Greed of Monopolists?

"Aztelekom" and "Baktelekom" have announced changes to internet prices effective from August 15. The announcement states that the minimum speed for subscribers in the new tariffs will start at 100 Mbit/s. The payment amount per Mbit/s will be reduced from 0.45 AZN to 0.25 AZN. Thus, prices will be 25 AZN for 100 Mbit/s, 30 AZN for 150 Mbit/s, and 36 AZN for 250 Mbit/s internet.

They explain this by citing the increasing demand for high-speed broadband internet among customers: "These measures are being implemented to keep up with global trends, address the growing demand for high-speed internet among the population, improve the quality of services, and ensure a sustainable infrastructure."

Incidentally, the "Speedtest Global Index" recently reported that Azerbaijan ranks 118th out of 181 countries with an average fixed broadband speed of 39.48 Mbit/s. Generally, international reports indicate that Azerbaijan is among the countries with expensive internet.

Who benefits from making the already expensive internet even more costly?

ASTNA consulted expert Vahid Qasimov on the topic.

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Question: Mr. Vahid, as you know, the monopolists of the internet services market in Azerbaijan, “Aztelekom” LLC and “Baktelekom” LLC, have agreed to raise the minimum monthly price of internet packages from 18 AZN for 40 Mbit/s to 25 AZN for 100 Mbit/s starting August 15. These companies are trying to convince the public that since the internet speed will increase by 2.5 times, the price will actually decrease, lowering the cost per Mbit/s from 45 qapik to 25 qapik. How convincing is the statement about increasing internet speed? And why do they see the need for a price increase? Is this a problem for subscribers?

Answer: The main issue with Aztelekom LLC and Bakinternet LLC's changes in internet packages and prices is not the price changes per se, because indeed, the price/traffic ratio indicates a decrease in cost for the provided traffic. The second issue to discuss is the unilateral change of contract terms by a company that has entered into an agreement with consumers under certain conditions.

The first and main point of discussion is the monopolistic activity of Aztelekom LLC and Bakinternet LLC. Other internet providers' networks are being abolished, and GPON networks are being forcibly installed in homes, with internet services provided only by these two providers. Thus, having established a monopoly in the internet service sector, these companies can dictate any conditions they want at any time. All problems stem from this. Overall, though consumers will pay more, they will have access to higher speeds. Do they need this, or was the previous speed sufficient? It may not be necessary and was indeed sufficient. The price increase benefits the providers because by acquiring more traffic, they lower the cost of purchasing traffic for themselves and increase their revenues by raising the contract amount. Therefore, from a business perspective, this is entirely beneficial for the companies and partially beneficial for consumers. The legal aspects and monopolistic nature of these companies are the main discussion points.

Question: Do these companies have the technological capability to provide a minimum speed of 100 Mbit/s?

Answer: In general, GPON technology and the equipment used in Azerbaijan support speeds up to 250 Mbps. Therefore, the announced speeds can theoretically be provided. However, it is unclear whether consumers will receive this speed fully during peak hours due to traffic sharing. This depends on usage density. However, speeds were divided before as well. After increasing the traffic volume, the speed reaching consumers will be higher.

Question: Experts call the desire of these companies to increase prices under the pretext of speed as the "principle of cheating in weight." How can this be explained?

Answer: "Cheating in weight" is somewhat a marketing step, and it means selling a service/product that the consumer cannot fully utilize. This exists in many service sectors in various countries, not just in technology. It is incorrect to attribute this solely to Azerbaijan and internet sales. Especially in synchronous networks, traffic variability (instability) is their technological feature.

Question: Why don't companies disclose how much traffic they buy and sell to the public?

Answer: Disclosing how much a company buys/sells to the public is nonsense. They can keep this confidential under the "company secret" label. Any company engaged in sales in the business sector does not publish monthly public reports on the goods and products they buy and sell, right? This information can be determined by tax authorities. It is possible to request this information through a journalist's inquiry. If no response is received to such an inquiry, then it can be said that information is not being provided.

Question: Is there no institution in the country that protects consumers' rights?

Answer: The institution that protects consumers' rights is the State Service for Antimonopoly Policy and Consumer Rights Protection under the Ministry of Economy of the Republic of Azerbaijan. The problematic aspect is that this is a state institution. Since the mentioned providers are also directly affiliated with the Ministry, "whom to complain to?"

Question: Comparing the speed and price of internet in the country with other countries, what results would emerge? Is the internet cheaper or more expensive in Azerbaijan compared to them?

Answer: Compared to neighboring countries, both mobile and fixed internet in Azerbaijan are expensive. Compared to large countries (Russia, Turkey), it is understandable that internet traffic is more expensive here, because higher volumes of purchased traffic result in lower unit costs. However, the fact that internet is cheaper in smaller countries (Georgia, Armenia) can only mean that the domestic internet infrastructure in those countries is better than ours, with more local content, thus most of the traffic is free. Here, the high prices can be explained by the costs of the newly installed GPON infrastructure and the greed of the providers.

Question: What steps can be taken to prevent price increases, ensure companies do not arbitrarily raise prices, and make internet accessible to everyone?

Answer: Every sector should have competition. In a competitive environment, consumers should have alternative offers at their disposal. Consumers should be able to choose a service based on price/quality parameters and select a suitable service for themselves. Unfortunately, this is not possible in a monopolistic environment. And if the monopoly is created by the state institution itself, another antimonopoly state institution cannot help in this situation.