Divide and rule

Maka Ghaniashvili

After mobile communication services, internet service is the second most increasing and profitable segment at electro communication market of Georgia.

According to the regulation committee of communications, incomes of the internet providers operating at Georgian market has increased from GEL 3.15 million to GEL 30 million within the period of 2000-2007. Volume of total incomes in 2006 increased by 32% compared with the showings of previous year. In the end of the same year, aggregate number of internet consumers of DSL technologies increased by 80% in comparison with 2005Y. The figure exceeded 35 thousand in 2008. Experts reckon that internet market has big prospects in Georgia. Considering all the above mentioned, it is not surprising that the battle to intercept consumers is taking new phase. However, this battle has nothing in common with healthy competition principles.
XXI century is the era of high technologies. Under such circumstances, the growing importance of internet services is obvious. Online space becomes attractive for doing business all over the world. For instance, incomes of internet advertising market in Russia made up $2.8 billion in 2008. Online shops earned $5.5 billion last year (Source: www.rbc.ru). Together with lots of appeals, internet space is characterized with severe competition. One of main principles of healthy competition in whole world is to “Find out consumers’ needs and offer solution”. However, beloved motto of the participants of the communication market of Georgia is “Divide and Rule, with its direct meaning. They create quite a number of problems to their clients and at the same time they do not or cannot find solutions to these problems. I cannot find another explanation for the ongoing events of Georgian internet market of the last years.
It is of common knowledge that the fight of competitors for share at the market is positively reflected on consumer interests. Competitors are trying to gain consumers confidence by offering more attractive terms of service. However, everything is on contrary in Georgia. Interest of ordinary consumers is sacrificed to the constant arguments among internet providers. Quality of internet service leaves much to be desired that is infringement of consumers’ rights. Though, sometimes even low quality internet might become desirable. As it is well-known, internet providers does not possess own wells and telephone pairs. Thus they are using cable pairs of other telephone operators and paying rent fee to them. Telephone operators often take advantage of their monopolistic state and create numerous problems for internet providers.
United Telecom left thousands of Caucasus Online consumers – the biggest internet provider of Georgia – without internet for several weeks. The mentioned companies are disputing GEL half million of accumulated rent for the use of telephone pairs and cable channels. Representatives of United Telecom are declaring that the reason of disconnection was that the hardware of Caucasus had no permanent electricity supply. Caucasus Online should have ensured this by itself. The document exists. However, no response followed, the terms expired and United Telecom cut the permanent electricity supply to the hardware of Caucasus. That’s why people are left without internet. United Telecom is claiming that Caucasus Online has GEL 430 thousand of debt. However, Caucasus Online was recognizing indebtedness of GEL 243 thousand. The companies started financial investigation in order to find out the right and wrong. However, providers left own consumers without attention. Telecom is declaring that they have no legal right to supply Caucasus Online abonents with internet. On the other hand, Caucasus representatives are claiming that in two weeks after disconnection of abonents, they sent a guarantee letter from TBC Bank to the United Telecom. However, internet supply was not restored anyway. Caucasus Online accuses United Telecom that the company is trying to intercept consumers this way. On its part, United Telecom proves that it has not received any gurantee letter from Caucasus and the company does not intend to connect 6000 abonents until Caucasus pays off its debts.
However, the snag is that Caucasus Online is the biggest provider at internet market of Georgia – it holds 70% of the market. United Telecom’s share of the market is 15%; Five percent is owned by internet provider Egrisi of the company Akhali Kselebi (New Networks). The rest share of the market is divided among small companies. Despite the fact that Caucasus is the biggest internet provider in Georgia, 80% of telephone lines are owned by United Telecom and 20% by New Networks. Thus Caucasus Online is utilizing these telephone lines for providing population with the internet service.
United Telecom bought government-owned company Electrokavshiri with communication wells in May 2006 for $90 million. Now the company is the only owner of DSL pairs and communication channels.
Unfortunately, this is not the first dispute between the internet provider companies. One of the most famous scandals took place in summer of the last year. Kazakh-Georgian investors’ group bought United Telecom. New investor decided to increase the rate to internet providers from GEL 3.5 to GEL 15. Naturally, this was followed by discontent of the last, especially of Caucasus Online. “We could just cease the contract with Caucasus Online and left its consumers without internet supply. However, we understand importance of internet supply for the population and for the development of Georgian economy. Therefore, if Caucasus Online does not pay the rent, then we demand payment from consumers. I cannot see anything unclear in this” – this is the attitude of united Telecom.
As it seems, we should be grateful for this “kind act”. Quite a number of companies and citizens suffered huge losses due to cessation of internet supply. Before regulation committee get involved in this dispute and established margin rate for all internet provider companies – GEL 11.68 – the population suffered damage.
Considering all the above mentioned, “abilities and experience” of Georgian companies, then we truly should have been grateful of United Telecom for not leaving us without internet.
While Akhali Kselebi and Akhteli do not (cannot) take rights and interests of the consumers into account. The mentioned companies disconnected Caucasus consumers for three days in February 2008. Together with ordinary citizens, state and private companies, including objects of strategic and essential importance, were left without internet supply also. Caucasus Online claims that disconnection was illegal and its aim was to frighten and discredit the company. Akhali Kselebi reckons that disconnection was necessary as Caucasus Online had indebtedness of three months and it rejected to pay the debt on principle.
Caucasus Online, on its part, is pointing to other infringement done by Akhali Kselebi. Regulation Committee found out that Akhali Kselebi made Caucasus Online to pay user charge of 800 abonenets that were never consuming Caucasus Online services. The rival company does not deny that excess numbers might have existed that already implies difference of data of the companies. However, it is trying to explain such difference with objective reasons – these numbers might have been removed from the network, but the information was not provided to Akhali Kselebi. 700-800 numbers are periodically removed and the same number is added; this is an ordinary working process and the number of abonents to be removed is constantly defined.
Regulation Committee intervened and obliged both parties to compare own data on the above mentioned issues and only afterwards make the mutual settlement of accounts, together with another matter of dispute – additional 177 telephone numbers that were accounted incorrectly since 2006.
Despite committee requests, LLC Akhteli and Akhali Kselebi demanded to pay the sum according to their calculations and disconnected internet consumers from the network without any notice. Moreover, teleoperators were offering disconnected consumers to cease contract with Caucasus Online and became consumer of the company’s own internet service.
Regulation Committee adopted a resolution on the dispute of Caucasus Online and Akhali Kselebi. According to the resolution, claims of Caucasus were not satisfied and the company is required to pay the sum. There is no denying that fair decision was made in this case, but another question rises – why regulation committee did not call Akhali Kselebi to account for illegal disconnection of the Caucasus consumers for three days? Illegal disconnections of internet consumers have been ceased after intervention of regulation committee. However, there is and I guess always will be some risk that this might happen again (we’ve already discussed recent events above) until the punishment mechanisms won’t actually become operative in the country.
Why the consumers had to suffer damages because of financial disputes between internet companies? Why nobody is called to account for this? These questions remain unanswered. None of the companies in Georgia has been punished for infringement of consumers’ rights. As I have already admitted, internet market is becoming more attractive both in Georgia and whole world and thus competition gets severe. Naturally, Georgian telephone companies are actively trying to enter internet market. However, they are playing with unfair game rules and trying to use monopolistic state for achieving desirable results. All in all, once again consumers suffer damages out of this.