By Atom Markarian in Yerevan, Harry Tamrazian in Prague
According to a World Bank study, during the last five years the waiting list for installing fixed line telephone connections in Armenia has almost doubled. Meanwhile the demand for fixed line telephone installations in Georgia and Azerbaijan over the same period declined by13 and 17 percent accordingly.
The World Bank study showed that Armenia also has the lowest rate of digitalized telecommunication in the region. The wired-line telecommunication service in Armenia for consumers and corporate clients is almost twice as expensive as in neighboring countries. Mobile telecommunication rates are even more expensive. Almost 4.5 percent of the population in Azerbaijan and almost 2.5 percent in Georgia have cellular phones, compared with only 0.5 percent of Armenians.
Telecommunication in Armenia is a monopoly of the Armentel Company, a subsidiary of the Greek company Hellenic Telecommunications Organization (OTE). In 1998 the Armenian government granted Armentel the exclusive right to all forms of telecommunications in Armenia. In the absence of competition, the Armenian telecommunication market remains under the absolute control of Armentel, which has undisputed pricing power.
The situation is completely different in neighboring Georgia and Azerbaijan, where competition between several foreign and local telecommunication companies pushed down telecommunication tariffs. The fixed rates for mobile telecommunication in Armenia are twice as high as in Azerbaijan and three times higher than in Georgia. At the same time the South Caucasus states have the same per-minute payment rate. The neighboring countries Georgia and Azerbaijan have ten times more mobile phone users than Armenia.
Experts believe an increase in the usage of mobile phone services is an accurate indicator of higher business activity. The increase in mobile phone users is an indirect indicator of a favorable business climate. But Armenia lags its neighbors in this respect as well. The cellular telecommunication in Armenia is affordable only for wealthy people. Most of the Armenian middle class has left the country in the search of better business opportunities.
Armenia also lags behind its neighbors in terms of Internet services. The average cost of Internet service in Armenia is three times higher than in Georgia and Azerbaijan.
The Armenian government hoped that granting exclusive rights to OTE would encourage the Greek company to make multimillion-dollar investments in the telecommunications industry. But so far Armentel has no plans or not enough resources to embark on the modernization of telecommunications equipment. There is no improvement in the quality of telephone connections in Armenia.
The government and the Armenian parliament have tried to renegotiate the terms of Armentel's monopoly and to prevent the company from introducing next month payment-per-minute telephone charges. Several Armenian parties unsuccessfully tried to legally ban the monopoly power of Armentel. But the managing director of Armentel, Georgiolas, made it clear that the OTE management will not agree to the annulment of its monopoly without financial compensation.
Local experts believe that replacing the government's monopoly by a private one didn't improve the telecommunication sector in Armenia. It is hard to believe that the Armenian government will be able to implement its plans to transform the country into the information technology center of the South Caucasus.
Last month Armenian President Robert Kocharian set up a new government council which will try to attract foreign investments in Armenian information technologies.
According to a World Bank study, during the last five years the waiting list for installing fixed line telephone connections in Armenia has almost doubled. Meanwhile the demand for fixed line telephone installations in Georgia and Azerbaijan over the same period declined by13 and 17 percent accordingly.
The World Bank study showed that Armenia also has the lowest rate of digitalized telecommunication in the region. The wired-line telecommunication service in Armenia for consumers and corporate clients is almost twice as expensive as in neighboring countries. Mobile telecommunication rates are even more expensive. Almost 4.5 percent of the population in Azerbaijan and almost 2.5 percent in Georgia have cellular phones, compared with only 0.5 percent of Armenians.
Telecommunication in Armenia is a monopoly of the Armentel Company, a subsidiary of the Greek company Hellenic Telecommunications Organization (OTE). In 1998 the Armenian government granted Armentel the exclusive right to all forms of telecommunications in Armenia. In the absence of competition, the Armenian telecommunication market remains under the absolute control of Armentel, which has undisputed pricing power.
The situation is completely different in neighboring Georgia and Azerbaijan, where competition between several foreign and local telecommunication companies pushed down telecommunication tariffs. The fixed rates for mobile telecommunication in Armenia are twice as high as in Azerbaijan and three times higher than in Georgia. At the same time the South Caucasus states have the same per-minute payment rate. The neighboring countries Georgia and Azerbaijan have ten times more mobile phone users than Armenia.
Experts believe an increase in the usage of mobile phone services is an accurate indicator of higher business activity. The increase in mobile phone users is an indirect indicator of a favorable business climate. But Armenia lags its neighbors in this respect as well. The cellular telecommunication in Armenia is affordable only for wealthy people. Most of the Armenian middle class has left the country in the search of better business opportunities.
Armenia also lags behind its neighbors in terms of Internet services. The average cost of Internet service in Armenia is three times higher than in Georgia and Azerbaijan.
The Armenian government hoped that granting exclusive rights to OTE would encourage the Greek company to make multimillion-dollar investments in the telecommunications industry. But so far Armentel has no plans or not enough resources to embark on the modernization of telecommunications equipment. There is no improvement in the quality of telephone connections in Armenia.
The government and the Armenian parliament have tried to renegotiate the terms of Armentel's monopoly and to prevent the company from introducing next month payment-per-minute telephone charges. Several Armenian parties unsuccessfully tried to legally ban the monopoly power of Armentel. But the managing director of Armentel, Georgiolas, made it clear that the OTE management will not agree to the annulment of its monopoly without financial compensation.
Local experts believe that replacing the government's monopoly by a private one didn't improve the telecommunication sector in Armenia. It is hard to believe that the Armenian government will be able to implement its plans to transform the country into the information technology center of the South Caucasus.
Last month Armenian President Robert Kocharian set up a new government council which will try to attract foreign investments in Armenian information technologies.