[comp.dcom.telecom] New Telecommunications Opportunities in the USSR

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