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Calling Party Pays was introduced in Russia in July 2006. CPP is the concept in which the subscriber does not pay for incoming calls from any telephone numbers. Quite usual for the rest of the world itcame new for Russia. The CPP introduction is viewed as an attempt by the government to make mobile communication more available for the population through changing the mobile tariff scheme. Besides, CPP should provide fixed operators with new revenue sources.
The telecom market reacted to the initiative in a number of different ways. Landline operators welcomed the news with enthusiasm; mobile operators were not happy about the new rules; as for the subscribers, they just did not know how to react. At first the only thing that was clear was that a the per-minute cost of a phone call made from a landline connection to a mobile phone was 1.5 rubles changing slightly from one region to another. The tariffs were set by RosSviazNadzor, the Russian telecom watchdog. The news on the changes in prices for other services like international roaming came later and in portions.
The rise in the cost of mobile services was triggered by the need of the three biggest mobile operators to make up for the losses incurred by the abolishment of incoming call charges. According to J’son & Partners, Mobile Telesystems, VympelCom (working under trade mark Beeline) and Megafon control 86 percent of the market. Experts say that the total losses incurred on the three companies will reach around $1 billion a year.
The implementation of the new tariffs was hampered by a big scandal that involved all the three giants of the Russian mobile market. The Russian Federal Anti-Monopoly Service accused the three companies of conspiracy against the Law On Competition after they set unreasonably high prices for connection services and traffic transit for regional operators. The probe in relation to MTS and VympelCom has been closed due to the companies curing the breach voluntarily. Megafon does not agree with the accusations and intends to challenge them in court.
It has been a few months since CPP was introduced, so the market players and customers have had an opportunity to try the new tariff scheme and see the pros and cons. VympelCom and Moscow Telephone Network have drawn up the results of their operation under the new CPP rules.
Moscow City Telephone Network (MGTS) has a client base of 4.5 million fixed subscribers. 770,000 of those are corporate clients. According to Alexei Goltsov, MGTS’ general director, within the period from July to September 2006, the traffic volume from fixed phones to mobile phones totaled 310 million minutes which is a 200 million minute increase on last year. The increase in the outgoing traffic showed the biggest rates in September, by the time when subscribers had had a chance to see the value of the new tariff scheme for inter-network calls. Moscow Telephone Network believes that the next few months will see further increase in the number of connections from fixed phones to mobile phones.
According to Goltsev, the company’s fixed-to-mobile connections revenues have totaled 400 million rubles over the said three-month period. However, of the 1.5 rubles per minute only 29 kopeks goes to the fixed-line operator with 95 kopeks going to the mobile operator. 18 kopeks goes to pay VAT and 8 kopeks is pays for the transit.
It may seem that the main beneficiaries of the new tariff scheme are Russia’s three biggest mobile operators whose subscribers get calls from fixed phones. However, Nikolai Pranishnikov, VympelCom’s vice president, says it is not quite so. According to Pranishnikov, a payment of 95 to 103 kopeks per minute for an inter-network connection cannot make up fully for the operator’s expenses to provide these services.
VympelCom’s estimates have it that the figure has to be 110 kopeks per minute minimum. This is in accord with RosSviazNadzor’s estimates. Pranishnikov hopes that in 2007 the regulating governmental bodies will manage to eliminate this mismatch to draw the mobile operators’ losses from CPP to a minimum.
The majority of Beeline subscribers (around 71%) are happy about CPP. This came in the survey conducted by VympelCom together with the Russian Public Opinion Center. The survey has it that the expenses of most subscribers have not increased since July 2006. Pranishnikov believes that mobile communications tariffs in Russia remain the lowest in the world and the CPP introduction has not changed the situation. Since July there has been a 50 percent increase in the number of calls made from fixed-line telephones to Beeline’s mobile subscribers. The incoming traffic share of fixed-line networks today is six percent of the total number of Beeline connections. Previously this figure did not exceed four percent.
To sum it up, the first results of the CPP introduction can be characterized as encouraging. The majority of subscribers are quite satisfied with the new tariff scheme and are actively making use of the advantages it gives. Fixed-line operators are already experiencing an increase in revenues. Mobile operators are struggling with the difficulties the new scheme has caused them but they are counting on the government to help them solve the problems.
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