January 2000

Estonia Update Memo

The following memo outlines new developments in the past three months and the state of on-going developments.

From October to December (inclusive) 1999 the trends mentioned in previous reports continued. New legal acts have proceeded and overall development is continuing.

I – General background

1. General telecom policy

The overall developments of Estonian telecommunications policy are oriented towards liberalisation. The Concession Agreement signed between the Government of the Republic of Estonia and Estonian Telephone Company Limited (ETC Ltd.) granted exclusive rights to ETC to provide basic services (e.g. local, national and international switched fixed voice telephony services), but these exclusive rights end starting January 1, 2001.

At the present moment there are important legislative developments going on as well-functioning telecommunication market is considered to be a precondition for the rise of economy and the quality of life. Starting June 1, 1999 the new Cable Distribution Act is in force and licensing starting.

2. International relationship and agreements

In addition to agreements and organisations mentioned in the previous reports, by the end of 1999 Estonia has taken the following important steps:

• Estonia is a full member of the World Trade Organisation (WTO) since November 13,1999;
• On October 8, 1999, Estonia presented its application to join the Wassenaar Arrangement that regulates the export, import and transit of high technology and strategic goods;
• On June 16, 1999, Riigikogu passed the Strategic Goods Import, Export and Transit Act (Strateegilise kauba sisse- ja väljaveo ning transiidi seadus (RTI 1999, 57, 597) that abolished the Strategic Goods Export and Transit Act (Strateegilise kauba välja- ja transiitveo seadus, RT 1, 1994, 30, 466). This Act regulates the import of strategic goods into and the export of strategic goods from the customs territory of Estonia and the transit of strategic goods through the customs territory of Estonia. The Government also issued a regulation confirming the List of Strategic Goods (Strateegiliste kaupade nimekirja, RTI 1999, 77, 720, entered into force on October 25, 1999), that among other things includes a section on computers, software and telecommunication and data protection equipment.

3. Regulatory framework

3.1 Key legislative measures

Key legislative acts that regulate the area of telecommunication, are the following:

The new telecommunication law is under proceeding. It will be analysed in the report later.

3.2 Licensing

On June 1, 1999 the Cable Distribution Act took force in Estonia. With the Act licensing of cable network operators started. Licences to continue operating in cable networks market or to build new networks are granted by Estonian National Communications Board.

Currently (On December 2, 1999) the following licences have been issued:

Source: Ministry of Transport and Communications, Estonian National Communications Board

Estonian National Communications Board issued a licence to Tallinn Cable Television (operating under trademark TELE 2) permitting to cover Tallinn City area with the cable network. The licence issued is valid for 10 years, the network has to be operational on April 27, 2001.

Other cable network operator Starman has filed a litigation questioning the issuing of network licence to Tallinn Cable Television Ltd. The case is built on the fact that the competition for licence (took place in 1992) was won by company Telag that has since been liquidated. According to Starman the company that has been liquidated can not have a legal successor and this is why the whole procedure has been questioned. The network licence of Tallinn Cable Television has been stopped until the court resolution.

3.3 Universal Service, Tariffs policies, Quality of Service

Although universal service is not explicitly defined, the concept is to some extent introduced by the obligation in the Concession Agreement for ETC to provide "basic services", subscriber assistance and directory services. According to the Concession Agreement the Concession Holder has to submit to the Government annually updated development plan about expansion strategy in rural areas and remote population centres and for residential subscribes.

The Board of Estonian Telephone Company approved the principles of the business plan on November 16, 1999. Based on these principles ETC prepares action plan for the next three years. Board of Estonian Telecom approves the business plan and according to the Concession Agreement the Government of Estonia has to approve it. The business plan will be handed over to Government on the first quarter of year 2000.

To finish the cross-subsidising of different services ETC plans to rise tariffs of private clients and to diminish the tariffs of business clients. In order to be ready for the opening of the market starting January 1, 2001 ETC plans to rise tariffs of local calls and to reduces tariffs on long-distance and international phone calls.

4. Freedom and protection

4.1 Copyright and intellectual property rights

On December 9, 1999, Riigikogu passed four laws concerning copyright and broadcasting:

• Amendment to the Copyright Law and Related Legal Acts;
• The Law on Joining the International Convention on the Protection of the Rights of the Performer, Phonograph Producer and Broadcasting Organisation (Rome Convention);
• The Law on Joining the Convention Protecting the Phonograph Producer against illegal duplication of the Phonograph;
• The Law on Ratification of the European Convention on Cross-Border Television and the Amendment Protocol.

International organisation Business Software Alliance (BSA) has become active in fighting against widely spread software piracy in Estonia. BSA has organised training for police officers, educated computer users through the media; and, together with the police, organised raids to different organisations in order to check the legality of the software used by the company.

4.2. Consumer protection

Estonian Competition Board (Konkurentsiamet) started an investigation in December about the legality of the selling of subsidised mobile telephones to new clients by mobile network operators.

II - On-going developments

1. On-going changes in the institutional structures

The Estonian National Communications Board (NCB) was founded on August 1, 1998. One of the main laws regulating the work of the Board is Telecommunications Law, which has still to be adopted by the Parliament.

Major change is related to the joining of the Ministry of Economic Affairs and the Ministry of Transport and Communications. For that purpose the interministerial commission has been established in the beginning of 1999 that analyses the consequences of such activity and prepares legal documents and solves managerial issues if joining is to happen (happens probably during year 2000).

Big changes are taking place in the organisation on foundations under the jurisdiction of different ministries. The current nine foundations will be replaced by two. The aim of this action is to stop duplicating the work of the private sector and increase the transparency of business support schemes. The availability of information about business support schemes should also increase and management structure of the development of private entepreneurship should become simpler.

One of the new foundations will deal with projects and the other with different kinds of investment and insurance.

Under the jurisdiction of the Ministry of Economic Affairs the following Foundations will be restructured:

• Estonian Investment and Trade Development Foundation;
• Small Business Loan Foundation;
• Estonian Export Credit and Guarantee Agency;
• Estonian Housing Foundation;
• Estonian Innovation Foundation.

Under the jurisdiction of the Ministry of Agriculture, Rural Credit Guarantee Fund will be terminated, as well as the Agriculture and Rural Life Credit Fund under the jurisdiction of the Ministry of Finance.

Under the jurisdiction of the Ministry of Transport and Communications, the plan includes the Estonian Infrastructure and Transport Development Foundation; and the Estonian Regional Development Foundation under the Ministry of Internal Affairs.

2. On-going changes in the regulatory framework

2.1 New laws/measures under preparation

2.1.1. The Freedom of Information Act

"The Freedom of Information Act" ("Avaliku teabe seadus") – a legal act that will guarantee citizens’ constitutional right for information – is one of the most important regulations being prepared at the moment. This law should regulate what information on the administrative apparatus and its activities will be offered to the public and what are the means for doing it. The law should specify the essence of information meant for internal use only and the order for gaining access to such information; attention will also be given to the distinction of passive and active information distribution, the latter being also organised through the Internet.

Minister of Interior is responsible for the draft. At the moment the draft is distributed to different Ministries for comments. After Government discusses the draft it will be sent to Riigikogu and will be adopted probably on the first half of year 2000.

2.1.2. Digital Signature Act

The Parliament is proceeding "Digital Signature Act" ("Digitaalallkirja seaduse eelnõu", no 151 SE). The second reading was cancelled on November 24, 1999. However, the law is planned to adopt in the beginning of year 2000.

2.1.3. Telecommunication Act

The Parliament is reading the Telecommunication Act (Telekommunikatsiooniseadus, no 32 SE) that will to regulate telecommunication within a liberal environment. The draft has been harmonised with corresponding legal acts of the European Union and will start to regulate liberal markets of telecommunication; this will mean that the exclusive rights of Estonian Telephone Ltd. will be finished.

The second reading was interrupted on November 24. In December received suggestions for amendments were analysed; it is highly probable that the law will still be passed in the beginning of year 2000.

2.1.4. State Budget, Year 2000

Riigikogu approved the State Budget for Year 2000 on December 15, 1999.

There are 200 mln kroons (12.8 mln EUR) foreseen for IT-expenditures in public sector that is ca 1% of the whole budget. For years 1996-1999 financing level has been proportionally same.

3. Court Proceedings

3.1. Litigation relating to activities of SuperTel Eesti OY in Estonia

In June 1999 SuperTel Eesti OY started to offer international telephone calls through the Internet. Estonian Telephone Ltd. states this is a violation of the Concession Agreement, SuperTel Eesti Oy considers the service to be data transmission, not a telephone service, and therefore not being under the subordination of the exclusive rights delivered with the Concession Agreement.

With an order issued by the Estonian National Communications Board the illegal activities (establishement of common data communication network, used for offering international phone calls, without having a licence) of SuperTel Eesti Oy were stopped. In July 1999 SuperTel Eesti Oy filed a litigation questioning the order of the Estonian National Communications Board.

The case was analysed in the court on December 6, 1999, but as the representative of the Ministry demanded additional materials, Tallinn City Court will continue with the case on January 19, 2000.

3.2. Litigation relating to Estonian Telecom Ltd.

Mr Järvet, a law student of Tartu University who filed nine litigations related to Estonian Telecom in September 1999, has withdrawn several of them. Several others have been proceeded and not satisfied.

4. On-going changes in IS policies

Estonia has adopted a political document "Principles of Estonian Information Policy" and a specifying "Estonian Information Policy Action Plan" that is constantly being developed. The Action Plan is approved once a year (last time on June 1, 1999).

The Government of Estonia has decided to give preferential treatment to the following areas in 2000 and 2001:

• "Külatee" (Village Road), programme aimed at developing county-level data communication networks;
• Electronic Document Management Programme for governmental institutions;
• actions creating a legal framework, organisational structure and technical environment for the implementation of digital signature;
• Programme for informatizing higher education ("Tiger Leap in Higher Education")

Office of Public Administration (created in the State Chancellery in January 1999, actual work started in November 1999) has the task to co-ordinate the development of public administration in different governmental institutions and to analyse the development of public administration in Estonia.

The first task of the Office is to prepare a Public Administration Reform Programme for the Government. The Programme sets the main principles of the reform policy and it will become the basis of creating a reform strategy and action plan.

The "Principles of the Government's Public Administration Reform Programme", published in December, includes better application of information and communication technologies in the public sector as one of the priority areas.

Estonian political leaders have also expressed their concern about the scarcity of IT specialists. To overcome this problem, an IT college with practical orientation is being founded. The college should begin working in Autumn, 2000. The teaching will be based on the academic potential of Estonia's leading universities. Estonian Telecom has announced its financial support to the college.