Azerbaijan’s Journey towards Mobile Broadband Services

About author

Prof. Dr Ali Abbasov is Azerbaijan’s Minister of Communications and Information Technologies. He received engineering degree from Moscow Energy Institute in Automatic Control and PhD degree from the Ukraine Sciences Academy in computer sciences-microelectronics and served as a professor in informatics at the Azerbaijan Technical University. He has a long and distinguished career in academia, education and the public sector: director of the Institute of Information Technologies of the National Academy of Sciences (1991-2000); Rector of Azerbaijan State Economic University (2000-2004); Member of Azerbaijan National Parliament and of the Parliamentary Assembly of the Council of Europe (2001-2004); Minister of Communications and Information Technologies (2004 - present).

As Minister, Prof. Dr Ali Abbasov pays special attention to the acceleration of transition to the information society and formation of the digital economy, e-government solutions and new technologies, development of broadband services and human recourses in Azerbaijan. He is an initiator of national and regional-level projects such as “Trans-Eurasian Super Information Highway”, “Regional Innovation Zone” and “Azerspace”. He has also played a particular role in the establishment and further development of internet in Azerbaijan.

Abbasov is a full member of the National Academy of Sciences of Azerbaijan and Fellow of the IEEE as well as Commissioner of the Broadband Commission for Digital Development.

Article abstract

Azerbaijan has identified ICT as one of its focus areas. Indeed, there has been good progress in privatising Telecom and encouraging foreign investment. Since 3G licences were granted recently, the popularity of various IP based messaging has increased, but SMS is still the prime vehicle for promotions, broadcasting interaction and banking services. Unlike some countries, devices are not subsidised in Azerbaijan, but smartphone penetration is on the rise as prices begin to fall. As new communication satellite services are launched, Azerbaijan will not only improve its own trans-continent connectivity, but will also maintain its historical Silk Road role as an important transit link between Europe and Asia.

Full Article

After recovering independence in 1991 the Republic of Azerbaijan has successfully leveraged its historical role in the oil and gas industry. A boom in oil-related revenues had the potential to dramatically increase the GDP over the last decade, stimulating the development of other sectors. The Government has implemented tangible measures to diversify the economy in order to prepare for the eventual depletion of energy reserves. Several state programs in various sectors including ICT, tourism, construction and agriculture gave the economy a boost in 2010. Non-oil economic growth was strong in 2010 at 7.6 per cent, compared to 3 per cent a year earlier, largely encouraged by high public investment spending .

In line with the Government’s plans for diversification it is considered a priority to encourage foreign investment into the country. Incentives have been set to simplify the business registration procedures. In the IFC’s (International Finance Corporation) “Doing Business 2011 ” Azerbaijan is positioned well in starting up a business, registering property, protecting investors, enforcement of contracts and obtaining access to credit. More progress is being made with registration period for foreign companies through benefiting e-service applications. However, the largest challenge remains the excessive document requirements for international trade, customs procedures, time required and high costs for transactions.

In recent years, the ICT sector has played an increasingly important role in the socio-economic development of Azerbaijan. In recognition of that important role, the Government has identified ICT as one of the priority sectors of the national economy, and has taken significant steps towards the formation of information society and knowledge-based economy. These developments are reflected by the private sector’s share of the overall ICT market, which has soared from 67.3 per cent in 2003 to 80.0 per cent in 2011. Moreover, all of the market players have been very active in investing. ICT-related investment has reached $2.0 billion since 2004, 25 per cent of which was FDI (foreign direct investment).
The largest FDIs in the ICT sector have been in mobile telepho¬ny, followed by a number of companies with fixed line operations, internet and cable TV distribution. In 2007 the public shares in two mobile operators – Azercell and Bakcell were privatized. In 2009 Azerfon, the country’s youngest mobile operator signed a Partner Market Agreement with Vodafone to ensure Vodafone’s presence in the local market of Azerbaijan. Mobile broadband increased significantly after Azerfon was granted a 3G license, recently followed by Azercell and Bakcell.
For the first half of 2011, the number of subscription per 100 inhabitants reached 110, which was higher than the world average by 1.4 times. However, the average Minutes-of-Use is one of the lowest in the CIS region . The reason behind it is the increasing popularity of various Internet-based IM applications such as iMessage, BBM, Twitter, Google Voice, Facebook messaging. Yet peer-to-peer SMS still holds the majority of value added services since the premium ones are widely used in broadcast media, promotion campaigns, banking and student admissions. Micro-billing services are becoming trendy among young people and subscribers who don’t have a banking account.
Through the recommendations of the Ministry of Communications and Information Technologies in 2011, the mobile operators have switched into the new manat -based billing system which ended a major area of complains from subscribers, giving them permission to manage their phone calls properly and control their account balance. Enabling number portability is also expected to boost the mobile data and mobile broadband.
The market is moving from a traditional mobile Voice to one with mobile broadband. The demands for smart-phones and various mobile applications have been noticeably increased. It is important that both content and applications are developed with local tastes, interests and ICT literacy in mind. There is no subsidy market in Azerbaijan as operators are reluctant to deal with risks of subscribers’ instability. The challenges of custom clearance, warehousing and cash payment for handsets also hamper practicing of the device subsidy model.

However, the annual growth of local smartphone market is about 15 per cent and it is highly competitive. The development of tourism and particularly Eurovision, the popular song contest to be held in Baku, has considerably endorsed the investment to expand further and strengthen the 3G networks and promotional applications. Despite the fact that use of cell services and the price of advanced handsets remain expensive for the average Azerbaijan consumer, prices are coming down as a result of greater competition, with companies launching incentive schemes to attract new customers and to retain existing ones.

Development of the efficient provision of e-government services is also expected to open up the further opportunities for advanced applications and ensure transparent and prompt online interactions. Based on Microsoft’s solution, the ‘National Electronic Digital Signature’ has been introduced. It has a positive impact on development of e-services and provision of information security. Business and financial services are gradually going online. E-payment systems are in active service and hundreds of merchants are now connected.

Another remarkable fact in the development of the Azerbaijan’s telecom infrastructure will be the satellite program supervised by state-owned Azercosmos OJSC. The first step in that program is to launch Azerspace-1, the region’s first telecommunications satellite. The satellite will upgrade the quality of TV broadcasting and telecommunications not only in Azerbaijan but also throughout the Eurasia and CIS regions and will transform Azerbaijan into a major relay site for signal transmission between Europe and Asia. The satellite’s footprint will cover Eastern Europe, Central Asia, and Africa. Azerbaijan is going to use only a quarter of the Azerspace-1 capacity, while the rest will be available for leasing. Azercosmos plans to launch a second satellite, Azerspace-2, in 2015, which will expand Azerbaijan’s satellite capacity further.
By strengthening regulatory frameworks and embarking on strategic initiatives to expand domestic and international connectivity while improving citizens’ capacities to access and utilize broadband, Azerbaijan has the potential to create an infrastructure that supports its development of the knowledge-based business and helps diversify its economy. As a part of the historical Silk Road, today Azerbaijan continues playing its traditional role as a transit country for the number of emerging opportunities for the development of the region.