Lietuviškai
THE CONSTITUTIONAL COURT OF
THE REPUBLIC OF LITHUANIA
R U L I N G
On the compliance of Parts 1, 2 and 3 of Article 8
and Parts 7, 8 and 9 of Article 16 of the Republic
of Lithuania Law on Telecommunications with the
Constitution of the Republic of Lithuania
Vilnius, 6 October 1999
The Constitutional Court of the Republic of Lithuania,
composed of the Judges of the Constitutional Court Egidijus
Jarašiūnas, Egidijus Kūris, Zigmas Levickis, Augustinas
Normantas, Vladas Pavilonis, Jonas Prapiestis, Vytautas
Sinkevičius, Stasys Stačiokas, and Teodora Staugaitienė,
with the secretary of the hearing-Daiva Pitrėnaitė,
in the presence of:
the representatives of the petitioner-a group of Seimas
members-Vytenis Povilas Andriukaitis, a Seimas member, and
Juozas Bernatonis, a Seimas member,
the representatives of the party concerned-the Seimas of
the Republic of Lithuania-Onutė Buišienė, a senior consultant
to the Law Department of the Seimas Chancery, and Academician
Eduardas Vilkas, Director of the Economics Institute,
pursuant to Part 1 of Article 102 of the Constitution of
the Republic of Lithuania and Part 1 of Article 1 of the
Republic of Lithuania Law on the Constitutional Court, on 7-8
September 1999 in its public hearing conducted the
investigation of Case No. 12/98 subsequent to the petition
submitted to the Court by the petitioner-a group of Seimas
members-requesting to investigate if Parts 1, 2 and 3 of
Article 8 the Republic of Lithuania Law on Telecommunications
were in conformity to Articles 5 and 46 of the Constitution of
the Republic of Lithuania, if Parts 7, 8 and 9 of Article 16 of
the Republic of Lithuania Law on Telecommunications were in
conformity to Part 4 of Article 46 of the Constitution of the
Republic of Lithuania and if Part 9 of Article 16 of the
Republic of Lithuania Law on Telecommunications was in
conformity to Article 23 of the Constitution of the Republic of
Lithuania.
The Constitutional Court
has established:
I
On 9 June 1998 the Seimas passed the Republic of Lithuania
Law on Telecommunications (Official Gazette Valstybės žinios,
1998, No. 56-1548; hereinafter also referred to as the Law).
Parts 1, 2 and 3 of Article 8 of the Law provide:
"1. The Lithuanian market of operation of fixed public
telephone communication networks and provision of
telecommunications services via fixed public telephone
communication networks must be free as of 31 December 2002.
Until this date, the main fixed public telephone communication
operator has the right to remain the sole operator of fixed
public telephone communication and the sole provider of fixed
public telephone communication services.
2. Until the date specified in Part 1 of this Article, no
additional licences or authorisations may be granted that might
alter the conditions for the activities of the main operator of
fixed public telephone communication.
3. Persons shall be prohibited from providing, organising,
advertising or taking part in any other way in establishing
call-back services."
Parts 7, 8 and 9 of Article 16 of the Law on
Telecommunications provide:
"7. The terms and conditions of using the conduits, ducts,
collectors, towers, poles and other equipment belonging to
another operator shall be established by contract. The
telecommunications operator, who owns the telecommunications
equipment referred to in this paragraph, may not refuse to
conclude such a contract with another telecommunications
operator, request its amendment, and termination if the
obligations stipulated in the contract are fulfilled.
8. A telecommunications operator shall pay, under the
agreement of the parties, an appropriate fee to another
operator for using his conduits, ducts, collectors, towers,
poles and other equipment.
9. In a manner prescribed by the Government of the
Republic of Lithuania, the company Lietuvos telekomas shall buy
out the telecommunications networks installed at the consumers'
expense."
A group of Seimas members appealed to the Constitutional
Court with a petition requesting to investigate whether Parts
1, 2 and 3 of Article 8 of the Law on Telecommunications were
in compliance with Articles 5 and 46 of the Constitution,
whether Parts 7, 8 and 9 of Article 16 of the same law were in
compliance with Part 4 of Article 46 of the Constitution, and
whether Part 9 of Article 16 of the same law were in compliance
with Article 23 of the Constitution.
II
The request of the petitioner is based on the following
arguments.
Parts 1, 2 and 3 of Article 8 of the Law on
Telecommunications provide for the monopoly of fixed public
telephone communication services, prohibit provision of
call-back services, besides the consumers of telephone services
are deprived of the right until 31 December 2002 to choose the
provider of the services, and, alongside, they lose their right
to cheaper services received under the pressure of competition.
After call-back communications became prohibited, the services
for international communications will become more expensive for
many consumers of this country.
Under the aforementioned parts of Article 8 of the Law,
the provider of fixed public telephone communication services
will acquire all exclusive rights in the telecommunications
sector as of 31 December 2002. Upon privatisation of the
company Lietuvos telekomas, the monopoly of private subjects
will be established.
In the opinion of the petitioner, Parts 1, 2 and 3 of
Article 8 contradict Article 46 of the Constitution, as until
31 December 2002 persons' economic freedom and initiative are
groundlessly restricted in the telecommunications market, a
private monopoly is established in this market, the principle
of fair competition is violated. Due to all this the interests
of consumers may definitely suffer.
The petitioner draws one's attention to the fact that
under Article 5 of the Constitution, institutions of power
shall serve the people, while the Seimas exercises state powers
and is one of state institutions. The petitioner doubts whether
the Seimas, adopting Parts 1, 2 and 3 of Article 8 of the Law,
did not violate the stipulation of Article 5 of the
Constitution.
According to the petitioner, by Parts 7, 8 and 9 of
Article 16 of the Law, wherein the common use of
telecommunications lines and equipment is regulated, the
company Lietuvos telekomas acquires the monopolistic right to
the whole infrastructure of construction, networks, conduits,
cable ducts, collectors, towers and poles. The other operators
who will be able to receive the licence and permission after
2002 will find themselves at a disadvantage as it is extremely
costly to lay telecommunications network and construct a new
infrastructure, while during the negotiations with the
monopolist as regards the use of conduits, ducts and other
objects, one of the parties to the negotiations is at a
disadvantage. Therefore, the petitioner is of the opinion that
Parts 7, 8 and 9 of Article 16 of the Law contradict Article 46
of the Constitution.
The petitioner maintains that at present the system of
conduits, cable ducts, collectors, towers, poles and other
equipment meet the requirements of the public. Part of the said
items of infrastructure have been built by the right of common
shared property, by way of management, or at consumers'
expense, and is legitimate property of natural and legal
persons and of the whole society. Under Part 9 of Article 16 of
the Law, the company Lietuvos telekomas, which undergoes
privatisation, shall buy out the telecommunications networks.
It means that this is taken from society and given at the
disposal of a private monopolist. The Law does not provide for
the procedure for taking such property from society and its
transfer at the disposal of the monopolist, nor does it contain
any stipulation as regards fair compensation. The Government is
commissioned to do so. The petitioner draws a conclusion that
Part 9 of Article 16 of the Law contradicts Article 23 of the
Constitution under which property may only be seized for the
needs of society according to the procedure established by law
and must be adequately compensated for.
III
1. In the course of the preparation of the case for the
Constitutional Court hearing, the representative of the party
concerned O. Buišienė presented the following
counter-arguments.
The provisions of Parts 1 and 2 of Article 8 of the Law on
Telecommunications were adopted by taking account of the fact
that actually the company Lietuvos telekomas was and is a
natural monopoly and that virtually it alone provided the
public telephone communication services. The provision made by
the legislator stipulating that temporarily, till 31 December
2002, there shall not be established any more providers of such
services was grounded on the attempt to ensure that the prices
for the services provided would not increase or would increase
insignificantly. The norms of Parts 1 and 2 of Article 8 of the
Law on Telecommunications do not violate the interests of
consumers. On the contrary, they protect them. The protection
of consumers' rights and the activity of the state in the
welfare of the people has priority and may not be linked with
promotion of competition.
Part 3 of Article 8 of the Law on Telecommunications
prohibits call-back services because these are unlawful
services. The providers of these services act on illegal
grounds and they do not pay taxes. The State of Lithuania must
prohibit illegal activities.
In the opinion of the representative of the party
concerned, the argument of the petitioner that under Parts 1, 2
and 3 of Article 8 of the Law, the consumers are deprived of
the right to choose the provider of the services is groundless
as in Lithuania there are several enterprises which provide
telephone and telecommunications services to natural and legal
persons. The consumers of these services are not deprived of
the right to choose.
The relations regulated by Parts 7 and 8 of Article 16 of
the Law on Telecommunications are based on agreements between
the parties. Part 10 of the same article provides that arising
disputes may be settled in court.
Part 9 of Article 16 of the Law on Telecommunications does
not require that the networks installed at the consumers'
expense be sold to the company Lietuvos telekomas under
compulsion. The company is entitled to buy out these networks.
But it is the owners themselves who decide whether to sell them
or not.
2. In the course of the preparation of the case for the
Constitutional Court hearing, explanations of the
representative of the party concerned E. Vilkas were also
received. It was noted therein that under the prior resolution
of the Seimas the adoption of the Law on Telecommunications was
a necessary condition for the privatisation of the company
Lietuvos telekomas.
According to the representative of the party concerned,
the privatisation of the company Lietuvos telekomas was
positively assessed by the foreign media, which propagates
liberal market. The said privatisation was described as an
exemplary contract useful to every party concerned-buyer,
vendor, and consumer-and which is to be included in the
textbooks. After the company Lietuvos telekomas had been
granted exclusive rights in the sector of fixed telephone
communication as of 31 December 2002, there was not any
negative reaction among European liberal economists, even
though in the European Union much attention is paid to
liberalisation of communications sector.
In the opinion of the representative of the party
concerned, the petitioner does not take account of the fact
that the company Lietuvos telekomas is a natural monopoly. It
is more useful to society not to dismantle such monopolies but
to supervise the prices of the services provided by them so
that such prices would not be unreasonably high and would
approach marginal prices.
According to the representative of the party concerned,
the provision of Article 46 of the Constitution "the law shall
prohibit monopolisation of production and the market, and shall
protect freedom of fair competition" may not be applied without
any reservations, otherwise it would contradict the provisions
of the same article of the Constitution which are: "the State
shall regulate economic activity so that it serves the general
welfare of the people", and "the State shall defend the
interests of the consumers".
The representative of the party concerned noted that the
company Lietuvos telekomas which is the monopolist of fixed
telephone communication is no longer the monopolist in
telephony in general as it faces competition with operators of
mobile communications and providers of The Internet services.
On liberalisation of these telecommunications areas in
Lithuania, the market power of the fixed telephone
communication monopolist decreased substantially, i.e. it has
less opportunities to increase prices unreasonably. The Law on
Telecommunications reflects the reality that the company
Lietuvos telekomas has always been and is at present a natural
monopoly in the sector of fixed telephone communication, and,
as long as it remains such a monopoly, one has to regulate the
prices for telephone services. In the future the communications
sector might be totally liberalised by way of modern
demonopolisation of fixed telephone networks. In order to
completely liberalise the communications market in Lithuania,
it is necessary to change the pricing of communications
services by substantially increasing the tariffs for local
calls and reducing the prices for international calls. In case
this is not done, the company Lietuvos telekomas would lose its
excess profits from which it supports local networks, as the
competitors would act in the area of international
communication (which is profitable) but not in that of local
communication (which is unprofitable). The company Lietuvos
telekomas would find itself in a desperate financial situation,
while much harm would be done to the development of
telecommunications. Taking account of the interests of
consumers and those of telecommunications development, it is
impossible to restructure pricing too abruptly without any
transitional period. The Law on Telecommunications provides for
such a transitional period which must terminate not later than
31 December 2002.
Parts 1 and 2 of Article 8 of the Law mention the
abolition of the monopoly, which has always existed and the
existence of which was economically grounded, i.e. it was
useful to society, from 2003 without considerable increase of
the expenses for provision of services. Part 3 of Article 8 of
the Law of Telecommunications prohibits call-back services,
first, because of the said unbalanced tariffs, and, second,
because call-back services are contraband, their providers act
in the Lithuanian market unlawfully and evade taxes. All
contraband goods are cheaper to the consumer, however, it is
doubtful whether on the grounds of the narrow interests of
consumers one may defend contraband. As Parts 1, 2 and 3 of
Article 8 of the Law contain the norms which are reasonable as
regards economic standpoint and the interests of consumers,
they do not contradict Articles 5 and 46 of the Constitution.
The representative of the party concerned is of the
opinion that the petitioner attaches the meaning to Part 7 of
Article 16 of the Law which is practically opposite to the
actual one. The Law obligates the company Lietuvos telekomas
(or any other owner) to let the infrastructure to other
operators but its does not grant him any monopolistic rights.
This is in line with the aforesaid way of demonopolisation,
viz., to encourage several operators who might use the same
fixed telephone network. The owner of the infrastructure does
not enjoy any monopolistic powers during the negotiations on
lease with another operator, as under Part 6 of Article 12 of
the Law, the Communications Regulatory Authority shall settle
disputes between telecommunications operators concerning the
interconnection of telecommunications networks and a joint use
of conduits, cable ducts, collectors, towers and poles. By Part
10 of Article 16 of the Law, if an operator disagrees with the
decision of the Communications Regulatory Authority, he shall
have the right to apply to court. Such procedure is in line
with international practice and is held sufficient in order to
implement demonopolisation. Parts 7, 8 and 9 of Article 16 of
the Law on Telecommunications are in conformity to the
Constitution.
Concerning the explanation of Part 9 of Article 16 of the
Law, the representative of the party concerned emphasised that
the company Lietuvos telekomas does not want the networks which
have been installed at the expense of the consumers. It is the
consumers who, on the grounds of privatisation, demand that
Lietuvos telekomas buy out these networks. The Law on
Telecommunications obligates the company Lietuvos telekomas to
do so. The manner of buying out these networks will be
prescribed by the Government so that there would not arise
disputes concerning it between the company Lietuvos telekomas
and the consumers. In this way the Government will protect this
company from endless judicial proceedings and, it goes without
saying, it will satisfy the interests of the consumers. If the
Law had emphasised that the buying out is compulsory but the
sale is voluntary, such a misunderstanding would never have
arisen.
According to the representative of the party concerned,
the Law on Telecommunications in all its aspects is in
compliance with the Constitution.
IV
In the course of the preparation of the case for the
judicial investigation, explanations by Rimantas Didžiokas,
Minister of Transport of the Republic of Lithuania, Gintaras
Švedas, Vice-minister of Justice of the Republic of Lithuania,
Rimantas Antanas Stanikūnas, Director of the State Service for
Competition and Protection of the Rights of the Consumers, as
well as those by the specialists-Jonas Ūsas, Director of the
Communications Department at the Ministry of Transport, Prof.
Habil. Dr. Arvydas Pajuodis and Prof. Habil. Dr. Vytautas
Pranulis who work at the Faculty of Economics of Vilnius
University, Assoc. Prof. Dr. Brunonas Dekeris and Assoc. Prof.
Dr. Arminas Ragauskas who work at the Faculty of
Telecommunications and Electronics of Kaunas Technological
University, and Remigijus Šimašius, a legal expert at the
Lithuanian Institute for Free Market-were received.
1. R. Didžiokas explained that in attempt to liberalise
the market of telecommunications services one has to ensure
that all the population were provided with universal
(compulsory) telecommunications services. Therefore, as a rule,
the national telecom, regardless of whether it is private or
public, is granted a limited exclusive right to provide the
main services. The national operator burdens itself with the
investment designated for development of the network, its
modernisation, instruction of the staff etc. so that the
services of voice telephony were accessible to all the
population under reasonable price. Besides, not only in
Lithuania but in all central and eastern Europe the prices for
local calls are unprofitable, while the prices for
international calls are excessively high. The profit received
from international calls is used to cover the loses experienced
by the operators who provide the services whose expenditures
are higher than the charged price.
The main duty of the national operator is provision of
universal services which is of utmost importance to rural
population and those whose income is low and whose interests
might not been taken into consideration in case the
telecommunications market is liberalised too early. Due to such
reasons the European Commission permitted several member states
of the European Union-Spain, Greece, Portugal and Ireland-to
liberalise this market only partially. The permission of the
European Commission to extend the term of the liberalisation of
telecommunications market of these states is grounded on the
fact that their telecommunications networks have not been
developed enough (meanwhile, the density of the network of the
national operators of these states is nearly twice as big as
that of the company Lietuvos telekomas).
The states of central and eastern Europe are also
determined to liberalise their national telecommunications
markets later: Latvia in 2013, Macedonia in 2005, Albania has
not decided as to liberalise it as yet, Poland, Bulgaria,
Slovakia and Romania in 2003, Hungary in 2002, Slovenia,
Estonia and the Czech Republic in 2001. The Hungarian telecom
was privatised in 1993, while the Estonian telecom-in 1992. The
survey of the privatisation process of the telecoms from
central and eastern European countries shows that after the
national telecommunications operator has been privatised, the
monopolistic rights to provide services which it enjoyed are
left to it for at least ten years. The company Lietuvos
telekomas will have to accomplish the obligations of balancing
the tariffs and development of networks far sooner than the
national telecommunications operators of all member states of
the European Union and those of some states from central and
eastern Europe: from the moment of signing of the transaction
of the sale of the shares to the strategic investor in the
middle of 1998 until 31 December 2002.
Under Licence No. 174/97 granted to the company Lietuvos
telekomas, it is obligated to provide universal services. In
addition, it is obligated to implement the following
stipulations during this short period: to balance the tariffs
so that the prices would conform to the expenditure; to
increase the density of digital telephone lines from 23.7 per
cent in 1998 until 50 per cent in 2002; to increase the general
density of telephone lines from 30 per 100 residents in 1998 to
37 lines per 100 residents in 2002; to finish the modernisation
of fixed public telephone network.
R. Didžiokas also presented explanations as regards the
other questions regulated by the Law on Telecommunications. He
noted that under the open network provision (European Community
Directive 98/10/EC), every operator who began
telecommunications activities before and is the owner of public
telecommunications network may not hinder the activities of
another operator. The former must permit the latter to use his
telecommunications equipment under contract. The national
telecommunications operator (such is the company Lietuvos
telekomas) is the owner of public telecommunications network,
it supervises and maintains this equipment by its means,
therefore other operators who make use of the infrastructure of
the said network must pay in proportion with the exploitation
of this infrastructure.
In most European countries the call-back service is banned
as the national telecommunications operators pay for the
licence, they invest into the development of the network and
attempt to balance tariffs, meanwhile, foreign companies,
making use of the differences in tariffs between non-developed
and economically strong countries, use telecommunications
networks of the countries which are less developed
economically, and these companies provide cheaper international
call-back services. Such companies grossly violate the rules of
licensing, they do not pay taxes to the state, they use the
telecommunications networks of another operator without any
contract and thus ruin fair competition.
Some consumers of telecommunications services have
installed telephone links at their own expense, i.e.
telecommunications cables form public telecommunications
network until network termination points (telephones) have been
laid at their expense. Some time ago it was common practice
that the consumers would hand over the laid part of the network
into the balance of the telecom without any compensation,
therefore such consumers were not owners of the said part of
the network, nor did they exploit nor manage it but they merely
used it as the rest of the subscribers of the company Lietuvos
telekomas.
2. G. Švedas noted in his explanations that prohibition to
undertake certain economic-commercial activity or licensing
certain economic-commercial activity may not be assessed as a
groundless restriction of freedom of economic activity and
initiative of persons. By taking account of certain objective
circumstances, the Seimas is entitled to establish prohibition
to undertake certain economic activities. Such circumstances
are: situation of the national economy, variety and changing
nature of economic and social life, economic, social and other
interests of the state. In certain areas where competition is
impossible owing to the specific character of the market or
where it is undesirable as it could violate the interests of
consumers, the state may introduce a monopoly on the grounds of
Parts 3 or 5 of Article 46 of the Constitution, i.e. in attempt
to regulate economic activity so that it serves the general
welfare of the people, or in order to defend the interests of
consumers. The Constitution itself does not prohibit
monopolisation of production and the market, but it commissions
the legislator to do so. This creates constitutional grounds
for the legislator, when he bans monopolisation of production
and the market, to take account of the situation of the
national economy, the variety and changing nature of economic
and social life, and presupposes his respective discretion
within the limits of the Constitution. Thus, prohibiting
monopolies, the Seimas may, alongside, establish exceptions to
this rule, which are grounded on the objective basis. Upon
establishment of the temporary monopoly of public fixed
telephone communication services, protection of the consumers
of these services was also provided for.
In the opinion of G. Švedas, Part 7 of Article 16 of the
Law on Telecommunications provides for the right of a
telecommunications operator to use the conduits, ducts,
collectors, towers, poles and other equipment belonging to
another operator, therefore not only the company Lietuvos
telekomas but also other telecommunications operators have the
same right as well. The provision of Part 9 of Article 16 of
the Law on Telecommunications whereby in a manner prescribed by
the Government the company Lietuvos telekomas shall buy out the
telecommunications networks installed at the consumers' expense
must be understood as an obligation for this company to buy out
the telecommunications networks from the consumers which were
installed at the consumers' expense. Most networks installed at
the consumers' expense are of little or no value, therefore it
is more profitable for the company Lietuvos telekomas to lay
new networks. By the obligation established in the Law on
Telecommunications for the company Lietuvos telekomas one
attempts to protect the interests of the consumers.
3. R. A. Stanikūnas noted in his explanations that
scrutiny regarding exclusive rights in economic activity must
be based on Part 4 of Article 46 of the Constitution wherein
freedom of fair competition is secured. Assessing the relation
between Parts 3 and 4 of Article 46 of the Constitution, one
has grounds to believe that a reservation to the fair
competition principle might be possible. Regulating economic
activity, the state may grant entities of economy exclusive
rights to undertake certain economic activity in cases when
this is of necessity for the general welfare of the people.
Granting exclusive rights for an economic entity to provide
certain services ought to be based on the obligation, under the
established conditions, to provide services of defined quality
which are necessary to ensure the general welfare of the people
and in cases when there is clear evidence that such services
might never be provided on commercial basis or that they would
be inaccessible to a certain part of society.
R. A. Stanikūnas pointed out that the legal acts which
were in force prior to the adoption of the Law on
Telecommunications did not provide for an opportunity to grant
exclusive rights to provide telecommunications services.
Therefore it is necessary to assess the changed conditions
linked with provision of telecommunications services which
determined the necessity to grant the exclusive rights. The Law
on Telecommunications does not directly indicate the reason on
the grounds whereof one must grant the exclusive rights. The
object of the exclusive rights granted to the company Lietuvos
telekomas is very extended and includes not only the exclusive
right to provide voice telephony services between fixed network
termination points but also virtually grants the aforesaid
company the monopolistic right to the means of production of
all commutation and transmission equipment and all
infrastructure designated for reciprocal links by means of
public telecommunications networks outside Lithuania and
established the exclusive right of the said company to provide
services of international voice telephony. Due to this one must
assess whether such an extended object of exclusive rights is
necessary for the general welfare of the people. The Law does
not directly indicate any reasons justifying the object of the
exclusive rights.
In the explanations by R. A. Stanikūnas attention is paid
to the fact that granting the exclusive rights to the company
Lietuvos telekomas is not directly linked with the obligation
to provide services of defined quality which are necessary to
ensure the general welfare of the people.
4. J. Ūsas explained that before the Law on
Telecommunications went into effect, on 18 August 1995, the
company Forenta was granted a permission by the Ministry of
Communications and Informatics to lay wireless fixed digital
telephone network in the Kaunas district and to provide
telephone services by this network. The said company was due to
begin this activity on 1 September 1996 but it did not begin it
then nor during the additional time period established by the
ministry, therefore by Decree No. 17 of 10 February 1997 of the
Ministry of Communications and Informatics the validity of this
permission was abrogated. On 31 October 1997 a licence was
granted to the national operator Lietuvos telekomas to lay and
use fixed telephone communications network and provide
universal services by this network. Other entities of economy
do not have nor are they granted additional licences nor
permissions as their granting is prohibited by Part 2 of
Article 8 of the Law on Telecommunications.
5. In the opinion of A. Pajuodis, by way of creating the
conditions to monopolise the exploitation of fixed public
telephone network and provision of services by this network
until 31 December 2002 as provided for by Parts 1, 2 and 3 of
Article 8 of the Law on Telecommunications, one does not ensure
the protection of the rights of consumers. Part 9 of Article 16
of the Law on Telecommunications permits to monopolise the
infrastructure of the telecommunications market, thus
pre-conditions are created to apply different conditions for
competition and to dominate for one economic entity in the
telecommunications market after 31 December 2002. The fact that
Part 9 of Article 16 of the Law provides for buying out the
telecommunications networks installed at the consumers' expense
according to the procedure prescribed by the Government but not
to that established by law violates Article 23 of the
Constitution.
6. V. Pranulis noted that Part 4 of Article 46 of the
Constitution clearly, strictly and unambiguously contains the
prohibition to monopolise production and the market. The
provision of Part 1 of Article 8 of the Law on
Telecommunications whereby as of 31 December 2002 the main
fixed public telephone communication operator has a right to
remain the sole operator of fixed public telephone
communication and the sole provider of fixed public telephone
communication services legitimises the monopoly of one
enterprise and thus abolishes competition. The norm established
in Part 2 of Article 8 of the Law on Telecommunications also
restricts freedom of economic activity and initiative, grants
monopolistic privileges and impedes competition. The provisions
of Part 7 of Article 16 of the Law on Telecommunications in the
context of the aforesaid norms of Article 8 broaden
monopolistic powers and legitimise them in the infrastructure
of construction, networks, conduits, cable ducts, collectors,
towers and poles, and, alongside, this legitimatises removal of
competitors as well.
V. Pranulis emphasised that it is impossible to tolerate
violations of Parts 1 and 4 of Article 46 of the Constitution
on the grounds of Parts 2 and 3 of the same article. First, the
theory of economics and examples of its practice show that
those countries where the competitive market economy prevails
enjoy greater economic progress as well as general welfare of
the people. Second, upon legalisation of the monopoly of one
entity of economy, a mere vision of effect is created: the
buyer of the company Lietuvos telekomas, making use of its
monopolistic situation, will attempt to recover through prices
and tariffs everything for what it has paid to gain the
advantage of the monopolistic position. Third, when the power
of one monopolist is protected for five years by the Law on
Telecommunications, the competitors will be discriminated and
removed from the market, and, in addition, their technological,
financial and organisational opportunities will be restricted.
Thus, it is a reality that after 31 December 2002 in Lithuania
the monopolist will dominate for quite a long time. Fourth, the
monopolistic position, especially when protected by law, does
not induce the monopolist to work economically, to reduce
expenses and prices for provided services. The consumers who
have no choice are forced to pay non-competitive prices.
7. B. Dekeris and A. Ragauskas pointed out in their
explanations that until the adoption of the Law on
Telecommunications the company Lietuvos telekomas was the only
licensed operator of fixed public telephone network, therefore
it is possible to maintain that the monopoly in this market had
already existed. In order to completely liberalise the
communications market in Lithuania, one has to change the
structure of prices for communications services. However, it is
impossible to do so hastily and without any transitional
period, as for the purpose of this one has to modernise
technologies and big capital investments are needed.
Before liberalisation of the market it is necessary to
create an independent Communications Regulatory Agency which
has been provided for by the Law on Telecommunications and
which will have to ensure fair competition in the
telecommunications market. The term provided for in Part 1 of
Article 8 of the Law on Telecommunications is necessary so that
telecommunications networks might be sufficiently developed and
the tariffs balanced. At present rural and local calls are
unprofitable to the company Lietuvos telekomas. The losses are
covered from the profit received from international and
intertown calls. In case this market is liberalised at present,
no provider of communications services would be able to provide
unprofitable services, therefore the tariffs for rural and
local calls would inevitably increase.
In the opinion of the specialists, it is not correct to
assert that Article 16 of the Law grants exclusive rights to
the telecommunications infrastructure for the company Lietuvos
telekomas. The provision of Part 9 of Article 16 of the Law
occurred in attempt to correct the situation which historically
appeared due to the hand-over of the telephone networks
installed at the consumers' expense to the telecom gratis.
8. R. Šimašius explained that free entering into the
market is an essential and necessary element of competition and
that of the right to competition, while monopolisation is
understood either as consolidation of one entity in the market
or as creation of monopolistic conditions, i.e. prohibition for
other entities to enter into the market. Parts 1 and 2 of
Article 8 of the Law on Telecommunications abolish all
competition and establish a monopolistic situation. Part 4 of
Article 46 of the Constitution obligates not to restrict or
regulate but protect competition by law. Parts 1 and 2 of
Article 8 of the Law on Telecommunications contradict the
objective to protect freedom of fair competition established in
Part 4 of Article 46 of the Constitution. Because the
prohibition to monopolise the market as established in Part 4
of Article 46 of the Constitution is applicable to all subjects
and the Constitution does not provide for any reservations,
there is no doubt that this provision is valid as regards the
state and the legislator as well.
In the opinion of R. Šimašius, the prohibition concerning
call-back communication established in Part 3 of Article 8 of
the Law contradicts the provision of Part 1 of Article 46 of
the Constitution whereby Lithuania's economy shall be based on
freedom of individual initiative. The Constitution does not
contain any other principles or objectives on the grounds of
which the prohibition of call-back communication may be
grounded, which, doubtless to say, restricts freedom of
individual initiative.
V
In the Constitutional Court hearing the representatives of
the petitioner V. P. Andriukaitis and J. Bernatonis reiterated
the arguments set forth in the petition and presented
additional motives.
During the judicial investigation the representatives of
the party concerned virtually reiterated the counter-arguments
set forth in the written explanations.
VI
The specialists V. Pranulis, B. Dekeris, A. Ragauskas, R.
Šimašius, R. A. Stanikūnas, J. Ūsas who spoke in the
Constitutional Court hearing specified and more comprehensively
reasoned in favour of their written explanations.
Also the specialist Prof. Habil. Dr. Vilenas Vadapalas,
Director General of the Department of European Law under the
Government of the Republic of Lithuania spoke at the
Constitutional Court hearing.
V. Vadapalas explained that Paragraph 1 of Article 86 of
the Treaty of European Union which was amended by the Amsterdam
Treaty (i.e. former Paragraph 1 of Article 90) provides that in
case of public undertakings and undertakings to which Member
States grant special or exclusive rights, Member States shall
neither enact nor maintain in force any measure contrary to the
rules contained in this Treaty, in particular to those rules
provided for in Article 12 and Articles 81 to 89. Under
Paragraph 3 of Article 86 (former Paragraph 3 of Article 90),
the European Commission shall ensure the application of
provisions of this Article and shall, where necessary, address
appropriate directions or decisions to Member States. On the
grounds of this, on 28 June 1990 the Commission adopted
Directive 90/388/EEC on competition in the markets for
telecommunications services.
At that time in all member states of the European
Community the rights of provision of telecommunications
services and exploitation of telecommunications networks were
granted to one or several telecommunications organisations
which were enjoying either special or exclusive rights.
Telecommunications services were liberalised step by step by
implementing principles of competition in particular types of
telecommunications services. This was linked with the fact that
it was necessary to create a smoothly functioning mechanism of
regulation of competition equally applicable to public and
private sectors, to separate the functions of provision of
telecommunications services and those of regulation of these
services, to balance the prices for provision of services while
taking account of expenditure etc. Therefore the provisions of
Directive 90/388/EEC have been amended several times
(Directives 94/46/EC, 95/51/EC, 96/2/EC). On 13 March 1996
Commission Directive 96/19/EC amending Directive 90/388EEC with
regard to the implementation of free competition in
telecommunications markets was adopted. After the said
amendment, Paragraph 1 of Article 2 provides that Member States
shall withdraw all those measures which grant exclusive rights
for the provision of telecommunications services, including the
establishment and the provision of telecommunications networks
required for the provision of such services. Paragraph 2 of the
same article provides that Member States may maintain special
and exclusive rights until 1 January 1998 for voice telephony
and for the establishment and provision of public
telecommunications networks. It is also provided for therein
that Member States with less developed networks shall be
granted an additional implementation period of up to five years
and Member States with very small networks shall be granted
upon request an additional implementation period of up to two
years, provided it is needed to achieve the necessary
structural adjustments. On the grounds of this provision as
well as requests filed by member states and upon the assessment
of the actual situation of each state, the Commission
established transitional periods of various degree for Ireland
(by Commission Resolution 97/114/EC the liberalisation of voice
telephony services and exploitation of voice telephony network
was postponed until 1 January 2000), Greece (by Commission
Resolution 97/607/EC its liberalisation was postponed until 31
December 2000) and Portugal (by Commission Resolution 97/603/EC
its liberalisation was postponed until 1 January 2000).
V. Vadapalas noted that, adopting its decisions on
attribution of transitional periods for member states, the
Commission was taking account of the necessity to change
analogous lines by digital ones, to balance the prices for
services provided by telecommunications operators with the
expenditure, as well as the size of investments in order to
achieve these purposes and possible negative effect arising
following prompt liberalisation of the market and after
permitting other operators to perform while the latter would
not face such problems. In its resolutions the Commission
underlined the importance of the principle of common
proportionality in this area: the imposed transitional periods
must strictly be such so that necessary structural adjustments
might be performed, and never exceed this as this is an
exception to the general rule.
The specialist pointed out that, while analysing the
exclusive rights granted to the company Lietuvos telekomas, one
is to take into consideration the above-mentioned provisions of
European Union law, as well as the international obligations of
the Republic of Lithuania in this area.
V. Vadapalas explained that European Union law does not
regulate provision of call-back services, leaving it to decide
to member states.
The Constitutional Court
holds that:
I
Article 1 of the Law on Telecommunications points out that
this Law shall establish the telecommunications regulatory
framework of the Republic of Lithuania, with due regard to the
requirements of the European Union law. It is also indicated
therein that in the Law conditions for promoting competition in
the telecommunications sector are set forth, as well as other
telecommunications relations are regulated.
According to the petitioner, the norms established in
Parts 1, 2 and 3 of Article 8 and Parts 7, 8 and 9 of Article
16 of the Law unreasonably restrict persons' economic activity
and initiative, consolidate a private monopoly, violate the
principle of fair competition, therefore the interests of
consumers may clearly suffer. In the opinion of the petitioner,
Parts 1, 2 and 3 of Article 8 of the Law contradict Articles 5
and 46 of the Constitution, Parts 7, 8 and 9 of Article 16 of
the Law contradict Part 4 of Article 46 of the Constitution,
while Part 9 of Article 16 of the Law also contradicts Article
23 of the Constitution.
II
1. Article 46 of the Constitution provides:
"Lithuania's economy shall be based on the right to
private ownership, freedom of individual economic activity, and
initiative.
The State shall support economic efforts and initiative
which are useful to the community.
The State shall regulate economic activity so that it
serves the general welfare of the people.
The law shall prohibit monopolisation of production and
the market, and shall protect freedom of fair competition.
The State shall defend the interests of the consumers."
The principles laid down in this article constitute a
whole, which is the constitutional basis of the economy of this
country. The principles are in harmony with each other, and
this pre-supposes their balance, therefore each of them must be
interpreted without denying another constitutional principle.
2. The provision "Lithuania's economy shall be based on
the right to private ownership, freedom of individual economic
activity, and initiative" of Article 46 of the Constitution
defines that the fundamental values on which the national
economy is based are private ownership, freedom of individual
economic activity and initiative.
The notion of freedom of individual economic activity and
initiative is a broad one. It includes the right to choose
business freely, the right to free conclusion of contracts,
freedom of fair competition, equality of subjects of economic
activity etc. Freedom of individual economic activity and
initiative is a whole-complex of legal opportunities creating
pre-conditions for an individual independently to adopt
decisions necessary for his economic activities (18 June 1996
Constitutional Court ruling).
3. Freedom of individual economic activity creates
pre-conditions to implement various aspirations of an
individual. The national economy is based on freedom of
individual economic activity and initiative, therefore society
is concerned with the implementation of the said freedom and
initiative. The state supports economic efforts and initiative
which are useful to the community.
4. Freedom of individual economic activity is not
unrestricted one. In the course of its implementation the
interests of society are affected in various respects,
therefore the state regulates economic activity. In the
constitutional provision "the State shall regulate economic
activity so that it serves the general welfare of the people"
the constitutional principle is established which sets the
guidelines and ways for as well as limits on the regulation of
economic activity. As a rule, the national welfare is reflected
by the consumption of material values. The Constitutional
provision "general welfare of the people", however, may not be
construed, while only taking account of the satisfaction of
material values by an individual. It is also possible to judge
as regards the general welfare of the people according to the
social development of the people and the opportunities of
self-expression of an individual. The content of the notion
"general welfare of the people" is to be disclosed in every
particular case, while taking account of economic, social and
other important factors.
5. The necessary guarantees for an effective functioning
of the market economy are provided for in the constitutional
provision "the law shall prohibit monopolisation of production
and the market, and shall protect freedom of fair competition".
Competition creates self-regulation of the economy as a
system, which promotes optimal distribution of economic
resources, their effective use, economic increase and that of
the welfare of consumers. However, freedom of individual
economic activity by itself does not guarantee competition,
therefore the state must protect fair competition.
The constitutional guarantee of fair competition obligates
the institutions of state authority to ensure freedom of fair
competition by legal means. Such measures are prohibition of
agreements between/among entities of economy whereby one
attempts to impede or impedes or may impede competition,
prohibition of abuse of the domineering position, control of
the concentration of the market and respective prohibitions of
concentration, prohibition of unfair competition, control over
adherence to the rules of fair competition protection as
established by laws, and responsibility for their violations.
It needs to be noted that the guarantee of the protection
of fair competition means prohibition for state authority or
local government institutions regulating economic activity to
adopt decisions which distort or are capable of distorting fair
competition.
6. An opportunity for competition decreases or competition
is removed from a respective market when monopoly begins to
dominate in it. The state must restrict monopolistic tendencies
by legal means. In case that a monopoly has been formed, the
state shall regulate monopolistic economic activity by
establishing by law corresponding requirements for the
monopolist. The scope of such legal regulation may depend on a
number of factors: the regulated economic area, peculiarities
of the time period etc.
The provision "the law shall prohibit monopolisation of
production and the market" of Article 46 of the Constitution
means that one may not introduce a monopoly, i.e. one may not
to grant an entity of economy exclusive rights to act in a
certain sector of economy due to which this sector might become
monopolised. However, the prohibition of monopolisation of
production and the market established in Article 46 of the
Constitution does not mean that it is prohibited to state in
the law that there exists monopoly in a particular sector of
economy. Such a statement creates legal pre-conditions to apply
respective requirements to the monopolist in protecting the
interests of consumers.
The special measures of protection of the interests of
consumers are: restriction of establishment of discriminatory
prices, state regulation of the size of prices and tariffs for
the goods of monopolistic market, establishment of the
requirements for the quality of goods as well as other
requirements for monopolistic entity of economy etc. State
institutions exert control over how entities of economy adhere
to the established regulations.
7. The Constitution is an integral act. The principle of
harmonisation of interests of an individual and those of
society is established therein. One must conform to this
principle in the course of regulation of economic activity as
well. On the grounds of an analysis of the constitutional
principles of the organisation of the national economy, it is
to be concluded that in the course of regulation of economic
activity, the key manner to ensure harmonisation of the
interests of an individual and those of society is protection
of fair competition.
8. Deciding the question of compliance of the disputed
norms of the Law which regulate economic activity in the
telecommunications sector with Article 46 of the Constitution,
it is important to establish on what basis and by what scale
the state may regulate economic activity in general so that it
would not deny the protection of fair competition and other
principles laid down in Article 46 of the Constitution.
Legal regulation is a form of establishment of certain
social order. Peculiarities of legal regulation depend on the
specific character of the regulated social relations. One area
of such relations is economic activity. The constitutional
principle of freedom of individual economic activity and
initiative conditions the fact that regulation of economic
activity is characteristic of the method of common permission:
everything is permitted what is not prohibited. Thus
prohibitions are one of the ways to regulate economic activity.
Individual economic activity may be restricted when it is
necessary to protect the interests of consumers, fair
competition and the other values entrenched in the
Constitution. The prohibitions provided for in the law must be
reasonable, non-discriminatory and clearly formulated.
Due to complexity of economic activity and dynamism of
particular relations, regulation in this area may not be the
same all the time, i.e. the proportion of prohibitions and
permissions may fluctuate, however, in the course of alteration
of the content of legal regulation the principles of regulation
of the national economy established in the Constitution may not
be denied.
III
On the compliance of Parts 1, 2 and 3 of Article 8 of the
Law on Telecommunications with the Constitution.
Parts 1 and 2 of Article 8 of the Law on
Telecommunications provide:
"1. The Lithuanian market of operation of fixed public
telephone communication networks and provision of
telecommunications services via fixed public telephone
communication networks must be free as of 31 December 2002.
Until this date, the main fixed public telephone communication
operator has the right to remain the sole operator of fixed
public telephone communication and the sole provider of fixed
public telephone communication services.
2. Until the date specified in Part 1 of this Article, no
additional licences or authorisations may be granted that might
alter the conditions for the activities of the main operator of
fixed public telephone communication operator."
1. As regards regulation of economic activity, the
disputed norms of the Law provide that during the defined
period, i.e. until 31 December 2002, respective
activity-provision of public telephone communication
services-will be allowed for only one entity of economy, which
is the company Lietuvos telekomas. The said provisions also
contain a guarantee that during this period no additional
licences or authorisations that might alter the conditions for
the activities of this economic entity will be granted.
Investigating whether under such regulation of economic
activity by the Law the limits set by the Constitution are not
overstepped, one has to take account of peculiarities of the
telecommunications market and those of its development, as well
as what purpose is sought by such legal regulation and the fact
that the prohibition of competition in the telecommunications
sector is not universal and absolute as the market of mobile
communications services and that of the Internet network
services are free.
2. Telecommunications are transmission, sending, receiving
of signs, signals, written texts, images and sounds or other
information via wire, radio, optical, and other electromagnetic
systems (Part 26 of Article 2 of the Law). Fixed public
telephone communication services are local, long distance and
international telephone communication services provided to the
consumers via a public fixed telephone network (Part 7 of
Article 2 of the Law). Under Part 8 of Article 2 of the Law,
this is such telecommunications network which, in addition to
other services, is used to provide voice telephony services
between network termination points at a fixed location. It
includes switching and transmission equipment and other
infrastructure intended for interconnection with public
telecommunications networks outside the boundaries of
Lithuania.
Telecommunications is a specific branch of economy. In
today's society, after the need for transmission of the news,
dissemination of information had increased, for an individual
telecommunications became necessary means of communication,
therefore the state must take care of its development.
3. As mentioned above, the main pre-condition for economic
development and satisfaction of the interests of consumers is
existence of competitive market.
From the times of planned economy, in the
telecommunications sector there was a state monopoly. After the
state telecom enterprise had been re-organised into the company
Lietuvos telekomas, the state became the owner of all the
shares while fixed public telephone communication networks
belonged to this company. No matter that under the 30 November
1995 Republic of Lithuania Law on Communications other subjects
were entitled to undertake economic activities in the
telecommunications sector, however, in fact this market
remained monopolised.
In the course of adoption of the Law on Telecommunications
it was sated that there exists monopoly in fixed public
telephone communication sector. As there existed such a
situation, Part 1 of Article 8 of the Law provided that as of
31 December 2002 the market of fixed public telephone
communication must be free.
4. A real opportunity of demonopolisation of the
telecommunications market is generally linked with world's
technological progress in this branch of economy. Creation of
competitive telecommunications market is linked with the
necessity of restructuring existing telecommunications
infrastructure, therefore it is recognised that in the
transitional period of telecommunications market a
corresponding legal regulation of existing monopolies is
needed. This is confirmed by the experience of the European
Union which was acquired in the course of liberalisation of the
telecommunications market.
For instance, on 28 June 1990 the European Commission
adopted Directive 90/388/EEC on competition in the markets for
telecommunications services. Paragraph 1 of Article 2 of the
said Directive provides that Member States shall withdraw all
those measures which grant exclusive rights for the provision
of telecommunications services, including the establishment and
the provision of telecommunications networks required for the
provision of such services. Paragraph 2 of the same article
provides that Member States may maintain special and exclusive
rights until 1 January 1998 for voice telephony and for the
establishment and provision of public telecommunications
networks. It is also provided for therein that Member States
with less developed networks shall be granted an additional
implementation period of up to five years and Member States
with very small networks shall be granted upon request an
additional implementation period of up to two years, provided
it is needed to achieve the necessary structural adjustments.
Thus, in the course of implementation of the said European
Commission Directive, liberalisation of telecommunications in
member states of the European Community took place from 1990
till 1998. By its special resolutions the European Commission
postponed the date of complete liberalisation of
telecommunications for Ireland, Greece and Portugal until the
end of 2000. According to the specialists, adopting its
resolutions on transitional periods for member states, the
European Commission took account of the necessity to change
analogous lines by digital ones, to balance the prices for
services provided by telecommunications operators with the
expenditure, as well as the size of investments in order to
achieve these purposes and possible negative effects arising
following prompt liberalisation of the market and permitting
other operators to perform while the latter would not face such
problems. In the opinion of the European Commission, these
measures are necessary to create a smoothly functioning
mechanism of regulation of competition equally applicable to
public and private sectors, to separate the functions of
provision of telecommunications services and those of
regulation.
5. Liberalisation of the telecommunications market means
that equal conditions for competition are created to all the
operators who perform in the market. It is obvious from the
provisions laid down in the Law on Telecommunications that,
adopting it, one was basing himself on the fact that conditions
must be created for competition in the telecommunications
sector (first of all international), and that transitional
period in the telecommunications market is necessary.
The Law provides for the transitional period in the
telecommunications market due to the necessity to strengthen
the technological basis of telecommunications and gradually to
restructure prices for telecommunications services. Such
provision is in line with the said experience of the European
Union which confirms that, unlike other sectors of economy, the
telecommunications market must be liberalised gradually, by
implementing principles of competition for individual types of
telecommunications services.
6. The Constitutional Court emphasises that after it has
been established in the Law on Telecommunications that in the
fixed telephone communication sector the market will be free as
of 31 December 2002, and, on establishing monopoly until then,
it is necessary to establish respective requirements for the
monopolist so that the interests of consumers might be
protected which in case of absence of competition might be
violated. Such requirements ought to be worded and laid down in
the Law. In order to protect the interests of consumers the
main requirement for the monopolist must be provision of
telephony services of defined type and quality under
established conditions. The Law on Telecommunications does not
contain any requirement of such nature designated for the
monopolistic provider of telecommunications services. It is
evident from the information presented to the Constitutional
Court by the Ministry of Transport that the main operator of
fixed public telephone communication, which is the company
Lietuvos telekomas, is obligated under the licence granted to
it to provide universal telephony services and develop them,
respectively balance the tariffs, to finish modernisation of
fixed telephone communication, however the power of obligations
established in the licence is not equal to that of the
requirements established in the Law.
Under Part 3 of Article 11 of the Law on
Telecommunications, the maximum price for fixed telephone
communication and universal services shall be established by
the Government. This norm of the law is designated to protect
the interests of consumers. Establishment of price limits is
one of the ways to protect the interests of consumers. These
interests would be protected in a more effective way, if the
law provided for the other legal measures permitting to
minimise possible negative effects for the consumers which
might occur due to the absence of competition in the area of
provision of fixed telephone communication services.
Taking account of the motives set forth, one is to hold
that the regulation established in the Law on
Telecommunications is insufficient and, therefore, defective as
it does not establish respective requirements for the
monopolist of fixed telephone telecommunication so that the
interests of consumers might be protected in the Law in every
way possible.
7. Part 3 of Article 8 of the Law contains a prohibition
for persons to provide, organise, advertise or take part in any
other way in establishing call-back services.
Assessing the compliance of this disputed norm of the Law
with Article 46 of the Constitution, the fundamental attitude
is that an individual may indulge in any economic activity
which is not prohibited by law. The prohibition concerning
freedom of economic activity of individuals must be clear in
every particular case and must be designated for the protection
of the values entrenched in the Constitution, i.e. those of
fair competition, interests of consumers etc.
Considering the question of prohibition of call-back
services, the fact is of importance that the national
telecommunications operators pay for the licence, invest into
expansion of the network and implement the requirements made by
the state. Due to different development of telecommunications
in different countries, the tariffs for calls are different.
Certain foreign companies make use of the telecommunications
networks of economically less developed countries and because
of difference in the tariffs for international calls they
provide much cheaper international call-back services.
Providers of such services violate the rules of licensing, they
do not pay taxes to the state, they use the telecommunications
networks of another operator without concluding with him
respective contracts and violate fair competition.
Protecting the interests of national operators and
safeguarding fair competition, the state may establish
prohibition for provision of call-back services.
Prohibition to advertise call-back services is based on
the fact that commercial advertisement encourages to buy
certain goods or services. By banning to provide call-back
services by law, the prohibition to advertise such services is
to be held reasonable. This prohibition is not to be linked
with dissemination of information of any other kind as regards
call-back service.
On the grounds of the arguments set forth, one is to draw
a conclusion that Part 3 of Article 8 of the Law on
Telecommunications does not violate the constitutional
principle of freedom of individual economic activity and
initiative.
8. The Constitutional Court notes that establishment of
exclusive rights in the sector of fixed telephone communication
for a certain period and temporary restriction of competition
in this sector at the same time are to be assessed as an
exceptional case of legal regulation of transitional period in
the specific telecommunications market.
Taking account of peculiarities of the relations regulated
by the disputed norms of the Law and the purpose sought by the
established legal regulation whereof as well as the fact that
restriction of the competition in the fixed telephone
communication market is only temporary, a conclusion is to be
drawn that Parts 1, 2 and 3 of Article 8 of the Law on
Telecommunications are in compliance with Article 46 of the
Constitution.
9. In the opinion of the petitioner, Parts 1, 2 and 3 of
Article 8 of the Law of Telecommunications contradicts Article
5 of the Constitution.
The said article of the Constitution provides:
"In Lithuania, the powers of the State shall be exercised
by the Seimas, the President of the Republic and the
Government, and the Judiciary.
The scope of powers shall be defined by the Constitution.
Institutions of power shall serve the people."
After it was held that Parts 1, 2 and 3 of Article 8 of
the Law on Telecommunications are in compliance with Article 46
of the Constitution, one is to draw a conclusion that they are
in compliance with Article 5 of the Constitution as well.
IV
On the compliance of Parts 7 and 8 of Article 16 of the
Law on Telecommunications with the Constitution.
Parts 7 and 8 of Article 16 of the Law on
Telecommunications provide:
"7. The terms and conditions of using the conduits, ducts,
collectors, towers, poles and other equipment belonging to
another operator shall be established by contract. The
telecommunications operator, who owns the telecommunications
equipment referred to in this paragraph, may not refuse to
conclude such a contract with another telecommunications
operator, request its amendment, and termination if the
obligations stipulated in the contract are fulfilled.
8. A telecommunications operator shall pay, under the
agreement of the parties, an appropriate fee to another
operator for using his conduits, ducts, collectors, towers,
poles and other equipment."
According to the petitioner, under the said norms of the
Law the main operator of fixed telephone communication the
company Lietuvos telekomas acquires the monopolistic right to
all infrastructure of construction, networks, conduits, cable
ducts, collectors, towers and poles. The petitioner is of the
opinion that this contradicts Part 4 of Article 46 of the
Constitution wherein it is established that the law shall
prohibit monopolisation of production and the market.
1. The disputed norms of the Law on Telecommunications
regulate the relations of common use of telecommunications
networks. The necessity of such legal regulation is determined
by the fact that the state must ensure the minimum of
telecommunications services (universal services) provided to
all consumers.
Laying of telecommunications lines, construction of
telecommunications facilities is a complex and expensive work.
When telecommunications market services are developed, the fact
is of importance that technically more than one operator is
capable of making use of telecommunications infrastructure. Due
to this in the telecommunications sector a rule of common use
of telecommunications networks became firmly established. Under
Directive 98/10/EC adopted by the European Parliament and
Council of Europe, every operator who began telecommunications
activities before and is the owner of public telecommunications
network may not hinder the activities of another operator. The
former must permit the latter to use his telecommunications
equipment under contract. The provision of joint use of
telecommunications networks is based on the fact that this
helps to develop the market of telecommunications services and
is one of the ways to demonopolise this market.
2. Part 6 of Article 16 of the Law on Telecommunications
provides: "In the event a telecommunications operator cannot
exercise his right to lay new telecommunications lines and
install telecommunications facilities or if the costs of
exercising this right are disproportionately high, the
Commissions Regulatory Authority may request any other
telecommunications operator to allow the former operator to
jointly use, on a non-discriminatory basis, the existing
conduits, cable ducts, collectors, towers, poles and other
facilities or to install telecommunications facilities when
this is economically expedient and does not require any
additional cardinal work."
In case there are the aforesaid conditions, under Part 6
of Article 16 of the Law the Communications Regulatory Agency
has the right but not necessarily has to demand that the owner
of telecommunications lines and telecommunications equipment
allow to jointly use the existing telecommunications
infrastructure. Such legal regulation pre-supposes that other
requirements of laws, too, may bind the Communications
Regulatory Agency, e.g. those linked with prohibition to
monopolise production and the market. In cases when the
Communications Regulatory Agency assents to the possibility to
joint use of telecommunications networks, the questions
regulated in Parts 7 and 8 of Article 16 of the Law on
Telecommunications are decided in respective manner.
3. Several independent norms are to be distinguished from
Parts 7 and 8 of Article 16 of the Law on Telecommunications:
1) the terms and conditions of using the conduits, ducts,
collectors, towers, poles and other equipment belonging to
another operator shall be established by contract; 2) the
telecommunications operator, who owns the telecommunications
equipment, may not refuse to conclude such a contract on use of
telecommunications networks with another telecommunications
operator; 3) the telecommunications operator, who owns the
telecommunications equipment, may request neither any amendment
nor termination of such a contract if the obligations
stipulated therein are fulfilled; 4) a telecommunications
operator shall pay, under the agreement of the parties, an
appropriate fee to another operator for using his equipment.
4. In the course of construction of Part 4 of Article 46
of the Constitution, it has been mentioned in the present
ruling that one may not to grant an entity of economy exclusive
rights to act in a certain sector of economy due to which this
sector might become monopolised.
Deciding the issue raised by the petitioner that under the
disputed norms of the Law on Telecommunications a particular
entity of economy the company Lietuvos telekomas acquires
monopolistic rights to all infrastructure of provision of
telecommunications services, one is to note that Parts 7 and 8
of Article 16 of the Law on Telecommunications do not contain
any norms designated particularly for one subject. The norm
establishing that a telecommunications operator may not refuse
to conclude a contract with another operator on use of his
telecommunications lines and other equipment is applicable to
every subject of this sector of economy, i.e. every
telecommunications operator. The same applies to the norm of
the Law under which no telecommunications operator may request
either any amendment or termination of a contract on use of his
equipment if the obligations stipulated in the contract are
fulfilled. Thus a conclusion is to be drawn that under Part 7
of Article 16 of the Law on Telecommunications the right to
common use of conduits, ducts, collectors, towers, poles and
other equipment is enjoyed by both the company Lietuvos
telekomas and other operators. Particular conditions of the
contract, the size of payment are established under agreement
of the parties. In case of disagreements on the conditions of
the contract the parties to the contract may apply to court.
The arguments set forth do not provide grounds to conclude
that Parts 7 and 8 of Article 16 of the Law on
Telecommunications establish the monopolistic right to all
telecommunications infrastructure for one telecommunications
operator, therefore the said parts of Article 16 of the Law are
in compliance with Part 4 of Article 46 of the Constitution.
V
On the compliance of Part 9 of Article 16 of the Law on
Telecommunications with the Constitution.
Part 9 of Article 16 of the Law on Telecommunications
provides:
"9. In a manner prescribed by the Government of the
Republic of Lithuania, the company Lietuvos telekomas shall buy
out the telecommunications networks installed at the consumers'
expense."
The petitioner maintains that this norm of the Law on
Telecommunications contradicts Part 4 of Article 46 of the
Constitution as it grants the right to the company Lietuvos
telekomas to buy out the telecommunications networks installed
at the consumers' expense and thus to monopolise all
telecommunications infrastructure. Besides, according to the
petitioner, the disputed norm contradicts the requirements
established in Article 23 of the Constitution under which
property may only be seized for the needs of society according
to the procedure established by law and must be adequately
compensated for.
1. Article 23 of the Constitution prescribes:
"Property shall be inviolable.
The rights of ownership shall be protected by law.
Property may only be seized for the needs of society
according to the procedure established by law and must be
adequately compensated for."
Inviolability of property means that an owner has the
right to demand that other persons do not infringe his rights
as well as it means an obligation of the state to defend and
protect property from unlawful attempts on it. The Constitution
guarantees protection of subjective ownership rights.
Subjective ownership rights are the right of the owner to
manage, use and dispose of his property without overstepping
the limits established by laws, without violating the rights
and legitimate interests of other persons.
2. Under Part 3 of Article 23 of the Constitution property
may only be seized for the needs of society according to the
procedure established by law and must be adequately compensated
for. Seizure of property for the needs of society (eminent
domain) is relation of administrative nature, while the parties
to this relation is the state and the owner of private
property.
The Constitutional Court notes that Part 9 of Article 16
of the Law on Telecommunications regulate not seizure of
property for the needs of society but relations of different
nature which appeared between the operator of public fixed
telephone communication the company Lietuvos telekomas and the
consumers of telecommunications services provided by the
former.
3. Some consumers of telecommunications installed
telephone communication at their expense, i.e.
telecommunications cables form public telecommunications
network until network termination points (telephones) which
were in the estate of the consumers were laid at their expense.
Such telephone networks were entered into the balance of the
existing telecom enterprise and this enterprise exploited the
said networks.
Entering telephone networks into the balance by itself
does not mean that the question of ownership has been solved.
After such relations occurred between two parties-provider of
telecommunications services and consumers of such services-it
is provided in Part 9 of Article 16 of the Law on
Telecommunications that the company Lietuvos telekomas shall
buy out the telecommunications networks installed at the
consumers' expense.
Several aspects of this norm of the Law are to be noted.
First, the provision of the Law whereby "the company Lietuvos
telekomas shall buy out the telecommunications networks
installed at the consumers' expense" indicates that these
persons are treated in the Law as the owners of the said
networks. Thus, it is to be concluded that they are entitled to
demand that their property be returned in kind, that it be
compensated etc.
Another crucial aspect is that the disputed norm of the
Law is attributed to the company Lietuvos telekomas. This norm
obligates Lietuvos telekomas to settle accounts with the
consumers for the telecommunications networks installed at the
consumers' expense which the said company at present exploits.
Thus one attempts to protect the interests of the consumers of
telecommunications services who installed telecommunications
networks at their expense.
On the grounds of these arguments, the provision of the
Law "the company Lietuvos telekomas shall buy out the
telecommunications networks installed at the consumers'
expense" must be construed in the following way: there is a
concrete obligation for the company Lietuvos telekomas to
settle accounts with the consumers in case the owners of
telecommunications networks express their wish to transfer them
into the property of the said company. From this provision a
conclusion follows that in the regulated relations one must
conform to the fundamental rule of the legal institute of
purchase and sale whereby the price for the property
transferred into the ownership of another person shall be
established under agreement of the parties. Thus, the payment
for the telephone networks installed at consumers' expense must
be performed not according to the balance value established by
the company Lietuvos telekomas or any other value established
by the said company but under agreement of the parties. In case
of failure of the agreement on the size of payment, the dispute
may be settled in court.
The wording "in the manner prescribed by the Government"
used in Part 9 of Article 16 of the Law means establishment of
certain procedures without interfering with the legal
regulation established in the Republic of Lithuania Civil Code
and the Republic of Lithuania Code of Civil Proceedings. Thus
the Government may not determine the size of payment for the
telecommunications networks installed at consumers' expense and
transferred into the ownership of the company Lietuvos
telekomas. As mentioned, this is the matter to be settled under
agreement of the parties.
What has been set forth does not give grounds to assert
that Part 9 of Article 16 of the Law on Telecommunications
contradicts the provisions regarding protection of property as
laid down in Article 23 of the Constitution.
4. According to the petitioner, under Part 9 of Article 16
of the Law on Telecommunications, the company Lietuvos
telekomas acquires the monopolistic right to all
telecommunications infrastructure.
Deciding the compliance of this disputed norm of the Law
with Part 4 of Article 46 of the Constitution, one is to take
into consideration the fact that therein it is provided for
buying out of telephone networks installed at consumers'
expense on the basis of free will but never by coercive way. It
needs to be noted that regardless of to whom these networks
belong at present or will belong in the future, under the
disputed norm of the Law the situation of the company Lietuvos
telekomas in the telecommunications market virtually remains
intact.
Taking account of the set forth above, it is to be
concluded that Part 9 of Article 16 of the Law on
Telecommunications is in compliance with Part 4 of Article 46
of the Constitution.
Conforming to Article 102 of the Constitution of the
Republic of Lithuania and Articles 53, 54, 55 and 56 of the
Republic of Lithuania Law on the Constitutional Court, the
Constitutional Court has passed the following
ruling:
To recognise that Parts 1, 2 and 3 of Article 8 and Parts
7, 8 and 9 of Article 16 of the Republic of Lithuania Law on
Telecommunications are in compliance with the Constitution of
the Republic of Lithuania.
This Constitutional Court ruling is final and not subject
to appeal.
The ruling is promulgated on behalf of the Republic of
Lithuania.
Judges of the Constitutional Court:
Egidijus Jarašiūnas Egidijus Kūris Zigmas Levickis
Augustinas Normantas Vladas Pavilonis Jonas Prapiestis
Vytautas Sinkevičius Stasys Stačiokas Teodora Staugaitienė
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