Competition between participants of the country’s internet services market and their future perspectives Исполнитель

Competition between participants of the country’s   internet services market and their future  perspectives

A competition is a main tool for improving quality and decreasing costs in the market. The country’s internet services market can be divided into two parts: landline (dial-up, ADSL, DSL) and wireless (Wi-Fi, WiMAX, mobile internet).

If we compare these two types of internet servicing, in the recent years it can be easily seen the dominance of wireless internet, to be more specific the mobile internet. There are a number of reasons for this criterion. The initial one is that internet service providing market is a bit sense of oligopoly. Mainly the market is occupied by 4-5 giant ISPs (Figure 2.2.1), because there were a variety of tariffs for ISP to rent international channels by Uzbektelecom until 2010. And in turn this was a big challenge for small ISPs to hire the channels.  It cost much for small ISPs so they have to take channels from giants. 

According Uzbektelecom in order to reduce the rates for rental of the international channels and other services provided by ISPs, is working on the transition to modern technologies DWDM and IP / MPLS in the construction of transport networks for the organization of interstate connections with international operators, as well as to build bandwidth Internet channels at an international site.
The need to increase the total bandwidth of international channels directly associated with a significant increase from the leading providers of Internet services in Uzbekistan, the number of subscribers and their need for bandwidth.

Under these conditions, the main task of the national regulator should be to encourage active competition among sellers - the participants to establish an oligopoly perfect competition in the Internet market, which will lead to lower prices and increased volume of services provided. It must take into account the fact that competition in an oligopoly can be greater if the industry there is a fairly large number of firms, or, for example, these firms are linked regionally and do not compete directly. But the scope of services to provide access to the Internet virtually closed to small businesses due to high capital costs to enter the market. And how to ensure a competitive environment in a highly capital-market entry and further developing the country's economy – is another matter for separate investigation.

Figure 2.2.1 Proportion of the ISPs in Tashkent

According to Figure 2.2.2, we can conclude that the providers do not plan to soon lower prices for services on access to the Internet, although about a third of them (27%) believe that low prices - an important factor in the development of Internet in the country.  Opinion providers united in the fact that currently there is no scope for reducing the cost of services, as well as the financial structure of the business models of operators working primarily to cover costs of activities - from paying for the lease of channels of access to international data networks and services, cross-connect before you buy equipment and emergency unplanned reinstalling equipment  on the nodes of communication, and is in a very compacted state, producing an annual net income of less than 10%. This means that reducing the cost of services access to the Internet can only occur by reducing the tariffs of the national operator of the first level of access to international channels, Internet access and rental transport channel data transmission over the country.

Figure 2.2.2 The decrease in prices for services of companies

According to the decree of the Cabinet of Ministers on 29 September 2004 the exclusive right of access to international telecommunications network, including with the use of IP-telephony technology, has given the joint-stock company Uzbektelecom.

Operators and service providers, operating on the basis of the relevant licenses have the right to enter the international telecommunications network solely through technical means "Uzbektelecom. This circumstance gives Uzbektelecom monopoly on the provision of access to international telecommunication networks including the Internet.

As a result of measures taken by the State committee on de-monopolization and Competition, in March 2010 provided the declaration of tariffs for the international transfer of data (providing access to the Internet) and the lease of international channels through the establishment of the Ministry of Finance of the maximum level of profitability "Uzbektelecom.

Before the declaration of tariff access to the Internet providers of the republic "Uzbektelecom" applied tariffs to the gradation of prices, depending on the capacity of consumer channel. Since the beginning of the declaration set a single tariff for this kind of service that does not depend on the capacity of consumer channels, which was lower than the previous maximum tariff of 58%.
Given the changes in the cost structure of the company, taking into account the established profitability rate "Uzbektelecom" to date, compared with the rates established at the time of declaration, also declined by about 50%.
Antimonopoly Committee has explored the influence of the above changes in the tariffs "Uzbektelecom" on ISPs that provide Internet access services to end users (businesses and individuals). For the study were selected rates for 2010-2011, several large providers that access to international channels directly from "Uzbektelecom.
As the press service of State Committee, through the examination of the prevailing prices for consumers revealed overall downward trend in internet service providers by 10-50%.

For example, the rate of Sharq Telekom to provide Internet access for businesses in the current year has decreased on average by 44% over the previous year.
ISP East Telecom also significantly lowered the prices of internet access. The subscription fee in the tariff, without loss of traffic at speeds of 64 Kbps is reduced as compared to 2010 by 35%.

Reduction of tariffs by Internet service providers carried out on an individual basis, based on the tariff policy of each company, despite a steady increase in other expenses (cost of license activity, card payment, staff salaries, rent, electricity consumption, etc.).

According to the State Committee, providers are ready to further optimize its tariffs for services in proportion to reduce tariffs to provide access to the Internet by "Uzbektelecom.

Table 2.2.1 Tariffs for renting international channels by Uzbektelecom

According to recent figures, announced at the Board meeting UzACI up to 2010, the number of Internet users in Uzbekistan reached 7.4 million. The number of mobile Internet subscribers has exceeded 4.1 million.

It is clear that some part of the subscribers use and stationary and mobile versions of Internet access, however, during the year 2010 was marked by a sharp rise in popularity of mobile Internet in our country.

Speaking at a meeting of the Cabinet of Ministers of 21 January 2011 President of Uzbekistan Islam Karimov said: “We attach special importance to development of modern services such as cellular communications, Internet, video telephony, digital television, the modern banking products, leasing, insurance, audit, engineering and others.”

Today the country is among the top ten countries in the world development index of mobile communications. The total number of users of cellular communications services in Uzbekistan is over 21 million subscribers, up to 2000 by 200 times.

Indeed, according to the Index Altimo, Uzbekistan over the past four years among the ten countries with the highest index of investment attractiveness of the global cellular market.

Altimo Index is based on a comprehensive analysis of key factors for the activities of mobile operators such as market size, the average EBITDA of operators in the market, actual and projected levels of expenditure on mobile communications per capita (ARPC), the growth rate of mobile penetration, capital costs of the operators (CAPEX ), the country's GDP per capita (GDP / capita).

According to the 7-th edition of the Index Altimo, compiled from data on mobile communications market for the 4th quarter of 2009 and the 1st quarter of 2010, Uzbekistan ranked third among the 92 countries of the world, after China and Indonesia.

Rating Uzbek leader among CIS countries in the last index, decreased due to the higher attractiveness of other emerging markets. Thus, our country, staying in the top ten on the index of investment attractiveness, during 2011 will be even more actively develop the market for mobile data services. All mobile operators in Uzbekistan are actively expanding the coverage of networks 3G, and some even plan to start commercial operation of 4G networks based on the standard LTE. For example, even in 2010, MTS-Uzbekistan UCell licensed and even demonstrated in a test mode network 4G (LTE) in Tashkent.

Based on the data, it is expected that in 2011 the mobile Internet will become the main engine of development UzNet. One of the major successes of the "Beeline" in 2010 was the launch of 3G network in regional centers of the Ferghana Valley: the cities of Fergana, Andijan, Namangan, Kokand and Margilan. In addition, the operator has expanded the capacity of external Internet bandwidth to subscribers in the third - of Internet users, which number more than 10 thousand.

In areas where existing telephone lines are not able to provide quality and uninterrupted data transfer, it would make sense to cover the 3G networks and develop special tariff plans for wireless home Internet access. 
Mobile operators to periodically offer new tariff plans for mobile internet users. One of the operators, offers its subscribers a USB-modems are two models - one for work in networks of 3G (HSDPA technology), the other - to work in areas where network coverage is no 3G (EDGE technology and GPRS). 

In an attempt to reach different segments of the market, mobile operators represent a variety of plans that can be grouped into packages with limited bandwidth (Limit and No Limit), the access time (day, night), a unit of payment (soums and dollar) monthly fee (with and without subscription fee). Based on the differences packages vary and the cost of connection to the Internet. All carriers charge a fee for the amount of sent / received data per 1 MB, and the average value in the packages with no monthly fees and connection fees of $ 0.03. 

As a new trend is also worth noting that in 2010 the domestic operators to think seriously about mobile Internet users, and brought a special tariff plans for active users with mobile phones ("MTS Connect" Rates «Online» from Ucell). Previously, this rate was only operators Beeline and Perfectum Mobile. All operators of the Uzbek "Big Three"have started to market their 3G USB modem for mobile internet users and came to market Internet access, which belonged to the previously only Internet service providers. The companies themselves offer USB modems which are cost 45000 UZSaverage. According to the UzACI, the number of mobile Internet users in Uzbekistan makes up 4.1 thousand million and exceeded the number of wired Internet users 3.1 million.

As we compare the mobile internet tariffs, we come up to this figures.

MTS has already launched 3G in all cities in the country. Now it has these tariffs and packages for internet users (Table 2.2.2):

Table 2.2.2 MTS internet packages

And also the company offers a nice tariff for unlimited users at night. This tariff is called “Night Internet” which gives a good opportunity for service users at the record low price – only $0.01 for 1Mb (from 01:00 till 08:00).

A second cellular company UCell also offers internet packages and tariffs with are cheaper that other companies’ offers (Table 2.2.3).

Table 2.2.3 UCell internet packages

Also company has good internet services for who likes to surf at nights (from 01:00 to 08:00) and enjoys social networks (Table 2.2.4).

Table 2.2.4 Extra internet services by UCell

But the most valuable offer by UCell is the tariff “3 G” and tariff “Online” which both cost $ 0.04/MBduring daytime (8:00-1:00) and $ 0.02/MBat night(1:00-8:00).

Today UCell opens new network opportunities of UMTS standard for its subscribers. Moreover, because of using HSDPA technology in network of UMTS standard UCell provides to subscribers 3,5G services – following after the third generation of evolutional level of mobile connection network development.

Beeline attracts subscribers with its high quality internet services; even they are a bit more expansive than UCell’s offers (Table 2.2.5).

Table 2.2.5 Beeline internet packages

Beeline also offers two internet tariffs for individual subscribers (Table 2.2.6)

Table 2.2.6 Beeline internet tariffs

It is worth remembering Perfectum Mobile’s internet service, because of its stability and cost effectiveness and attracting more mobile internet users (Table 2.2.8).

Table 2.2.8 Perfectum Mobile’s internet packages and tariffs

As we compare all mobile operators’ internet services, we have to deal with a number of reasons, such as prices, service quality and stability. For example even UCell’s services a bit cheaper than other providers’ internet services it makes some difficulties for far regions, so that, in these cases the best option would probably be Beeline’s services which is higher quality.