Nearly nine months after a new law gave telecomunications regulators the power to make the Czech market more competitive, they still can't do the job. In the meantime, the smaller players are getting fed up.

The delays are because the Czech Telecommunications Office (ČTÚ) is late in delivering a market analysis, as required by the new Telecommunications Act. The law went into effect last May and stipulated that Czech authorities be allowed to develop individual regulations to fix the weak points in the market.

Ordered by the European Union, the analysis is designed to help regulators determine whether areas of the market need changes to ensure fair competition between providers. Among other things, the analysis should determine whether any company has an unfairly dominant position.

Experts contend that the market indeed needs reform through regulation if consumers are to benefit.

But regulators, including the ČTÚ and the Anti-Monopoly Office (ÚOHS), can't make crucial decisions that might level the playing field before completing the analysis because they lack a clear official map of where the problems are, experts say.

At a Jan. 20 telecommunications conference, a representative of the ČTÚ conceded the office would not meet the Jan. 31 deadline and promised to complete the analysis by April 30.

In the meantime, alternative telecom providers such as Etel and Tiscali are crying foul. The companies say they're struggling to survive in a market where fixed-line operator Český Telecom (ČT), which had a monopoly here until market liberalization in 2000 and was bought by Spanish telecommunication company Telefónica, owns the vast majority of the country's fixed-line network.

"It has a tremendous effect on how we do business," says Stefan Lager, CEO of Etel. "It is almost impossible for an alternative operator to develop a service without part of it coming from Czech Telecom. And if those parts are not available at a reasonable price, we are at a [significant disadvantage]."

No solutions

Alternative operators say, for example, that ČT in many cases sells its retail customers voice service connection at the same price it charges other companies to rent the fixed lines wholesale. Telecommunications experts refer to this practice as "margin squeeze." Alternative providers, which have to rent access to ČT's network to provide their own services, say margin squeeze makes it impossible for them to offer competitive prices.

"The cost of interconnection for voice services has a major impact on our business," Lager says, adding that interconnection costs are 30 percent higher here than the EU average.

He continues: "This means that my gross margin is 30 percent less than my counterparts' in Western Europe if the customer pays the same price."

ČT spokesman Martin Žabka rebuffed the accusations. He said, however, that ČT makes limited-time special price offers to retail customers that require clients to subscribe for a set period of time.

"This is a normal marketing trick that anyone can use," he said.

Telecommunications experts recognize that margin squeeze is a problem for alternative providers doing business in this country. But the ČTÚ and ÚOHS can't do anything about it until the analysis is complete because margin squeeze isn't officially on record as an area where the telecommunications market is unfair, experts say.

"We are in a period when nothing is regulated, old rules are in place, and neither the ČTÚ nor the ÚOHS can react to new market impulses," says Ivan Pilný, a telecommunications analyst who was formerly general director of Microsoft Czech Republic and chairman of the board at ČT.

No surprise

The delay hasn't come as a surprise to alternative providers.

"We were expecting it," Lager says.

Michal Frankl, a board member at the ČTÚ, says the regulator waited too long to start working on the analysis.

The ČTÚ began the analysis after the telecommunications law went into effect last May, which even critics of the regulator concede isn't enough time to complete it. The critics counter, however, that nothing prevented the ČTÚ from starting the analysis earlier, considering it knew the Telecommunications Act would require it.

Alternative operators are more concerned, however, that the results of the analysis won't accurately reflect conditions on the market. They are especially worried that the ČTÚ won't pay enough attention to ČT's business with its wholesale customers, which, they argue, is evidence that the former monopoly is abusing its dominant position.

"We are convinced that it's necessary to focus on analyzing wholesale markets first," Pavel Henke, director of the regulation and interconnection department at GTS Novera, writes in an e-mail response to questions.