The first years of Russian transition were extremely difficult. The economic activity decreased dramatically, while price inflation was rampant. Massive capital flight took place.
A semi-fixed exchange was introduced in 1998 in order to create an atmosphere of stability.
However, the currency system of managed floating collapsed in August of the same year.
The devaluation crisis of 1998 was an obvious blessing for the Russian economy. A new realistic exchange rate created precondition for an investment boom. A dramatic turnaround took place in the Russian economy, which profited enormously of a world market boom of oil prices in 2000. In the post-devaluation period, the Russian economy has grown with an average annual real rate of about 6%.
Some revolutionary changes have occurred in the post-Soviet Russia in the sphere of telecommunication. In the period of central planning, information technology was strictly guided by communist authorities. The creation of decentralized market has launched a golden era of telecommunication with modern methods of this sphere. A huge market with a population of almost 150 million people opened up for mobile telephony. The biggest country of the world with very low population density offers really optimal potential for modern telecommunication.
Telecom service sector is clearly a capital-intensive branch. Both capital and technology are available in the global economy. Thus, it is not surprising that the Russian economy has lately experienced a breath-taking boom. A multitude of mobile phone operators appeared on the market containing plenty of foreign capital. Not surprisingly, mobile phone operators conquered the two metropolitan areas (Moscow and St. Petersburg) first. The mobile phone penetration rates in these two areas with high concentration of people and purchasing power increased very rapidly already in the 1990s. Price level was rather convenient from the investors’ point of view.
In the early years of the 21st century, there have been several interesting features in the developments of the mobile phone market of Russia. A clear consolidation process can be observed. Mergers and acquisitions have taken place. Presently, there are three main operators in the mobile phone game. In this oligopolistic market, all major players are interested in
“regions”, which means all the rest of the country outside of the two metropolitan areas. This run to the regions means that huge sums have been invested in the mobile phone
infrastructure. In the overall equity stock in this branch, foreign companies have an estimated share of 85%. Overall penetration rates have increased exponentially.
The mobile phone revolution in Russia with very clear oligopolistic features has in the last couple of years had very concrete advantages for the subscribers: the operators are in the middle of a fierce price war. The costs of using the new mobile devices have decreased really dramatically (ARPU dropped by almost 20% in 2003). As all operators must continuously watch carefully the market share chart, there is hardly any leeway for price hikes.
In every market, price is only one means of competition. All providers of mobile phone services can potentially enlarge the range of offered services, improve the quality and launch new technologies. Obviously, the main operators of the Russian mobile phone business are able to offer a wide range of high value-added services, for which the potential clientele is in the corporate sector. The growth in this field is closely linked with the development of the SME-sector (small and medium-sized enterprises). Continuous economic growth is likely to improve the performance of the SME-sector, which would be good news for the mobile operators.
Obviously, amid the consolidation of the mobile phone market in Russia, only resourceful operators will survive. The remaining players have either money of their own or access to favorable credits. However, every single one must make their feasibility – studies carefully, and consider payback periods of new networks with advanced technology in accordance with the expected cash flow. In the investment decisions it is also of utmost importance to pay attention to the availability of the free frequencies in different bands allocated for mobile networks deployment. In this field, there is the historical preference given to military and other state purposes.
As shown above, the legal and administrative environment is rather complicated in Russia.
However, in this respect the situation is improving. However, it can be assumed that certain groups (for example, remaining small operators with old technology) have an interest in hampering development.
The general growth prospects of the Russian economy can be judged positively. The main export article of the country – oil – is catching very high prices. Natural gas is following closely oil price trends. Products of metallurgy are in high demand. Thus, economic growth is likely to be sustainable. With the increasing living standard, the prospects in mobile phone services are excellent. The overall saturation of the market is not reached yet. The fixed-line
telephone is an inferior competitor to the more modern mobile telephony in the huge area of Russian Federation.
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Analysis of technological factors preventing mobile networks infrastructure development in Russia
Efimushkin V.A., Ph.D.
Associate Professor of Telecommunication Systems Department of Peoples’ Friendship University, Moscow, Russia
This paper is focused on the technological factors preventing mobile networks infrastructure development in Russia and considers and analyzes papers and documents devoted to the problem [1-11].
Mobile networks infrastructure is very heterogeneous in Russia nowadays. In Russia networks of different standards and generation have been developed. In some regions first-generation networks NMT-450, AMPS/DAMPS are still in use. Commercial operation of IMT-MC-450 networks, which are aimed to replace NMT-450 networks, have started. And, finally, pilot UMTS networks projects are deployed in Moscow, St-Petersburg and some other cities.
GPRS data packet switching equipment is inculcated in different regions, promoting a network conversion to 3G. Now in Russia more than 42 million people use cell phones, and 40 million of them use GSM.
The first thing that is striking – irregularity of development of regional mobile markets and their lag from Moscow and St. Petersburg. Some mobile networks in Russia give way to communication networks in developed countries for the level of technical development.
However, there is a huge analog network close by, some digital devices have to work in analog environment. Yet the level of mobile networks penetration is 75% in Moscow and 64% in St-Petersburg.
In such conditions the infrastructure development in Russia depends on a wide range of factors:
• radio-frequency spectrum available;
• trends of national mobile networks development, directed to the range of services expansion;
• development of Public Switched Telephone Network (PSTN) and its suitability to mobile systems introduction and development.
In Russia the mobile 2.5G networks development and parallel introduction of third-generation mobile networks are now foreseen. Third-generation system is a new stage in
telecommunication development. It allows to integrate mobile networks system, wireless access connection and data transmission system, ground and satellite system and others, it enables to realize convergence of fixed and mobile networks, it will provide a wide range of new services such as high-speed data transmission, multimedia services and others. For such systems of third-generation 2 GHz range with 2x40 MHz bandwidth is provided.
A conversion to the third-generation mobile systems needs more frequency bandwidth. This problem can be solved by transforming the native system of air navigation to another range and releasing the necessary range according to the radio communication regulations for the mobile network systems. To continue slim development of the mobile sector and ensure integration of the Russian mobile infrastructure with European the civil frequency allocations have to correspond to those adopted in other European countries. This will allow to essentially increase the effectiveness of radio-frequency spectrum use by existing and emerging technologies.
In Russia because the frequency range for mobile networks used all over the world is occupied by other systems of military and civil purposes, frequency range for mobile networks system is assigned by residual principle. That is why the native frequency allocation table is essentially different from radio communication regulations that prevents the necessary technology development in Russia. Besides, frequency allocation in different ranges for mobile networks of technologies of the same kind leads to the situation when it becomes impossible to allocate a whole bandwidth for each of them. That is why frequency range is used ineffectively, mobile networks capacity is decreased essentially and mobile networks system development becomes very complicated.
Since mobile networks development in Russia is kept back by the lack of frequency range, some possibilities of new frequency bands allocation for this service and all kinds of limitations for the frequencies which are already in use removal are considered.
Another factor influencing mobile networks infrastructure development in Russia is global trend of mobile network development, directed to the service range enlargement. Mobile operators are interested in evolutionary development of existing network infrastructure, which will allow to create new services not reside to such networks until now. Further infrastructure development with the purpose of capacity increase, range of services enlargement, system functionality quality increase is possible in the presence of new communication protocols and network management methods creation, which include time and frequency bands allocation, mobile networks subscribers localization, handover and etc. These problems are solved in the
context of third-generation networks creation. Active Internet and Local Area Networks growth supporting IP packets transmission expansion acted as an essential impulse in this problem solving.
Mobile networks infrastructure modernization in Russia will be carried out in several stages:
GPRS, EDGE, UMTS. These technologies introduction on the stage of GPRS/EDGE will allow to realize mobile access to Internet services. However, available radio-frequency resources and transitional technologies GPRS/EDGE on this stage will bound the operators by narrowband communication modes. Providing a wide range of I&R, e-mail and WAP services will need a transition to the wideband third-generation systems.
GPRS technology is a very important stage in GSM networks evolution. GPRS introduction ability in Russia is achieved due to the wide prevalence of GSM standard which is basic for GPRS and needs only active network modernization:
• GSM radio channels are modified: new multi-user modes of time slots using in hardware and software are introduced on base stations;
• new nodes of packet switching appear in GSM network structure: SGSN and GGSN.
Thus, GSM operators in Russia can concurrently solve two important interconnected problems by GPRS developing:
• totally reconstruct network infrastructure and introduce high-speed channels and communication modes;
• gradually create new network infrastructure corresponding to Mobile IP standards and new applications. Global roaming environment for users of any kind of mobile networks (GSM, IMT-MC, UMTS and others) have Mobile IP gateways in their network infrastructure can appear in the future on the basis of Mobile.
However, network infrastructure evolution according to the requirements of radio-communication wideband channels and high-speed multimedia streams support now cannot be achieved only by modernization of base stations and new GPRS nodes introduction to the existing mobile networks. Range of services enlargement and integration with other IP networks requirement make operators in Russia and network equipment producers to find more global architectural solutions which will divide operator’s network infrastructure into separate levels according to the following principle: “private network” – “backbone IP networks and internetwork gateways” – “application servers and service nodes”.
Mobile communication technologies rapidly develop in the last 10-15 years. The core of their development – large and very large scale integration circuits, high productive microprocessor,
high-capacity DSP-processors, LCDs and other technical innovations. Fundamentally, new methods and algorithms for radiochannel access, information compression/decompression, signal coding and modulation, antenna adaptive tuning and others have been developed.
Internet in Russia has been developed in a similar way. Besides, success in the rapid Internet development in many respects is accounted for new communication protocols creation skills.
However there is a number of differences in mobile networks and Internet development: for instance Internet applications in Russia have a high productive channel infrastructure from the beginning, while mobile communication only starts to use new speeds in radiochannels;
Internet protocols architecture is democratic and open to general use, while mobile communication protocols architecture only starts to form as a global management and data stream organization systems and so on.
The mentioned factors have a great influence on the process of Internet and mobile communications evolution in Russia:
• Mobile Internet will rapidly grow to mass technology of wireless access;
• Internet protocols are introduced into protocols of mobile communications unchanged or being slightly adapted;
• There is an intensive development of integrated protocols of mobile networks and Internet access: Wireless IP, Mobile IP, WAP, etc.
When talking about 3G networks, authorities of Ministry of Communications of Russian Federation mean “European” UMTS standard. Successful development of UMTS will depend on an availability of services. IP technology offers flexible means of services creation and provides possibilities for introduction of new multimedia services. As for convergent services for mobile networks, the main goal is to provide wire and wireless access to promising services of 3G mobile networks. There are many ways of fixed and mobile networks (such as Bluetooth, WLAN, DECT, satellite systems, basic rate access networks and so on) interaction for a provisioning of wireless access to 3G services. The usage of combined fixed and mobile wireless access to 3G services has many advantages. On the one hand, providers could cut the costs of mobile networks infrastructure. Besides, providers could use the existing equipment of local networks, which is very important in Russia. On the other hand, users will gain dedicated high-speed channels, which can provide higher transmission rates compare to offered by mobile systems.
The main factor of mobile networks development is a process of convergence. The convergence is an interaction of different networks (different in nature and in functionality).
The process of convergence is an event of similarity in soft and hardware structure and in part of providing services.
Wireless access to Internet through mobile networks will expand the fixed global network infrastructure, the same way as 2G mobile networks enlarged PSTN networks. There will be a great variety of access technologies, such as GSM, UMTS/UTRAN, WLAN, etc. However, terminal applications will choose the technology, which will meet special requirements for conditions of radio-waves propagation, location, quality of service and cost. Besides, the network will provide mobile access to Internet and roaming.
Introduction of 3G mobile networks in Russia is hampered by lack of necessary equipment.
Furthermore, the main advantages of the new technology – mobile high-speed access to Internet and capability of video transmission to mobile phones at 2 Мb/s – has not been realized in trial 3G networks in Russia.
The equipment certification process in Russia is additional reason, which prevents 3G network deployment. Russian regulations do not consider the results of certification tests made by European and American certification centers and so it increases the equipment introduction period into Russian market. Moreover, it has to do compatibility tests of equipment to Russian networks.
Another reason preventing development of third-generation mobile communication in Russia
Another reason preventing development of third-generation mobile communication in Russia