|Issue:||Europe II 2002|
|Topic:||Connecting Europe, CIS and Asia|
|Author:||Dr. Mikhail Poliantsev|
|Title:||Vice President, Carrier Relations|
Since the Russian Telecommunications market was deregulated in the mid 90’s, new entrants have started to roll out their networks across the country. Among the new networks are those of power utilities, gas and oil companies and railways. Despite many impressive initial plans, only the network put in place by the railways has succeeded on a large scale. This 45,000 km network connects all of Russia’s significant population centers. It is Russia’s largest infrastructure project of the last decade.
As in most of European countries, Russian telecommunications has gone through privatisation and liberalization processes, which accelerated dramatic changes in the industry’s foundations. Today, Russia is rapidly emerging as a new and integral participant in the global telecommunications infrastructure providing excellent opportunities for cooperation of national and global operators. Market growth and competition The Russian telecommunications market has been growing for three years. In 2001, it grew 19% and reached $6.2 billion. According to estimates by The Boston Consulting Group this growth will continue at the rate of 15% annually and will result in a total market of $8 billion by 2004. Mobile and data communications are the most successful sectors, with constantly increasing shares of total revenues. According to the Ministry of Telecommunications and Informatisation of the Russian Federation, the competitive operators employ only 4% of the telecommunications sector’s total labour force, but they produced over 50% of its revenues in 2001. At present, the new telecom companies dominate mobile communications (97.3% by revenues), data communications (78.0%) and Internet access (49.3%). Although competitive operators already have over 54% of total long-distance infrastructure (calculated in circuit-km), they produced only 23.6% of revenues from long-distance and international traditional telephony. This highlights the continuing limitations that new operators face in Russia’s long-distance voice market. Improving Domestic Connectivity Substantial improvement of the telecommunications infrastructure will be needed to adequately serve Russia’s vast territory. During the last decade, several projects were implemented both on the national and regional levels. Most of them have already improved the existing local networks, but they were not focused on radical improvement of national infrastructure. Use of a combination of various copper, microwave and fiber optic technologies is the typical telecommunication landscape in national trunk networks. As a result, it increases the expenses for network management and maintenance costs. Large businesses have steadily increasing needs for telecommunication services. With the liberalization of domestic telecommunications, a number of industries established their own telecom companies. Obviously, the use of their own rights of way to deploy their telecommunications infrastructures was a logical decision for these companies. Now “rights-of-way” operators are becoming an important part of the Russian telecommunication marketplace. Usually, they provide services for their corporate needs and as well as offer their excess capacity to other telecom companies. In 2001, TransTeleCom completed the country’s largest telecommunication project of the last decade. The new fiber optic network, made for Russian Railways, stretches over 45,000 km reaching more than 900 cities and over 90% of the population. The network’s topology corresponds to the map of Russia’s railway system, which connects major cities, industrial areas and marine ports. The network has a multi-ring structure to provide redundancy in the geographically distributed routes. In general, the fiber optic cables have 16 fibers, including 4 non-zero dispersion shifted fibers that can be used in future DWDM systems. Transport SDH level is based on STM-1, STM-4 and STM-16 equipment from internationally recognised suppliers. Competitive operators, using fiber optic cables, have played a significant role in improving the connectivity of Russian cities, which has doubled in the past three years. One of the new networks, for example, connects over 145 cities not served by the regional incumbent operator’s fiber networks. The new operators have connected 40% more Russian cities than all of Russia’s incumbent operators previously served. Railway-based operators have evident advantages compared to other utility operators. First, Russia has a well-developed railway network which connects all the populated areas of the country. On the other hand, power companies – especially gas and oil utility operators – face additional expenses to reach customers since many of their power lines and pipelines pass quite far from populated areas. Secondly, railways are not limited by country boundaries but extended into neighbouring countries. Because of this, between 2001 – 2002 railway based companies were able to interconnect with Finland, Lithuania, Latvia, Kazakhstan, Mongolia and China. Due to these advantages, railway based networks have been better able to meet the needs of the population and provide telecommunication services both domestically and internationally. Servicing New Demands The advent of competition has had a strong impact on the carrier business environment in Russia and opened new possibilities for regional operators. As can be seen above, the competitive operators can meet over 50% of the demands. The rapid success of advanced telecommunication technologies is based on the following: · Digitalisation of telecommunications, which permits the easy storage of large amounts of information for processing by fast computers and transmission at the almost unbelievable rates of today’s fiber optic cables. · Mobility – due to modern radio technologies the customer can be reached by communications services anywhere in the world. · The Internet creates a new, virtual reality through unlimited access to public information sources and, through the convergence of various applications and technologies, gives rise to a new business environment based on IP ubiquity. These new customer values generate new customer needs, which in turn requires more and more capacity and bandwidth in telecommunication links. The huge transmission capacity of optical fiber makes it possible to serve various customers – such as telecommunication carriers, Internet service providers and enterprises – by providing basic carrier services such as National and International Private Lines, Internet Access, IP Transit and IP VPN. In April 2002, IP Virtual Private Networks using Multi-Protocol Label Switching (MPLS) standards were implemented nation-wide in Russia. Solutions based on IP VPN provided several critical advantages for domestic businesses. Firstly, they offer better network performance, at lower total cost, for the transmitted traffic. Secondly, the dedicated IP network used for IP VPN services is distinct from the public Internet. Lastly, MPLS packet routing provides better traffic engineering and introduces various classes of services. There are high expectations for IP VPN services in Russia. According to some estimates, over 50% of companies in the sector see these new services positively and plan to use them in future. New Opportunities for International Operators Since it is located between the rapidly growing European and Asian markets, Russia provides direct connectivity to both regions. Given the regional structure of telecom demand most of the routes were traditionally directed to Europe. Asian connections were not fully established, owing to the absence of reliable redundant routes between Russia’s western and eastern borders, prior to 2002. During 2001, total connectivity with European countries increased by 50%. The DWDM systems planned for installation in 2002 will increase capacity almost 3.4 times by the end of the year. Creation of a redundant telecom infrastructure across Russia opens new opportunities for transit between Europe and Asia via terrestrial routes. Historically, there are strong US/Europe Internet traffic flows which used over 160 Gbps of total capacity by 2001. The US/ Asia Internet routes total 42 Gbps of traffic, but only 1 Gbps transits directly between Asia and Europe. According to the ITU, 80% of Asia/Europe transits pass through North America. It is evident that there is a need to increase the communications infrastructure between Europe and Asia to mirror the growing information exchange and commercial trade between the two regions. In 2003, TransTeleCom plans to start installation of DWDM systems between the European border and China. This project will connect DWDM systems existing abroad to terrestrial capacity on routes between Europe and Asia. Such an infrastructure will benefit global telecom carriers by adding resilience to their global networks and build capacity to serve their growing customer base. Conclusion Russia is rapidly emerging as a new and integral participant in the global telecommunications infrastructure. The creation of the new 45,000 kilometre nation-wide fibre optic network has provided access for more than 900 major cities – over 90% of Russia’s total population. As a result, investment in broadband local loops to reach businesses throughout Russia will accelerate. At present, the network extends to the Far East and China and bridges the old gap in terrestrial routes between Europe and Asia. The new routes will open excellent opportunities for cooperation between national and global operators and will optimise the flow of telecom traffic between the two continents.