ESIS extension / Hungary / Regulatory Developments / Update Memo 6

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

After early summer the Prime Minister appointed a government information technology commissioner, the new commissioner has carried out the surrendering and assumption activities of the transitional period. In the year 2000, the main emphasis laid on the enactment of the new, unified Act on Communications which is an extraordinarily significant step, equally adopting 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 preliminary plan of the law on electronic signatures and documents has came before the cabinet in autumn 2000. The plan, which lays the foundation for the everyday use of electronic documents, in line with EU directives, finds it necessary for the future law to be state that digital signatures have to be accepted. The verification of signatures is not a task for the authorities, but a freely performed market activity, therefore it merely has to be reported to the authorities. Nevertheless, signature verification will be a service subject to licensing. The full extent of the validity of electronic documents as evidence will be laid out in the Code of Civil Procedure, which will therefore have to be amended.

According to experts, electronic signatures can first become general practice in the field of company procedure, since there, in the form of the so-called one-window system – between the courts, the Tax and Financial Inspection Office (APEH), the Central Statistical Office (KSH), and the other authorities – it already exists in part. The amendment of the law regulating companies, planned for next year, can bring progress, if it grants the conditions for the movement of electronic data between clients and the Court of Registration. In company matters, legal counsel is mandatory. And some of the legal counsels are in possession of the necessary computer background for filing petitions directly into the Court’s computer system. This would speed up proceedings. At the same time, the full-scale publicity of company matters would be achieved. Currently, those interested can only access the data of the company registry through their computers, for everything else, they have to request the files from the Court in person. If the preliminary plans are accepted, the draft bill can be completed by the end of the year.

Based on the proposal of István Stumpf, Minister in Charge of the Prime Minister’s Office (MeH), the cabinet nominates Erno Simonyi for the post of chair of the National Telecommunications and Information Technology Council (NHIT), and delegates Zoltán Sík, Gyula Sallai, and József Bajó as members of the body.

The eleven-member National Telecommunications and Information Technology Council (NHIT) is the body that gives opinions and proposals to the cabinet in the field of tasks relating to information technology and telecommunications. Three members of the NHIT are delegated each by the cabinet and the National Radio and Television Council (ORTT), and a further one member each by the Cooperative Forum on Telecommunications, the Hungarian Academy of Sciences, the Cooperative Forum on Information Technology, and the Alliance of Technical and Natural Science Societies. The chair of the body is appointed by the President, with the countersignature of the Prime Minister, with a mandate of four years.

Erno Simonyi is a private entrepreneur, chief editor of the Telecommunications Magazine. Zoltán Sík is currently the Information Technology commissioner of the Prime Minister’s Office, Gyula Sallai is the deputy chair of the Telecommunications Authority, and Colonel József Bajó is the director of the Governmental Office on Frequency Allocation.

Matáv hopes to gain funds for the development of its mobile phone and Internet services by issuing bonds in the form of an auction. The dominant telecommunications service provider will be able to gain long-term funds from the bond issue, and foreign investors will also be more accessible this way. The bonds will be issued for a three-year period, with a fixed annual interest rate of 9.25%. The bonds, which will have a minimum nominal value of 1 million forints, are aimed primarily at large investors; the date of sale is July 7. The bond will also be introduced on the Budapest Stock Exchange (BÉT). According to reports, one-third of Matáv’s annual income of 385 billion forints was from the fast-growing mobile phone and Internet data communication sectors.

Matávnet Kft., owned 100% by Matáv, is turning into a joint stock company. The share capital of the new company is 1.56 billion forints. Although this is only 20 million forints more than the nominal capital of its predecessor, the parent company has allocated a further 809 million forints to fill up the negative profit reserves. The likely background for this step is the strengthening of the competition on the Internet market.

CA IB Securities Rt., in collaboration with the Austrian CAIBON.COM Internet Services AG, has started the online trade of stocks listed on the Budapest Stock Exchange. The fees of electronic broker trading are lower than in conventional trade, the commission is 0.8% instead of CA IB’s 1%. CAIBON’s home page also offers market news and analyses. The page is available in several languages; the security of online trade is the highest currently possible, with three levels of verification. The trade of investment funds is planned to start by the end of the year, and the international stocks circulated by CA IB Securities Rt. and the Bank Austria Creditanstalt Group as of 2001 on the system.

The online trade of stocks is currently hindered by the fact that the law on online customer recognition has not been accepted yet. Thus, with the acceptance of the encryption procedures, substantial progress is expected in 2001. Last year three banks started online services, with 10,000 users, this year six banks had 41,100 clients. Estimates for next year say that 15 banks will provide electronic banking services to 112,000 customers.

The online newspaper Praxispiac (Practice Market) provides news to users since the passing of the law on the privatization of medical practices. At the Internet address www.praxispiac.hu, those interested can read the text and the enactive clauses of the law on independent medical activities. In addition, visitors to the site can also read the previous issues of the paper, including interviews with, among others, the Minister of Health, the ministerial commissioner of privatization, the state secretary of the Interior Ministry responsible for local governments, the chair of Parliament’s committee on health care, MPs, the mayor of the year, and leaders of local governmental organizations.

Visitors to the site can read guides to the recently developed credit schemes. The web page offers advertising space for operation rights, which will be free for sale and purchase as of January, 2001. Praxispiac offers guidelines for the possible aspects of the market evaluation of practice rights.

The Market Monitoring Department of the Telecommunications Authority published the latest flash report on the domestic GSM digital mobile phone providers, based on data as of July 2000. According to the report, in July 55.33% of the total active Hungarian GSM phone users were subscribers of Westel Mobil, 39.27% of Pannon GSM, and 5.4% of Vodafone. Compared to June, Vodafone increased its market share by almost one percentage point. The number of mobile phone subscribers per 100 people as of the end of July was 22.43 (at the end of June the same figure was 21.24). The flash report also states that, taking the previous month as a base, the number of active GSM subscribers grew by almost the same amount, 5.5%, for the fourth straight month.

Thanks to the joint tender of the Soros Foundation and the Sulinet Klub Association, five hundred teachers can receive home computers and IT training in October, interest-free, and without having to pay the starting installment. Teachers with a college or university degree, and having an official work contract with an educational institution are eligible to take part in the tender. The winners will receive the computers on a 24-month installment plan, with monthly installments of gross 8984 forints, but without having to pay the starting installment. A requirement for receiving the computer is the participation in the one-year further training course for teachers to be held in teleworking format, starting in October 2000.

The National Child and Youth Parliament (OGYIP) has launched a new home page as of August 15 by the name of csakhogytudd.hu ("just so you know"), which they hope will provide all the necessary answers that young people might have concerning their lives. The youth organization, which has almost one million members and 68 member organizations, launched the electronic news page to create the greatest information database for those Hungarians aged between 15-30 living in Hungary or in neighboring countries. After the current trial run, the workers of the youth organization will expand the web page by the middle of the month with lodging possibilities in the Carpathian Basin and in Europe, documents aiding the work of civil organizations, and a wide range of scholarship opportunities. The list of the latter includes not just the applications available in Hungary, but also those higher education programs announced by the European Union.

As of July 1, MATÁV has launched its caller identification service in its geographic are of service – 36 of the country’s 56 prime zones. Users who subscribe to the service – if they purchase a phone or a supplement suitable for displaying phone numbers – can see the number of the person calling, if the caller did not have his number classified. Initially the service will be available to 70% of MATÁV subscribers, the clients of the three GSM-based mobile phone companies, and the nationwide ISDN subscribers, but the range will be gradually expanded to include 0660-type mobile phones and the rest of the fixed-line subscribers. The monthly subscription fee for displaying the phone numbers of incoming calls is gross 200 forints. The display of our phone numbers on other people’s phones is free. A fee only has to be paid if we want to know who is calling us.

Parallel to the launching of this service, MATÁV has centrally authorized the possibility of displaying phone numbers. The phone number of the caller is displayed even if it was requested to be treated in the phone book or at the directory assistance as a hidden ("secret") number by the customer. Subscribers still have the opportunity, if they wish, to prohibit the display of their phone number before each call (by dialing *31*, or 131 on rotary phones). In this case, the prohibition is valid only for the immediate next call. Clients can generally prohibit the display of their phone numbers at any time, by calling MATÁV Telephone Assistance.

The Alliance of Information Technology Enterprises (IVSZ) has established a specialized group on information security. The activity of the specialized group would include the question of the security of networks and communication, as well as of verification and Internet publishing. The specialized group, to be formed on August 30, wishes to play an active role in the development of the legal background of information technology security, defining and representing the uniform opinion of the profession.

2.17 Freedom of expression and information as far as the distribution via electronic networks is concerned

The section heads of the Information Technology Commissioner's Office were appointed effective from August 1. Péter Szemerei heads the Information Society Section, and Anna Dessewffy is the head of the Regulatory Section. Gábor Kleinheincz heads the Electronic Government Section, which is responsible for coordinating government communication and information technology development.

For the second time in slightly more than one month, the Office of Economic Competition (GVH) has denounced the leading domestic telecommunications company. In July, they stated that Matáv Rt. abused its economic position of power by providing their IP-based international voice and fax transmission services only to the licensed fixed line and mobile phone service providers, excluding other companies. Matáv could give no acceptable explanation to the exclusion within the boundaries of the law on economic competition. Therefore the competition council declared the telecom company's violation of the law, prohibited the company from continuing its policy, and fined it five million forints. As a result of the prohibition of continuing the policy, Matáv has to find the legal possibility to provide this service to those phone companies with which it is technically possible and there is no specific reason of exclusion.

Matáv Rt. has also been summoned for the suspicion of abusing their economic position of power, after the GVH noticed that, in its regulations, the company narrowed the line of services it offered in the so-called package for small consumers, available to subscribers, to a level lower than that demanded by law. The competition council of the GVH, on its session held on August 8, stated that Matáv violated the law by not providing the supplemental comfort services (systematic wake-up call, call waiting, etc.) to the subscribers of the small consumer (safety) package. The competition council prohibited the continuing of the policy - with a 60-day deadline -, but refrained from setting a fine.

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

The current year brought significant changes in the ownership structure of MATÁV. Deutsche Telekom gained full control of MagyarCom - the mixed holding company established in alliance with SBC - which currently has a 59.49% stake in MATÁV. Since the Hungarian telecom market is expected to be completely liberalized in about 18 months, MATÁV will rely more on the expertise, capacity, and resources of Deutsche Telekom.

The principal shareholders of MATÁV as of June 30, 2000 were The Ministry of Transport, Telecommunications, and Water Management (the holder of the Golden Share) and MagyarCom, owned by Deutsche Telekom AG and SBC (59.49%), while 40.51% of the shares are in public circulation.

Írisz Kft., which also played a pioneer role in the realm of web TV, was recently acquired by EuroWeb Kft. The news was not made public by the parties involved, but - based on the legal obligation - was published in the Official Gazette of Companies by EuroWeb Rt. The new owner will not merge with the Internet service provider.

Starting in 2001 in Hungary cost-based network connection fees will have to be adopted in the realm of license-obligated telecommunications services. The proposition, the details of which the Telecommunications Authority was empowered to work out, and which is the object of the contractual project between the telecommunications authority and Arthur Andersen Kft., is currently being worked out.

Work is planned to be completed by September-October 2000. The selection of the outside expert company required for the execution of the task was made by way of a joint Ministry of Transport, Telecommunications and Water Management (KHVM) - Telecommunications Authority (HIF) invitation for public procurement bids. The realization of the project is currently under way at three levels (expert committee, project development and supervision committee).

During the course of the project, in several phases, the cost model of the development of cost-based connection fees will be completed, but the telecommunications authority will also consider other factors when giving a proposal - probably in October - for the connection fees for 2001 to the Minister of the Prime Minister's Office (MeH), who is responsible for making the decision. Currently a cost study, or proposal, will only be made for the 2001 connection fees of fixed-line services, the project does not include mobile connection fees (according to reports, those will be worked out during the course of another project).

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.