July 2000

Central and Eastern European Countries Synthesis of Update Memos

I. INTRODUCTION

The rapid growth of the ‘information society’ (IS) has become a major challenge for the economic and social development of Central and Eastern European countries (CEECs). For several years, public and private players have become increasing interested in enabling the development of infrastructure networks, technologies and information society applications, in order to facilitate these countries’ integration with the global economy and society.

Since 1989, a significant part of the CEECs efforts have been concentrated on implementing major social and economic reforms. New information technologies such as multimedia and the Internet, are seen as key components of growth.

However, the level of development of the information society (measured by the amount of computer equipment in the country or even the rate of penetration of telephony services) remains low across the region in comparison with the EU’s level. Furthermore, national reports show that significant differences exist between the CEECs, particularly in the area of Information Society. (The relevant national reports are available on the ESIS II web site.)These disparities explain important differences regarding countries’ priorities for reform and the Information society’s policies

The purpose of this document is to summarise regulatory developments related to the information society which have taken place between April and July 2000.

The first section of this document restates the information society policies which have been put into place in the Central and Eastern European countries – reiterating the influence of the European Community – and the main characteristics of national policies. The second section outlines the main developments which have taken place in the course of the past three months.

This document is based on the contributions of the national contractors to the ESIS II project. For more information, please see national reports or the master summary (April 2000).

1. Information society policies

1.1 'Acquis communautaire’ (acceptance of the body of EU law)

Since its foundation the EU has developed a wide-ranging regulatory framework – aimed at enabling the introduction of competition and development of the telecoms sector, and today the "information society" sector – through the adoption of a series of directives.

Central and Eastern European countries are candidates to join the European Union. The integration is likely to be a two-stages process, with the first wave of countries to include Hungary, Poland, the Czech Republic, Estonia and Slovenia, and the second wave to cover the others countries : Latvia, Lithuania, Slovakia, Bulgaria, Romania, Albania, Bosnia & Herzegovina and Republic of Macedonia.

The ‘Acquis communautaire’ or the wholesale acceptance of the body of EU law, is a major element of EU integration policy. This involves not only embodying European legislation as part of each country’s national law, but also the concrete, practical implementation of these rules.

Key EU developments related to IS include

• Establishment of a legal framework to open up the telecoms market.
• The implementation of a legal framework which helps to promote the rise of e-commerce (focusing particularly on respecting people’s privacy, authentication and security).
• Supporting content-providers and those involved in R&D in the industry.

More specifically, key telecoms directives adopted since 1990 include:

• the end to monopolies by a specific deadline
• the separation of regulatory from operational functions
• the setting up of a framework to enable the development of a competitive market. This includes a set of rules dealing with universal service, licensing, tariffs and consumer protection
• the development of open access to all networks (interconnection principles), the requirement being that every telecommunications operator may access existing infrastructures on a fair and equal basis, at a reasonable price.

In July 2000, after a review of the directives quoted above, the European Commission adopted a set of new legislative proposals. These ones take into account convergence between the telecommunications, multimedia and information technology sectors. These arrangements focus particularly on the promotion of high-bandwidth Internet access. This approach is aimed particularly at enabling the development of an all-inclusive information society, accessible to everyone.

In particular, the Commission emphasised the following points:

• regulation should be ‘technologically neutral’: which means that the same rules must be applied to all infrastructures (fixed, mobile, cable, satellite and so on) regardless of their chosen technology. This regulatory evolution takes into account the convergence between different technologies. It is founded on the type of services being offered, rather than the type of technology infrastructure used.,
• as competition increases, so regulation should be gradually simplified and reduced,
• liberalisation of the local loop, necessary to promote Internet,
• the obligation of the provision of ‘universal service’ should be kept.

The Commission has also launched the eEurope initiative that should have a major influence. The EU’s ambitious goal is to give everyone in all its member states – every citizen, every school, every company… – access to the Internet as quickly as possible. In particular, eEurope includes the following objectives: cheaper access to the Internet, promotion of e-commerce, high-speed Internet access for researchers and students, on-line government, and so on.

eEurope initiative should involve a lot of ressources from EU’s members and candidats to integration and the implementation of public and private dedicated programmes.

1.2 National policies

1.2.1 The low level of penetration of information technology makes it difficult even to conceptualise the information society at the highest level in many Central and Eastern European countries

At the end of 1999, with an average penetration of 26% for basic telephone services and just 9% for mobile, the CEE countries are way behind the EU countries, who enjoy comparative penetration rates of 46% and 40% respectively (source: ESIS - ISPO).

The rate of penetration of PCs is also extremely low, averaging 12 PCs per 100 head of population across the region at the end of 1999, although rates vary markedly between different countries.

Note: Data taken from end 1999.
Sources: ESIS II

It is clear that the very concept of the information society is extremely difficult to comprehend, particularly for countries such as Albania, Bosnia-Herzegovina, Romania, or the Republic of Macedonia which still only have very low levels of technology penetration.

It is clear that the implementation of wide-scale public policies will be essential to help speed up the spread of new developments related to the information society.

1.2.2 Major focal points for national policies

Studying the various national reports reveals several key focal points for national policies related to the information society

Most governments have put in place specific structures dedicated to information society policies, and reflecting the wish to develop truly universal information society strategies. These bodies are responsible for developing national programmes and co-operative programmes with the European Union and international organisations working the area of the information society. For example, the Czech Republic has a government Council for the State Information Policy, while in the Republic of Macedonia the Macedonian Information Society Project Office acts as a bridge-builder between the government, EU and organisations interested in the information society.

The policies which are being implemented are designed to conform with European arrangements.

The main application sectors for published policies are:

• Government departments and other public sector bodies. Programmes in this area are aimed at computerising government departments, creating databases, making large amounts of information available to the general public via the Internet and so on. The objectives are to improve public sector efficiency and enhance communication with citizens.
• The telecoms and Internet sectors are, by necessity, the subject of many national policies, for instance to modernise networks, open up markets to competition, appint new operators and so on.
• E-commerce and recognition of electronic signatures are also instigating significant amounts of work in certain countries, with moves to reflect European Union directives in national legislation and the creation of dedicated working parties.
• When it comes to vertical market applications, research and education is the most important sector. Often, major projects start out in the higher education, for instance with the development of inter-university networks or active co-operation with other sectors of the economy and foreign. Wider Internet access is a consistent feature of these programmes.
• The healthcare and transport sectors are also the subject of a number of programmes, albeit a much smaller proportion of the total.

2. New developments between April and July 2000

In terms of national information society policies, there have been developments in a number of countries, notably Bulgaria where the government has published a document setting out the general orientation of the country’s information society policy. This document covers policies for telecoms, education and research, and e-commerce, as well as the setting up of several programmes. In the Republic, the national information society action plan has been formally adopted. And in Lithuania, an information society development plan has been published.

In the application sectors for the information society, many more developments have taken place:

• In the telecommunications and Internet sector: moves towards privatisation of historic operators, notably in countries where liberalisation has so far been advancing fairly slowly such as Albania and Bulgaria. Privatisation programmes have got under way in Slovenia and the Republic of Macedonia, and the privatisation of TPSA in Poland continues. Albania, the Czech Republic, Poland and Slovenia have all voted on new telecommunications laws.
• Most of the countries have adopted new laws on e-commerce which conform to European Union directives or are in the process of doing so.

In terms of vertical market projects, the government of the Czech Republic has launched an education programme in line with the European Union ‘eEurope’ initiative to provide all school children with access to the Internet. In healthcare, Estonia has launched a global programme of to modernise and reform its health sector.

Elsewhere, the establishment of privatisation policies in key sectors of the economy and the encouragement of foreign investment in high technology activities are priorities in many countries, including Bosnia-Herzegovina and Bulgaria. In certain countries, such as Estonia, we have seen evidence of continued moves towards privatisation of major state-owned companies and the entry of Western operators like Netcom AB into the market.

Below, we summarise the new developments which have taken place during the past three months in each country:

Further details and analysis can be found in the national reports, the ESIS II database and the master summary (dated April 2000).

2.1 Information society policies

2.1.1 Umbrella policies and national IS strategy

In Bulgaria, the government continues to pay special attention to the development of IS and has adopted a new ‘Strategy and National Programme for IS development’. Many sector-focused programmes have also been adopted including a telecommunications sector policy, a national strategy for ICT education, a programme to apply advanced information and management technologies in the public sector, a national strategy to promote small and medium-sized enterprises (SMEs), a national strategy for the development of high-technology activities and so on. A draft national programme on electronic commerce has also been prepared.

In the Czech Republic, the most important IS event was the approval of the action plan for implementing the state information policy in May 2000, and the appointment of Karel Brezina as the new minister responsible for IS. The action plan is project-oriented and focuses in particular on information literacy and e-commerce.

In Estonia, the Estonian information policy action plan forms the basis of the national IS policy. A number of objectives have already been reached, including an Internet access point in every town and city. In 2000 and 2001, IS priorities will be the creation of legislation to cover digital signatures, and the setting up of a programme to computerise the higher education sector.

In Hungary, according to the new Act on Communications, the role of the government in the information society is the creation of the legal environment, education, analysis, and the guarantee of communication between the public and civil sectors. The country’s information strategy encompasses telecommunications, information technology and content provision.

In Lithuania, in May 2000 the ministry for the reform of government departments and local authorities published the ‘Lithuanian Information Society Development Strategy’, which sets out the focal points for the country’s IS policy over the next three years. The education priorities include the desire to connect schools to the Internet and to create a unified electronic network for all schools by 2003.

In Latvia, a new government was elected in May 2000 and it has already indicated its priorities in the area of IS, notably promotion of the Internet and liberalisation of the telecoms sector in 2003.

2.1.2 IS application areas

2.1.2.1 Government and the public sector

In the Czech Republic, two new laws covering public tenders (Act 28/2000 Coll.) and auctions (Act 26/2000 Coll.), enacted on 1 June 2000, require the authors of important documents such as public tenders and auctions to publish them additionally on-line at a single, recognised ‘central address’ on the Internet).

In Estonia, several government ministers have signed up to a memorandum commiting them to use EDI (electronic data interchange).

2.1.2.2 Telecommunications and the Internet

Albania has seen a large number of changes over the past three months, including the vote on a new telecommunications law in June and the privatisation of the historic operator AMC (with a Greek/Norwegian consortium Cosmote-Telenor taking an 85% stake in the company).

In Bosnia-Herzegovina, the public TV broadcasting system underwent a major reform which, in particular, enables the granting of licences to new public-access TV channels.

Bulgaria experienced several developments including:

• The selection of a strategic investor for the historic operator, with the Greek/Dutch consortium OTE/KPN taking a 51% stake in BTC.
• At the market level, the national report underlines the continued advance of the Internet, with the creation of many new Internet access centres and development of portals.

In the Czech Republic, several recent developments demonstrate the advanced state of deregulation in the market, including:

• The vote on a new telecommunications law which anticipates the end of the historic operator’s monopoly by I January 2001. Nevertheless, the actual arrangements are drawing many criticisms from potential competitors. In order to meet these, Cesky Telecom is only proposing to offer carrier pre-selection and number portability functionality by 2003, effectively creating very strong barriers to entry into the market,
• the government has decided to privatise its remaining stake (51%) in Cesky Telecom. At the present time, the privatisation process has not been finalised. However, the Dutch operator KPN, already a major shareholder in Cesky Telecom, seems certain to buy an additional share in the equity.
• Conforming to European Union directives, in June 2000 the telecommunications ministry set out the plan for awarding future UMTS licences, with three licences to be awarded to three current mobile operators.
• Three invitations to tender for local wireless loop licences should also soon be announced.
• It should be noted that foreign investment in the area of IT is increasing in the Czech Republic, with the focus on Internet start-ups in particular.

In Estonia, it is interesting to note that the government has decided not to sell its remaining 28% equity stake in the historic operator yet, contrary to initial plans. This decision comes from the fact that the operator is proving particularly profitable. Elsewhere, in May the Swedish group NetCom AB indicated that it would like to buy an equity stake in the country’s main cable operator, Starman. This would result in NetCom becoming a major competitor to the historic operator from the end of its monopoly on I January 2001.

In Lithuania, in June, the government continued the process of disengaging itself from the historic monopoly operator by selling 25% of its remaining stake. The government now owns no more than 10% of Lithuania Telekomas.

In the Republic of Macedonia, the government issued an international invitation to tender for 51% of the shares of the historic operator.

In Poland, the key events over the past three months were:

• The vote on the new telecommunications law, which is in total alignment with the ‘Aquis Communautaire’.
• Continued work on the privatisation of the historic operator, with a consortium led by France Telecom being chosen as the new investment partner. Although only a maximum of 35% of the equity in TPSA is currently available, this will be increased to over 50% after 2001.
• Adoption by the government of a programme aimed at developing rural telephone services. The ‘universal service fund‘ has been created to help expand telecommunications services in less developed regions, especially rural areas.
• In addition, it is interesting to note that the three mobile operators in Poland are all offering Wap-based Internet services.
• In Slovenia, during the last three months, telecommunications were a key focal point for policy makers, politicians and investors:
• The government adopted a new draft law on telecommunications.
• The ministry of transport and communications published a public invitation to tender, with the aim of choosing a consultancy firm to lead the privatisation of Telekome Slovenije.

2.1.2.3 E-commerce

In Bulgaria, e-commerce is currently the subject of major debate within the government, which is developing a ‘national programme for electronic commerce’, with the aim of harmonising current legislation with European Union directives. A law recognising electronic signatures, and conforming to the European directive, was passed in May 2000.

In the Czech Republic, e-commerce legislation is currently being brought into line with European directives. A new law recognising electronic signatures and conforming to the European directive is in the process of being adopted.

In Estonia, the new digital signature act was approved during the last three months.

In Hungary, a great deal of work is going into harmonising national legislation regarding electronic signatures with European directives.

In Lithuania, the background for e-commerce and electronic signatures was approved by the government in May

In Slovenia, the national assembly has passed the new law on electronic commerce and electronic signatures.

2.1.2.4 Education and research

In the Czech Republic, in May 2000 the government approved a programme prepared by the education minister concerning the proposed information society strategy in the education sector. The programme sets objectives in accordance with the ‘eEurope’ initiative:

• To start connecting schools to the Internet in 2001.
• By the end of 2003, every school should be connected to the Internet.
• By the end of 2004, information technologies should be integrated into the education process and multimedia technologies should be widely used in teaching. All students leaving school should be fully IT-literate.
• By the end of 2005, all citizens should be IT-literate.

In Estonia, the Research and Development Council – which is responsible for setting the direction for national R&D policies – is being reorganised.

In Poland, the Pioneer project was approved by the government in June 2000. This project involves establishing a fibre-optic network dedicated to the scientific community.

2.1.2.5 Transport

In Bulgaria, the current priorities of the different organisations involved in the transport sector are:

• For the Bulgarian state railways, the state airline ‘Balkan’ and other airline companies, the Bulgarian sea and river fleets to maintain and develop centralised operational control systems to support their basic technological processes.
• The implementation of advanced logistics automation systems, covering the whole transportation chain: manufacturers -> vendors -> shipping agents -> carriers -> customs and other public bodies -> banks -> customers.

2.1.2.6 Healthcare

In Bulgaria, the ‘strategy and national programme for IS development’ sets out the following priorities in the health sector:

- establishment of national information health networks, based on the following stages for establishing and operating the network:

• building a communication infrastructure for the national information health network,
• using healthcare information and exchanging data between medical, educational, scientific and public sector bodies,
• establishing health information centres to enable the general public to access the network.

- the introduction of electronic smart cards in the healthcare sector is also planned. These cards will hold data about the patient’s health status, past medical treatment, medical images, analytical results and so on, and will also utilise multimedia capabilities. The cards and the procedures for accessing them will be in line with the standards adopted in the EU.

In Estonia, at the end of May the government approved the ‘Estonian healthcare project 2015’. This project aims to reform the country’s entire healthcare system, which is currently suffering from major deficiencies, between now and 2015. As part of the project, a major programme of computerisation will be carried out.

2.1.2.7 Employment

In Bulgaria, the authorities are looking at how information technologies might potentially be used to improve working conditions. The following actions have been proposed:

• reforming the national system of control over employment conditions by introducing new laws, ensuring that Bulgarian legislation comes into line with EU directives and ILO conventions covering the appropriate sectors of the economy
• ensuring that general health and safety at work regulations apply to the non-typical forms of employment often associated with the IT sector
• specifying the exact responsibilities faced by both employers and employees in non-typical forms of employment
• adopting explicit requirements for adherence to minimum working age rules for non-typical forms of employment.

2.1.2.8 Public access to data

In Estonia, in May 2000 the government approved the first draft of the ‘freedom of the information act’. This will oblige local government and other public sector bodies, in particular, to guarantee that the general public has access via the Internet to a range of documents such as laws currently in force and so on.

2.1.2.9 Privacy, data protection, consumer protection

In Bulgaria, a consumer protection law was recently adopted. In addition, the country’s data protection law is in line with the EC data protection directive.

In the Czech Republic, in June 2000 a government decree established a new office for the protection of personal data.

2.1.2.10 Others

In Bulgaria, it is interesting to note that a recent law covering public sector tendering processes – the ‘law on public orders’ – puts forward measures which favour small and medium enterprises.

2.1.3 Institutions and organisations in charge of IS regulation

In the Czech Republic, the Czech forum for the information society (an advisory body to the government committee for state information policy) has started work.

2.1.3.1 International co-operation in R&D

The national report reiterates the fact that Bulgaria is involved in the Fifth Framework Programme (1998-2003) and is working closely with more than 30 European and international scientific research organisations. The country is also taking part in several European educational research programmes, including Socrates and Leonardo amongst others.

2.1.4 The competitive market: privatisation, foreign investment, mergers, acquisitions, invitations to tender, etc

In Bosnia-Herzegovina there are currently a number of important reforms being implemented which will enable rapid privatisation in several key sectors of the economy. The national report underlines the fact that the national economic task force is considering measures including the establishment of a central tendering office and the appointment of international experts to work in the privatisation agencies. Privatisation is seen as a key element of overall economic reform. A new agency for the promotion of foreign investment has been created, with the involvement of the World Bank. This agency is benefiting from international technical aid, and will be responsible for the national policy on encouraging investment from outside the country.

In Bulgaria, the government is following a policy of encouraging foreign investment in high-tech activities. Part of this includes the development of a new law covering high-technology business parks and activities, which aims to create:

• a favourable climate for investment
• preferential labour, insurance and legal standards for high-tech companies
• a legal framework to stimulate the development of high-tech activities
• a legal framework to enable the establishment of high-tech business parks as an appropriate way of speeding up the development of the information industry.

In Estonia, the country’s privatisation agency has announced the future privatisation of 66% of the equity in the Estonian railway company.

2.1.5 Standards

In Estonia, it is interesting to note that the Estonian Standardisation Centre – a non profit-making body – started operating in April 2000 as the national standards organisation.