ARMENIAN PROVIDERS – TEAM UP!
Vyacheslav Khachatryan

ArmInfo. January 30, 2007.

In September, 2006, the National Commission for settlement of public
services of Armenia has represented and constituted in December
the new rules for the cell operators of Armenia. In particular,
to assure a high-quality communication service, the changes will
touch upon the registration, a relevant designing and documenting of
networks, including all the associating permissive documents. However,
a sufficient requirement is a payment of state dues of 2 mln drams
for the work in Armenia’s capital and 500,000 drams in RA regions,
which are fixed in the Law on State Dues. The network operators
will have to pay 3 mln drams of the state due during the work both
in Yerevan and in the regions. At that, all the network operators,
having received this license, will probably get equal rights with
today’s network operators. ArmInfo correspondent has addressed the
Technical Director of "Arminco" Company, the biggest company that
renders an Internet access in Armenia, Grigory Saghyan, for comments
about the influence of changes on Armenia’s Telecom.

Mr. Saghyan, how the regulation is carried out with coming of the
new Law into effect?

According to the new Law, we have two licenses: for rendering of
services by the network, that belongs to the third person (licensed
network operator) or licenses for rendering of network services
(is given to the network operator). According to the Law, if you
are a network operator and you have a network, at that, it is of
no importance whether it is fiber-optic or wireless, the services
should be rendered properly. Because of the absence of standards
in Armenia in this area, it is necessary to be guided by a so-called
business-practice. Let’s consider, for example, the present practice of
"ArmenTel" or "KTelecom" Companies. All the stations of "ArmenTel"
have an uninterruptible power supply, battery rooms, independent
current supply lines, sliders, formal contracts for the rent of areas
for base stations, contracts with the power network. Most likely, the
same demands will be made to those claiming to the network licenses. In
the wide sense, the licenses are given by the state to assure a proper
quality of services based on the user’s interests. You see, the user
should not face the problem that when he wants to be connected up,
somebody had installed a base station, powered by a "friendly user",
or a neighbor had turned it off as it was hiding the view.

How can it be achieved?

First of all, by technical requirements to the network under
construction.

We have no Armenian standards but an actual practice. Following the
logic of decisions, one may suppose that the licenses will be given
to the companies who build the networks in line with the following
standards: reliability, qualified staff and a relevant documentary
completion. In my opinion, these requirements are justified. As for the
small companies, the world experience shows that it is more comfortable
and correct for the regulating authority to influence the network owner
for the latter to enable the small organizations to render services,
using a big operator’s network. The big networks should assist the
others in using all their resources more completely. A simple license
will be probably given for such services (the state due rate is 100,000
drams), which presumes the using of other’s network. This will free the
organizations, rendering such services (a term "value added services"
is sometimes used), from a number of problems: payment of huge means,
a great volume of building and organizational measures.

What is the reason of such rise in prices?

There was no increase of the rates of state dues in 2006, they
had been fixed, if I am not mistaken, in 2004, when the Parliament
adopted an addition to the Law on State Dues. It is very difficult
to carry out an economic calculation of the state due rates: there
are neither formulas nor specific recommendations. Most likely,
it is a question of succession. There was a state due for a license
at the time of the USSR. Probably, this value serves a basis during
establishment of new values, taking into account the change of the
living standard and the sizes of the basket of goods. There is no
definite economic calculation. However, there were probably some
general considerations the Parliament was guided by during adoption
of changes and additions to the Law on State Dues: 100,000 drams for
a simple license and 2,000,000 drams for a network license. If the
network was of a republican scale, the state due made up 3,000,000
drams, if the network is built in a separate region (marz), the state
due is 500,000 drams. By the decision of the Regulating Commission,
the companies which had a simple license (a license for Data Transfer),
are enabled to get a license in a simplified sequence. The companies,
which have no branched infrastructure, can receive the licenses
for operation using the network of another operator. In this case,
connection to the operator’s network is necessary – this is the
"ArmenTel" Company, in our case, to the network of which it is
possible to be connected up from all the regions of Armenia. However,
the connection quality is acceptable not in all the regions. It is
possible to be connected up to the fiber-optic network of "ArmenTel"
in 25 towns of Armenia, while it is impossible in the others, that is
about 22-23 towns. There is no fiber-optic cable there as yet, so the
Soviet infrastructure of communication is still used there. Judging
by the latest information, the Russian companies, including the
"VympelCom", intend to make one and a half-billion investments in
Armenia, and probably, this issue will also be considered.

What is the further development of events?

The further development is completely determined by the policy of the
regulating authority of communications. At least, the last year, the
regulating authority has been inviting, during three months, all the
interested sides to conferences to discuss the issues for separation
of terms of a network service and a service for data transfer. As a
result of these discussions, the regulating authority has resolved,
and I think, quite soundly, that availability of the own wire or
wireless infrastructure falls under the term of a network service. If
the service is rendered through the networks of other operators,
this is not a network service. In this regard, the use of a small
modem with WiFi technology (this is equivalent to a great quantity of
wireless lines and these lines belong to this operator) is, probably,
a network service, for which the payment of a state due makes up 2 mln
drams. It is rather a great amount for that rendering a WiFi service
and a legal rendering of network services by him is unlikely. Taking
into account the society’s demand in such services and the absence
of offer by traditional operators, it makes sense to fix a standard
state due at the rate of 100,000 drams. There is no load on the
budget in this case, since it is rather simple to attract 20 small
companies. The same applies to the regions. The activity of users
there is not so great and it is difficult to find a sufficient amount
of means for these payments. A payment of 2 mln drams for a boundary
region’s operator is difficult, so he will turn to a "shadow activity".

Based on the aforesaid, could you say that high state dues will retard
the development of the branch and of the Internet, in particular?

Yes, the small organizations in this situation have either to fall
back into the shadow, that is not so good, or to combine with big
organizations, which, somehow or other, are able to pay the due of
2 or 3 mln drams per year.

Each organization should decide for itself how to act in the existing
situation.

What steps have been taken to reduce the licensing tariffs?

We have planned to organize a meeting of telecom-companies with
representatives of the active part of the population, which influences
the policy, for them to further the revision of this issue after
having got acquainted with the problem. It will allow a great number
of organizations to keep on rendering the serveces. Moreover, the
issue was revised in many organizations, as well as at the session of
the Council for promotion of information technologies under RA Prime
Minister. Though the authorities are well informed of the situation but
it is aggravated by the fact that several sessions of RA Parliament
of this convocation are left, and it is unlikely that time will be
found at the sessions for this problem solution, since new elections
are assigned for May 12. On the other hand, one may only hope that,
before elections, the representatives of parties will be interested
in a collection of more voices. Such an approach as improvement of
conditions for small companies, reduction of the amount of state dues,
may be positively percieved by the electorate.

How can this high price affect the Internet price?

It is a due, paid by operators, and increase of the license cost
will finanly have a possible affect on the Internet connection
prices. However, I do not think this will be so noticeable for
the users.

What number of companies may suffer from such a solution of the
regulating authority?

I think, all the small providers both in Yerevan and in the regions
will suffer from such a solution. Then changes will especially affect
the companies which operate in Armenia’s regions. A regional network
operator, for example, in the Gegharkunic region, cannot provide a
high-qaulity communication by investing great means and giving an
Internet-access to 20-30 users only. It is commercially not lucrative.

Does it mean that the regions of Armenia may be deprived of an Internet
communication at all?

Of course, not. A possibility of a commutated access (by phone)
remains in any case. That is, one can reach just by an Automatic
Telephone System.

Finally, the regulating authority also realizes the consequences,
even better than me, and it always has all the opportunities to make
a decision for every specific case.

Please, tell about the plans of "Arminco" Company and what is your
prediction of the telecom development in the Republic?

Like 15 years ago, the Internet development is determined by the
"ArmenTel" Company’s policy. We have passed its different stages for
this period, since different owners had different policy. For example,
the "TWT" Company’s policy was aimed, by expression of one of the
managers, Steve Walker, at "Dressing the "ArmenTel" beautifully for
sale". For this reason, the "TWT" displayed no special activity. The
only result was a construction of a fiber-optic circle in Yerevan
and two-three base stations. The Greek"OTE", as we understand now,
also tried to keep a high cost for sale. As for the new owner,
the "VympelCom", we were informed that it is going to make great
investments in the infrastructure. Today, we may say with confidence
that the level of "VympelCom" services gives grounds for optimism.

Then how will you explain the continuation of history with Armenia’s
IP-telephony companies?

First of all, the IP-telephony uses the element of cross financing. The
level of the cost price of services the "ArmenTel" renders by the
local telephone lines is a little lower than they cost in fact. The
"ArmenTel" covers the difference between the actual cost due to high
tariffs for international telephone calls. In fact, the IP-telephony
providers use an expensive telephone network by a tariff lower than
the cost price. The subsidies of "ArmenTel" for keeping the intercity
network operable come from the international calls. It turns out
that the "ArmenTel" subsidizes all the operators of IP-telephony at
the expense of incomes it receives due to a cell communication and
international calls. It is reasonable to assume that as soon as the
"ArmenTel" submits new tariffs to the regulating authority, eliminating
this disproportion, we are in for some raise of tariffs for the local
telephone talks with simultaneous reduction of prices for international
talks. In this case, it will be profitable for "ArmenTel" to render
the local intercity telephone network for services to IP telephone
operators, the telephone company will be interested in the availability
of organizations, which widely use a local telephone network.

In 2006, the regulating authority did not accept the inquiry for
increase (balancing) of tariffs probably because of insufficiently
well-reasoned basis.

The permission for rendering of IP-telephony services will be most
likely given just after these services are profitable to all the
participants: the network operator, the service providers and the
users.

What about the covering of Yerevan with WiFi communication?

Unfortunately, this is a sore point, since if it is possible not
to determine the providers of WiFi services as network operators,
the whole Yerevan would be covered within a month or two.

What projects are under development of "Arminco" Company today?

The "Arminco" is presently working over implementing an
Internet-Television project. Today we provide an access to 40
TV-channels in a test mode. The Company’s specialists are debugging
the network. The problem now is to assure the delivery of these TV
programs to the final user.

Could you, please, tell about the technologies in details.

It has become possible today to transfer great massifs of information
by networks. For example, a TV program requires 2 Mbits/sec. You see,
the television uses the same terms as the Internet and the digital
telephony.

Implementation of a high-definition television (HDT), which requires
20 Mbits/sec, ten times more than the usual MPEG-2, is considered
a very interesting project today. It cam be compared only with a
cinema screen. However, this technology is very sensitive to the loss
of information: "cubes" immediately appear on the screen at a small
information loss. In our case, the only way to connect the final user
to HDT is a fiber-optic network.

When it will be possible to watch this television?

It will be possible to watch it when the population can stably pay for
a high-quality service. For example, the quality of telephone services
in the world is determined by calculation of an average income per
head. If the annual income per head in Armenia makes up a little
more than $1000, in the USA – tens of thousands, it is, of course,
incorrect to compare the opportunities from the viewpoint of a service
level. Those, who invest money in the network services, hope to get a
profit from it, while in a country with a very low level of incomes,
no serious company will make billion investments. In view of this,
one may be sure that our country will create as better conditions as
possible for the development of entrepreneurship, competition support
that, in its turn, will contribute to the growth of the population
welfare and a chance to get high-quality services.