On communication sector regulation in Azerbaijan

The communication sector regulation may take place either at the state level (legacy of the past) or as an independent regulator (off state structure) which is in line with the market economy of European countries, including the following:

- Avoidance of monopoly in the communication sector services by any operator or provider

- Alternative and conceptions in the communication sector to cheapen tariffs;

- Responsibility for technical policy and personnel training in the communication sector...

In all probability, processes of demonopolization, liberalization and privatization made it possible to reorganize state structures in charge of telecommunication problems. This notwithstanding, the post-Soviet countries are still persuaded that "telecommunication remains to be state"s natural monopoly" and that they are effective under the state only, hence, it is the responsibility of state structures to get them privatized (following the autumn 2015 developments).

However, as far back as earlier 1980s as the head of the British government Margaret Thatcher carried out economic reforms to change the philosophy in some branches deregulation, including telecommunications, and create a flexible labor market and privatize state-owned telecommunication companies of England.

It became obvious after gaining of independence that the market-oriented economy is accompanied by interference of state regulators which makes it necessary to transform the telecommunication monopoly market and create a competitive market. For this to happen, it is essential to provide a transparent control over the above processes.

As usual, the state comes out as an initiator of the creation of an independent telecommunication regulator, as an arbiter of communication sector problems in interconnection and mutual settlement to ensure the rights and benefits of all operators and providers of the country through making amendments in the statutory and regulatory basis of the "Law on Communication".

The objective of an independent regulator is to signalize the intensification of processes of demonopolization and liberalization of telecommunication market services with a view of transition to civilized methods of privatization.

Earlier 1990s the World Trade Organization (WTO) submitted reforms for developing countries, including CIS countries, which were received as too radical though today they are believed to be rather usual. Of particular interest was an agreement on WTO basic telecommunications and related documents to integrate the reforms mentioned above.

Main duties of the communication regulator are as follows:

- creation of legislative basis due to market economy;

- creation of independent telecommunication regulators to control the sector;

- making of fair decisions by mutual settlements with all operators of the country;

- drawing up of technical standards of telecommunications for operations, etc.

Account has to be taken of that according to many experts a market price of European operators is 50% determined by communication regulation principles of the country to avoid the discrimination of private operators (like Azeurotel).

It is an exceptional case where the Ministry of Communication and High Technologies (MCHT) of Azerbaijan exerts a state monopoly over the communication sector and concurrently an advocate of technical, legal and tariff policy all in one (sectoral institutions are missing).

For a start, it is essential to distinguish the MTCHT authorities into the two independent subdivisions - telecommunication services (functions of operator) and legal functions of independent regulation (functions of interrelation and mutual settlements of operators). In all probability, their integration into a single entity is a reason of Azerbaijani telecommunication backwardness from some CIS countries, particularly, by the number of fixed telephone sets per 100 residents.

It should be remembered that material welfare of the modern state rests on economy, information, intellect and education, hence, any state is interested in carrying out these reforms for ensuring transparency, effectiveness and competition in consideration of manpower (human) resources needed for social consent.

It has to be kept in mind that the basic method of telecommunication restructuring is country"s participation in deciding regional, inter-regional and global telecommunication regulation issues, in the first turn, with the European Community (EC).

It should be remembered that 27 ago the Euro-commission (EC) published a report on the results of competition at Europe"s telecommunication market from the start of regulation.

Under a WTO report, most communication services of Eastern Europe were non-transparent and non-competitive and characterized by high level of monopolization and state support for national operators (Cowhey-Klimenko_WTO_Agreement_Telecom.pdf).

As viewed by EC representatives, the present situation is explained as being due to the fact that not all EU member-countries have not finished transition of their communication legislation to a common European communication regulator - "super regulator". With that end in view, the EC created a common European communication regulator similar to a regulator of banking activity in Europe.

It was suggested to vest the telecommunication regulatory body with authorities on tariff regulation and joining international communication services, as well as with rights to put a ban on any decisions of national regulatory bodies that provide one third reduction in the number of regulated services.

So alternatives were offered to optimize the current telecommunication regulatory process in the EU countries, in particular:

- Provision with national regulators for transparent regulation;

- Authorize the EC to put a ban on national regulators for inadequate measures;

- Effective interaction between national regulators of EC countries, etc.

However, even despite protests of some telecommucation companies of Europe, EC representatives announced that a single oranization would be set up to regulate telecommunication sector in EU countries.

The point is that the civilized world recognizes a single trasparent parameter on revealing mutual relations both between telecommunication operators and various countries in keeping with the International Telecommunication Union (ITU) which is none other than a real flow of trafic between world operators.

The point is that traffic regulation issues on operating communication networks are dependent on Communication Administration (we have MTCHT), on information-technical characteristics of the communication sector ensuring the required quality of services by ITU recommendations and the opportunity for projecting, forecasting and developing the sector on the basis of an integrated communication network of the country. We are faced here with a closed hub (state monopoly), and who knows how strict are observed standards of the international regulation to be agreed with the ITU (Azerbaijan is as member of the organization since 1991).

One cannot forget that the transparency would make it possible to rationalize the current divided system of regulation (some developing countries have to apply the state regulation) and effectively commply with common conditions forv all operators acting on the territory of the EU.

According to the Euro-commission plans, a single regulating organization must work with national regulators in line with the European System of Central Banks, ESCB. According to the scheme, national regulators go one exploring their national markets; however, the last word comes from the EU regulator.

At present, unprecedented alterations are typical for the telecommunication system accompanied by active process of liberalization and privatization in many countries (earlier than state-owned telecommunication objects).

That considered, an independent regulator in the CIS communication sector is required prior to the start of privatization. This would pave the way for liberalization and demonopolization process and thus begin privatization in the telecommunication sector (including Azerbaijan) to contribute to the implementation of the Presidential decree of March 29, 2001 on the start of privatization country"s communication enterprises. Perhaps, for this reason we cannot complete the process over the past 17 years?

For instance, in some developing countries worldwide the Communication administration (we have MTCHT) traditionally employed excess manpower in the system of telecommunication guided largely by political considerations (unemployment reduction), not economic ones which leads to ineffectiveness of the whole communication sector and minimum wages as compared to Europe.

It should be remembered that the privatization of telecommunication networks results in the growth of volume of telecommunication services, competition and reduction in service costs in terms of introduction of digital technologies in the said network.

However, when "commercializing" operators and joint enterprises, the state unfoundedly draws in the monopoly state structure (MTCHT) to thus lay hands on them (as occurred with Bakteleqraf and АзЕвроТел).

Given the above, world"s developing countries adhere to various views on the best institutional structure of telecommunication sector, so the above-stated model is recommended to be used as a standard based on transparency, impartiality, professionalism and effectiveness.

It should be remembered that the US Trade and Development Agency has been drawn into the establishment of an independent regulator in Azerbaijan. Note that the United States allocated $734,782-worth grant to ensure the technical aid for strategic and organizational restructuring of the Ministry of Communication (today the Ministry of Communication and High Technologies) dated January 18, 2005 (routine bubble project). Yes, we are evidently losing a chance to create an independent communication regulator in the country.

Below-cited are distinctive features of the independent regulator to serve citizens. To all appearance, no apologies have ever been presented to a subscriber for inactive status of telephone or Internet, not to mention any compensation (though subscribers must have signed a certain contract).

I have been engaged in the communication sector for 52 years but never heard about any apologies or compensations over 70 years of the USSR and 27 years of our restored independence period. No compensations are stipulated regardless of an hour or several days" failure to provide communications (rural communication failure may last for weeks. The same is true of the situations in communal service (water, gas and electric energy supplies) with one-and-only reason - state form of regulation (nobody bears responsibility).