For many sectors of the Russian economy, the country’s accession to the World Trade Organization (WTO) signifies the beginning of a long period of transition. For instance, under the WTO requirements, Russia will have to remove all restrictions on foreign-company involvement in the country’s telecoms market only by 2016. Until then, a national monopoly on long-distance services and the limited participation of foreign companies in the major Russian telecoms operators remain the main barriers to free-market access.
It is a common practice during WTO negotiations to pay thorough attention to telecoms market regulations. Making no exception to this rule, Russia has been under pressure to assure equal access to the market and eliminate any discriminating treatment in respect of international telecoms companies.
For example, much time has been spent on negotiating the elimination of the major Russian operators’ (such as Rostelecom’s) monopoly on fixed long-distance services. In this respect, the WTO has expressed its disapproval of the cross-subsidisation practice that has permitted monopolies to maintain lower prices on local services (as compared to their competitors) at the cost of excessive prices on long-distance services.
In turn, Russia has tried not only to retain the advantages of national operators for as long as possible, but has also restricted the participation of foreign companies in the share capital of those operators.
Negotiations have led to a transition period, which has resulted in Russia assuming certain obligations that are applicable as of the date of accession, whereas other obligations will come into force at a set time in the future.
Access to the Russian market
Under the Protocol on accession to the WTO (the “Protocol”), all restrictions with regard to foreign companies, other than those directly mentioned in the text of the Protocol, are strictly forbidden. Russia is not permitted to establish any additional barriers on the access of foreign companies to the Russian market, and it may not treat such companies as national ones.
In addition to the restrictions applicable on all types of services, the following limits are applied in respect of the cross-border supply of services and commercial presence of foreign companies on the Russian telecoms market.
- Cross-border supply
From the date of accession to the WTO, there shall be no restrictions for supply of services only with respect to fixed satellite services provided by foreign satellite operators to any legal entity of Russia which has a license for telecoms services.
Within three years of Russia's accession to the WTO, all restrictions must be eliminated with respect to other satellite services provided by foreign satellite operators to any legal entity of Russia (provided that those Russian legal entities have licenses to provide telecoms services).
- Commercial presence
The commercial presence of foreign companies in Russia will still be limited to participating in the share capital of Russian companies and to establishing branches as legal entities of Russia.
Furthermore, for four years from accession to the WTO, total foreign participation in the charter capital of major “incumbent” operators (or successors of such operators) must not exceed 49%. The list of said incumbent operators is enclosed as a separate Annex to the Protocol. It includes such operators as OJSC Rostelecom, SUE Space Communication (State Unitary Enterprise), etc.
Russia’s additional commitments on basic telecoms services
Russia assumes a number of commitments under the WTO. These concern exclusively basic telecoms services, i.e. services of telephone communication, telex, telegraph, fax and private fixed network services (on lease).
Russia must adhere to the following principles under the WTO:
- Maintain competition on the telecoms market, meaning prohibiting cross-subsidisation as well as any other practices that distort competition (including refusing to provide competitors with important technical information about essential facilities and using information obtained from competitors with anti-competitive results);
- Provide equal access to the network of the major operators (interconnection), i.e. the possibility to link to the network of the main suppliers at any technically feasible point in such networks under non-discriminatory terms and at a reasonable price (at cost, as proposed by the WTO);
- Provide the population of a joining country with universal qualitative connection at a reasonable price (providing “universal connection service”);
- Provide the availability of licensing criteria, public availability of licensing criteria and information on the period for obtaining a license;
- Have independent regulators, meaning that they will not be involved in the administration of telecoms companies or act as interested parties;
- Allocate scarce resources fairly, which implies that any scarce resources (frequency numbers, most of all) will be allocated in an objective, timely and non-discriminatory manner.
In this way, Russia is ready to forfeit the current privileges of the major national telecoms providers and to abolish limitations with regard to a foreign company’s participation in Russian communication providers. However, international companies will not be granted full access to the Russian market until the local tariffs are settled, non-discriminatory access to the existing networks is provided, minimal guaranteed standards of service are established, and the licensing criteria are open and fair. These are the main challenges of the telecoms sector for the transition period.