ESIS extension / Hungary / Regulatory Developments / Update Memo 5

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

Under the former political system between 1949 and 1988, the economy was centrally planned and directly controlled by the government, and the development of infrastructure was not given priority. Following the 1990 political changes in Hungary, an intensive development of telecommunications was initiated. In the year 2000, the main emphasis shall be laid on the introduction of advanced telecommunications services including high-tech intelligent services and personal telecommunications as well as the broadband ISDN multimedia services. The enactment of the new, unified Act on Communications will be an extraordinarily significant step, which will equally adopt the direction of the European law and the related most important international conventions in the field of postal services (97/67/EC), networks, interconnections, network access (97/33/EC), licensing (97/13/EC), defining market representatives (95/62/EC, 98/10/EC etc.) and other conceptual definitions.

The accomplishment of the liberalised market can only be reached through the creation of a temporary, so-called asymmetric market regulation. At the beginning of this year, the composition of the so-called standard text started, the first results of the work was available on 6th March. The government, being aware of the socio-economic significance of the communication act, also asked the opinion of the marker players.

The backbone of the work for KHVM’s communications section and the Communication Authority (HÍF) currently involves the codification of the new unified Act on Communications (EHT) according to an extremely stepped-up schedule. According to the theses of the law, the role of the government in the information society is the creation of the legal environment, education, influence analysis, and the creation of communication between the public, economic and civil sectors. Information strategy comprises the development of telecommunication, information technology and content provision.

Three committees were established: the first includes domestic telecommunication service providers, it adds their ideas to the bill. The second comprises KHVM’s communication section, HIF and other experts involved by them. The third committee is composed of those organisations that can add their remarks to the final version of the law on the substance, which means it is a committee including ministries and organisations of national scope of authority.

KHVM’s Communication Office co-ordinates the harmonisation with the various interest safeguarding organisations and the involvement of the public. 50 HIF members are working on the improvement of EHT’s theses. A new branch of its authoritative work besides economic regulation and market surveillance is infocommunication: system regulation, telecommunication specific regulation, number and title management, radio telecommunication specific regulation, broadcasting surveillance, information technology specific regulation, measuring, standardisation, international relationship.

The most critical area of the draft of the uniform communication act is the co-operation and connecting of service providers. According to the theses passed last December, the law aims to provide a uniform regulation for telecommunication and the post, and determines the frame for the creation of the competition market. One of its main aims is to promote the creation of an effective competition market and to counter-balance the influence of the dominant service provider. In order to achieve this, it is highly important to define the dominant companies and those companies with significant market share, the interpretation of effective competition, which definitions will fundamentally determine the contents of the law and the accessibility of the aims set.

The Prime Minister appointed a government information technology commissioner. The applicants had to meet three fundamental criteria: firstly, thorough knowledge in the fields and markets of information technology and telecommunication, secondly, administrative regulatory work and experience in this field, and thirdly, an ability to communicate towards the society the importance and necessity of information technology even in the lives of common people in an easily intelligible way. The appointed Zoltán Sík has considerable experience both in the business competition sphere and government.

On the conference called The freedom and constraints of the Internet, a staff member for the National Police Office’s (ORFK) Directorate Against Organised Crime said the vast majority of Internet crimes committed in Hungary during the past two years involves paedophilia or pornography. The system of Internet department stores has not yet been created in Hungary and the user group is not so large either as to make perpetrators being motivated by economic crimes. In Hungary the number of computer crimes is hardly measurable while this type of crime comprises 5 percent of all crimes in other Interpol countries.

The theses for the legal regulation of electronic signatures, electronic document are made ready, currently their harmonisation is in progress. The RTTE statute and the related 25 ETSI standard naturalisation are under preparation as well as the translation of 13 EMC ETSI standards.

On the meeting of the Economic Competition Commission’s (GVH) Competition Council, UPC Hungary Ltd. undertook that in 6 months it will finish the conversion of TV2 and RTL Klub programs into the medium cable program package instead of the most expensive one in the largest settlements and will also start doing so elsewhere. A proceeding has been initiated by the competition supervising authority because of a suspicion that the company took an unfair advantage of its economic superiority. GVH noticed that the firm provided the popular Hungarian TV2 and RTL Klub programs in some areas like Pécs and Debrecen exclusively in its most expensive program package. The competition council terminates the proceedings for 6 months as a result of UPC’s undertaking, and then GVH will make sure during a supplementary check that the undertakings are fulfilled. UPC Hungary Ltd. takes into account 100’000 new subscribers this year – currently it is present in 30 Hungarian settlements having 503’000 subscribers. UPC Hungary Ltd. has been in the 100 percent ownership of the Dutch parent firm since the end of March 2000, which was the time when they purchased the 20,75 percent share of the First Hungary Fund for 63,9 million euros.

The National Consumer Protection Association (OFE) initiated competition commission proceedings against Matáv for violating antitrust laws regarding tariff rises. The consumer protection association considers the planned social package misleading, unfounded and far from reality, because the assumption that the offered service is sufficient for impecunious consumers, mainly pensioners, is not life-like. Those people who yet choose this tariff package will have to pay a penalising threefold charge for calls if they telephone for more than 250 forints a month. Being aware of the tens of billions of Matáv’s profit, OFE expresses its dissatisfaction and lack of comprehension for this amount of tariff rise.

The delegation of the National Consumer Protection Association took objection against Matáv’s new customer service system and services. The report notices that the customer when making a telephone complaint cannot justify its exact date, which obstructs the enforcement of his rights later on. In addition, customers do not always receive instant and substantial response to their complaints. The civil consumer protection organisation also takes objection that the consumer service offices are closed, thus ending the opportunity for a face-to-face conduct of affairs. Several people complained about the overload of the telephone customer service and the impatient, refusing behaviour, the sometimes off-hand manner treatment due to this and also about not getting substantial responses.

By the time the Parliament presumably passes the bill in June on the transformation of the government structure, the new government commissioner will have carried out the surrendering and assumption activities of the transitional period. There is no surplus budgetary source for the establishment and operation of the new apparatus. They have to manage the 16 billion forints, which was originally given to the Ministry of Transport, Communications and Water Management (KHVM) for this field.

Regarding codification, the number of participants expanded to 9 from 5 after the joining of Antenna Hungária, British Telecom, Pannon GSM and Vodafone. The aims of the new economic group with interest enforcing weight are unaltered. The "telecommunication nines" indicated the great responsibility of the codifiers and lawmakers, since EHT will also decide on the chance of the country’s economic modernisation. Its final text will have to support the information society strategy of the Széchenyi and Neumann plans developed by the government. The nines consider EHT the most important law of the decade

The alternative telecommunications service providers – currently partners of the monopolistic Matáv, but its will-be competitors – GTS, Novacom, PanTel, UPC and Vivendi handed in a document to the Communication Office of the Ministry of Transport, Communications and Water Management (KHVM) including their jointly shaped opinion on the upcoming single communication act (EHT). According to this document, Matáv, referred to as the dominant service provider after the liberalisation, should not be allowed to start from a position in which it yet preserves its quasi-monopolistic position because the new law will not involve a regulation on the use of its networks and charges. Although, there is no ban on connecting networks, and there is no such rule defining how it shall happen, if Matáv do not wish to have its networks connected to others, it cannot be obliged to do so.

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

Ericsson and Matáv signed an intention declaration regarding the mutual investigation and potential testing of the Engine system. The Engine solution enables Matáv to provide telecommunication-level services including efficient data transmission services and multimedia services accessible via an integrated multiple services network. The Engine network is capable of transmitting an increasing amount of voice and data traffic and meets the advanced network co-operation requirements of the liberal and competitive Hungarian telecommunications environment.

In the second half of January, Matávcom and Nortel Networks signed a partnership contract, according to which Matávcom has become the official distributor of the Nortel Networks Enterprise Solutions Data (private network data communications solutions) product line. Matávcom, registered as Matáv’s 100 percent subsidiary, runs a national network. Beyond strategic partnership relations, Matávcom aims to acquire the right to use the title ‘Enterprise Solution Partner’ of the Canadian giant firm. The management of Matávcom does nor expect the same scale of development in the market segment of sub-exchanges and traditional telephone distribution than in information technology, so the firm focuses on the IT market.

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.