Note of the Board of Directors

The year 2000 was a historical milestone for the telecommunications sector in Portugal, with the country opening up to the competition in the last of its preserves, viz. the Fixed Telephone Service.

The year was just beginning and there was Portugal thinking the near future, successful at getting approval, while it held the Presidency of the EU Council, for the eEurope 2002 Action Plan: An Information Society for All. An initiative that would subsequently be complemented by the adoption of the eContent programme at the end of the year. The goals here are linked up to the development of digital contents in a linguistically and culturally diversified environment.

The approval of the Directive on E-commerce has also strengthened the conditions for the construction of a knowledge based economy and the free movement within the EU space of services of an information society.

In 2000, in connection with the European Commission, the preparation of one of the most important legislative packages for the telecom sector was also completed. The package - known as Revision 99 - will be adapting the current legislation, a the EU level and subsequently at the level of each Member State alike, to the technological and market developments experienced in the past few years. After its approval by the EU Council, telecommunications will be regulated in a broader context, due to the new convergence scenario, which will provide the framework for both electronic communications networks and services.

On the other hand, in pursuit of the guidelines of the eEurope Action Plan, at the end of the year the Regulation of the European Parliament and the Council on the unbundling of the local loop, which is directly applicable in the Member States, without any need for any measure of transposition. This Regulation, which is an important instrument of support to the dissemination of the information society, strongly influenced the intervention and timetables of various countries, including.

At the level of the International Telecommunications Union (ITU), the most relevant developments are the Global Radio Communication Conference (WRC2000) and its decisions, related to the definition of additional bands for the IMT-2000/UMTS systems and the identification of frequency bands for the satellite radio navigating service, including the implementation of the European system still in the project phase in this area - GALILEO. The large Portuguese participation in this event is a point to be highlighted.

In the postal sector, the EU activity focused on revising the postal directive (process yet to be completed), while in the Universal Postal Union (UPU) the debate basically aimed to analyse the mission of the organization in the context of its restructuring.

In Portugal, the eEurope Action Plan took shape in the adoption by the Government of the Internet Initiative, thereby creating a central axis for the development of all aspects of the Information Society in our Country. The actions planned through this initiative are like to have a significant impact on the economic and social fabric of our society. This especially in the area of telecommunications, which is why ICP is involved in carrying out a host of measures, and so are the various telecom markets.

The year 2000 will always be remembered as one which saw the introduction of a last element of discontinuity vis-à-vis the past. On January 1st, new operators and providers were granted licences to operate an area, which, for many years, was almost mistaken for the telecommunications sector itself: the Fixed Telephone Service. The regulatory framework had already been produced in its most salient aspects by ICP. And the full liberalization of this market became reality to the users through indirect access and, in a commercially more relevant way, through direct access. For the consumers, it was a year of familiarizing themselves with new alternatives, such as the person-to-person selection and the provider pre-selection.

In this context, eligibility conditions were laid down for the various types of traffic for indirect access calls, including fixed-mobile traffic. ICP's intervention in all the matters relating to the Fixed Telephone Service was tremendous, where there was not a single moment in which any of the "droits acquis" of the consumers were challenged. Keeping the Universal Service, in its various forms, is a case in point.

As for the powers invested in ICP on market regulation, the following companies were declared as have a significant market power:

Portugal Telecom, SA, in the interconnection, fixed telephone networks and / or fixed telephone services and rented circuit markets, and TMN - Telecomunicações Móveis Nacionais, SA and TELECEL - Comunicações Pessoais, SA, in the mobile telephone networks and / or mobile telephone services.

ICP followed up and shaped the developments on the interconnection market between networks and services of different operators and providers, with special emphasis on the fixed telephone services market, which took the very first steps into the world of competition. The Institute intervened whenever necessary, basing itself on the legislative framework applicable and the Proposed Reference Interconnection for 2000 (PRI 2000), published in 1999.

In this regard, and by way of example, it must be mentioned that requirements were laid down for interconnection agreements for 2000 to be reached between Portugal Telecom, SA and the interested parties, the conclusion of which was thus determined administratively, where a set of modifications were made to the PRI 2000 itself, specifically concerning the conditions applicable to access to special services.

Also to be highlighted are the interventions directly related to the fixed-mobile network, whose regime changed as of October 1st 2000, where the maximum price of terminating corresponding calls was laid down.

At the same time, began the process linked to the preparation of the Proposed Reference Interconnection for 2001 (PRI 2001), by putting out feelers as to the respective minimum elements, which were subsequently defined, thereby permitting the development of works leading up to the completion of that instrument.

It was also formally determined to scrap the restrictions placed on the eligibility of local and regional calls in the indirect access to the Fixed Telephone Service, to come into effect in 2001.

The timely definition of the liberalization timetable, including the forecasts in terms of availability of new platforms, within a 2 year period, put out at the end of the first half, made significantly for the introduction of greater security and certainty for all the actors on the market. Bringing forward the date set for the introduction of competition in local access arose directly from the adoption of the corresponding EU Regulation, which is why ICP defined the related measures, including the creation of a working party, with an overall view to monitoring the implementation of this measure.

ICP's technical preparations for the future challenges also included the development and the public presentation of an economic engineering process model of a fixed telecom network, designed to determine the costs of telephone services produced on that network.

Equally striking, and with major implications during the next years, was the launch of a public call for tenders to grant four licences for the international mobile telecommunications systems (IMT2000/UMTS). The licences were granted before the year was out, following an intense process for the regulator, the committee analysing the proposals and the applicants. The licences were granted, by order of classification, to TELECEL - Comunicações Pessoais, SA, TMN - Telecomunicações Móveis Nacionais, SA, ONI WAY - Infocomunicações, SA and OPTIMUS - Telecomunicações, SA.

In marking the applications, the contribution to the Information Society carried 50% of the points. This criterion especially focused on the promotion of universal access and info-inclusiveness, involving the price policy, the special conditions for low-income groups, and those with specific needs special offers for socially orientated institutions.

In order to be able to monitor the obligations assumed by the winners of the tender, in connection with developing and promoting the Information Society, a working party was set up at the end of the year by a Council of Ministers Resolution, chaired by ICP.

At the same time, in coordination with the Media Institute (Instituto da Comunicação Social), the principles underlying the process of licensing of Land Digital Television (TDT/DVB-T) were defined, with the call for tenders to be put out in 2001.

In two different areas, ICP followed its policy of openness to contributions from the market and citizens at large, holding two broad based public consultations, related in particular to the number portability and the splitting of the local loop. The reports of these consultations were provided the food for thought in defining the framework applicable to these matters.

Along the same lines, ICP disseminated various studies and statistics, making information available to the market and the users. Given this novelty, the results of measuring the quality of service of the mobile networks (QoS-GSM) were reportedly mentioned.

Thus began the regular activity of producing quality service indicators, besides monitoring the indicators laid down in the licences, with a view to a wider dissemination of information to consumers, thereby promoting competition in terms of quality of service.

Also in 2000, a protocol was signed between the "Instituto das Comunicações de Portugal" (ICP) and DECO - Associação para a Defesa do Consumidor (Consumer Protection), which paved the way for a survey on "Communications in the 21st Century". The outcome of that survey was made public and supplied for free of charge to all those interested, and it helped create a knowledge base of consumer expectations in the face of the gradual convergence between telecommunications, audiovisual and information technologies.

The regimes on telecom infrastructure installation in buildings (ITED), licensing of radio communications networks and stations and the terms and conditions applicable to the radio equipment and telecom terminal equipment and the respective evaluation of compliance and marking complete this summary of the main regulatory developments of the telecommunications sector in Portugal.

In the postal sector, a salient development is the signing of the Universal Postal Concession Agreement between CTT - Correios de Portugal, SA (The Portuguese PTT) and the Ministry of Social Equipment, whose aim is to establish, manage and operate the public postal network and provide services and conduct reserved activities. Also at the national level the works inherent to the development of the legal framework applicable went on, in sync with the EU developments and with a view to providing services in a competitive regime. And it was in this environment that specialized studies were pursued, making it possible to enhance the knowledge of this market and contribute to a more solid regulation activity.

And lastly ICP maintained and further strengthened its participation in the development of the "Fundação das Comunicações" (Communications Foundation), an institution, which is becoming more and more relevant in the area of conserving and disseminating the historical, scientific and technological heritage of communications.

Internally, the budget on overall spending was implemented at around 83.5%.

Operating incomes registered a sizable rise compared with the previous year, reflecting a more and more significant increase in the use of the radio electric spectrum by telecom operators and service providers.

Costs and investments in overall terms grew 6.2% as opposed to the previous year, with ICP continuing to fully cover the total spending with its incomes.

In human resources, there was a rise of 2.9% in the staff strength, a development driven by the increase in the Institute's powers and attributes, due to the high level of development in the sector and the structural changes occurring therein. By way of conclusion, it may be asserted that, in the year 2000, the Institute fulfilled its objectives, having accomplished it mission by making a positive contribution to the public interest and the development of the telecommunications sector.

Lastly, it is important to express a word of gratitude to the Advisory Board and the Statutory Audit Committee, whose work in the respective areas of competence, significantly contributed to the accomplishment of ICP's mission and its objectives.