CIIP Report – 2009: Situation in the Kyrgyz Telecommunication Market

In 2009, 211 licenses were issued by 145 operators. However, the increase in the number of operators did not lead to the expansion of the telecommunication network. “Monopolization of the services market allows operators to raise prices uncontrollably,” according to a report from GIIP experts.

An overwhelming majority of operators get excess profits due to unregulated prices for services using existing networks, mainly Kyrgyztelecom, and not investing in the creation of their networks and, accordingly, without expanding the national telecommunications network.

The exceptions are just a few operators, for example, Katel, Bitel, Asia-Info, Al Cat, Transfer, Ak-Net, Saima Net, Vinline . Today, out of the total volume of the general use network, the network of Kyrgyztelecom JSC is about 83% and only 17% fall on the rest of operators.

And 30% of the network of Kyrgyztelecom JSC is a loss-making segment (rural communication and communication in hard-to-reach areas), which is subsidized due to Kyrgyztelecom’s revenues from international and long-distance traffic.

Past experience shows that the majority of operators that do not have networks and, accordingly, do not incur significant costs of operating and developing networks, will significantly reduce prices for services for the purpose of transferring traffic to themselves and obtaining super-profits.

Major operators having their networks, including Kyrgyztelecom, will be forced to reduce prices for international and long-distance services in order to save traffic. But in this case, no operator will contain unprofitable market segments. Thus, the development of telecommunications will be carried out mainly in large cities, and rural communications will be destroyed, which may pose a threat to the economic security of the regions and, in general, the republic for our agricultural republic. We already have the sad experience of the destruction of the network of automatic television repeaters, as a result of which an information vacuum has formed in the village, which in turn has become one of the factors contributing to political instability in the south of the republic.

An overview of the state of the ICT situation showed that:

• there is no truly independent regulatory agency for this industry,
• there is a large gap between the pace of liberalization and the creation of conditions for competition,
• privatization contributes to a better understanding investors by the existing regulatory and legal environment in the field of communications.

Now Kyrgyzstan is only at the beginning of the path to the civilized telecommunications market. Only one thing is reliably known: the state operator from the past, who has a monopoly on all services, cannot simply provide such a variety of services with appropriate quality and availability to the general population, as has already been done in countries where privatization of telecommunication enterprises took place, competition has been introduced and implemented liberalization of this market. It is not yet clear what approach to regulation will allow the most confident transition from a state monopoly to a service market.

In the case of a fund, all operators contribute funds to it, which are subsequently used to subsidize communication services in economically disadvantaged areas or for low-income clients.

In the case of access deficit payments, the operator charged with providing general services has the right to raise the tariff for connecting other operators by a certain amount, which is used to finance common service costs. It should be noted that there is little practical experience here, because the problem of common use arises where a decision has been taken to liberalize the public telephone market. Because the liberalization of the telecommunications market in Kyrgyzstan has not yet reached a certain level, it is difficult to judge which approach is more appropriate in a particular case.

Recommendations

Based on the above and expressing the desire to fill the communication markets with modern types of services, as well as facilitate the access of significant segments of the population to alternative types of international telephone communications, we offer the following recommendations:

• Recommend GUS, ITC, to develop proposals for the legalization of IP telephony services in the country. Thus, to prepare a package of proposals on making relevant amendments to existing laws and regulations on this issue. (These are the laws “On Communications”, “On Informatization”, “On Licensing”, Regulations on Licensing in the Field of Communications, etc.)
• Formulate the concept of IP telephony and put it for discussion for further adoption and placement in the appropriate directory on terms and definitions of an ITU organization whose recommendations are used by operators of all CIS countries.
• Develop recommendations that regulate the interaction of operators providing IP-telephony services and the national operator in each country. At present, there is a conflict of interests of these parties, which must be resolved in favor of consumers.
• Because IP telephony services are already really present in the communication markets of all CIS countries, a problem arises about the quality indicators for this type of services. Communications administrations should be requested to assist in the development of these quality indicators.

Download the full report here.