Bidders lambast Polish ministry's approach to long-distance licenses - Warsaw government comes under fire as telcos complain of "q
Potential bidders for long distance licenses last week sharply criticized the government's approach to opening up the telecom market, saying that existing guidelines for the tender will choke off future competition.
Last week, 14 potential bidders for the licenses purchased tender documents. Those bidders, which are expected to include independent telephone operator Netia, Elektrim, the Polish Power Grid (PSE), state railroad operator PKP and copper giant KGHM Polska Miedz, will have six weeks to submit their offers to the Communications Ministry. The ministry has until Nov. 25 to select three winning bids.
But bidders such as Netia last week said that the structure of the long-distance licenses will result in "a quasi liberalization" of the market. The problem, bidders said, is that current regulations prevent new operators from providing direct service to the customer and therefore stymie any attempt to build their own brand.
The guidelines currently force any new carrier to use Telekomunikacja Polska's (TPSA) billing system and prevent any direct access with the customer for two years, bidders said. The guidelines also fail to address how much the new carriers will have to pay TPSA to connect to its network, which means that they will potentially be subject to high charges that will limit their ability to compete.
The regulations will "totally subject (carriers) to the availability and reliability of TPSA," said Meir Srebernik, CEO of Netia. "Just because the licenses are granted won't mean that competition begins."
The Communication Ministry's decree concerning the licenses is seriously flawed, to the extent that "these rules must be changed if Poland is to live up to its European Union (EU) accession agreements," Srebernik said.
The structuring of licenses prevents them from being "true" long distance licenses, he said. "I call these 'carrier's carrier' licenses," Srebernik said.
Because operators will have to go through TPSA's billing system, they will be subject to the monopolist's efficiency and reliability. In addition, he said, using TPSA's billing system means that the monopolist will know and can react to any marketing strategies the carriers put together.
Thanks to this, "there will be no value to the customers created in the first year of operation at least," Srebernik said.
Another problem is that TPSA will continue to enjoy its position as a monopoly: TPSA doesn't have to take part in the tender and doesn't have to pay a license fee, said Piotr Czarnowski, public relations director for Elektrim Telekomunikacja, which will bid for a license.
"The fee is very high," Czarnowski said. "In many countries, there are no such fees."
The tender guidelines call for a minimum license fee of ECU 23 million, but Communications Minister Maciej Srebro has said the winning bids will be much higher. All winning bidders will pay the same amount for their licenses, Srebro added.
In addition, TPSA will keep its monopoly for international calls, Czarnowski said.
These flaws make the tender "very unattractive from a new entrant's perspective," Srebernik said. "What can they do? Only sell a very low-value, limited service."
Another one of the tender's key problems is that it is vague on the issue of interconnection fees between independent, long-distance carriers and TPSA, Srebernik said.
Interconnections between independent carriers and TPSA is not addressed at all in guidelines for the long-distance tender, bidders said. The regulations state only that these interconnection agreements must be negotiated separately between TPSA and each independent carrier. The ministry must step in and arbitrate agreements if none are achieved within six months, according to the guidelines. That is a foregone conclusion, Srebernik said.
"There will be no agreements with TPSA on voluntary terms, everything we've seen in the past proves that," he said. "So that's six months wasted. Then the ministry will step in, but how long will that take?"
He estimated that it would be at least one year after the licenses are granted before independent carriers can begin to offer services.
TPSA is not known for its flexibility on the interconnection subject. Negotiations with mobile telephone companies, for example, were a long and drawn-out process, said Piotr Wozniak, a telecom analyst at CDM Pekao Securities. "It will be the same interconnect problems like we saw between the mobile operators and TPSA," he said.
Bidders are already mulling ways to get around the restrictions. For example, Netia has direct billing access to residential customers in areas where it has local-calling licenses. It can also reach business customers throughout Poland via a license it holds for data transfer. Therefore, the regulations' ban on carriers' direct access to customers "won't hold more than a year," Srebernik said.
The process for obtaining long-distance licenses is however an improvement over that to bid for local-calling licenses, Srebernik said. Bidders for those licenses put together offers worth hundreds of millions of dollars, which seriously hampered the viability of their business plans. "At least this one is not going to turn into an auction game," Srebernik said.
This time around, the ministry required bidders to submit detailed business plans with conservative estimates, he said. "The ministry wants to be sure that the winners can do a good job," he said.
