ESIS extension / Estonia / Regulatory Developments / Update Memo 6

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

During the period reported several developments took place, as a result of which it is hoped to co-ordinate the development of State information systems more effectively and to support the general development of Estonian information society. A number of significant legislation drafts were included in proceedings and several laws were submitted for alteration, issuing communications operator activity licences continues. Privatisation of state-owned organisations continues as well. Most important changes in regulatory and in general developments are dealt with in 1.2.

As a well functioning telecommunications sector is considered important for raising the competitiveness of the economy and life quality, 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 resulted significant investments 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 telecommunications 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 Europe has not overtaken with USA in the development of economy and has not applied possibilities of using Internet sufficiently, although the European Committee has taken steps to speed up the development (lately eEurope initiative in June 2000). In this context Estonia is in spite of its near past and scarce resources among the first ones in the information technological development of Central- and Eastern European Countries (see also report 'WWW sites indicators'). The Republic of Estonia has and is basing much of its related activities on the eEurope initiative and Action Plan, at the same time participating actively in planning of eEurope initiative focused on Countries of Central and Eastern Europe.

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 of State actions in supporting the development of Estonian 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 action 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 is updated constantly. The last version of the plan and the changes proposed 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' project by the end of 2000), it will be suggested to set new goals and priorities for 2001. 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 education sector will be continued.

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 Internet users, 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 public administration is well equipped with IT, 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.

Since the document management programme of the governmental institutions is seen as a priority, activities concerning the area continue.

An important modification was introduced in the co-ordination of the State information systems, starting September 1, 2000 functions concerned were transferred into the governance of Ministry of Transportation and Communications from that of the State Chancellery. In addition post of an IT Deputy Secretary General was established. In the process of the reform a new sub-unit of the State Chancellery was established, Department of State Information Systems and Document Management responsible for archiving issues of State and local governments' institutions and promoting the application of electronic document management programme.

Public procurement practice indicates the need to revise the present situation in public procurements - many results of procurements have been contested and the arbitrary of the officials by management of public procurements continues. Therefore the new draft of the Public Procurement Act was in proceedings in Riigikogu.

Among the rest the draft foresaw a 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).

In the Parliament sitting on September 14 the Public Procurement Act was not approved, but the Riigihangete seaduse eelnõu was taken into proceedings again.

Pursuant to the Telecommunications Act (§ 105) persons willing to operate a public telecommunications network or with such or with a telecommunications network located on the territory of a foreign country connected telecommunications network had to register by the National Communications Board by September 1, 2000.

By that time the Communications Board received applications to operate a public voice telephony network from 9 enterprises; altogether 26 companies applied for registration.

Coming to the market with telephony services provision after the expiration of exclusive rights granted by the Concession Agreement has been announced by AS ComTrade, Levicom BroadBand OÜ (TELE2) and Uninet Andmeside AS. From 2001 on the most important companies in the market will probably be AS Eesti Telefon, Levicom BroadBand OÜ (TELE2) and Uninet Andmeside AS.

According to the Concession Agreement Estonian Telephone Company has to present a business plan to the Government of the Republic for approval. On June 14, 2000 Estonian Telephone Company presented a revised business plan to the National Communications Board: compared to previous year the annexes of the action plan have been revised e.g. prognoses about the turnover for next years have been added.

The business plan was under discussion in the Government in August 2000 and ETC was proposed to speed up the granting of telephone applications and to freeze private customers’ monthly and joining payments during the process of re-balancing the networks. Therefore the business plan was returned to ETC for further improvements.

The non-transferable activity licences for the duration of ten years, stipulated in the law, for the construction and operating of the cable television network are issued by the National Communications Board:

Pursuant to the Cable Distribution Act the National Communications Board arranges public tenders on the request of municipalities for the issue of cable television network licences.

Since the admission of the Cable Distribution Act over 70 cable television network licences have been issued, most of which are temporal activity licences permitting operating of a network and becoming invalid when the cable television network is given to be operated by the winner of the public competition.

The competition in the cable distribution market in Tallinn continues. In November 1999 Starman Cable Television Ltd. (Starman Kaabeltelevisiooni AS) filed a complaint disputing the issue of a cable distribution activity licence allowing the creation of a cable television network covering entire Tallinn to Tallinn Cable Television (Tallinna Kaabeltelevisioon AS, trademark TELE2).

In the middle of August, Supreme Court Appeals Selection Committee did not approve the appeal of TELE2 and therefore stopped the extension of TELE2 cable network in Tallinn.

So the situation in the Tallinn's cable distribution market previous to the issue of a 10-year activity licence to Tallinn Cable Television in October 1999 is restored.

Further developments depend from the outcome of the administrative dispute whether the National Communications Board issued the 10-year cable distribution licence to TELE2 lawfully or not. Also it is possible that the Cable Distribution Act will be altered since in the beginning of June the Legal Chancellor sent an inquiry to alter the Cable Distribution Act arguing, it favours monopolies and restricts actions.

Since according to Legal Chancellor Eerik-Juhan Truuväli the Cable Distribution Act contains aspects that favour monopolism and restrict actions, he sent an inquiry to the Parliament to alter the Act. Alteration proposals of the Act are worked upon and they will be in Parliament proceedings during 2000.

Alterations are made with the purpose to bring the Telecommunications Act and the Cable Distribution Act into accordance. At the moment the activities of the National Communications Board are limited by these legal confusions as well, since based on the Cable Distribution Act the Communications Board has issued regulations which later have been declared unlawful by courts.

Since with entering into force of the Telecommunications Act the decrees regulating the field given by the Government and the Ministry of Transportation and Communications were annulled, more than 30 regulative acts have been approved or are in preparation, incl. radio frequency allocation plan, numbering plan, etc.

Despite of the rapid spread of Internet connections, relatively high number of users and large investments in Internet stores (e-stores) the turnover of e-commerce is insignificant - the total turnover of largest Internet department stores does not exceed 1 Million EEK (63 kEUR) per month as of September 2000.

Factors impeding the development are sustainability of buying habits, limited product range of Internet stores, inconveniences in paying for goods and deliveries, and security risks when using credit cards. Forming a new electronic commerce culture is a world-wide problem and in this light Estonian developments are in line with the most successful European countries. One of the strongest Estonian advantages in these developments is the widespread Internet banking habit (favours attitude improvement towards e-commerce); the most important discouraging factors are the smallness of the potential market and conventional shopping habits.

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

Private sector has taken the initiative: Hansapank, Eesti Ühispank, Estonian Telephone Company and Estonian Mobile Telephone Company signed a collaboration contract for elaborating the Public Key Infrastructure in May 2000. In March 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 most important event was the opening of Information Technology College. In the tuition charging school IT College 200 students were accepted and College is seen as a rapid and effective method to form a new generation of IT specialists in Estonia.

In August co-operation agreement with the University of Tartu and Tallinn Technical University. According to the agreement the universities recognise the education level of the College and enable the students of IT College to continue their studies in the University of Tartu or in Tallinn Technical University.

Estonia started accession negotiations with the European Union in March 1998; the chapter concerning transportation (Ch. 9) was opened on November 11, 1999. In course of negotiations European Union has requested additional information about harmonisation and application of relevant legislation.

In relation to the enforcement of the Digital Signature Act at the end of year 2000 the Ministry of Transportation and Communications has announced of an electronic data connection system application pilot project. The system has mainly been developed by the Estonian Infrastructure and Transit Development Foundation (a sub-division of the Ministry of Transportation and Communications).

Purpose of the Act is guaranteeing the development of gene research for the benefit of mankind's health considering human rights and generally approved ethical principles. For realisation of the objectives Estonian gene bank will be established, in which DNA samples from voluntaries and electronic descriptions, genetic information, data characterising person's health and family connections and personal data will be collected. According to the draft people's participation in gene research is voluntary, the draft also forbids advertising the research.

As there are no similar laws in the world Estonian Human Gene Research Act is unique.

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.

At the moment draft of law regulating working hours (Töö- ja puhkeaja seadus) is in proceedings in the Parliament, it stipulates the duration of working hours rest periods for employees and civil servants. Among other it is stated, including hours worked overtime a working week may not exceed 48 hours.

No significant changes from information society's point of view (e.g. development of employees' IT related skills) took place.

According to the State Audit Office's act analysing the sale of Estonian Telecom's shares' (IPO) the organisation of the sale was not the best of possible ones, setting of objectives and division of commitments and responsibilities were insufficient (for example there was no shares sale prospect in Estonian). Administration quality was pointed out as the main problem, there were shortcomings in the documentation of transactions as well.

In the beginning of September the Supreme Court Appeals Selection Committee interdicted the leave to appeal Ritabell's appeal in cassation, with which Ritabell applied the Concession Agreement signed between the Estonian Telephone Company and the Government of the Republic to be declared unlawful.

AS Ritabell argued the Concession Agreement signed between the Government of the Republic and the Estonian Telephone Company in 1999 contains aspects of forbidden agreement stipulated in the Competition Act.

Since several companies are making preparations to enter the Estonian telecommunications market, Estonian Telephone Company is preparing itself for competition as well.

It is wished to stop cross subsiding services with fixing new tariffs (starting October 1). Prices of international calls are lowered up to 25% and of local calls raised by 25% on average.

According to the Concession Agreement, Estonian Telephone Company has the right to set its own tariffs for services provided. Changes of tariffs have to be agreed between ETC and the Government. The base for changing the tariffs should be the business plan of ETC, currently analysed (see 2.5.1).

Starting October 1, a number of tariffs for services provided by the Estonian Telephone Company will be raised. Considering the popularity of Internet a reduced price is offered to Internet users. The deal allows using Internet dial-up service during business time about 17% below the normal tariff and during the reduced tariff periods 1/3 below the normal. Since ETC is the dominant company in the field, offers for dial up services is extending to other service providers in the market (TELE2, Delfi) as well.

During the second half-year of 1999 and the first one of 2000 the large-scale fight against software piracy was carried on under the lead of Business Software Alliance (BSA). Next to the extensive awareness campaign companies were 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.

In the beginning of September the Estonian Committee of Business Software Alliance announced of the start of a new software legalisation campaign. It will take place till the end of the year 2000 and during that time Estonian enterprises are sent information materials using direct mailing and checks of final consumers are carried out.

On May 30 the Government approved of the draft of 'The Freedom of the Information Act' (Avaliku teabe seaduseelnõu), at the end of June it was introduced to the legislative proceeding of the Parliament. The draft provisions conditions, order and means for accessing public information, bases for refusal and restrictions of access, also the monitoring of access granting.

According to the draft the Act will not be applied to information subjected as state secret and to responding to applications and memos according to the stipulations in the Responding to Applications Act in case responding requires analysing or synthesising recorded information or collecting and documenting additional information.

According to the draft public information is information recorded in any way on any information carrier and documented information gained or created while performing a public duty stipulated by the Act or any legislative act based on it.

In August the City Court of Tallinn convicted for the first time in Estonia a person who had instigated people against the Republic of Estonia via Internet. In October 1999 the convict composed a WWW page on which he instigated people to fight against the state constitution under the name 'Estonian anarchist - communist movement'.

He was charged for political hate, national feud and violence sedition and convicted in a criminal offence.

In the beginning of September the Government introduced the draft for altering the Surveillance Act to the Parliament (Jälitustegevuse seaduse muutmise eelnõu), it would permit the surveillance agencies to collect information about phone calls. The area is more precisely regulated with the Telecommunications Act stipulating obligation to provide surveillance agencies with information. In case of the enforcement of the draft one has to provide surveillance agencies with information concerning personal data of sender and receiver of the message and their locations.

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.

In the beginning of September companies interested in participating in the public tender for manufacturing the ID cards were announced. These were Bundesdruckerei GmbH (Germany), ID Süsteemide AS (Estonia), Setec OY (Finland), Maurer Electronics GmbH (Germany), TRÜB AG (Switzerland) and Gemplus (France).

The Ministry of Internal Affairs chose the offers made by Bundesdruckerei GmbH, TRÜB AG and Setec for further negotiations and started negotiating at the end of September.

The alteration draft of the Identity Documents Act (isikut tõendavate dokumentide seaduse muutmise eelnõu) postponing the identity document requirement (was supposed to be effective starting 2002) by more than 4 years, is in proceedings in the Parliament.

The draft for alteration of the Identity Documents Act initiated by the Government replaces the date of entry into force of the valid Act (January 1, 2002) with a new one, July 1, 2006.

According to the Government issuing of ID card to every person by January 1, 2002 is technically impossible and therefore postponing of the enforcement of the Act is strictly necessary.

In June the Parliament altered the Government of the Republic Act according to which the co-ordination of state information systems was 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 - Deputy Secretary General 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 personnel of the State Chancellery was transferred into the governance of the Ministry of Transport and Communication.

In July the supervisory control concerning the sub-unit of the State Chancellery, Government Department of Communications, exercised by the State Chancellery was completed. As the result re-organisation or termination of activities of the Board were suggested. At the sitting on August 29, the Government established an expert committee for re-organising the Communications Board.

At the moment the draft for altering the Security Authorities Act and related alterations in the Government of the Republic Act are in the proceedings of the Parliament, according to which operating government institutions' communications systems and organisation of communications related security will be re-organised.

With implementation of the draft an information board will be established in the governance of the Ministry of Defence, at the same time the Information Service subordinated to the Ministry of Foreign Affairs and the Communications Board will be winded up starting mid October. Co-ordination Director's Office in the governance of the State Chancellery will become a consulting unit of the Government, among other it co-ordinates the activities of different areas of government.

Starting September 2000 new rules, based on which Estonian sub-domains still not used will be registered in Internet, have force. Previously, EENet rules had a restriction of generic terms, now

annulled. At the same time the restriction to grant one domain name per company remained in force, as an exception very large companies are granted several domain names.

The re-organisation of national information systems continues. The co-ordination of development of national information systems was subordinated to the Ministry of Transport and Communications from the governance of the State Chancellery starting September 1.

In July 2000 the supervisory control concerning the sub-unit of the State Chancellery, the Government Department of Communications, exercised by the State Chancellery was completed and re-organisation of the Department suggested. A regarding committee was established in August 2000 with the purpose to analyse the State information communications system and to discuss the establishment of the National Information Communications Foundation (see also 'Expert committee for National Information Communications Foundation establishment in the database).

In May 2000 the Ministry of Economic Affairs announced of creating a technology agency 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.

The Technology Agency will be sub-oriented to the Enterprise Development Foundation (Ettevõtluse Arendamise Sihtasutus) and concerned with supporting technological projects and distributing information about information technology, product and technology development.

No significant international agreements were signed during the period of reference.

However, the information technology field and the need for regarding development plans were found to be of great importance in course of several events:

5. Market: Privatisation, foreign investments, 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.

All four tenders were accepted into the second stage of the tender: Raudtee Erastamise Rahva AS (RER), CSX Estonia ApS, Baltic Rail Services OÜ and SJ International.

According to PriceWaterhouseCoopers, the sale consultant of major shares of AS Starman Kaabeltelevisoon the sale will take place in course of 2000. In preliminary plans the sale was to take place in June/July.

At the moment ownership relations (Telia AB as the major shareholder of the company) prevent the company from participating in tenders for activity licences arranged by the National Communications Board. At the moment Starman has 10 temporary activity licences but some of these will expire soon. For example Starman could not participate in the tender of cable distribution operator in Kehra.

According to Starman the Swedish corporation NetCom AB (trademark TELE2) is interested in becoming the major shareholder in Starman.

In April 2000 the State decided to privatise the state-owned Estonian Broadcasting Transmission Centre through a tender with preliminary negotiations. 49% of the Transmission Centre share capital will be sold.

Although the best offer was made by Teracom AB, the parties concerned did not issue a privatisation contract and on September 18 the Estonian Privatisation Agency sent an invitation for starting privatisation negotiations to the French company TeleDiffusion de France, maker of the second-highest bid for privatisation.

Involving a private investor creates the possibility to start digital television in Estonia in near future, in addition to programmes broadcasted at the time being, it would enable supplementary services and television programmes. At the moment the Broadcasting Centre serves 4 Estonian television programmes and 4 state-owned radio stations. Besides the masts of the Broadcasting Centre are used by most private-owned radio stations and all mobile connection operators.

The office responsible for standardisation of information technology is the Estonian Informatics Centre, which participates in preparing standard analysis of the public sector and produces 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.

According to the Estonian Informatics Centre in near future following instalments of the standard are published:

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.