Czech industry minister calls changes at telecoms watchdog

Changes called at Czech telecoms regulator (CTÚ) in a bid to stop telecoms from gouging citizens and companies

Kuba has nominated one of the CTÚ’s biggest critics to its board foto: © ČT24Česká pozice

Kuba has nominated one of the CTÚ’s biggest critics to its board

The Czech Minister of Industry and Trade has called for a far reaching shake up the way the country’s under fire telecoms regulator performs in order to bring down phone charges for citizens and companies.

Martin Kuba (Civic Democrat, ODS) didn’t mince his words on Monday, saying that he was not happy with the work of the Czech Telecommunication Office (CTÚ) and pledging to seek changes on its board — and in the way it regulated the sector.

The move follows heightened criticism of the telecoms and postal services regulator in recent days for the frequently bemoaned fact that Czechs pay more for lower quality phone services than almost anyone else in Europe. Lax regulation and reluctant competition between the three main players on the telecoms market –  Telefónica O2, T-Mobile and Vodafone — are frequently blamed for that state of affairs.

Kuba took a first step towards changing the face of the five member CTÚ board by announcing the nomination of one of its biggest critics, young telecoms journalist Ondřej Malý, as a member, adding that he could bring a “new wind” and dynamism to what is often perceived at best as an unresponsive and sluggish institution. Malý’s nomination must be approved by the whole government.

Others changes could occur in the summer when the five-year term of some of the serving members expired, Kuba added, commenting that it did not seem right that the leadership of a dynamic and fast-changing sector of the economy was mostly headed by people reaching their retirement age. Kuba would not be drawn on whether CTÚ chairman Pavel Dvořák is one of those who now faces the chop.

‘This is the biggest event of the last five and perhaps the biggest event of the next 10 years.’

The recently-installed minister also spelled out that he wanted to see the regulator taking a more pro-active role than hitherto in encouraging cheaper and better telecoms services for Czechs. “The CTÚ should act ex ante [before the act] with the competition office following up afterwards to see if there are any problems in the market. That is how it should work,” Kuba said.

In particular, he said that much scrutinized preparations by the regulator for a new generation of wireless broadband mobile services, so-called 4G services, should be framed in such a way that the telecoms market is opened up and result in lower charges.

Malý commented: “This is the biggest event of the last five and perhaps the biggest event of the next 10 years.” He added that the regulator has so far given few clues as to how the process would play out locally, in contact to its counterpart in Britain, OFCOM, where dozens of pages of information about the likely impact in the market and prices had been prepared.

Kuba said that the ministry would be calling on experts from Oxford in the UK and Stanford University in the US to help better prepare the 4G rollout process. “We will do everything possible so that is conducive to more competition,” he said. Consultations about the auction procedure should take place throughout the rest of the year with the auction for 4G services held in the last quarter,  the minister explained.

One of the biggest decisions that the regulator and government will have to tackle is whether the winner of the auction for new frequency for wireless broadband, in particular high-speed Internet services, will have to pay dear for the privilege of becoming a key telecoms operator in the country. A high auction price up front usually encourages operators to gouge customers at their ease in order to recuperate their up front spending.

Kuba’s comments on Monday suggest that a low entry price, more vigorous competition and lower prices are his priorities, but the Czech telecoms incumbents can be expected to how over this, unless that is they are allowed to bid for the new 4G license.

‘And the cherry on the cake is that for the worst 3G services we are paying the highest prices in the developed world.’

Pressure on the CTÚ soared last week with the publication by a Czech think tank, the Information Institute, of a damning report on its activities which blamed the regulator for making Czechs pay through the nose for telecoms services and guaranteeing “incredible” margins of around 45 percent for the likes of Telefónica O2 and T-Mobile.  

“High charges for data roaming abroad damage our fundamentally damage our small exporters and our competitiveness against those abroad,” said one institute member, economic Pavel Kohout. “And the cherry on the cake is that for the worst 3G services we are paying the highest prices in the developed world. The only explanation for this is the fact that the CTÚ is not doing its work in an optimal way,” he added. Lax regulation meant that the market was being run by a few oligarchic operators, the institute concluded.

The Information Institute is not the first to point out the high prices being paid by Czech for telecoms services.   A study by the club of rich countries, the OECD, found Czechs were paying around 20 percent more than citizens in Germany, Austria, Poland, and Slovakia for a low-use  package of services and on average at least twice are much as OECD countries for a more advanced package of services. Such figures have sparked calls for Czechs to turn off their mobile phones in organized protests against the operators.