Home / Business / Bekauri should Quit if Tariffs Rise in Communications Sector: New Cartel Collusion between Magti and Silknet

Bekauri should Quit if Tariffs Rise in Communications Sector: New Cartel Collusion between Magti and Silknet

The Oligopoly in the communications sector has demonstrated its negative effects again – last week, two major players released statement on raising tariffs. Surprisingly, both companies raised tariffs simultaneously for the same services. In economics, this move is called cartel collusion, and in all normal countries similar manipulations are severely punished.

According to Silknet, which bought Geocell in 2018, the new tariff will come into effect on March 1.

“Starting March 1, the company will enforce revised tariffs. As a result of the new price policy, subscribers to both landline and cellular services will receive improved packages, and more internet data”, the Silknet statement reads. Namely, starting on March 1st, the new package for Meti S will cost 7 GEL instead of 5 GEL. The new package for METI M will cost 15 GEL  instead of 10 GEL, and the new package for Meti Unlimited will cost 30 GEL instead of 25 GEL.

Magti also plans to introduce revised tariffs. Namely, starting February 18, the Martivi 25 package will be replaced by a new Martivi Martivi, and it will cost 30 GEL instead of 25 GEL. The new package will also include  more data, 1500Mb instead of the current 1000 MB.

At the same time, the companies will introduce a mobile number service fee: Geocell at 20 Tetri a month, and Magti at 1 GEL in every 180 days. The number service fee enables them to keep the number active on a permanent basis. A mobile number will not be cancelled, and the number owner will receive cellular services without limits.

It should be noted that, amid declining communication tariffs worldwide, in Georgia, on the contrary, communications tariffs grow year on year. And the communications commission makes no move against this practice, and sometimes it even supports the companies’  increasing tariffs and working against  the interest of their subscribers.

It is also unacceptable to increase tariffs on wholesale internet and IP television, because, starting in 2018 Caucasus Online halved the tariffs of wholesale internet for Magticom, while Silknet sells wholesale internet itself. Consequently, expenditures on this front  have also essentially decreased.

Similar arbitrary decisions are preconditioned by the reality of oligopoly on the telecommunications market, as Magticom and Silknet control about 75% of the entire market, including 75% of the market in mobile services, 78% of the internet market, and 83% of the market  in IP television.

The oligopoly in the telecommunications market poses serious threats to  subscribers. Without efficient operation of the regulatory commission,  subscribers remain absolutely unprotected at the hand of companies”, representatives of Association of Young Financiers and Businessmen  (AYFB) noted.

The communications commission will not let Magti and Silknet  raise tariffs. The commission will not let major companies use their power and advantages on the market to the detriment of subscribers. The commission plans to inspect the  landline services market to regulate the retail market and set marginal tariffs for the companies, which raise prices without substantiation, the commission chairman Kakha Bekauri said.

“We will examine the landline and mobile service market in the retail segment, with the aim of regulating the market, and introduce top marginal tariffs. I have already passed due instructions. As to the question of whether companies may raise tariffs in advance, I assure you that we will make them and make them  return to their old position. I hold the leverage and legal rights to regulate retail tariffs. Therefore, if they do not take into account our recommendations, we will definitely enter the retail market and regulate it.

“There are risks that influential operators may misuse this power against their retail subscribers. Therefore, the regulator should take the corresponding decision. The commission holds all the leverage to correctly manage this sector, and I assure you that we will definitely do this”, the commission chairman noted.

And what statements does the commission make today? We have an absolutely different reality today. For example, 3 years ago, Bekauri promised that landline internet tariffs were inadequately high, and he would by necessity lower them, but in reality internet tariffs rose. Moreover, in September 2018, the regulatory commission intervened, as mobile calls and internet tariffs rose in price. The changes effected all corporate clients. The commission has had a direct impact on tariff growth. Seemingly, after the inspection, the commission discovered  that Geocell, Magti and Beeline were subsidized when offering various tariffs to subscribers. The commission banned the companies from subsidizing corporate clients. As a result, tariffs doubled.

If the telecommunications companies do not pay the cost for the aforementioned tariff growth and the commission, as usual, turns out to be impotent, Kakha Bekauri, head of the Georgian National Communication Regulatory Commission (GNERC) should resign. We have evident signs of cartel collusion, a misuse of power obtained as a result of oligopoly, and if the commission cannot regulate this situation, the regulatory commission should bear the responsibility.

By Merab Janiashvili
Economic Analyst
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