About tariffs in the communications sector

It should be noted that in terms of the dynamic development of telecommunications worldwide, the issue of tariff policy requires special and systematic attention. After all, an optimal pricing policy is an essential factor for the development of fixed-line telephone communication and Internet services.

As a rule, the tariffs fix the economic relations between the subjects of the consumer services market - the operator and the provider for income generation to thus cover the costs of new services in the communications sector (CS).

Studies into the issue are indicative that today in Europe, basic telephone communication services for new market participants are not a source of income (like our country), but a means of attracting a large number of subscribers (in particular, for advertising). In this regard, the development of telecommunication technologies in the developed countries of the world resulted in the availability of more than a hundred new types of services, without which it is actually impossible to imagine the telecommunications of the future.

A question arises: how many new types of CS services have we introduced in the Ministry of Digital Development and Transport (MDDT) of Azerbaijan? At present, the communications sector of Azerbaijan is represented by the MDDT (state monopoly structure), which affects the tariff policy in the CS and, obviously, does not take into consideration the impact of market factors due to the lack of an alternative. If the provision of free telephone communication in any developed country of the world (for example, in England) is a priority of this industry in favor of ordinary communication consumers, then we have increased tariffs for monthly fixed telephone services to 2.5 manats after the launch of our first satellite Azer Space-1 in February 2013. Obviously, to refund all the costs.

Since November 1, the monthly subscription fee for the use of fixed telephones has grown to 3.5 manats for the population. In the meanwhile, the tariff for long-distance phone calls has been reduced from 5 to 3 gapiks.

Added to this can be that the market economy has introduced positive elements into the country's economy, however, apparently even in our technogenic communications sector, a lot of random and superficial things have appeared. After all, intelligence, professionalism and continuity have always been valued in our personnel, but today, apparently, to some extent, the CS is at the mercy of “marketeers” who led to scandalous corruption, arrests and convictions of managers and employees of the Ministry 7 years ago.

A civilized tariff policy carried out by both government agencies and independent regulators (private operators and companies) could have a direct impact on the balance of supply and demand in services to meet the ever-growing demands of subscribers for new communication services to AzEvroTel consumers. Obviously, our service pricing system is based on the combination of the so-called principles of free pricing with market economy with the current state principle of regulation (a monopoly operator represented by the MDDT).

Probably, from the point of view of improving the technical base of the CS, the Ministry has a desire to periodically raise the level of tariffs for services provided and thereby compensate for the MDDT costs. Suffice it to recall the nearly ten-year telephone war between AzEvroTel and the Ministry of Communications in 1999-2009, following which the activities of a number of telecom services were stopped by the AzEvroTel joint venture.

When adjusted for the transition period in the economy of the CIS countries, many states use the principle of “cross-subsidization” as the basis of tariff regulation in the CS, and in many CIS countries the rural telephone network is subsidized by international and long-distance negotiations of the population. The same is possibly true of us.

It appears that the disadvantages of cross-subsidization are the constant decline in the volume of international and intercity traffic running through the networks of the state monopoly, as well as the displacement and discrimination of private operators. To all appearances, this is confirmed by statistics over the past 15 years (http://www.rcc.org.ru ).

To eliminate this, it is necessary to switch to "time-based payment" for communication services, which requires the replacement of subscriber payment systems (which is no longer difficult to carry out in terms of complete transition of the local telephone network to the new generation networks (NGN), which will completely change our possibilities for mutual settlement, as is customary in Europe. And the principle of "cross-subsidization" used in the past years for rural and regional communications at the expense of long-distance communications has led to dependency in the communications sector.

Eventually, since the times of the USSR, "time-based payment" for communication services has been used for long-distance and international negotiations. Why not complete this practice for the local (urban and rural) network at the current level of digital technology and computerization of Azerbaijan?

Of interest is the the statistics of international telephone traffic of the country's relationship with the outside world. The volume of outgoing international traffic in Azerbaijan, for example, for 2013 (in recent years, since 2016, these data have not been printed), is, in comparison with Belarus, two times less with practically the same population. The territory of Belarus is 2.4 times larger than Azerbaijan.

When comparing the tariffs for Internet access in the CIS countries over the same year 2013, it is clear that our Internet tariffs are almost an order of magnitude (ten times) more expensive than in Belarus (http://www.rcc.org.ru - p. 69).

If we compare the rates of long-distance and international telephone calls in the CIS countries (2013), it turns out that Azerbaijan has the second most expensive tariff out of 11 CIS countries (after Kazakhstan), our prices are much higher than in Belarus (http://www.rcc.org.ru , p. 63).

Among the requirements that are imposed on the countries of Eastern Europe when they are accepted into the European Community, there is an end to “cross-subsidization”, and a five-year tariff equalization plan is proposed.

The necessity of introducing the system of time-based recording of connections (calls) in the local telephone network, first of all, was due to the significant excess by subscribers of the permissible load (traffic) on the existing communication networks of the country. In the old technology, an Internet user on average occupied the network for up to 6-8 hours a day, whereas on average a telephone subscriber occupied the network for only 20-30 minutes. And today, when nearly all of Azerbaijan's telephone communications are based on the Next Generation Network (NGN) which supports the full integration of three services: speech, data and multimedia transmission, there are no technical problems for the introduction of time-based accounting system. However, this drawback is still apparently for the benefit of Azerbaijan's 10 million people, since a sharp transition to "time-based payment" for ordinary CS consumers will lead to a slight shock.

It has to be noted that, according to experts, the market price of a European telecom operator is 50% determined by the principles of CS regulation in this country. That is why in the CS, unlike other sectors of the economy, this factor is significantly more important than such traditional indicators as the effectiveness of management processes (management); reduction of capital costs (for construction and development), etc.

Therefore, the urgent issue of the establishment of non-state regulatory bodies of the CS in Azerbaijan is on the agenda with the market structure of the communication network. It ought to be stressed that as soon as a lot of private and independent operators and providers appear on the telecommunications market of the country, the state will be forced to switch to the principle of an independent regulator.

Some state structures (apparently for mercantile interests) divide operators into “their own” and “strangers” depending on the proximity of the operator to the ruling structure. That's probably why the AzEvroTel joint venture is disappearing.

Added to this can be that usually the shortcomings of pricing in government agencies negatively affect the state of the material and technical base of the industry itself. The improvement of the existing mechanism for regulating tariffs on communication networks should be based on the formation of a real pricing system. This will ensure full satisfaction of the needs of communication services on the following principles: coordination of the economic interests of subscribers (its solvency); organization of high-quality communication services (reliability and reliability); meeting the needs for communication services (including rural), etc.

Hence, the improvement of the tariff system in the CS is considered possible in keeping with the philosophy of telecommunications and taking into account the uniform availability of subscribers to CS services; transparency and objectivity of the applied methods of tariff policy in the CS; and the application of an independent (non-state) method of regulation in the CS of the country. The fact is that, as a real competitive environment is created, the list of regulated CS services should be reviewed in order to develop uniform principles for setting tariffs that are advisory in nature, before the regulatory body in the country establishes fixed tariffs for these services accepted by all operators operating in the country.

It should be remembered that in the past only one organization was involved in managing incoming and outgoing tariffs in the USSR, but today everyone wants to have their own pocket organization. This apparently led to the shameful events in the Ministry of Communications in the fall of 2015.

However, the Western analysts estimated 15 years ago that piracy and fraud cost about $ 13 billion a year for modern telecom networks, and these losses are growing by 10-15% annually (Bulletin of Communications No. 6, Moscow, 2005). Therefore, unauthorized access to the CS is one of the the main threats to telecommunications operators of any country, causing enormous material damage.

Tariffs become high only when the CS market is dominated by a monopoly, there is no alternative (for local and long-distance communication), and citizens are forced to accept existing tariffs.

Is the Tariff Council of Azerbaijan able to fulfill the requirements, for example, of the “marginal pricing” method, where the coefficients of the maximum allowable tariff changes are indicated, for example, for a year? And the International Telecommunication Union (ITU) believes that access to mobile broadband Internet is technically possible for 84% of the world's inhabitants, but only 47% actually use them. The reason is banal - "high prices, poor quality of services, etc.

Tariffs in the CS should be regulated openly, for everyone according to the same principles. Corruption and the shadow economy are considered to be the reason for not fulfilling these international requirements. These circumstances are not reflected in the official statistics of the country. And we are naively looking for justice in the tariff policy of the communications sector.