Home / Business / Silknet and Caucasus Online – Cartel Collusion Signs on Internet Market and Subscribers without Choice

Silknet and Caucasus Online – Cartel Collusion Signs on Internet Market and Subscribers without Choice

Internet service tariffs have become an additional headache for Georgian subscribers. Domestic providers offer unaffordable prices on the internet services market. According to the report of the Association of Young Financiers and Businessmen (AYFB), today the Georgian internet market registers several tens of providers, while only Caucasus Online and Silknet control a 60% ratio of the internet market. The rules of game are determined by these companies. Uncompetitive environment has brought cartel collusion signs. The companies have been jointly growing prices and subscribers are left without choice.

Caucasus Online has recently introduced a new tariff system for both internet and TV service packages. Thus, subscribers will pay the following tariffs: Optimal: 10mb/sc – 27 GEL (instead of 25 GEL); Express: 30mb/sc – 37 GEL (35 GEL); Extreme: 50mb/sc (45 GEL); Infinite: 100mb/sc – 100 GEL. Prices have increased because of international market realities and current economic situation in Georgia, Caucasus Online asserts.

In early March Silknet took the same decision. Tariffs increased because of higher internet connection speed and the market realities, Ilia Enuqashsili, a director for Silknet strategic development department, noted.

AYFB vice president Giorgi Kapanadze says in both cases the companies refer to the request of their subscribers for growth in internet connection speed. In this case the companies were to take into account the consumer interests and enable them to either to maintain the existing tariffs and use less speed or increase the speed and price consequently.

Information we have received from the Georgian National Communications Commission (GNCC) shows in 2014 Caucasus Online expenditures on purchase of internet services shrank by 5 million GEL compared to 2013. Consequently, we believe the company has increased tariffs without substantiation, Giorgi Kapanadze said.

AYFB has introduced a report on the expenditures Caucasus Online and Silknet have taken in 2013 to 2014. Silknet has purchased 211 656 megabytes more internet space and spent 2 056 542 GEL more compared to 2013, but the GNCC statistics shows from only operators of foreign countries and according to the 6-month report, the company received 605 393 more revenues compared to 2013 and sold 46 000 megabytes more internet connection. Moreover, the companies have also sold the internet connection to Georgian providers and received revenues from them, as well as from increased service tariffs from subscribers, Kapanadze noted.

AYFB has also collected information on tariffs in various countries of the world. The analysis has showed Georgian internet providers have set biased prices in practice.Kapanadze calls on GNCC to show interest in this question and request the companies to officially publish the set tariffs on their websites.Providers must enable subscribers to choose either to maintain the existing packages or to move to new packages, he added.

“GNCC should explore the market of internet providers in details, identify real expenditures and revenues of the companies. If the exploration proves these companies have artificially increased tariffs and receive super profits, GNCC should apply the law on electronic communications and set a top margin tariff. AYFB will continue exploring the market and introduce various reports to the society,” Kapanadze noted.

Georgian citizens permanently complain about the quality and speed of the internet connection. Several months ago the Young Barristers also explored the market and developed recommendations for GNCC to set top margin tariff to the provider companies, but in vain. As a result, providers have been growing service tariffs without taking into account the consumer interests.