Internet Prices Increased: A Competitive Environment, Monopoly, and Struggling Consumers

On August 15, despite ongoing antimonopoly investigations, the state telecommunications provider "Aztelecom," under the Ministry of Digital Development and Transport, has raised its tariffs for gigabit passive optical network (GPON) services. "Aztelecom" has updated its website, aztelecom.az, with new prices, significantly increasing the minimum internet speed offered to consumers. According to the revised tariffs, the minimum traffic speed has risen from 40 Mbit/s to 100 Mbit/s. Consumers will now pay 25 manat per month for 100 Mbit/s, 30 manat for 150 Mbit/s, and 36 manat for 250 Mbit/s. Previously, the lowest package with 40 Mbit/s speed cost 18 manat.

The announcement comes amid an inspection by the Azerbaijan State Service for Antimonopoly and Consumer Market Control. On August 14, the agency began checking the price changes implemented by "Aztelecom" and "Baktelecom," two state telecommunications providers. The investigation aims to determine whether the providers' actions comply with the Competition Code and whether the new tariffs are applied in accordance with legal standards.

The decision on the investigation followed criticism from field experts, who expressed concerns about the unilateral actions of state providers. The price increase by "Aztelecom" has heightened concerns about monopolistic control in Azerbaijan's telecommunications market, highlighting issues related to consumer rights and market transparency.

Since the investigation is ongoing, its results could set a precedent for regulating pricing policies in Azerbaijan's evolving digital space.

IT expert Vahid Qasimov responded to ASTNA's questions.

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Question: Mr. Qasimov, despite ongoing antimonopoly investigations, the state telecommunications provider "Aztelecom" has raised its tariffs for GPON services. The announcement was made against the backdrop of an inspection by the Azerbaijan State Service for Antimonopoly and Consumer Market Control. The agency started checking the price changes by "Aztelecom" and "Baktelecom" a day before the announcement. The aim of the investigation is to determine whether the providers' actions are in line with the Competition Code and whether the new tariffs comply with legal standards. Despite this, prices have been increased. What does this indicate?

Answer: Entities that practice monopolistic policies are also state-owned. The antimonopoly regulatory body is a state institution as well. Its function often boils down to calming the situation by saying "we will deal with it" when complaints arise. It may negotiate with companies to reduce prices by 1-2 manat or implement discount policies for certain regions or social groups. However, at the state level, monopolistic features are officially represented by a few entities, but in reality, these entities are under the same central authority. This pattern is observable not just in internet prices but also in domain sales, mobile communications, pharmaceuticals, and fuel sectors: there is no competitive pricing, and different entities are compelled to sell at the same price. Without competition, the consumer suffers.

Question: The minimum traffic speed for the internet has increased from 40 Mbit/s to 100 Mbit/s. As for prices, consumers will now pay 25 manat per month for 100 Mbit/s, 30 manat for 150 Mbit/s, and 36 manat for 250 Mbit/s. Previously, the lowest package with 40 Mbit/s speed cost 18 manat. Simple citizens are generally more interested in low or moderate internet speeds rather than high-speed packages. For example, does a person living in a remote village like Gədəbəy need 100 Mbit/s? Considering that they will now have to pay more for it?

Answer: Increasing traffic volumes in minimal packages is a significant issue at the national level. International organizations monitoring the situation find that the majority of the population uses lower traffic, resulting in the country's average traffic being lower compared to other countries. This negatively impacts Azerbaijan's image. Therefore, increasing the minimum traffic limit, if infrastructure allows, is generally considered a positive step. Considering that the unit price of traffic has decreased overall, the re-adjustment of prices is somewhat understandable. However, as mentioned above, the burden will fall on the population. With the increased cost from 18 manat to 25 manat, the citizen will pay an additional 7 manat per month. With the average traffic increasing more than twice in the country, a 7 manat increase might not be significant for many citizens. However, applying discounted rates for vulnerable population groups and lower-income residents could be a satisfactory solution for everyone. Given that providers are state-owned, the government has the capability to easily organize this.

Question: But when the provider says, “I don’t have a lower-speed internet package,” it forces people to switch to this package and pay more. How correct is this step?

Answer: There is no such thing as a situation without an exit. As people are financially squeezed, they find their own ways out. If an additional 7 manat is a difficulty for someone in Gədəbəy, they might choose to forego internet service altogether. They could also share a single internet package among 3-4 households, either wirelessly (Wi-Fi) or through wired connections (LAN + Router), depending on the distance between homes. However, this would result in the provider losing customers. Therefore, as mentioned earlier, providing higher-traffic internet while keeping prices the same for regions could be a solution. Since traffic consumption in rural areas is not high, providers charging based on volume rather than speed would not be greatly impacted.

Question: According to the Statistics Committee, there are 1.6 million internet subscribers in the country, with over 60% being customers of state monopolistic companies (Aztelekom, Baktelekom, Azevrotel) under the Ministry of Digital Development and Transport. The Information and Communication Technologies Agency has registered 163 provider companies, with others holding a market share of only around 1%. What could be the objectives of encouraging customers to buy faster internet packages (100 Mbit/s)?

Answer: This is not an encouragement. As stated, this is a necessary and strategically significant step to raise the average internet speed in the country. The problem here is the unfair distribution of market share that justifies monopolistic behavior despite the presence of 163 providers (not all of which are ISPs; there are also hosting providers, operators, etc.).

Question: The nearly 30% increase in internet tariffs in the country could also lead to risks. After this decision, the number of low-income people, those living in regions, and sensitive social groups who might give up internet service could increase. Is this not considered? Or is this also intended?

Answer: Compared to other utilities, internet services have shown the least price increase. Just as there is no significant reaction to price increases for other utilities, this could be absorbed as well. Citizens cannot refuse electricity, water, gas, or fuel, and similarly, they cannot refuse information and its provider, the internet. Therefore, they will not completely abandon the service but will seek alternative solutions as mentioned above. Were these steps considered by the price-increasing institutions beforehand? I don’t think so. But as citizens find their own solutions, these institutions will also need to take certain measures if the number of consumers decreases.

Question: How can we ensure that the internet is accessible and affordable for everyone? What are your suggestions?

Answer: Our internet may be more expensive compared to neighboring countries primarily because our non-oil sector, especially the IT sector, is less developed compared to neighboring countries. If the state refrains from entering the IT sector and creating monopolies, if the IT sector becomes independent, and if foreign companies are attracted to the sector to create a competitive environment, then the IT sector will develop and offer competitive prices that provide suitable options for consumers. If only things were as easy as they are written. But these changes will take years. We all need patience. Development requires sacrifices.