Report: Russia Legalizes VoIP

Economic commentator Nina Kulikova of The Russian Information Agency (Novosti) reported today on the legalization of IP Telephony in Russia.

According to the news item, the Information Technologies Ministry is currently formulating a legal basis for IP telephony. According to the new regulations, operators may receive a license for voice transmission and develop appropriate networks, including intercity ones, and to provide services on the same terms as traditional operators.

The IP operators have responded by saying they fear the licenses will be too expensive. But the authorities believe that, although small companies will really find it hard to comply with all the requirements, the new regulations for IP telephony will allow operators to capitalize their business and improve their positions.

I’m including the complete release below.

2005-04-08 16:52 

IP TELEPHONY MARKET LEGALIZED IN RUSSIA

The Russian government has approved Regulations on Connecting Electric Communication Networks and Their Interaction. This document is one of many designed to reform the legal basis for the communications market in Russia, which, so far, remains monopolized. Most importantly, though, it gives a legal status to phone communications over the Internet, or IP telephony.

IP (or to give it its full name Voice over Internet Protocol) allows people to use the net to transmit voice messages in real time. It began spreading fast in Russia a few years ago and by 2004 the IP market had increased by 45% and had earned more than $160 million.

Many people in Russia have already realized the advantages of this form of communication, as it is cheap and user-friendly. All you have to do is buy a card and with a tone-dialing phone you can speak with anyone in America, for example, and pay 80-86% less than you would by using a traditional operator. One minute on the phone with the U.S. or Europe costs a Moscow-based IP subscriber 9 or 12 cents as opposed to the 50-70 cents usually charged.

Although rates for intercity and international calls using traditional phones are falling in the world, they keep growing in Russia. According to the Ministry of Information Technologies, rates increased by 28% in 2004. Given that most Russians are not high earners, this has left the new service in demand.

People often named the low quality of communication as a drawback of IP, but that was at its dawn in Russia. Now IP quality is approaching its traditional rivals. In fact, corporate clients are increasingly using IP services, because they can combine telephony and computer technologies, which is not something you can do on your old dial up.

The Regulations affect various spheres of the telecommunications sector, and not only IP operators. This document attracted attention on the market primarily because some companies working with IP feared that after the regulations were accepted some operators would have to leave the market. However, the authorities gave assurances that the Regulations would create normal conditions for competition on the market, where traditional communication services and IP telephony may coexist.

No clear rules existed for IP operators until recently. After realizing that a new service had appeared on the market, the authorities classed it as a telematic service (like text messages). The licenses used by IP operators were not directly associated with voice transmission and, in fact, they existed outside legal bounds.

Deputy Information Technologies Minister Dmitry Milovantsev says state-run communications company Rostelecom saw that packets associated with voice transmission passed through it and, hypothetically, it could jam such transmissions. But because of a lack of relevant legislation, a decision was made to refrain from prohibitive technical actions.

The Information Technologies Ministry is currently formulating a legal basis for IP telephony. According to the new regulations, operators may receive a license for voice transmission and develop appropriate networks, including intercity ones, and to provide services on the same terms as traditional operators.

The IP operators have responded by saying they fear the licenses will be too expensive. But the authorities believe that, although small companies will really find it hard to comply with all the requirements, the new regulations for IP telephony will allow operators to capitalize their business and improve their positions. Milovantsev says the expenditures on licensing for business operators are not what matters most here. At a certain stage they will have to make these outlays, but when these companies become more attractive for investment, including foreign money, the situation will change in favor of the operators. The entire world is changing to IP technologies as a basis for telecommunication networks.

At the same time, in keeping with the Connection Rules, the ministry intends to issue licenses for remote voice transmission irrespective of the technology used. However, operators see a problem. Other requirements mean they first have to provide services throughout Russia. But today only a few big traditional operators can do this. The rest will have to sign agency contracts with Rostelecom. This company only emerged on the IP market in 2004 and is way behind independent operators. The authorities have evidently decided to bolster its positions before the upcoming liberalization of the communications market.

Market operators say the specifics of business and technologies that they use should be taken into account in the terms of licensing. But the official position of the ministry is that it has no intention of regulating technologies and is issuing licenses for services.

On the whole, the IP market is developing following global trends in the communications sector. IP traffic already exceeds traffic along traditional lines in many industrialized countries. A complete transition of telecommunication structures to IP telephony is hardly possible in Russia soon, as the infrastructure for traditional networks is just too large, but legislative support for new technologies will help liberalize the communications market. Though the new regulations may complicate the work of small IP operators, in principle the new legislation should help to improve the quality of communication services in Russia.