The following section presents a general overview on the regulatory framework in Russia.

Regulation of Telecommunications Industry

In the Russian Federation, telecommunication services are regulated by the federal government. The provision of telecommunications services in Russia is governed by federal legislation, which includes federal laws, presidential and governmental decrees, government regulations and orders, procedures, letters and instructions issued by ministries and other federal executive authorities. The principal law regulating telecommunications in the Russian Federation is the Communications Law, which came into effect on 1 January 2004.

The Communications Law creates a legal basis for state supervision and development of the communications industry and provides, among other things, for the following:

  • licensing of telecommunications services;
  • requirements for obtaining a radio frequency allocation;
  • equipment certification;
  • equal rights for individuals and legal entities, including foreign individuals and legal entities, to offer telecommunications services;
  • effective and fair competition among telecommunications providers;
  • freedom of pricing other than pricing by companies with a substantial position in public telecommunication networks;
  • protection of rights of telecommunications services users and telecommunication services providers; and
  • liability for violations of Russian legislation on telecommunications.

The Communications Law provides for equal rights of individuals and legal entities to participate in certain categories of telecommunications operations and does not currently contain any special restrictions with regard to participation in the Russian telecommunications market of foreign persons. Some restrictions on foreign investments into telecommunications industry, however, are introduced by the Strategic Enterprises Law, which came into effect on 7 May 2008 .

The Communications Law also provides for the special regulation of telecommunications operators occupying a “substantial position” (i.e., operators which together with their affiliates have, in the Russian Federation generally or in a geographically defined specific numerical zone, 25% or more of installed capacity or capacity to carry out transmission of not less than 25% of traffic). We were added to the register of telecommunications operators occupying a substantial position in 2005. As a result, we are subject to the requirements of the Communications Law relating to operators occupying a substantial position in the public switched telephone networks including, among others, the following:

  • we must develop interconnection rules and procedures in accordance with the requirements set forth by the federal government;
  • we must ensure that interconnection agreements with operators who intend to interconnect to their networks are entered on the same terms and conditions as the agreements between our affiliates; we must publish the terms and conditions, including interconnect and traffic transit rates which are regulated by Rossvyaz; we also cannot refuse to provide interconnection or discriminate against one operator over another; and
  • the Roscomnadzor may monitor our interconnection terms and procedures and issue mandatory orders where non-compliance with the law is found.

The Natural Monopolies Law establishes the legal basis for the federal regulation of natural monopolies (such as us) and provides for state control over tariffs and other activities of natural monopolies. The Federal Service for Tariffs oversees the implementation of this law, which significantly impacts the ability of certain categories of telecommunications providers to set tariffs. The Natural Monopolies Law and the Competition Law, also control the types of transactions into which a regulated entity may enter. Regulated entities are subject to continuous reporting requirements, which include the submission of plans for capital investments. In addition, regulated entities may not refuse to enter into contracts with particular consumers if required by the regulatory authority. As the primary provider of fixed-line voice telephony in Russia, we have been subject to regulation under these laws. As of December 2010, we were included in the list of natural monopolies.

Regulatory Authorities

The Russian telecommunications industry is regulated by several governmental agencies. These agencies form a complex, multi-tier system of regulation that resulted, in part, from the implementation of the Communications Law, as well as from the restructuring of the Russian government.

Mincomsvyaz is the federal executive body that develops and supervises the implementation of governmental policy in the area of communications and coordinates and controls the activities of its subordinate agencies. The Ministry has the authority to issue certain regulations implementing the Communications Law and other federal laws. Mincomsvyaz coordinates and supervises the work of several federal executive bodies in the area of communications, including, among other, Roscomnadzor and Rossvyaz.

Roscomandzor is the federal executive body that provides for state supervision and control in the areas of communications and information technologies, including for the:

  • issuance of licenses and permissions in the area of communications and information technologies;
  • registration of radio-electronic and high-frequency equipment;
  • assignment of radio frequencies based on decisions taken by the State Radio Frequencies Commission and registration of such assignments;
  • technical supervision of networks and network equipment throughout Russia;
  • monitoring of compliance by network operators with applicable regulations, terms of their licenses and terms of the use of frequencies and numbering capacity allocated and assigned to them;
  • enforcement of equipment certification requirements;
  • examination of electromagnetic compatibility of equipment with existing civil radio-electronic equipment;
  • organization of tenders with respect to licenses in the sphere of communications; and
  • control over the processing of personal data.

Rossvyaz is the federal executive body that implements governmental policy, manages state property and provides public services in the area of communications, including the certification of equipment for compliance with technical requirements and assignment of numbering capacity.

The State Radio Frequencies Commission is an inter-agency coordination body acting under Mincomsvyaz which is responsible for the regulation of radio frequency spectrum and develops a long-term policy for frequency allocation in the Russian Federation.

The Federal Antimonopoly Service is a federal executive body that supervises competition regulations and enforces the Natural Monopolies Law and the regulations enacted thereunder. FAS controls certain activity of natural monopolies, including monitoring their execution of certain obligatory contracts, and can issue mandatory orders as provided for in the Natural Monopolies Law.

Other regulatory authorities. The Federal Service for Tariffs regulates certain tariffs in the sphere of telecommunications, including the tariffs on local, intra-regional and DLD calls by subscribers of public switched telephone networks, installation and subscription fees and telephone line access tariffs. The FST also maintains a list of natural telecommunications monopolies and has other supervisory and enforcement functions under the Natural Monopolies Law. The Federal Service for Supervision in the Area of Consumer Rights Protection and Human Well-Being, or Rospotrebnadzor, is responsible for the enforcement of sanitary regulations and has some authority over the location of telecommunications equipment, and supervises the compliance of companies with the regulations relating to the protection of consumer rights. The Federal Registration Service is responsible for registering certain telecommunications infrastructure that is considered real property in accordance with Government Decree No 68 “On Particularities of State Registration of Ownership and Other Proprietary Interest on Line and Hardwire Communication Facilities” of 11 February 2005.

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