East-west as a link
This year for the Azerbaijani users of IT-sector was as a period of unprecedented tariff reductions on broadband Internet, which made this service available to the large layers of population. Ministry of Communications and Information Technologies (MCIT) has begun to reduce tariffs for ADSL-service in December last year, continuing the campaign in January and February, as well as spring and summer of this year.
In general, over the past two years, the Internet tariffs have declined almost four times. Such a sharp decline in the cost of the connection is explained through reduction of prices for external channels (both satellite and terrestrial), reduction in the cost of equipment and increasing of the competition between providers.
As a result, the tariffs for broadband access to the global network in a number of local companies, agents were lower than the average for CIS countries and several states in the region.
The Internet Access Service Market in Azerbaijan has a substantial growth potential as on introducing new services and improving existing ones, as well as increasing the number of users. Over the last years, an increase has been observed in the number of Internet users. According to the Azerbaijani Communications and Information Technology (IT) Ministry's latest data, as for the first half of 2009, the level of internet penetration in Azerbaijan reached 37 percent. Regions are still seriously lagging behind the capital market.
At present 30 internet service providers (ISP) operate in Azerbaijan. Most providers have not yet covered regions outside the capital, not because of the lack of development of telecommunication networks and the high cost of their creation in the regions, but because Internet users are still few in the regions outside Baku.
The Internet Services Market in Baku has been strongly demonopolised. None of providers has a dominant position, but this is due to the fact that the Internet has received most development exclusively in the capital.
The bulk of the Azerbaijani Internet accounts for the primary providers - Delta Telecom and Aztelecom. Another part accounts for secondary providers, most of which lease channels in the primary - mainly from Delta Telecom. Azertelecom Joint Venture (JV) founded recently has become to claim for the role of primary provider. The JV jointly with the Russian telecommunications company Synterra has started to design and construct a cross-border fiber optic transition between Russia and Azerbaijan.
Theoretically, there are several different types of providers. Some specialize in providing services to access, others offer useful online services, while others - the content providers - are involved in design and filling of new web-site content or providing and supporting a full-fledged work of the existing portals. These levels almost do not exist in Azerbaijan. Almost all providers to feel more confident in the market have organized units specializing in the provision of any set of these services.
Today, many providers are added to the list of services and integration services. Providers have actively begun to develop methods for dedicated Internet access connection. The most common types of connections over the last few years have become ADSL and Wi-Fi broadband on technology. WiMAX is gaining more popularity. An average number of a subscriber base of Internet service providers today is about 4,000-7,000 users.
Today's different ways to connect to the Internet please everyone, and competition among providers contributes to improving the quality of Internet services.
Majority of home Internet users still connect to the network via Dial up. Access to the global network through Dial up is the most simple and economical. Its main advantage is a low cost - requires a modem (worth about $10), card access and availability of telephone lines.
After studying the tariff plans of ISP companies, offering Internet cards, one can come to the conclusion that the tariffs of the most providers are completely identical. If one compare prices the providers, they will be virtually identical: 10 hours - 1 manat, 25 hours - 2 manat, 50 hours - 5 manat, etc. The cost of unlimited access is 20 manat per month.
Dial up users of the most providers number around 60-70 percent of its customer base. If we talk about volume of sales, then 35-40 percent of the providers' income will fall to this category of clients.
Yet prospects for Dial up are limited and this technology will dominate on the market around 4-5 years, after which it will be replaced with mobile and dedicated connection. This process has already begun. It is about ADSL service, whose cost is gradually approaching Dial up.
Access via ADSL technology ranks second amongst existing ones on the market at the moment. The introduction of NGN technology by telecom operators also plays an important role in the development of this type of service. Depending on the chosen tariff plan, the cost of high-speed ADSL access is from 30 manat - 256/256 kbit / to 360 manat - 3072/1024 kbps.
Over the past two years the Internet tariffs have declined by 4 times in average and another decrease is expected in September. Such a sharp fall in the cost of the connection occurs due to cut in prices for external channels (both satellite and terrestrial) and the cost of equipment, as well as increasing competition between providers.
Further decline in price subscription fees and equipment (ADSL modems) may change radically the situation and press quite noticeably the Dial up, which in turn may affect the development of home networking market.
The rapid growth of broadband market attracts new players, which are expected to promote cut in prices by creating their own networks. That will consequently lead to reducing prices for users.
At present, wireless access gains more popularity. The wireless network standard Wi-Fi, WiMAX and iBurst have been set up and successfully operate in Baku.
The competition in the market of internet services could significantly tighten soon. Particularly, cellular operators, who will soon carry out the commercial launch of third generation network (3G) may compete with Internet providers. New communication standard is aimed primarily at data transfer with the speed of up to 2 Mbps.
Comforts of the Internet access by 3G technology are obvious. Third-generation network is able to provide mobility, along with the high speed. That is why a large proportion of users (portable computers) will choose this connection that, in turn, will force providers to pay more attention to marketing and lower prices for traditional methods of connection.
The installation of 3G (in the presence of appropriate tariffs) may substantially affect the significant development of the Internet market, particularly, the increase in number of home users of broadband services.