Impact on Mobile Operators
In March 2001 an amendment to the Communications Law aimed at cancelling incoming call charges was developed by two members of parliament and submitted to the Parliament for consideration. However, it was never put to vote, as opinions on the issue were divided.
Just 10 months later, on January 17 2002, the Parliament passed in the first reading the revised draft Law on Amending the Communications Law, which cancelled all incoming signal charges for all categories of telephone services customer and introduced a new approach to time tracking. The law provoked heated debate among both communications services operators and their customers. It is still unclear whether the law will be enacted at all, but it has definitely captured public attention.
The drafters of the law believe that incoming calls constitute a service which is provided without the explicit volition of a customer and must therefore be non-chargeable. Charging incoming calls is now considered to be illegal, and the law will prohibit both state owned and private telephone services providers from charging incoming telephone signals for all types of phone services. This approach will be most detrimental to mobile operators, as in Ukraine current fixed-to-mobile/mobile-to-fixed call charges are approximately 80 times higher than those charged for fixed-to-fixed calls, and the customers of mobile operators pay for both incoming and outgoing calls. As yet the mobile operators have no viable alternative to charging for the receipt of incoming calls, due to the out-of-date equipment installed at fixed networks and the absence of respective settlement arrangements with the national communications operator, Ukrtelekom, which runs almost all fixed networks.
Under the new time-tracking approach, local calls may be charged to a customer on a time basis only if a time-tracking device is attached to that customer's telephone. Otherwise, the customer will pay only a fixed service fee. Both a fixed service fee and a per-minute charge are currently paid by telephone service customers.
This law will adversely affect the mobile services market and may even cause the bankruptcy of some operators. If enacted, the probable effects include the following:
- The ratio of incoming/outgoing calls will change to 80:20;
- Prepaid services plans will become unavailable;
- Mobile networks and interconnection equipment will suffer heavy overload;
- Connection charges, security deposits and outgoing call charges will increase significantly;
- Direct seven-digit mobile numbers will be unavailable; and
- Per-second billing will be cancelled.
Oleg Guyduk, Ukrtelekom's chief executive officer, has been quoted as saying: "At present, for technical reasons, Ukrtelekom cannot install time-tracking devices at every customer's premises as required by the draft law." It appears that nearly all customers will pay a fixed service fee irrespective of the number and duration of their calls, thus causing considerable losses for Ukrtelekom.
Though the law is seemingly intended to protect consumer interests, it may render mobile communications services unaffordable for many customers, while operators will sustain losses and budget revenues from taxes will fall dramatically.
Further, Ukrtelekom's unwillingness to comply with the provisions governing local calls charges may result in impediments to the approval and enactment of the law, and lobbying for legislation that is more favourable and protective of this de facto monopolist.
For further information on this topic please contact Igor Svechkar or Pavlo Shevchenko at Shevchenko, Didkovskiy & Partners by telephone (+380 44 230 6000) or by fax (+380 44 230 6001) or by email ([email protected]).