Eesti Telefon will lose its exclusive right as the only provider of telephone services in Estonia when the law goes into effect Jan. 1.
The purpose of the act is to boost activity in the telecommunications sector by creating favorable conditions for development of that sector. The law also aims to guarantee protection of users of telecommunications services by promoting free competition.
The third and final vote on the law was suspended in late January when drafters reviewed it for compliance with existing European Union legislation. In addition to people from the government and Estonia's private sector, EU experts made up the committee that drafted the law that was deliberated over several months before its Wednesday adoption.
The telephone monopoly welcomed the law's passing, saying it was necessary for Estonia in order to keep up with the fast-growing telecommunications industry.
"We haven't had any regulation for many years and the sector has been developing rapidly so we need it, so this is positive that Parliament has finally accepted it," said Raul Kalev, public relations officer at Eesti Telekom, the holding company of Eesti Telefon.
Eesti Telecom, which also owns the cellular phone service provider, Eesti Mobiiltelefon, has hired analysts to look into the specifics of the new law and how it will influence the company's operations.
"It is a complicated act and there are many new regulations that we haven't seen before," Kalev said. "How the services will operate and influence customers remains to be seen. At the moment we are still not ready to say what kind of influence it will have: positive impact or negative."
The Eesti Telecom analysts are focusing on comparing the new law with its European counterparts, because in order to compete in the economic bloc, Estonian telecommunications principles must be the same as those in the EU, Kalev said. The analysts will reveal their findings at the end of the month.
While the law's goal is to open up the telecommunications market to more players, critics argue that newcomers will actually face barriers to entering the market such as high connection tariffs. The effect may be that although in theory anyone can provide telecommunications services, in practice, only a few can afford the cost of gaining access to lines currently owned by Eesti Telefon.
"Competition is not the number of operators on a market. Competition means that there are several operators in the market with the same size market power," Peep Poldsamm, director of strategy planning at Tele2, said.
Tele2, owned by Sweden's Levicom Broadband, launched free Internet access in Estonia in September with the intention of attracting a customer base that would remain loyal to the company after deregulation of Eesti Telfon in 2001. The market strategy should help the company enter the free market on stable ground, but Poldsamm said despite customer loyalty, the company still must buy into infrastructure.
"How the regulator will act to prevent discrimination by Eesti Telefon is most important," Poldsamm said.
"Right now it is indirect access, no one owns the infrastructure."
Poldsamm predicts that without certain changes in the new law, the Estonian market will in the future go the way of the Scandinavian telecom market where one big company holds a majority of the sector. Levicom is the second largest telecommunications company in Sweden, but remains four times smaller than number one Telia, he said.
Liberalizing the market will pull down the rates of telephone calls, which is a favorable development for the consumer who is currently slapped with unusually high international rates and unbelievably low domestic rates. Local calls in Estonia are 16 Estonian cents per minute during peak hours and 8 cents during off hours.
"The common trend is that international calls will go down and local calls will go up. Local calls are too low at the present moment, they are not based on the market changes," Ain Parmas, press officer at Eesti Telefon said.