ESIS extension / Estonia / Regulatory Developments / Update Memo 5

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

During the period reported (April - June 2000 inclusively) several changes took place, as a result of which it is hoped to co-ordinate the development of State information systems and to support the general development of the society into an information society more effectively. The most important changes in regulatory developments are dealt with in 1.2.

The report deals with developments of last three months and it is suggested to see a more thorough ESIS report about the Estonian regulatory situation from March 2000.

As a well functioning telecommunications sector is considered important for raising the competitiveness of the economy and the quality of life, Estonia has paid much attention to the information society developments and its shaping after regaining its independence. The main issue in the beginning of 1990s was insufficient technological and informational infrastructure, and in order to support its development a Concession Agreement was signed and the national telecommunications enterprise was privatised. This has resulted in significant investments that have been made in the extension and digitisation of the public telephone network. The state has adopted several important legislative acts and established the necessary state structures and has in this way organised the telecommunication market.

1999 and the first quarter of 2000 have been characterised by the fast development of the entire telecommunications market:

At present the term 'information policy' is in use according to the 'Principles of the Estonian Information Policy', which defines information policy as 'an integral part of public policy. It reflects the principles of the actions of the state in the creation of an information society – areas of interest and regulation mechanisms - in an era of rapid technological change. Government information policy takes into account the goals set up in regulating different spheres of social life and introduces opportunities for presenting innovative solutions'.

Telecommunication policy and related policies are sub-areas of information (society) policy.

By European Commission has Europe compared with USA not realised the possibilities of using Internet, although steps have been taken to speed up the development (lately e-Europe initiative). In this context has Estonia, considering its near past, made a rapid jump in information technology development (see also report 'WWW sites indicators').

Successful fast development is based much on the activities of the public sector, that in both speeding the technological development (for example attracting foreign investors in telecommunication sector) and in wider sense (the education modernisation program, introducing electronic services in operations with the state).

Estonian Parliament (Riigikogu) approved the Principles of the Estonian Information Policy (State Gazette [Riigi Teataja], RT, 1998 [year], 47 [number], 700 [article]) in 1998. The document determines the main principles for the development of the information society. The basic principles have been concretised in the Information Policy Action Plan approved by the Government of the Republic, and on the basis of the plan government agencies make their annual proposals for the attainment of the objectives set out in the basic principles of the information policy.

The Estonian Information Policy Action Plan updated constantly. The last version of the plan and the changes offered by the Estonian Informatics Council to that plan were approved by the Government on June 1, 1999 and the document will be updated in the course of 2000. Since several of the main objectives are achieved (for example all Estonian local governments are to be connected to Internet by 'Village Road' ('Külatee') project), it will be suggested to set new goals and priorities. According to provisional plans special methods for favouring development of enterprises (especially IT-companies) and diminishing the gap between information-haves and have-nots are to be taken. Also evolving the field of education will be continued.

Through Public Key Infrastructure, which by approving the 'Digital Signature Act' was given legislative power (the law will enter into force on December 15, 2000), several new electronic services will become accessible, also wide use of electronic documents and digital signatures.

Hansabank (Hansapank), Eesti Ühispank (Ühispank), Estonian Telephone Company (Eesti Telefon, ETC) and Estonian Mobile Telephone Company (Eesti Mobiiltelefon, EMT) signed a collaboration contract for elaborating the Public Key Infrastructure. The goal of the parties is to create commonly the PKI infrastructure in Estonia, which would enable exploitation of electronic operations in all areas.

Previously Estonian Telephone Company, Estonian Mobile Telephone Company and Privador AS announced of the intention to work out a public key infrastructure which would enable ordering and using the services of ETC and EMT safely via Internet, the structure will be based on clientele of ETC and EMT. The supplier of technical solutions will be AS Privador.

In 1992 the Concession Agreement was signed by the Estonian Government and Estonian Telephone Company (ETC), granting ETC exclusive rights till 01.01.2001 for the provision of basic services (national and international switched fixed voice telephony services, telex and telegraphic services, their installation and interconnection to them). The exclusive rights shall not be extended.

Considering the general living standard in Estonia the situation in the field of application of information technology is relatively good. There are about 200,000 frequent users of Internet, 18 per cent of the population between ages 15 and 74 owns a PC and 53 per cent of home PCs are connected to Internet.

Most popular application area is Internet-banking, also is public administration with IT well equipped, although compared with banks, electronic services are less offered and there is much potential for developing IT-based services in public administration.

Additional information can be found in reports 'WWW sites indicators' and 'IS promotional activities'.

Estonian Government has decided to set the following priorities for 2000 and 2001:

At the moment finding an agreement about new priorities and changing the Estonian Information Policy Action Plan are in progress.

Department of Public Administration Reform that was set up in the State Chancellery in January 1999 virtually started in November 1999. Assignment of the department is to co-ordinate the development of public administration between governmental institutions and to analyse the development of public administration in Estonia. Besides other tasks the department prepares the program for an administrative reform, which will determine the main positions of the reform and which will become the basis for elaborating the strategy and plan of action of the administrative reform.

As an important realm improved application of information and communication technologies in the public sector are foreseen. In co-operation with the Department of State Information Systems of the State Chancellery measures have been taken to establish a national document management system. However, more concrete results are to be waited in 2002.

Since Electronic Data Interchange (EDI) is seen as an opportunity to decrease the use of paper documents significantly, to increase the speed and quality of data exchange and to reduce illegal commercial activities, steps have been taken to start exploitation of the pilot project of the digital signature.

At the end of April four ministries announced of signing the mutual apprehension memorandum about the employment of EDI. The ministers involved are Minister of Finance Siim Kallas, Minister of Agriculture Ivari Padar, Minister of Transport and Communication Toivo Jürgenson and Minister of Internal Affairs Tarmo Loodus.

During many years several attempts have been made to develop a national information system of bookkeeping, but up to now hoped results are not attained. In autumn 1999 the commissions of Swedish organisation SIDA and Ministry of Finances attested the 50 Million EEK (3.2 Million EUR) project 'Agresso' for developing a national information system of bookkeeping as a failure.

Security Police Board was addressed to determinate the guilty parties, but Security Police Board finished the investigation without determination referring vaguely on the contracts concluded.

Since many results of the public procurements have been contested and the arbitrary of the officials by management of public procurements continues, the new draft of the Public Procurement Act (Riigihangeteseaduse eelnõu) is in proceedings in Riigikogu. Beside other things the draft foresees a management of public procurement for purchasing products and ordering services when the value of the product or service exceeds 10,000 EEK (640 EUR), by contracting of construction work the limit is 30,000 EEK (1,900 EUR).

Despite of the fact that the supervisory board of the Estonian Telephone Company already on November 16, 1999 approved the principles of the business plan, based on which the action plan for next three years presented to the Government of Estonia was to be formalised, there was a delay in presenting the business plan to the Government. Estonian Telekom referred to the enterprise as a stock-enterprise and did not consider it possible to present a business plan to one of the investors since it would damage the interests of other stockholders.

However Estonian Telephone Company presented in June 2000 a business plan for 10 years and Estonian National Communications Board will present the analyse of the business plan by July 20, 2000. According to the analyse results a position in approving of changes in tariffs will be taken.

The Cable Distribution Act stipulates that the National Communication Board issues non-transferable licenses for the construction and operation of cable television for the term of ten years:

Pursuant to the Cable Distribution Act the National Communications Board is arranging public tenders that will be carried out by municipalities for the issue of cable television network licenses.

As of June 2000 public competitions were announced in smaller places: in Rapla, Vasalemma and Rae.

Since the admission of the Cable Distribution Act 70 cable television network licences have been issued, all of which are temporal activity licenses permitting operation of network becoming invalid when the cable network will be given to be operated by the winner of the public competition.

The competition for the cable distribution market in Tallinn continues. Previously Starman Cable Television (Starman Kaabeltelevisioon AS) has filed a complaint disputing the issue of a cable distribution activity license to Tallinna Cable Television (Tallinna Kaabeltelevisioon, trade mark Tele2). The license was expected to be in effect for ten years and allowed creating a cable television network covering entire Tallinn.

During the reporting period the Tallinn Administrative Court decided to curtail the usage of the 10-year cable television network license and monopoly rights arising from it. According to the ruling of the court Tele2 has the right to operate the network it had prior to the issuing of the network licence, it is not allowed to extend the network.

At end of March the Administrative Court of Tallinn repealed the regulation of the Communications Board which obligated Starman to cease offering cable television services in City of Tallinn and in the city district of Haabersti.

At the beginning of June Legal Chancellor Eerik-Juhan Truuväli sent an inquiry to the Parliament to alter the Cable Distribution Act, condemning monopolies and unreasoned restrictions of action and claiming the Act to be in contradiction with the Constitution.

As a vital problem the Legal Chancellor sees possibilities to establish a monopoly, however it remains unclear, on what grounds the decision to issue one or more cable television network licenses in a region is made. The valid law provisions the Communication Board to issue only one cable television network license in every cable television network region on the base of a public competition, if some of the applicants undertakes also the provision of telephony services. The Legal Chancellor designates the fact the public interest to restrict the area is not evident from the law. Also the people living in a cable network region are forced to buy services from one company.

Also by the enforcement of the Cable Distribution Act the situation may arise where lawful investments, which were made until the entry of the law into force might contradict with a later passed law. In addition there exist some minor conflicts with the Telecommunications Act passed afterwards. As a major violation of the Constitutional right the Legal Chancellor displays the fact, it is impossible for the owner of a lawfully established cable television network to use his or her property freely and even if the established network is to be sold to any other enterprise, value of the property is intricate to estimate.

As the exclusive rights granted to Estonian Telephone Company (ETC) will end on January 1, 2001, but the Concession Agreement will remain in force till 2017, both the Ministry of Transport and Communications and the ETC see the necessitate to alternate the Concession Agreement. Meetings of the specialists on the subject started in May, by autumn the alterations should be approved.

In 1999, Supertel Eesti OY started to provide long-distance calls through the Internet, but according to the precept of the National Communications Board, Estonian Telephone Company deprived the company of the possibility to use connection lines and number series.

At the beginning of May, Tallinn Administrative Court decided to govern an independent communication-technological expert analysis, dependent of which further actions of Supertel as provider of Internet-based long-distance calls will be decided. Representative of the Estonian Telephone Company applied a request for the expert assessment to which the representative of the Ministry of Transport and Communications agreed. Although Supertel protested against it, the court granted the claim and determined an expert analysis.

Parties will have to present the names of the candidates of the experts in June since the expert analyse will be transacted by an independent group of experts consisting of three members.

As the regulations of the Ministry of Transport and Communications regulating the area lost their effect with the entering into force of the Telecommunications Act, more than 30 normative acts of lower levels are currently being prepared, incl. the radio frequency plan, numeration plan, etc.

Prior to the annual meeting of the European Bank of Reconstruction and Development Sonera announced during a business conference held in Riga in May the wish to interconnect more intensively the fixed telephony networks of Baltics. Concrete actions are to be taken, when all the fixed telephony networks of the Baltics, in which Sonera has a participating interest, are listed in the official stock exchange listings.

Estonian Telephone Company will close its NMT 450 network, which has 9600 clients, at the end of 2000 since the GSM network of the same company covers almost the same area, at the same time the additional services offered in GSM network exceed those of the NMT. NMT 450 was the first mobile network in Estonia, which was started by EMT in 1991. Digital GSM 900 network was started by EMT in 1993 and GSM 1800 at the beginning of 1998.

In the Ministry of Education the development plan for re-organising the Research and Development Council is in preparation. Committees of specialists will be established to deal with concrete domains instead of the present advisory body by the Government which consists of 23 members and the work format of which are plenary meetings held according to the occasion.

In March the Estonian Government decided to establish the Estonian Information Technology Foundation. The establishers of the Foundation were the University of Tartu, the Tallinn Technical University, Estonian Telekom and the Association of Estonian Computer Companies. The goal of the Foundation is organising the establishment of the Information Technology College, which will start work in autumn 2000. In the tuition charging school IT College up to 200 students will be accepted each year, the studies will last for three years.

College is seen as a rapid and effective method to form a new generation of IT specialists in Estonia. In May the Ministry of Education issued the activity license for the IT College, the education will be given according to the diploma program of the higher education.

The project for re-constructing the health care system till 2015 was approved by the Government at the end of May. To reach the goals raised the reform of the municipal medical establishments is to be completed, the number of the hospitals to be optimised, disengaged buildings of hospitals to be re-profiled and standards for planning the work of social welfare establishments to be revised.

Also establishment of a jointed information system of medical statistics and use of standardised case history electronic forms are planned.

At the end of May public was informed of the Estonian Genome Project. In the course of realisation of the project an unique information base will be established, the use of which gives an opportunity to diagnose diseases, determine the risks to the health and to enhance the treatment more accurately and efficiently than before.

For the durability of the project five years are planned (most of the work should be completed with the first 3-4 years) and for the costs 1.5 Billion EEK (96 Million EUR). Project has two broader domains of action - to gather information about the health of the population and the process of genetic typification, also a set of supporting actions is foreseen what could be done in for example data protection or forming a database.

A petition was made by Radiolinja Eesti and Ritabell (Q-GSM) to the National Competition Board in January to investigate the actions of Estonian Telephone Company. ETC was accused of posing discriminating conditions to other operators for interconnection of networks and accessing the network.

The reason for the accusation is the fact Estonian Telephone Company refused to interconnect the networks of Ritabell and Radiolinja for the price of the fixed connection claiming in these cases it is not a regular fixed connection.

Mobile operators Q-GSM and Radiolinja Estonia agreed at the end of 1999 in the interconnecting of their networks, which should start from the beginning of May. Up to that time the calls of the clients went through the network of the Estonian Telephone Company, whom the mobile operators paid for transit calls.

With the Concession Agreement the Estonian Telephone Company acquired exclusive rights to basic services. However, one of the conditions of the Concession Agreement is: "The concession holder shall, on terms and conditions to be agreed between the concession holder and the party interested in interconnection, allow, facilitate and effect the interconnection to its network of the Basic Services and systems of other telecommunications operators, according to the Telecommunications Act of the Republic of Estonia, and established international standards". (§4.12)

According to the Concession Agreement, Estonian Telephone Company has the right to set its own tariffs for services provided. It has the right to alter the rates no more than four times a year and the changes of tariffs have to reflect adequately the expenses of ETC for the provision of the respective services and take into account the average income of an Estonian household.

Changes of tariffs (requested by the ETC at the moment) have to be agreed between ETC and the Government. The base for changing the tariffs should be the business plan of ETC, currently under analyses (see 2.5.1.).

During the second half-year of 1999 and the first one of 2000 the large-scale fight against software piracy was continued under the lead of Business Software Alliance (BSA). Next to the extensive awareness campaign companies have been inspected in co-operation with the police and the first victories in court over traders of pirated copies and companies that have used pirated software attained.

According to BSA Estonian Committee and software company Microsoft as the result the rate of software piracy in Estonia dropped form 86 per cent in 1998 to 72 per cent in January 2000.

At the beginning of the year the Parliament altered the Copyright Act (Autoriõiguse seadus), by which the fines for using pirated software were raised form 150,000-250,000 EEK (9,600-16,000 EUR) to 500,000 EEK (32,000 EUR).

On May 30 the Government approved of the draft of 'The Freedom of the Information Act' (Avaliku teabe seaduseelnõu), among the rest it obligates the state institutions and local governments to guarantee public access to document registers and documents via Internet. 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. The draft will be read by the Parliament in the course of 2000.

A conflict between the Ministry of Finances, the Statistical Office and the Inspection of the Data Protection arouse. Inspection of the Data Protection accused the Statistical Office of creating an illegal master database using the data of the census, which was conducted in 2000.

At the meeting of the parties concerned a solution was found; it enables the Statistical Office to continue processing the data when it elaborates previously a program guaranteeing the anonymity of the persons' data.

At the end of May the Government of the Republic sanctioned the plan for the introduction of the ID cards and proclaimed on June 15 the tender for purchasing cards. According to the plan it is wished to start issuing ID cards in December 2001.

At the end of April the Consumer Protection Board arranged a roundtable meeting with vendors of hardware and software for discussing provision of trade articles with information in Estonian. Among the rest conclusion was reached, translations of license contracts into Estonian to be necessary since essentially these are contracts evoking the consumer certain commitments.

Participants of the roundtable decided to commence working out directions comprising minimum requirements for installing hardware and software and for annotation hardware and software with information in Estonian.

In May the State Audit Office started to investigate the economic activities of the Government Communications Agency which belongs into the governance of the State Chancellery since the institution has been accused of relations with private enterprises and hence diversion from statutory intentions by the company. Namely, some of the governmental communication circuits subjected to the state secret have been or are used by private enterprises. A corresponding report should be completed by June 15.

In June the Parliament altered the Government of the Republic Act according to which the co-ordination of state information systems will be transferred into the governance of Ministry of Transport and Communications. With the modification the importance of the domain is increased through the determination of responsibilities since a post of the official in charge of the domain will be established - vice-chancellor of the Ministry of Transport and Communications.

Up to now corresponding functions were carried out by the Department of State Information Systems of the State Chancellery and to sustain the coherence of co-ordination it is wished to transfer the personnel of the State Chancellery into the governance of the Ministry of Transport and Communication.

During the session on June 20 when explicating the foundations reform the Government decided to establish two relevant new foundations (Ettevõtluse ja Elamumajanduse Laenude Tagamise Sihtasutus and Ettevõtluse Arendamise Sihtasutus).

With the creation of these two foundations the merger of activities of foundations subordinated to different ministries will take place. The aim of the action is to stop duplicating the work of the private sector and to 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 enterprises should become simpler.

At the beginning of May the Government formed a plan to re-organise the Government Communications Agency, currently a sub-unit of the State Chancellery. Passing of the security operations law by the Parliament will designate the new structure. According to the amendment proposal the radio surveillance function would be transferred from the Government Communications Agency into the domain of the Information Unit, which will be created as a sub-unit of the Ministry of Defence. The section of the Government Communications Agency providing telecommunication services will be transferred into a foundation the aim of which would among the rest be integration of information systems, which at the moment are operating separately and belong to different state offices.

In the area of governance of the Ministry of Transport and Communications the Estonian National Communications Board is operating. The Board has started issuing cable distribution licenses, negotiating with Estonian Telephone Company, etc.

At the beginning of April the new Broadcasting Council came into operation. The Broadcasting Council supervises the activities of Estonian Radio and Estonian Television. Broadcasting is regulated with the Broadcasting Act (Ringhäälinguseadus, RT1 1994, 42, 680).

In May the Ministry of Economic Affairs announced of creating a technology foundation aimed at the better expediting and financing of development activities and innovation. Establishment of the agency is part of the alteration of Estonian science and development system.

In May Estonia joined the foundation conventions of the European Radiocommunication Bureau and the European Telecommunication Bureau.

In June during the meeting of the USA-Baltic Charter Supervisory Board a joint declaration was signed according to which the United States of America and Republics of Estonia, Latvia and Lithuania confirmed continuation of co-operation. The declaration was signed by the Vice-Minister of Foreign Affairs of the USA Strobe Talbott, Estonian Minister of Foreign Affairs Toomas Hendrik Ilves, Latvian Secretary of State of the Ministry of Foreign Affairs Maris Riekstind and Lithuanian Minister of Foreign Affairs Vygaudas Udackas. Next to eliminating factors which impediment the co-operation in the domains of economy and commerce, increased co-operation in the fields of scientific research, information technology, biotechnology and laser technology, are foreseen.

5. Market: Privatisation, foreign investment, mergers, acquisitions, call for tenders…

On April 17 the Estonian Privatisation Agency proclaimed the competition for privatisation of 66 per cent of the shares of the Estonian Railway Company (ERC) which will be held as a two-staged tender with preliminary negotiations.

At the first stage of the tender the bidder must produce his business plan for the ERC in writing; at this stage he does not submit a tender of the purchase price nor other financial obligations. Tenders can be submitted till July 17, 2000.

Last year the net turnover of the ERC was 1.4 Billion EEK (89 Million EUR) and the value of the company according to the Privatisation Agency is 20 per cent of the Estonian GDP. The privatisation of the ERC was also foreseen in the Memorandum of the Economic Policy presented to the International Monetary Fund (IMF), and in the Development Plan of the Estonian Economy.

5.2. The State will not sell its participating interest in Estonian Telecom in near future

At the beginning of May the Government decided not to the sell its nearly 28 per cent holding in Estonian Telecom (ET) although presumed it in the economic-political memorandum presented to the IMF.

The decision was passed based on the proposal of the Ministry of Finance: although the prices of the technology shares are unstable in the world market, the financial situation and perspectives for development of the ET are good.

One of the circumstances for not hastening with the sale is the potential dividend profit: in 1999 the share profit income from ET for the State verged 150 Million EEK (9.6 Million EUR) and payment of dividend profit for the owners should continue.

5.3. Swedish group of undertakings NetCom wishes to purchase majority ownership in Starman

In May Swedish telecommunication group NetCom AB announced of the intention to obtain major ownership in the biggest Estonian cable distribution company Starman; as a result NetCom with its subsidiaries would become the biggest rival of the Estonian Telecom. According to Starman the sale of 60 per cent ownership belonging to the telecommunication group Telia AB will take place at the end of June or beginning of July. Reason of the sale is a plan to start providing data connection and after the termination of exclusive rights of Estonian Telephone Company telephony services as well (a more detailed overview is given in the regulatory developments report '' Existing major network facilities in public utilities. What’s new over the last three months and on-going developments).

Beginning with April 1 the non-profit organisation Estonian Standardisation Centre as the national standardisation organisation started functioning. The Centre will be carrying out the functions concerning standardisation which up to now belonged into the domain of the Estonian Standards Board: management of national standardisation, preparation and updating of the standard program, distribution of information and participation in the international co-operation related to the subject.

The Estonian Standardisation Centre was reformed from the Estonian Standards Board, a government office established in 1991; according to international principles and those of the European Union standardisation is an unconstrained activity based on the consensus of the parties concerned. Therefore a national standardisation organisation can not act as a governmental office.

The office responsible for standardisation of information technology is the Estonian Informatics Centre, which participates in preparing standard analysis of the public sector and producing suggestions. Based on Estonian Informatics Centre the technical committee of information technology standardisation EVS TK4 was set up. The committee co-operates mainly in the field of official standardisation with the International Standardisation Organisation (ISO), the Assembly Committee JTC1 established by the International Electrotechnical Committee (IEC) and the information technology association CEN/ISSS of the European Standardisation Organisation CEN.

From other organisations most significant are Küberneetika AS (terminology, information security, ID cards), Estonian Language Institute (terminology, language), OÜ Imprimaatur (terminology), ID Süsteemide AS (ID cards), The Union of Estonian IS Auditors (audit of information systems), AS Regio (GIS), EAN ESTONIA (stripe code) and IT Meedia (Internet technologies).

In March a new version of the standard EVS8 'Rules of information technology in surroundings of Estonian language and culture' was presented. The solutions of the standard are based on the international standards, inc. the new code table 8859-15 of ISO.

Standard can be used by the localisation (Estoniazation) of software and adopting database systems for processing with Estonian data forms. An English version of the standard exists as well.

In April four ministries signed a mutual apprehension memorandum about employment of Electronic Data Interchange (EDI)(see 2.4.2).

The present report has been compiled based on the materials of news agencies BNS and ETA as well as the newspapers "Postimees", "Päevaleht" and "Äripäev", and the opinions expressed by various experts.

Please note that this report has been prepared under the sole responsibility of the ESIS II contractors.
It does not necessarily reflect the views of the Commission, nor does the Commission accept responsibility for the accuracy or completeness of information contained herein.
The ESIS Team of contractors welcomes any additional information or corrections.