Anatoly Golomolzin discussed development of Russian market of telecommunications and the Internet with foreign investors
“Russia has built up a favourable competitive environment on the market of telecommunications, digital technologies and “digital economy” in general. It is supported and improved through measures aimed at protecting and developing competition”.
Deputy Head of FAS Anatoly Golomolzin talked about this issue at a meeting with representatives of the world investment community on developing the markets of telecommunications and the Internet in Russia on 30 May 2017 in Moscow.
Investors from Norway, Sweden, the USA and other countries who represented foreign financial groups obtained FAS expert opinion about the trends in developing telecommunications and sectors of the so-called “digital economy”.
The range of questions that interested the investors was quite broad: the role of telecommunications and the Internet in the economy in general; the state of competition and the consolidation prospects on the market of information communications technologies (ICT); the level and behaviour of prices for the main services; competition; tariff and sectoral regulation; access to the infrastructure; the basic principles of state policy and its relations to the world practices; the Google case; the prospects of operations of aggregator-companies “Uber” and “Yandex” in on-line taxi booking; development of aviation markets. Detailed comments were given on all issues of interests to the meeting participants.
Answering the questions from representatives of investment funds, Anatoly Golomolzin pointed out that in 2016 the impact of Internet-markets was around 2.8% GDP. Accessibility of broadband Internet (BBI) services is approximately 70%. The penetration rate of cellular communications exceeds 150%, and about 70% of the population are based in the areas of LTE rapid access mobile networks. The costs of cellular services in Russia are one of the cheapest in the world (close to such investment-attractive countries as India, China, Finland), similarly to BBI costs (where Russia is close to the US and Japan); profitability of ICT business is at a very high level. Therefore, Russia demonstrates a high degree of readiness to the network community.
The situation has formed due to developed competitive markets in ICT and the measures undertaken to improve it. To a considerable extent, the government policy is based on the principles of technological neutrality, formalizing the advantages and benefits of convergence in ICT. It concerns approaches of the antimonopoly bodies to making decisions on market analysis and competition protection and is incorporated in allocation of frequency spectrum, licensing, technical regulation, requirements to building up networks and internetworking, in relations with consumers.
Contribution of the markets dependent (related) to the Internet in Russian GDP has already reached 20%. In the global ranking of readiness to the network community Russia moved up from the 56th position in 2012 to the 41st position in 2016. Another important principle under convergence of ICT and other sectors is network neutrality. As an example of the best practice Deputy Head of FAS mentioned the results of the Working Group for devising the Network Neutrality Principles at FAS Expert Council on Communications. “The base document on network neutrality” was adopted after extended public discussions with stakeholders. Following the principles, agreed upon by the business-community and the interested authorities, in the work of telecom operators, Internet-providers and content suppliers, including ОТТ-services, such as organizers of information dissemination, organizers of audio-visual services, ensures investment attractiveness, innovations and efficient competition.
Anatoly Golomolzin pointed out that in Russia the conditions for investment attractiveness are improving through preference to competition-development measures in comparison with direct state regulation. In particular, possibilities of subscribers to choose providers are important for developing competition. In several years approximately 6 million Russian subscribers have been able to move to another mobile provider without changing their telephone numbers due to escaping “mobile slavery” – ensuring portability of mobile phone numbers. Deputy Head of FAS also emphasized the significance of jointly using the infrastructure and radio frequency spectrum to develop competition in telecommunications.
Deregulation of land-line telephony also is under discussion, based on the conditions of its competition with other ICT services. The “Rules for non-discriminatory access to the infrastructure in order to place telecommunications networks” adopted in November 2014 also facilitate development of competition. Anatoly Golomolzin shared details of devising and adopting the “Fair Roaming Principles”. In particular, he informed about the progress in solving the issues of national roaming and terminating use (imposing) intra-network roaming services in 2017.
Efforts to protect and develop competition in international roaming were undertaken under the frame of the Headquarters for Joint Investigations in the CIS as well as the International Roaming Group formed upon an initiative of FAS and Turkey Competition Authority. The Group comprises specialists from antimonopoly bodies of around 20 countries. As a result, in a few years it became possible to manifoldly reduce the inter-operator rates and the costs of communications services in international roaming for subscribers (around 4-8 times for telephone calls and SMS-messaging and around 20-40 times for data transfer). At the same time operators benefited from a proportionate traffic growth.
This experience compares favourably with the experience of the European Union where similar results were achieved through direct tariff regulation rather than protection and development of competition. Another controversial aspect is that in the EU tariff reduction in international roaming happened due to increased tariffs for cellular services in some EU member-states and increased tariffs for international roaming services for some countries that are not members of the EU.
Anatoly Golomolzin pointed out that in the past ten years all except one out of the five companies with the largest capitalization – Microsoft – are replaced. Instead of Exxon Mobil, General Electric, Citigroup and Shell Oil there are Apple, Alphabet (the parent company of Google), Amazon, Facebook. Only digital giants remained in the top-5. All these companies operate in the field of high technologies, and each company dominates the relevant market. Global community and experts do not wish the new giant companies to behave the same way as monopolists on the markets of raw materials and industry 100 years ago.
The antimonopoly bodies are changing their approaches in view of the “digital economy” specifics, particularly, through cooperation within Russian and International Working Groups, EAEU and the CIS. For instance, the International Roaming Group has been transformed into the International Working Group on ICT. Its last regular meeting was held recently in Istanbul (Turkey) to discuss convergence in ICT and approaches to market analysis. Currently, a new practice of investigating antimonopoly cases is establishing.
Commenting on a possible failure by Google to execute an amicable settlement reached between FAS and the American technological giant in April 2017, Anatoly Golomolzin pointed out that this case as well as a series of cases on the telecommunications markets of Russia and the CIS are examples of applying the principles of “The Basic Document on Network Neutrality” in practice. The state has sufficient remedies to protect competition. At the same time Google is interested in executing the agreement, and therefore, adverse scenarios are unlikely. “In the long-term prospect, such companies as Google, are interested in the regulators supporting conditions for fair competition on the market and satisfying new needs of the increasingly more users not only in Russia but also in other countries”, said Deputy Head of FAS.
Regarding relative prospects of the market of on-line taxi booking (particularly using Uber, Yandex and other companies), Anatoly Golomolzin emphasized a positive FAS attitude to developing aggregators on the markets of transport and other services. At the same time, he stressed that companies, which use algorithms that breach the rules of competition, can attract attention of the antimonopoly authority.
Answering questions about the trends on the air carriage market, Deputy Head of FAS mentioned that air fare is affected not only by the conditions of competition within the air transportation sector but also the situation in the related spheres including prices for aviation fuel. At IATA Global Forum in St Petersburg in May 2017 it was emphasized that Russia had created one of the best pricing systems. In particular, up to 20% of the volume of aviation kerosene supplied to the domestic market are traded through the Exchange. Exchange quotations, indices of off-exchange prices and indices of comparable foreign prices are published daily.
Similar work should be done in air transportation. At one of its sessions FAS Methodological Council emphasized the need to publish the relevant price indices for air transportation on a regular basis. It will increase the sector transparency and not only for airlines. Deputy Head of FAS also drew attention to FAS initiatives on pro-competitive entry of airlines to international air carriage markets.
Summing up the meeting results, Anatoly Golomolzin emphasized positive expectations of the regulator with regard to inflow of additional investments into Russian economy.