Croatia: New Electronic Communications Act - What you need to know
The new Electronic Communications Act (Official Gazette No. 76/22) ('the Act') entered into force on 1 July 2022, transposing Directive (EU) 2018/1972 of the European Parliament and of the Council of 11 December 2018 establishing the European Electronic Communications Code1. Ema Mendjusic Skugor and Marta Hren, from Divjak, Topic & Bahtijarevic, provide an overview of the changes and provisions and answer frequently asked questions ('FAQs').
Overview of the Act: Key sections
The European Communications Code ('the EECC') is an important step towards consolidating the electronic communications legal framework and fulfilling the EU's goal to have gigabit connectivity in the EU and 5G coverage in all populated areas by 2030.
In Croatia, the telecommunications market, i.e. the provision of electronic communications services ('ECS') and operating electronic communications networks ('ECN'), is regulated and supervised by the Croatian Regulatory Authority for Network Industries ('HAKOM'). The Act is divided in key sections:
- the provision of ECSs and ECNs;
- universal services;
- the construction, installation, maintenance, and use of electronic communications infrastructure;
- competition rules specific to the electronic communications market;
- the management of the radio frequency spectrum and the address and number spectrum;
- digital radio and television;
- the protection of user rights and data protection;
- the security of ECSs and ECNs; and
- the scope and competence of the national regulatory body.
Main changes to the regulatory framework
We could say that the regulatory framework has not undergone material structural changes, but rather that the EECC aims to consolidate the European electronic communications market and polish out specific differences in national regulators' interpretations in setting the market, through defining the services and the market players/operators. Some other changes, more technical and specific in nature, concern EU-wide coordination of the radio spectrum use and access to the ECN infrastructure.
Maybe the most essential change EECC brings is the expanded definition of the ECS, which is now defined as 'a service normally provided for remuneration via electronic communications networks, which encompasses, with the exception of services providing, or exercising editorial control over, content transmitted using electronic communications networks and services, the following types of services: (a) "internet access service" as defined in point (2) of the second paragraph of Article 2 of Regulation (EU) 2015/2120; (b) interpersonal communications service; and (c) services consisting wholly or mainly in the conveyance of signals such as transmission services used for the provision of machine-to-machine services and for broadcasting'. As a result, many over-the-top ('OTT') providers, that did not previously fall within the definition of ECS, may now fall under the scope of national legislation and telecommunication regulatory obligations.
As to the market players, the legislator recognised the need to adjust regulatory obligations to different types of operators. The previous framework contained an extensive definition of an operator which made it open to interpretation as to whom should the regulatory obligations apply. The EECC, and subsequently the Act, introduced differentiation of retail/wholesale operators and the term microenterprise.
The HAKOM may impose a limited list of regulatory obligations if an operator does not provide retail services, but is only active in the wholesale market. Wholesale operators must only comply with the non-discrimination obligation and the access/use of specific network elements obligations.
Furthermore, provisions on the protection of end-users do not apply to microenterprises that only provide number-independent interpersonal communication services, i.e. the OTT services, thus alleviating small start-up apps from the regulatory obligations.
In lieu of advice to the undertakings, below we will answer some of the most important FAQs with regard to the Act.
The notification procedure is regulated by the Act. Each operator, providing an ECS or operating an ECN in Croatia, must file a notification form accompanied by:
- its corporate excerpt with an official translation in Croatian;
- a brief description of the service(s) it intends to provide and the date of intended commencement (at least 15 days from submission of the notification form); and
- the Croatian PIN ('OIB').
Since registering as an operator in Croatia means a more permanent presence at the Croatian market, operators must obtain the OIB prior to submitting the notification to the HAKOM. This number is obtained before the Croatian Ministry of Finance - Tax Administration, but it does not incur any obligations on the operators. It is merely an administrative tool, which enables government authorities (including the HAKOM) to keep track of the entities doing business in Croatia. All registered operators need to have it.
Upon submission of the notification, the company will be registered as an operator in Croatia and will be able to access the HAKOM's official platform ('e-Operator'). Based on the notification, the HAKOM should render a notification acknowledgement within the prescribed eight-day period. No fee is payable for the notification procedure.
Regulatory reporting requirements
All operators must submit reports on their total annual gross revenue generated from the operation of ECSs and ECNs in the market in the previous financial year, by 31 March of the current year.
Operators whose revenue exceeds 2% of total revenue in the relevant ECS market, or operators required to do so by the HAKOM, must undertake an assessment and testing of their billing system(s) and a test of their quality system(s) for the services provided, every six months or, exceptionally within a shorter timeframe, at the regulator's request.
The regulator has the power to request a financial audit. Under a general clause authorising the HAKOM to undertake an inspection, the latter can request the operator to deliver accurate and complete information/documentation necessary to carry out the inspection, which can include financial statements and reports.
Numbering: allocation, adoption, and use of telephone numbers
Numbers can be assigned through primary and secondary allocation (i.e. sub-allocation). In the last few years, the HAKOM decided to strengthen its market supervision, with respect to number allocation, and concluded that tertiary allocation is not prescribed by the law and should therefore not be allowed. Therefore, the term 'operator' in that sense should encompass only operators registered locally. In practice, that means only the provider who was allocated the numbers by the regulator can use the numbers and assign those numbers to end-users. In that regard, sub-allocation is only possible if an operator sub-allocates the numbers to another operator for them to use, i.e. without further sub-allocation to the end-user, which would, according to the HAKOM, constitute tertiary allocation.
Each operator can submit a request for primary allocation of numbers to the HAKOM and must pay number assignment fees for all numbers and codes assigned. Fees are prescribed in an ordinance on telecommunication fees and their amount depends on various factors, such as:
- the unit price for the use of numbers;
- the coefficient of control of the group of numbers;
- the coefficient of extension of the number space;
- the coefficient of demand for numbers in the group of numbers; and
- the coefficient of availability of numbers in a group of numbers.
Allocated numbers may only be used in accordance with the purpose ascribed to them by the Croatian Numbering Plan. Furthermore, operators must:
- start using assigned numbers within six months of the primary allocation;
- regularly keep a list of all assigned numbers (assigned through primary and secondary allocation) and submit it to the HAKOM upon request; and
- ensure availability of assigned numbers from all local ECNs.
End-users can keep their numbers regardless of changing the operator. The number transfer and its inclusion in another operator's network must be carried out in a timely manner, i.e. the number must be included in the network of the receiving operator within one business day upon fulfilment of all administrative and technical requirements. Furthermore, provisions on mandatory duration of the end-user's subscription contract do not constitute a restriction or impediment to number portability.
The Act and relevant bylaw explicitly state that this is an option for end-users of publicly available telephone services, including services in the mobile ECN.
Lawful intercept, i.e. surveillance obligations and measures, prescribed by the Security Intelligence System Act and the accompanying bylaws, are applicable to all the operators/providers of a public telecommunications network. Operators must ensure and maintain secret surveillance of telecommunications services by installation and maintenance of appropriate technical equipment and software necessary for secret surveillance of the content of communications, traffic data, location of the end-users, and secret surveillance of international telecommunication connectivity.
Fines and sanctions
The Act prescribes monetary fines for grave violations of the Act in the amount of 1%, to a maximum of 10%, of the total annual gross revenue generated from ECSs and ECNs in the market in the previous financial year. Furthermore, it lists serious violations punishable by fines up to HRK 1,000,000.00 (approx. €132,800). The Act still uses denominations in Croatian Kunas.
Unsolicited electronic communications
There have been no material changes to the regulation of the unsolicited electronic communications from businesses to businesses or individuals. There is an opt-in system in place, meaning the use of automatic calling and communication systems without human intervention, fax machines or electronic mail, including SMS and MMS messages, for the purpose of direct promotion and sales is allowed only with prior consent from the end-user.
Probably the most significant introduction is the broadened ECS definition. ECSs now include OTT services, machine-to-machine communications, and transmission services for broadcasting. In practice, this means more undertakings will now be considered operators and will have to comply with the Act, as the operator is defined as the undertaking providing, or authorised to provide, a public ECN or an associated facility.
Some of the more technical changes in the regulatory framework include the Union-wide governing of the radio spectrum and cross-border coordination between national regulators, competition rules specific to the telecommunication market, and access to the electronic communications infrastructure.