public telecommunications services, data communications and global wideband and multimedia telecommunications. The Law on Telecommunications is not specific about the liberalisation status after this date.

According to Article 64, the Government of the Republic of Slovenia should adjust the policy of the development of telecommunications to market conditions in accordance with the National Programme for the Development of Telecommunications before the implementation of the liberalisation of the telecommunications market. The National Programme was approved by the Government on 1 April 1999 and passed to the National Assembly. It is now in the proceedings of the Parliamentary Committee for Infrastructure and the Environment. The National Programme was adopted by the National Assembly at its regular session on 29 February 2000.

The Telecommunications Administration of the Republic of Slovenia issues licences for the provision of leased lines in accordance with the Regulations on the Issuing of Licenses for the Provision of Commercial Telecommunications Services (O.G. RS, No. 75/98). Until 30 September 1999, the Telecommunications Administration of the Republic of Slovenia issued 38 licences for the provision of commercial telecommunications services, of which 6 include provision of data communications and 9 provision of leased lines services. Apart from the incumbent operator Telekom Slovenije, amongst licence holders there are two internet service providers, seven operators of cable communication and/or cable distribution systems, a public utility for the transmission of electric power (ELES) and RTV Slovenija (Transmitter and Communications Department). According to reliable sources, Telekom Slovenije appealed to the Ministry of Transport and Communications against decisions of the Telecommunications Administration concerning licences issued for the provision of leased lines and data communications services.

Two other potential alternative networks providers, Slovene Railways and Motorway Company in the Republic of Slovenia have not been issued a licence so far and the question is whether they have already applied for it or not.

By 31 December 1999, 43 licences had been issued by the Telecommunications Administration of the Republic of Slovenia for the provision of commercial telecommunications services. Apart from the incumbent operator Telekom Slovenije, other licence holders include: internet service providers, operators of cable communication and/or cable distribution systems, a public utility for the transmission of electric power (ELES), Slovene Railways and RTV Slovenija (Transmitter and Communications Department). Another potential alternative network provider, the Motorway Company of the Republic of Slovenia, has not yet applied for a licence. According to reliable sources, Telekom Slovenije appealed to the Ministry of Transport and Communications against the decisions of the Telecommunications Administration concerning licences issued for the provision of leased lines and data communications services.

Potential network and service providers exert pressure on policymakers to lift some of the constraints set by the Law on Telecommunications. The most rigorous restrictions of the current Law might well be lifted before 31 December 2000. If not, the new law on telecommunications being drafted by the Ministry of Transport and Communications will set the framework for further liberalisation of alternative networks after 1 January 2001. The legal framework for liberalisation of alternative networks after 1 January 2001 will be defined by the new law on telecommunications. It is being prepared by the Ministry of Transport and Communications and has not yet been approved by the Government. Meanwhile, on 10 February 2000, a group of members of the National Assembly submitted a Law on Telecommunications (similar to the governmental one) to the National Assembly (Porocevalec DZ, No. 10/00, 18 February 2000) for the quick proceedings. It was withheld as there was another law covering the same area in the proceedings, i.e. a Law on Changes and amendments of the Law on Telecommunications.

After the Regulations on the issuing of licences for the provision of commercial telecommunications services (O.G. RS, No. 75/98) were implemented in 1999, several internet service providers and alternative infrastructure operators were issued only temporary licences for a period of one year. The licensing regulations require, for example, that the construction of telecommunications networks and the equipment used comply with the Law on the Construction of Buildings (O.G. SRS, No. 34/84; later amended several times). The procedure, however, is complicated, time consuming and costly. It represents an administrative barrier to the provision of otherwise liberalised services. Only temporary licences have been granted by the Telecommunications Administration to those Internet service providers and alternative infrastructure operators that have not met the requirements set by the Law on the Construction of Buildings.

1.2 Regulation and status of public utilities and public organizations regarding a potential entry in the alternative networks industry

At the end of August, rumours emerged in political and business lobbies that a consortium would be established for providing telecommunications services after the market was fully opened. During the last three months, the situation has been clarified. There are now two consortia with ambitions to become telecommunications operators after 31 December 2000, when the market is to be fully opened.

The leading driving force of the first consortium is the Municipality of Ljubljana while other partners have still been negotiating. The consortium would not cover solely Ljubljana area but the whole Slovene territory. According to some sources, Slovene Railways are willing to join the consortium while the other player with substantial network capacity – ELES, has not taken much interest. Also, leading cable TV operators are interested to join in. When negotiations were ended, this first consortium consisted of BTC d.d., Slovene Railways, Masterline d.o.o. and the Municipality of Ljubljana. It acquired a majority share of Meglic Telecom d.o.o., one of the largest Slovene cable TV operators. The Municipality of Ljubljana acquired 1% while three other partners acquired almost 20% each. Following the acquisition, Meglic Telekom d.o.o. was transformed into a joint-stock company and its name was changed to Telemach d.o.o. The President of the Board is Mr. Marjan Meglic, founder of Meglic Telecom.

The second consortium is formed by Simnet d.o.o., Autocommerce d.d. (which recently acquired the internet service provider Perftech d.o.o.), University of Maribor, Slovene Railways and Lucent Technologies.

The main entry barrier to the alternative network industry is imposed by the present Law on Telecommunications that grants exclusive rights (a monopoly) to Telekom Slovenije until 31 December 2000 for the provision of public telecommunications services of voice telephony and telex, and for the construction and management of the public telecommunications network intended for the provision of public telecommunications services, data telecommunications and global broadband and multimedia telecommunications (including Internet).

Current regulatory restrictions prevent the use of alternative infrastructure for the provision of certain liberalised services. Potential service providers must still rely mainly on transmission capacity (leased lines) provided by the incumbent telecommunications operator which is (itself or via its subsidiaries) also a competitor in the area of liberalised services.

In addition to the exclusive rights on the public network (see above), the incumbent operator became (according to the Law on telecommunications and secondary legislation) also an owner of an important part of telecommunications infrastructure: i.e. ducts.

Although the telecommunications market is planned to be opened after 1 January 2000, the situation after this date is still not clear as the new law on telecommunications has not yet been adopted.

Due to restrictions set by the Law, telecommunications networks have been solely constructed by utilities, governmental bodies and cable TV operators.

Some utilities have very good networks, however, they cover connections between major towns only and in some cases, neighbouring countries, while lacking local loop access.

On the other hand, cable TV operators enjoy good local coverage (villages and towns). There have been several attempts to connect major national cable TV operators in order to establish a nation wide network and service. According to representatives of leading cable TV operators, some of them might achieve this goal in the year 2000.

One important business constraint is the lack of private capital and a relatively closed market for foreign investment. As the construction of telecommunications infrastructure requires vast investments, this is one of the biggest barriers to the development of new Information Society services and e-commerce.

There have also been several cases reported by alternative infrastructure providers of the incumbent operator refusing or unjustifiably delaying interconnection, as well as sharing (leasing), of the ducts and some other parts of infrastructure.

Until June 2000, neither the legislation nor the regulations concerning alternative networks have been changed. The alternative infrastructure was still only partially liberalised and the licensing regime with its highly administrative provisions continues to be one of the largest barriers to the flourishing of the market.

The procedure, described in Regulations on the issuing of licences for the provision of commercial telecommunications services (O.G. RS, No. 75/98; implemented in 1999), and which also requires that the construction of telecommunications networks and the equipment used comply with the Law on the Construction of Buildings (O.G. SRS, No. 34/84; later amended several times)., is however very complicated, time consuming and costly. It represents an administrative barrier to the provision of otherwise liberalised services, as service providers need to go through the entire procedure even if they are installing equipment as simple as a computer or a few modems into an office. Only temporary licences have been granted by the Telecommunications Administration to those Internet service providers and alternative infrastructure operators that have not met the requirements set by the Law on the Construction of Buildings. Representatives of ISPs and alternative infrastructure operators claim that the proceedings could be discriminatory, especially as the historic operator has an important role in them.

One of the victims of the present licensing regime was Telemach d.o.o., one of the leading alternative infrastructure providers and cable TV operators. Through no fault of its own, Telemach could not obtain all the documentation required in order to comply with the Law on the Construction of Buildings in time. After the expiration of the temporary licence, the Telecommunications Administration did not issue another, so Telemach lost its licence for the operation of the network.

In August and September 2000 we witnessed the battle between the organization called ARNES (Academic and Research Network of Slovenia), through whom all the schools and universities have an access to the Internet, and the Slovenian telecommunication company Telekom Slovenije. The issue of dispute was Telecom new prices for Internet access. Until now the schools and universities were able to access the Internet free of charge. At the end of negotiations, government decided that schools and universities still need to have a free access to the Internet. ARNES will still provide a free access to the Internet for them, which will be sponsored by the government and the Telekom Slovenije. On the last session, Management board of ARNES reviewed the contract that was signed with Telekom Slovenije and Slovenian government. The contract assures ARNES the use of hired and ISDN network in Slovenia. Vice president of Telekom Slovenije Miran Kramberger and director of ARNES Marko Bonač stressed out that both parties would fully cooperate in implementation of new technologies and development of new services in Slovenia. According to the 390 million worth contract, Telekom Slovenia will provide access to the 1746 Internet users, mainly schools and public institutes.

In October commercial TV stations POP TV and A KANAL merger became official. After long and hard negotiations POP TV and A KANAL finally came to an agreement about 43 unresolved program issues to complete this long expected merger. Both TV stations are promising better program and they are convinced that the merger will significantly lower costs for marketing and costs for purchasing new movies and shows.

1.3 The actors and their strategies

Telemach plans to expand and upgrade its network. At the general meeting of Telemach on 20 April 2000, the owners decided to increase the capital of the company by a total amount of 1 milliard Slovene tolars (approx. € 4,9 million). The owners – BTC, Slovene Railways, Municipality of Ljubljana, Materline, Gorenje, Eon, Prviinvest, Rebus and Andrej & Matjaž Meglič – will implement the investment in two parts, the first one in May. The partners shall invest with respect to their ownership share. This is their second increase of capital this year. The first one was performed in February, also in the amount of 1 milliard Slovene tolars.

At the general meeting, partners also decided to expand and upgrade the network, which will require further investments.

The partners also agreed on the company’s revised business plan and so agreed on strategic goals and vision in order for Telemach to become a leading Slovene multimedia company.

Telemach reported that the number of their users is less than 500, which resulted in management board change and new business strategy, which is now limited only to become one of the leading providers of Internet access and Internet services. Telemach d.o.o. is changing management board and business strategy. After a good and ambitious start Telemach d.o.o. is facing lots of problems at the moment. The struggle with its major competitor Telekom Slovenije was hard and Telemach was not able to bear it. Not being able to realize strategic business goals resulted in the new management board of the company, which was announced in the late September. With the new management came also the announcement of the new Telemach strategy, which is now limited only to become one of the leading providers of Internet access and Internet services. British Investment Group EMP, which is strongly backed by USA capital, has bought 14% of the Telemach d.o.o.. Other owners after this acquisition are BTC with 20%, Meglič Telecom with 15, Slovenian Railroads with 11, Gorenje, Prvinvest, Eon and Masterline each with 10% and City of Ljubljana with 0,016%.

Slovene Railways intend to enter the telecommunications business. On 20 April 2000, the Government discussed the plan of Slovene Railways d.d. for the commercial provision of telecommunications services. The Government approved the plan and agreed with the commercial provision of free capacity in the optical network in accordance with the Law on Telecommunications. The Government also agreed to a buyout of the share in Telemach in a total amount of 234,7 million Slovene tolars (€ 1,15 million). Apart from this buyout, until 31. December 2000, Slovene railways made no visible progress to enter the telecommunications market.

In October commercial TV stations POP TV and A KANAL merger became official. After long and hard negotiations POP TV and A KANAL finally came to an agreement about 43 unresolved program issues to complete this long expected merger. Both TV stations are promising better program and they are convinced that the merger will significantly lower costs for marketing and costs for purchasing new movies and shows.

According to the 390 million worth contract, which was signed by Telekom Slovenije, ARNES and Slovene government, ARNES will provide access to the 1746 internet users, mainly schools and public institutes.

2.1 Types of Companies Offering Networks

There are a number of private networks of public utilities with the potential of providing telecommunicatons services, the largest amongst them being the networks of ELES (a public utility for the transmission of electric power), Slovene Railways and Motorway Company in the Republic of Slovenia. An important group of alternative network operators represent operators of cable communication and/or cable distribution systems.

Until 16 June 1999, licences for the provision of leased lines were granted to ELES, RTV Slovenija (Transmitter and Communications Department), and four cable TV operators. None of them have started providing services on a commercial basis yet.

By 31 December 2000, the Telecommunications Administration had issued 11 licenses altogether for the provision of leased lines, and 39 licences for cable communications and/or cable distribution systems.

Utility companies and cable TV operators are current providers of alternative infrastructure.

There are several private networks of utilities with the potential of providing telecommunications infrastructure and/or services. For the provision of leased lines, the following utilities were issued licences:

• ELES – Elektro Slovenija d.o.o. (a public utility for the HV electric power transmission),
• Slovene Railways d.d.,
• RTV Slovenija (Transmitter and Communications Department).

There are also other utilities with alternative infrastructure, e.g. Motorway Company in the Republic of Slovenia, that have not decided to enter the telecommunications market.

Slovene Railways intend to enter the telecommunications business. On 20 April, the Government discussed the plan of Slovene Railways d.d. for the commercial provision of telecommunications services. The Government approved the plan and agreed with the commercial provision of free capacity in the optical network in accordance with the Law on Telecommunications. The Government also agreed to a buyout of the share in Telemach in a total amount of 234,7 million Slovene tolars (€ 1,15 million).

2.2 Types of Operators Using the Networks

There are more than 80 cable TV operators with no single dominant operator. By 31 December 2000, 39 cable TV operators were granted licences in accordance with the Regulations on the Issuing of Licenses for the Provision of Commercial Telecommunications Services (O.G. RS, No. 75/98). The largest amongst them are:

• Telemach d.o.o. (former Meglic–Telecom d.o.o.)

Telemach is becoming one of the most important providers of extremely qualitative and fast communication services, contents and net applications. The direction of development is also cable TV with a multimedia network in Slovene, middle- and eastern European space building a high capacity backbone network that will connect Slovenia and enable its integration into the international multimedia network.

The Telemach's network will operate according to the principle of optical interworking operation, with a uniform transmission system (internet protocol) to which high throughput capacity devices of up to several hundred gigabytes per second will be connected. This type of multimedia network will provide the end user with the greatest flow speed of different types of data (picture, speech and other information).

• KRS Tabor d.d.,
• Astra Telekom d.o.o. (Gorenjski kabel),
• KRS Rotovz d.d.,
• KRS d.d. (Velenje),

• Telekabel d.o.o.