Leonid Reiman has been Russia’s Minister for Communications and Computerization since the formation of the ministry in November 1999. Before that, he headed the ministry’s predecessor, the State Committee for Telecoms, for three months. Reiman has held several leading positions in St. Petersburg’s regional telephone company, Petersburg Telephone Networks.

The Russia Journal: What is the current situation in the Russian telecom market? What role does the Ministry of Communications play?

Leonid Reiman: In recent years, significant changes have occurred in Russian telecoms. In addition to restructuring the industry, creating new regulations and privatizing state telecom companies, we have worked to foster competition, new technology and new services.

Under Russian law the ministry is responsible for regulating the country’s telecommunications sector. Among its main tasks is encouraging research and development in the national telecoms sector. We also work to design programs for regional operators. In addition, the ministry influences the market by regulating licenses and certificates, allocating frequencies and so on.

As of Sept. 1 this year, we issued more than 11,900 telecom licenses. Postal services, as in many of the world’s countries, remains under state control, but in telecoms, private enterprises dominate. The number of licenses issued and the kind the participants testify to the fact that the ministry enacts a liberal and indiscriminate policy when it comes to issuing licensees.

I should also point out that Russian law, unlike in many other countries, stipulates that there should be no obstacles to foreign capital in the telecom sector. The only thing limiting access to the market is the number of frequencies available.

Really, the industry’s recent achievements point to the narrowing gap between Russia and the developed nations in the communications field. In the last seven years, digital networks were built, telephone facilities modernized and thousands of kilometers of lines put into operation, as well as millions of new phone numbers and hundreds of thousands of long-distance and international channels.

Also, modernizing the communications infrastructure has made it possible for Russia to join the global communications network. Automatic direct phone services to 180 countries are now in operation, and Russian consumers can take advantage of the most modern telecom services available.

To ensure 1 percent overall economic growth in today’s Russia, the telecom industry must grow by 3 percent. At very modest estimates, at least $20 billion needs to be invested in the sector within the next few years to achieve that goal. In this respect, the creation of a favorable investment climate is one of the key tasks of the Ministry of Communications.

RJ: What are the prospects of development for Russia’s telecoms?

LR: In the very short term, our task is to build up Russia’s communications infrastructure in such a way that it can easily integrate with the global information network. We also want to turn the sector into one of the engines of the growing market economy. We have the right resources and expertise to pursue these aims. We still possess some of the world’s best scientific know-how in IT, and even that can be further improved.

Our overall strategy for the industry is in speeding up growth by making it more attractive for investors – this will involve further liberalizing the telecom markets, fostering competition, following through with the privatization processes and state support for priority areas.

RJ: What will happen to the industry’s largest company, Svyazinvest?

LR: Svyazinvest is being restructured to create more favorable conditions for industry development, improving the sector’s attractiveness to investors and significantly advancing the effectiveness of operators.

At the initial stage, local telephone companies will be collapsed into bigger units that roughly correspond to Russia’s new federal "super-regions." As a result of the restructuring scheme, the companies financial indicators should improve and the value of the state’s share in the regional phone operators should also increase, as will dividends. These companies will be large and competitive.

RJ: What problems is the telecom sector facing in Russia?

LR: One obstacle before telecom development in a country as big as Russia is the uneven distribution of telecommunications infrastructure across the territories. While it is obviously impossible to completely solve this problem in the near future, the focus should be on eliminating the most acute imbalances. The economic potential of a promising region may drop several times if it doesn’t have a modern communication infrastructure.

RJ: Tell us about the situation in the mobile communications market in Russia. What are its characteristic features?

LR: The development of wireless communications in Russia is continuing at the rapid pace of previous years. Cellular networks are operating in almost all of Russia’s regions, except for Chechnya and Tuva, and the number of subscribers has reached 2.6 million.

The majority – more than 70 percent – are subscribers of GSM-standard networks, whose number has more than doubled since the end of 1999 to about 1,870,000 as of Oct. 1, 2000. GSM services are available in 226 Russian cities in 60 regions. National roaming services are available in 48 regions.

More than 70 percent of all mobile subscribers reside in Moscow, St. Petersburg and the oblasts. This is natural – there is a greater volume of business activity in those cities and higher purchasing power. Also, a dramatic reduction in prices occurred last year.

By the end of this year, we will have drafted a national concept for the development of cellular mobile networks until 2010. This will more clearly outline state policies in this sector.

RJ: What is happening in the Internet sector, arguably, the fastest growing part of Russia’s telecom market?

LR: About 2 percent of all Russians actively use Internet services. This is too little, especially compared with the developed nations, where this figure stands at 20-50 percent. However, Russia’s potential in the field of IT is enormous. There are both human and economic reasons for that – 66 percent of the population has at least a secondary education; there are more than 30 million landline potential phone users, and more than 3 million wireless users.

State policy toward increasing Internet penetration in Russia includes establishing Internet connections for schools, universities, libraries and setting up public terminals. We also plan to develop regional Internet networks by creating incentives for local operators to offer the required services. We will promote new technologies that will give the existing infrastructure broadband capabilities.

The Communications Ministry does not deny the importance of self-regulation of the Internet and we support initiatives in this direction. But, given that online activities concern the interests of more and more people, self-regulation should be complemented with state regulation in the form of clear-cut laws.