Ceska Pozice

How to push business the Czech Post Office’s way

The Interior Ministry is looking to turn Česká pošta into a provider of internet, data and mobile services for the public administration

foto: © ČESKÁ POZICE, Richard CortésČeská pozice

Internet, data and voice services. The Ministry of Interior’s ambition as the founder of the Czech post office, Česká pošta, to turn the state enterprise into an integrated government service organization in the sphere of information and communication technologies (ICT) is taking shape.

According to material Deputy Interior Minister Radek Šmerda has already sent to the committee stage — and which Czech Position has at its disposal — apart from eGovernment services such as Czech POINT and data mailboxes, Česká pošta would provide government institutions a fixed internet connection and the services of a mobile operator. The idea is to amend the deed of foundation of Česká pošta.

Although the ministry’s aim, according to a white paper, is to “achieve significant savings and improve processes relating to the provision of these services to the public administration” by means of a shared provider of ICT services in the public sector (i.e. Česká pošta), the material lacks any information on the impact on public finances. This applies not only to the generally announced savings, but also to the expenses involved in implementing fundamental changes to access to information and communication technology services.

After the ministry’s “Information on the provision of selected information and communication technology services used by the public administrationis signed off on at the committee stage it will be discussed by the government. Note that the plan to push new business Česká pošta’s way — which smacks of unauthorized public support for a state enterprise — has surfaced at the same time as an auction is in the pipeline of available frequencies for the potential entry of a fourth mobile operator on the market, full liberalization of postal services is nearing completion, and the government’s plan to transform and privatize Česká pošta itself is still on the cards.

Mobile services

The first speculation regarding the plan to turn Česká pošta into a national mobile operator for the public administration appeared on Feb. 6 in Týden. The weekly magazine reported that a team based around Tomáš Ječný, executive director of the ICT division at Česká pošta, has been delegated with creating the necessary strategy. “The post office is already providing many ICT services to the Ministry of the Interior, and their provision to other central authorities is the direction approved by the supervisory board of the enterprise. It is now for the Post Office to submit more detailed plans,” ministry spokesman Jiří Korbel said earlier this month, reacting to the information. However, he did not confirm whether Česká pošta is to become a mobile operator as well. “The Ministry of the Interior has no plans in this regard at present,” he said.

According to the Ministry of the Interior consideration might be given in the future to the allocation of rights to the Czech Post Office to use some of the available frequencies

The problem is that the material as submitted by Šmerda seems to indicate the opposite, and contains another, potentially explosive, idea. “In order to improve the public administration communication infrastructure and achieve further savings, consideration might be given in the future to the allocation of rights of Česká pošta to use some of the available frequencies with the aim of providing mobile telecommunication services, above all for the public administration,” the document says. 

In other words, the ministry is thinking about earmarking some of the available frequencies for the provision of mobile services outside of the framework of a tender. The Czech Telecommunication Office (ČTÚ) is planning to auction off these frequencies this year.

How do the current mobile operators react to this plan? “We believe the auction should have clear, non-discriminatory rules stipulated in advance, and these conditions should not put any bidder at a disadvantage. Česká pošta has the same right to participate in an auction as any other company, but all bidders should have the same chance of acquiring the radio spectrum being auctioned off,” Martina Kemrová, spokesperson for T-Mobile, told Czech Position.

Telefónica O2 reacted similarly. “We would give precedence to the allocation of frequencies by means of an open auction under non-discriminatory conditions. The compliance of any other procedure with the principle of the protection of economic competition would be a matter for the Office for the Protection of Competition[ÚOHS],” Blanka Vokounová of the company’s communications department wrote to Czech Position.

The creation of another mobile operator could “make a positive contribution to improving the competitive environment, pushing down prices, improving the quality of services provided and to the creation and utilisation of new technologies and services in this sphere,” the material adds. While this might be true, the question is whether the creation of a new operator through circumvention of the rules of economic competition is the right road to go down. And again there is no concrete cost-benefit analysis of mobile services being provided by Česká pošta in comparison with those prices which ministries and other authorities are already able to receive from the current operators.

A fourth or virtual operator?

The ČTÚ, meanwhile, is preparing the conditions for holding an auction of available frequencies for operating mobile services, above all high-speed mobile internet by means of the 4G network. The auction is set to take place in October or November. As Pavel Dvořák, former head of the (ČTÚ, said inan interview for iDnes.cz, one of the aims of the auction is to attract a fourth operator to the Czech market. 

“For instance, this could be achieved under the national roaming condition, which allows a new company to compensate for the absence of suitable places to locate a network by sharing a network with the existing operators. We also want to enshrine a commitment to a wholesale offer, i.e. a virtual mobile operator. The spectral limits, which prevent the accumulation of transmission bands on the part of existing operators, would also assist the entry of a new operator,” Dvořák said.

Is it possible that the conditions would be drafted in such a way that Česká pošta would acquire some of the frequencies in the form of a “backhander”? “The frequencies being auctioned off are intended for public communication networks. It is impossible to take them and use them exclusively for a specialised network, for instance the eGovernment network,” Dvořák told iDnes.cz, adding that if Česká pošta participated in the auction, it would have the same access to frequencies as all the other bidders.

“However, I don’t personally believe that it would be appropriate for Česká pošta to invest several billion crowns in an auction for frequencies. It would be more realistic to take up the offer of a virtual mobile operator,” he added.

Internet and data services

The business daily Hospodářské noviny carried a report that the Česká pošta was to become the direct provider of internet and data services for the public administration. However, in this case it would be difficult to stipulate a market price for the services ordered and Česká pošta — in receipt of public funds — would enjoy an advantage over its potential competitors.

There is every threat that these competitors would lodge a complaint regarding a breach of the rules of public support. For instance, Tomáš Pfeffer of GTS Novera has already condemned this approach as unlawful. “If the state restricted competition by awarding contracts directly to Česká pošta, we would obviously fight back using all the resources available to us,” Pfeffer told HN. He added to Czech Position, “Let Česká pošta create what it wants, but only within the framework of traditional tenders in which it submits its bid alongside those of the current providers. This is the only way we will see if it is able to offer a better price.”   

If the Czech Republic uses the post office as a provider of internet and data services, the ministry’s material maintains that it would operate directly within the framework of vertical cooperation when providing these services to state bodies or individual departments. “The public administration, i.e. the Czech Republic, will be entitled to avail itself of these services and Česká pošta be obliged to provide them,” the material states.

If the Czech Post Office takes on a subcontractor, then the mantra that the state is basically paying itself by means of orders for the Post Office, would cease to apply

This concept apparently counts on utilisation of one of the exceptions set forth in the Act on Public Contracts or the specific relationships between the tender authority and a supplier. “These are procedures which originated in the regulations and judicial practice of the EU, especially vertical cooperation between public tender authorities or the concept of horizontal cooperation. As well as these solutions it is possible to proceed in the form of an agreement on collective purchase or the transfer of the authority in question under the terms of a contract under public law,” the ministry’s material states.

However, will Česká pošta be capable of supplying all ICT services from its own resources? Deputy Minister Šmerda had earlier declared that the Post Office will continue to be a public tender authority and would hire a subcontractor for those services it is unable to provide itself. But in this case his mantra, that the state is basically paying itself by means of orders for the Post Office, would cease to apply. And under such circumstances would the resulting price from the Post Office genuinely be cheaper for state institutions than if ICT services were competed for directly by commercial providers?

Supported by law

Behind the plan to push new business Česká pošta’s way might also be an attempt to compensate for the drop in its income associated with the planned amendment to the Postal Services Act (now being given its second reading in the Chamber of Deputies, the lower house of Parliament). The bill would see the full liberation of the postal market as of next year.

Although Česká pošta would remain the provider of basic postal services for Czech citizens “for an acceptable price at an acceptable quality” until the end of 2017, from next year onwards it would face competition in its hitherto monopoly sector involving the delivery of parcels up to 50 grams or for less than 18 crowns.

In the package of amendments to the Postal Services Act, which the economic committee of the Chamber of Deputies will debate on 29 February, there is an interesting proposal for “the clarification of transitional provisions.” Point 2 of the amendment, which specifies that Česká pošta (or its legal successor) will be the provider of this basic service up until Dec. 31, 2017, would have the following sentence added:

“It is also obliged (the provider of the basic service – ed.) to oversee the role of a specified provider of shared ICT services for the public administration and local government of the CR.”

In order to boost this role of Česká pošta, the Ministry of the Interior proposes adding new subjects of business activities to the deed of foundation. These would be as follows:

The government’s plan to transform the Czech Post Office into a joint-stock company or to privatize it, approved in 2007, remains on the cards

Privatise, but not everything

The idea of creating an integrated state service organisation which would provide ICT services is nothing new. The material prepared by the ministry refers to several examples from abroad, for instance the Austrian Federal Computing Centre, created by the state as an independent organisation operating on the basis of market principles, which is a key player in IT services for the public sector. Or Statens IT, the Danish Agency for Governmental IT Services, which provides services to eight ministries. However, the Czech plans go much further, especially as regards the idea of the Post Office as a mobile operator for the public administration.

Might the effort to pump business into Česká pošta be an attempt to increase the market value of the company in the event of privatization? The government’s plan to transfer the post office into a joint-stock company or to privatize it, approved in 2007, remains on the cards. Possibly: though the material prepared by the Ministry of the Interior warns that the sphere of strategic services provided to the government by the Czech Post Office “is not suitable for privatisation for security and other reasons.”

Selected services which the Czech Post Office already offers the public administration:

Selected services which the Czech Post Office would provide under the plans of the Ministry of the Interior:

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