Telecommunications in Serbia: Monopoly Problems until 2005

By Jovana Radevic, SD PETOSEVIC, Overijse, Belgium; Published in Computer Law Association Bulletin Volume 19, No. 2, Spring 2004
Precisely a year ago, after two years of negotiation and preparation the Serbian Telecommunication Law, aiming to be modern, liberal and fully harmonized with EU law, was adopted and put into force. By this law, the government tried to bring its legislation in the line with the real world and to begin solving long-standing problems. However, after a year, it seems that the main obstacles to liberalization of this market still remain.

The biggest and most disturbing obstacle is the monopoly of the state company Telekom Srbija on fixed-line telephony, provided by its contract with Greek and Italian companies until 2005 and confirmed by the Telecommunication Law. Telekom Srbija was present long before the contracts with its partners were signed in 1997. Although the monopoly of the Serbian Post Company PTT, foreseen by a previous 1991 law was abolished, Art. 109 of the law confirmed the monopoly of Telekom Srbija agreed in the contracts with the Italian and Greek partners. The government explained that this “contract monopoly” could not be easily abolished, for there was no legal basis for unilateral abolishment and thus abolishment could result in a financial penalty for Serbia. Moreover, the government argued that there have been countries in a similar situation that have had a transition period (e.g., in Greece it was five years ago) to adapt their markets to liberalization and free competition.

Telekom Srbija often abused its dominant position in the past, especially in relation to Internet providers. The monopolistic behavior of Telekom Srbija caused considerable damage to ISPs, which were accused of violating the contract signed in 1997 by using VoIP and as a consequence their use of fixed lines was limited or forbidden. Even though court judgments were brought in favor of ISPs, Telekom Srbija long refused to comply.

While the government finds these protective measures indispensable, the EU and WTO experts are not satisfied, nor are Serbian public opinion or the professional community. The basis of free competition has not been established, and Serbia risks having difficulties in acceding to both EU and WTO. Moreover, various problems related to the ownership of Telekom Srbija persist.

In February 2004, structural government reforms were instituted. A new Ministry for Capital Investments was created to replace Ministry of Telecommunications and Transport. The new Ministry seems determined to solve problems that the Telecommunication Law could not, as well as to achieve goals foreseen by the law but not accomplished to date, such as creation of an executive body, the agency for Telecommunication. Will the new government fulfill its promises and liberalize the market that has been monopolized on a legal basis? Or will Serbia be late, once again?