Communication Regulatory Body Accused of Protectionism
17 January, 2013
Communication Regulatory Body Accused of Protectionism
Georgian National Communication Regulatory Commission is accused of protectionism and its activity reported to the Prosecutors’ Office for further investigation.
Association of Young Financiers and Businessmen of Georgia (AYFB), a non-governmental watchdog closely keeping an eye on the activity of Georgian National Communication Regulatory Commission (GNCC), sent a request to General prosecutors’ office of Georgia on January 12, 2013 to investigate activity of GNCC. AYFB asserts that GNCC to be created to protect fair and just competition rules at communication
market has been practicing protectionism instead and hampering to establish healthy competition climate at the market. To exemplify the illegal practice of GNCC, non-governmental experts accentuate on allegedly unfairly established inter-connection tariff rates thanks to which the Mobitel [a part of Russian-based VimpelCom Group] largely known as Beeline, one out of three cell market operators at Georgian market, enjoyed preferences and has been subsidized by the remainder two market players Magti and Geocell [a member of international cell market player TeliaSonera Group] in fact.
The inter-connection tariff is a charge that cell operators pay to each other for reaching networks of each other in order to provide thorough coverage service to subscribers. Until July of 2005, the interconnection tariffs between Magti and Geocell that were the only market players till 2007 when Beeline appeared on the screen, was 22.8 tetri. Both Magti and Geocell were quite strong redistributing market share by approximately 50 to 50% and enjoying high prices. In 2005 the interconnection tariff rate dropped to 18.8 tetri and after Beeline entered the market the figure was cut to 14.8 in May of 2008. However when the said tariff rate reduced to 8 tetri in August of 2010 it remained 14.8 to Beeline until February 1st of 2012. Otherwise, while Magti and Geocell paid 8 tetri to each other they had to pay 14.8 tetri to Beeline. The latter meantime paid 8 tetri back to its rivals for similar service. According to GNCC, the preferential tariff rate fixed for Beeline and making 6.8 difference in advantage to Magti and Geocell was introduced once Beeline was an emerging company and has no significant market share in pursuance with Georgian law that defines at least 15% of market share as the starting point to consider cell operators as players with significant market power.
However, when Beeline crossed the 15% limit in May of 2011 GNCC did not change the preferential tariff policy to it until February of 2012 when the inter-connection tariff rate was cut not to 8 fixed for Magti and Geocell [with 40.19% and 41.61% of average market share respectively by data of November of 2011] but to 11 tetri that still remains in force and Beeline still enjoys 3 tetri in preference.
“GNCC turned a blind eye in fact and granted almost a year of preferences to Beeline during which the latter enjoyed around 7 tetri difference compared to its peers,” Nodar Chichinadze, a Chairperson of AYFB, told Georgian Journal. “We consider this kind of activity of GNCC falls beyond the frameworks of law. Each operator has significant advantages at inter-connection market and therefore each should be treated equally by law. It comes out that thanks to GNCC illegal approach Magti and Geocell have been subsidizing Beeline that is forbidden by law.”
GNCC has different justification to the questioned alleged protectionist time-gap.
“To recognize a market player to be of significant power and impose related obligations to it, one of the important factors is to find out how stable is the achieved significant market share. Therefore it was essential to monitor the market and when the data attested that Mobitel LLC market share was stable only after GNCC defined it as a significant market player and imposed due obligations,” GNCC informed GJ.
AYFB even questions the 3 tetri difference as too much compared to the best world practice that fixes cap preferential difference in the interconnection tariff by sums equivalent to 0.006 tetri [in Germany], 0.7tetri [in Turkey], and 1 tetri in Belgium and Spain. UK, Romania, Slovakia, Iceland, Denmark, France, and Holland to not practice any tariff difference at all.
As GNCC explained to GJ, the law does not acknowledge any obligation on automatic equalization of inter-connection tariffs to market players once they are recognized to be significant market players.
“The cap limit of interconnection tariffs is based on individual expenses/outlays of each company. Expenses of Mobitel exceed expenses of Magti and Geocell per minute and GNCC is not authorized to charge it by tariff rate lower than its expense,” thus GNCC explained the still existing tariff-difference between Beeline and Magti/Geocell.
However both Magti and Geocell find this kind of preferential tariff rates discriminating. Magti even tried to find the truth through court and filed a lawsuit on discrimination case at civil court that settled in favor to GNCC on April 12, 2012. Magti went on to Appellation Court of Tbilisi but to no avail. The latter kept the decision of civil court in force in December of 2012.
Discouraged by Georgian court system largely acknowledged to be biased and been under governmental control, Geocell preferred to negotiate the issue through private talks with GNCC officials but to no avail, Sandro Sadaghashvili, Head of Legal Department of Geocell, said.
GNCC claims that no pretension respective Beeline’s inter-connection tariff rate has ever been submitted at GNCC, neither any proof attesting discriminating approach was presented at both GNCC and court.
“I completely agree with the AYFB claim that we have been discriminated and subsidizing Beeline however based on our own experience of unfairly lost legal cases we did not join Magti at court this time and preferred to find some agreement within GNCC [in private negotiations] itself but all efforts appeared futile. Now we have new and more decisive management and I do not rule out to go to court as far as we find the GNCC methodology of defining this interconnection tariff subjective and incorrect,” Sadaghashvili elaborated.
If this time court settles in favor to plaintiff companies GNCC may face financial liabilities to compensate losses to discriminated cell operators as far as it was responsible for defining the law and Beeline just pursued the law. Beeline makes no comments as of yet.
Chichinadze assures the inter-connection tariffs are just a part of illegal practice GNCC has been exercising for years and more revelations are in store.
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