sovamcccp@cdp.uucp (04/09/90)
Note from Andrei: This file will update the status of telecommunications in the USSR. Article will be published in some US magazines. Warning! Copyright. [Moderator's Note: Used in TELECOM Digest / comp.dcom.telecom and affiliated or associated telecom echos, or newsgroups with the permission of the author. Permission is given to reprint anywhere TELECOM Digest is normally distributed. PT] NEW TELECOMMUNICATIONS OPPORTUNITIES IN THE SOVIET UNION Paul Falchi, Deputy Director General SOVAM TELEPORT (Moscow) and Director Marketing/Sales San Francisco/Moscow Teleport o Challenges in the Gorbachev Era o Current Telecommunications Project o Realizing New Ideas o Leap Frog and Customer Applications o Future is Bright for "Telestroika" The radical political changes in the Soviet Union have spurred new conditions and directions for economic transformation and innovation. A dynamic political landscape has set the framework for an evolution of the national and regional economies to move to a mixed economy involving better conditions for implementing telcommunications technologies and applications. As such, European, Japanese and North American participation will increase in the arena of engineering feasibilty studies, international investment in facilities and manufacturing and joint venture participation. Much commercial activity will take place, as national economic policy is retooling from a military-oriented emphasis to a consumer production direction. 800 services, telemarketing applications, answering machines, photocopiers, fax machines and plain old telephone directories are virtually nonexistent. All international calls placed from the Soviet Union and many long distance calls withing the country must be operator handled. By the year 2000, the Soviet Union telecommunications infrastructure will require massive investments to upgrade antiquated network facilities. This new emerging market translates into a lucrative, large and fast-growing potential for foreign participation. Challenges in the Gorbachev Era The telecommunications market, in the Soviet Union, both in terms of increased availability and improved quality, is facing tremendous changes for both providers and customers. The Soviet Union, today, has a very low penetration of telephones in its urban and rural areas -- less than 10% of households in the country have telephone sets. Of course, in major cities as Moscow, Leningrad and Kiev, household telephone penetration is significantly higher. Serious supply constraints are to be found also, in switching and transmission facilities. Some existing network facilities date back to the pre-1917 Revolution period; for example, single copper wire placed in 1907 by the Swedish company Ericsson, is till being utilized. As of 1989, only two major facilities in Moscow utilized modern digital PBX facilities. However, even with serious supply constraints, some interesting indications of tremendous market growth are emerging. In the last few years, US/USSR telephone traffic has shown robust activity. On the average, originating telephone traffic in the US to the USSR has increased about 35% per year, and voice traffic from the USSR to the US increased about 50%. Such growth compares favorably to other market growth. Annual Telecommunications Industry Growth o US Long Distance Voice Traffic 10% o US Enhanced Telecommunications Services 25/50% o RBOC Local Telephone Traffic 5% o International Voice Traffic from US 20% o US/USSR Telephone Traffic: Originating in US Terminating in US 35% 50% Demand for telephone traffic between the two countries will increasingly exceed capacity. This should result in growth of traffic in the 50% per year range. The Soviet Union not only represents a huge market but, aslo, represents having a very low installed base of modern equipment and telecommunications infrastructure. This has prompted some perceptive and agressive responds by Western firms, which even a few years ago would have been impossible. Current Telecommunications Projects o MCI has set up a deal to set up a satellite-based system for live video-conferencing between Moscow and US. o AT&T is actively supporting increased telecommunications circuits between the two countries by using the USSR's Instersputnik satellite system for the first time. o US West International and seven other international telecommunications companies want to develop a trans-Soviet fiber optic cable system linking Europe to Asia and the Pacific Ocean region. o Arthur D. Little, Inc., a management and technology consulting firm, has formed a partnership to develop Soviet technology. Realized New Ideas SOVAM TELEPORT is an example of a small player recognizing the immense needs, taking risks and initiative and finding a market niche. In late 1989, the first Soviet-American joint venture in telecommunications was formed by the All-Union Scientific Research Insitute for Applied Automated Systems (VNIIPAS) and the San Francisco/Moscow Teleport company, which have been collaborating closely since 1984. The joint venture has the financial support in the US from three leading businessmen - George Soros, Alan Slifka, from New York, and Henry Dakin from San Francisco. The Soviet parent, VNIIPAS, is the official record carrier in the field of data communications, packet-switching and various other computer/telecommunications projects. The new joint venture provides the following services: o Electronic mail between the Soviet Union and the US o Direct PC to Host Computer Service between US and USSR (*) o PC and Equipment Sales and Rentals o Telecom Consulting o Data Base Access o Direct Digital Private Lines Customer Applications and "Leap Frog" Possibilities o The focus on telecommunications market should be two-fold: 1) provide rapid technology development and deployment; and 2) investigate market sucess in developing new customer applications. In other words, technology innovation needs to be directed with very specicic customer benefits in order to gain widespread acceptance. At the same time, creative efforts to introduce new services, effectively, will require reorganization of unique customer requirements, marketing approaches and specific customer applications orientation. o The Soviet Union has targeted telecommunications as one of their development priorities. Professor Y.U.Gulyaev, chairman of the Telecommunications and Informatics Committee in the Soviet Parliment and Director of the Institute of Radio Engineering, is a key proponent of the new role of telecommunications development in the Soviet Union. The point is quite clear that as long as customers have to wait years for a phone line and frequently spend significant portions of the day trying to get through to one another, it will be difficult to get other sectors of their economies moving. o However, in the great efforts to build modern a communications infrastructure, there is a risk that a PTT, in the Soviet Union or Eastern Europe, will try to mirror historical technological and investment avenues provided by Western experience. The option to follow the sequences of regulatory structures, network facilities strategies and product/service provisioning may be shortisighted. Countries such as the Soviet Union have the ability in many cases, to leap-frog past business procedures in the West. For example, at the technology level, a strong case can be made for implementing mobile communications, instead of sticking to the traditional practice of hard-wire connections. The cost savings of mobile technologies and faster multiple applications possibilities are quite exciting. Since there is no huge amount of network plant, switches and transmission invested, to depreciate, new networks are more attractive. For a society which desperately needs fast consumer-oriented results, mobile communications provides additional impressive strategic and tactical benefits. Some form of deregulation and liberalization is very likely to be the business context in the coming transition, with the help of foreign investment, from ancient to modern systems. Future is Bright for "Telestroika" With the US beginning to pursue expanded trade agreements with the Soviet Union, a growth umbrella will provide impetus to telecommunications projects. In recent times, trade has hovered between $1 billion and $3 billion a year. A massive increase in US-Soviet trade may see annual trade grow to $10 billion to $15 billion, according to recent reports in the Bush administration. Increased and improved communications will assist the exchange of information -- personal, cultural, commercial and governmental and thereby, improving global relations. Although analog services dominate, strong potential exists to leap-frog technologies and significantly up-date services and introduce new customer applications. Private companies from outside the USSR will be increasingly invited to both build and opertate portions of domestic telephone systems. The Soviet Union's PTT in this decade will concentrate on extending universal service and drastically improving regional and national service. Future expansion of specialized networks, bypass facilities, value-added networks and enhanced services will create opportunities for foreign operators and joint ventures. =====EOF===== Andrei