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FOCUS: Technological neutrality unreasonable with extra charges for operators

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MOSCOW, Nov 25 (PRIME) -- Russian telecom regulators expect that the introduction of the technological neutrality principles allowing operators to develop any communications technology over available frequency bands will help them resolve the long-standing problem of unequal development of Internet access services in the country’s regions. The authorities plan to oblige operators to cover remote and sparsely populated areas with mobile broadband services, if the operators want to develop advanced technologies using the available frequencies. Market experts believe that extra obligations make the idea of introducing technological neutrality in Russia absolutely meaningless.

EXTRA OBLIGATIONS

The State Radio Frequency Commission will discuss the development of fourth generation (4G) Long Term Evolution (LTE) services on the 1,800 MHz and 900 MHz frequency bands commonly used for second generation, or GSM, voice services on December 11, Communications and Mass Media Minister Nikolai Nikiforov said in an interview with Rossiya 24 TV channel on November 12.

Nikiforov said that previous meetings of the commission devoted to the same issue were postponed, as market participants and regulators needed to agree on additional obligations that would be imposed on operators wishing to develop LTE networks over the GSM bands.

Initially, the commission planned to oblige the operators to build LTE networks in 40% of the localities with a population of at least 10,000 people in each region within one year of the companies receiving the needed permissions. During the following year, the operator would have to cover 70% of these settlements; and in two years, 100% of the region’s settlements should have LTE services available.

Nikiforov said he proposed obliging the operators that plan to use a channel with a bandwidth of up to 1 GHz, to cover residential settlements with populations of over 1,000 people with 4G LTE networks in five years after obtaining permission. The operators that plan to use the 1–2 GHz channel will have to cover residential settlements with population of over 2,000 people, and those telecoms planning to use more than 2GHz channels will have to cover towns and villages with over 10,000 people.

According to the Federal Antimonopoly Service’s Director Igor Artemyev, these sorts of obligations are reasonable, but they should not only be applied to operators that will receive new licenses to develop LTE service, but also to major operators that already have licenses to develop GSM, third generation (3G), and 4G LTE services.

MEANINGLESS DEAL

“By admitting new players to the LTE market, the regulator is trying to resolve its own problems. But the operators are, of course, unlikely to be enthusiastic about additional burdens,” Direct INFO’s Executive Director Alexei Kondrashov told PRIME.

“For example, none of operators has 100% coverage on the 900 MHz band, therefore the development of mobile services within these frequencies in sparsely populated areas will require significant investments,” Kondrashov said.

The 1,800 MHz band is not suitable for the development of mobile broadband services in remote and sparsely populated areas, Vitaly Solonin, director of the wireless technologies department at J’son & Partners Consulting, told PRIME. “In my opinion, the regulator should not impose any obligations in respect to this band,” Solonin said.

If the regulator wants to expand communications services in rural areas, it would be better to use the 450 MHz range, Solonin also said. “In Russia, the lower the range is, the easier it can be developed,” he said.

Apart from the 1,800 MHz band, the technological neutrality principles could be primarily introduced for the 450 MHz band possessed, for example, by wireline giant Rostelecom’s subsidiary Sky Link, Solonin said. “The next ‘candidates’ for LTE are the 900 MHz range and 3.5 GHz band used for Mobile WiMAX services,” he added.

“The plan to introduce the technological neutrality has thus far been overloaded with numerous conditions and restrictions; and now the approval of this initiative has almost lost its sense,” Yury Bryukvin, CEO of St. Petersburg-based information analysis agency Rustele.com, told PRIME.

ONGOING STORY

The issue of the necessity to introduce technological neutrality for the GSM band was raised last year by regional mobile operator Tele2 Russia, who was dissatisfied with the unequal access to LTE frequencies, which were given to wireless broadband operator Scartel, Defense Ministry affiliate Osnova Telekom, and major telecom companies MTS, MegaFon, VimpelCom, and Rostelecom.

In 2012, Tele2 Russia tested the 1,800 MHz band and proved that the provision of 4G LTE services in GSM bands would not have any negative impact on the quality of voice services. But regulators were not entirely satisfied with the result as mobile majors MTS, MegaFon, and VimpelCom did not take part in the experiment.

Tele2 Russia and the Radio Research and Development Institute tested 4G LTE services over the 1,800 band once again this July and have already submitted the results of the tests to the communications ministry. MTS, MegaFon, and VimpelCom have conducted similar tests and are also waiting for the regulator’s resolution.

The introduction of the technological neutrality will help Tele2 Russia expand the geography of its operations. The company now provides GSM services to around 23 million users in 42 of the country’s 83 regions, but does not operate in the lucrative markets of Moscow and the Moscow Region.

Tele2 Russia is preparing for an alliance with Rostelecom, which plans to contribute its mobile assets into a joint mobile venture with Tele2 Russia. The creation of this alliance will strengthen Tele2 Russia’s market positions and help the operator to force the regulators to decide soon on the development of LTE services over the GSM ranges, experts said.

“We can expect that the decision on the technological neutrality over the 1,800 MHz band will be made in the near future now that the proposed alliance between Rostelecom and Tele2 Russia has changed the landscape of the market,” Solonin from J’son & Partners Consulting said.

The current shareholders of Tele2 Russia should be most interested in technological neutrality in the 1,800 MHz band, Solonin said. “The possibility to use these frequencies for LTE services will surely increase the market value of the mobile operator,” he said.

Bryukvin from Rustele.com disagreed, saying that in 2011–2012, Tele2 Russia and Rostelecom with all its mobile subsidiaries were strongly interested in an option to provide 4G LTE services over the 1,800 MHz band. “However, the introduction of technological neutrality will obviously increase competition in the mobile market, and the lobby of the Big Three mobile operators appeared to be stronger at that time,” he said.

At the same time, the situation has changed following the proposed Rostelecom–Tele2 Russia joint venture. Small regional cellular operators, SMARTS and MOTIV, are now mainly interested in technological neutrality in the 1,800 MHz band, Solonin said. “But these companies do not have enough lobbying capacities to press for a favorable decision by the regulator,” he added.

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