Under the plan proposed last December, callers will have to pay a 0.48 kroon ($0.03) connection fee each time they make a phone call. Prices per minute will decrease from 0.32 kroons to 0.16 kroons per minute during peak hours and from 0.16 kroons to 0.08 kroons during off hours, making it cheaper to talk for longer periods of time.
Representatives from the Economics, Finance, and Transport and Communications ministries, the Consumer Protection and Competition boards, Estonian Telephone and experts from Tallinn Technical University met March 26 to discuss the plan and what its impact might be.
As a result of the meeting, Estonian Telephone will give an explanation to the Consumer Protection Board about why they had decided on 0.48 kroons for the connection fee and how revenues would be used by November 1. The company will also launch a public awareness campaign to let people know why the increase is needed. Consumers can expect to find a letter explaining the increase with their April bill.
"Our consumers, they don't know why it's 48 cents," said Anna Laar, from the Economics Ministry who attended the meeting.
She said the government is behind the connection fee. The government endorsed the price policy in November when it approved Estonian Telephone's business plan.
Critics of the plan say that the increase is too steep and that the company has not given proper justification for it nor have they explained where the money will go. Since Estonian Telephone has a monopoly on non-cellular local calls and international calls till Jan.1, 2001, customers have no options.
"We think it's not fair to pay just for picking up the phone," said Enn-Toivo Annuk, deputy director of the Consumer Protection Board. Annuk said the board is considering Estonian Telephone's position and will decide what to do by the end of this week.
The connection fee will affect older people on fixed incomes and poorer people who only have a phone for emergencies and quick conversations. Annuk said that although it's reasonable to expect that prices will increase, it should be in line with inflation.
He also objected to raising fees while at the same time the quality of service is sometimes very low and many people are accidentally disconnected which would cause them to pay the connection fee several times in order to complete one conversation.
This issue has also sparked some grassroots activism. Miina Hint, chairwoman of the Estonian Democratic Union Party, turned in a petition to the Consumer Protection Board in February with 2,000 signatures of people against the connection fee and is still collecting signatures.
"Already, people don't speak much by telephone because it's expensive for them," said Hint. The average telephone bill is 125 kroons per month, and the basic monthly fee was increased in January. Prices went from 57 to 75 kroons for digital lines and from 38 to 50 kroons for analog lines.
Representatives from Estonian Telephone do not see it that way. While they empathize with people in difficult financial positions, the company says it needs to raise prices to remain competitive. This means increasing local calls and basic service charges, which right now are heavily subsidized by expensive international and business calls.
"We need to run this business like a business, and we cannot subsidize anything," said Jaan Mannik, chairman of Estonian Telephone. The new price structure will be beneficial to businesses, which already saw their basic service decrease in January.
Customers who make a lot of international calls may benefit. According to Estonian Telephone, their international prices to many countries are almost double when compared to neighboring Sweden. A one minute call to the United States is about 13 kroons in Estonia while the same call is 4 kroons in Sweden. A one minute call to Australia is almost 20 kroons here compared to almost 11 kroons in Sweden.
Estonian Telephone decided to use a connection fee to raise prices because in a digital phone system the most expensive part of a phone call is the initial connection and after that prices drop.
Under the new price system, calls of three minutes or less are more expensive than the old system, but once a call hits the three minute mark it becomes cheaper than under the previous price system.
A 10 minute phone call will drop from 3.2 to 2.8 kroons, meaning people who use the phone for longer calls, such as connecting to the Internet, will benefit from the new price system.
Estonian Telephone's parent company, Eesti Telekom, is owned 49 percent by the Nordic telecommunication companies Sonera and Telia, 23.7 percent by shareholders and 27.3 by the state. Under the plan arranged by the previous government, the state retains a golden share in the company that allows it veto power.