Valdis Vancovics, director of international services for Lattelekom, said they got suspicious in the first quarter of last year when customers started complaining about the quality of incoming phone calls from abroad.
"We did our own investigation into this and discovered that some incoming international calls were entering Lattelekom's network through private companies," Vancovics said. "These are companies without any telecommunication licenses."
On Jan. 12 representatives of Lattelekom and Latvian Internet Telephony Association tried to reach an agreement on how international calls will be handled in Latvia. It was the Ministry of Transport that suggested the two parties meet.
Maris Seglins, who is responsible for EU directives and international affairs at the communication department in the Ministry of Transport, said "illegal" could be the wrong word to describe what the Internet telephony companies are doing to Lattelekom.
"In 1993, the Law on Communications defined communication as voice communication and not data communication," Seglins said.
Furthermore, Seglins said the Ministry of Transport advised Lattelekom to negotiate with LITA because some minor differences in legal interpretation could occur over the definition of communication.
"Lattelekom doesn't have a right to dictate how Internet companies are to act, but I'm glad that we are sitting down together at the negotiating table," said Peteris Avotins, spokesman for Latvian Internet Telephony Association.
The association promised during the first session of negotiations, to stop re-routing international calls and currently the two are discussing what will happen to outgoing international telephone traffic.
Lattelekom argues that at least one member of the association, Datagrupa 777, has violated the agreement on not channeling international phone calls into Lattelekom's fixed line network.
Datagrupa 777 would not comment on the allegations.
"Instead of stopping, they increased the amount of calls taken," Lattelekom's Vancovics said. "That is why they are currently cut off from our services."
According to Vancovics, Lattelekom is losing substantial revenue on the calls Ð more than 100,000 lats ($162,600) every month.
"But, of course, these companies are generating some money for Lattelekom, but they are also taking money," he said.
Avotins said that according to a deal with Lattelekom, Internet phone companies will be forced to pay 0.18 santims per call minute received.
Further agreement on future calling arrangements is expected later this month.