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. Last Updated: 07/27/2016

Cost of Calling Home to Fall 20 Percent

The cost of calling internationally will fall by 20 percent starting Jan. 1 as Russia's long-distance phone company responds to market pressures and trims international rates that are now among the highest in Europe.

And even bigger savings could be ahead if Rostelecom, the Russian long-distance phone company, decides to extend to the rest of the world a pre-Christmas discount which has already cut prices for calls to the United States by 60 percent to 80 percent.

Rostelecom says it is trying to boost traffic by cutting prices, making sure its lines are used to capacity, as part of a global move toward lower costs on international calls.

"It's economics for us," Vera Tolyakova, Rostelecom's deputy manager for international wire communications, said in an interview Monday. "The market demands this kind of service."

Industry analysts say the rate cut is also Rostelecom's response to the emergence of lower-cost call-back systems and also to technologically superior network overlay competitors.

The rate cuts have been determined by the Communications Ministry, which has jurisdiction over international calling rates.

Under the new rate scheme, to take effect Jan. 1, the price of all self-dialed international calls lasting five minutes or more will be cut by 20 percent.

Bigger discounts show up on operator-assisted phone calls, which were among the highest and now come somewhat closer in price to self-dialed calls.

These discounts overlap with a previously announced special offer for calls to the United States by Rostelecom. From Nov. 1, 1996 to Jan. 15, 1997, prices for calls to the United States had been set at 60 percent to 80 percent below the previous rate.

On weekends and holidays, one minute now costs 3,150 rubles (55 cents), down from 14,700 rubles; between 8 p.m. and 8 a.m. a minute costs 4,200 rubles compared with 9,800 rubles; and a daytime minute is 6,300 rubles instead of 14,700.

For comparison, it currently costs about $2 a minute to call Russia from the United States during business hours.

The U.S. discounts were put in place to raise traffic during the traditionally slow holiday period, when high-volume business subscribers close for vacation and calls drop off.

So far the program seems to have worked. "Traffic to the U.S. for November didn't fall, as is Rostelecom has 85 percent of the market for outgoing international calls, but only about 50 percent of the total international market. The rest has been grabbed by aggressive independent operators who lease lines from Rostelecom or build their own networks.

With the rate cuts, Rostelecom is battling cheaper international callback services. Callback, or "re-origination" services, re-route phone calls so they originate in a country outside Russia, such as the United States, and take advantage of much lower rates offered there.

International Kallback of Seattle, Washington, for example, advertises a total rate from Russia of $1.31 a minute to France and $1.06 to the United States. Prices are subject to change every 16th of the month and do not include the average $12-a-month billing services and $100 sign-up fees, which can be waived.

Rostelecom also has seen some of its traffic siphoned off by cellular phones or from so-called "overlay" services such as Moscow's Comstar, Combellga and Sovintel which maintain their own lines. Although those services tend to cost more, their lines are usually of better quality.

With the new rates, Rostelecom is making a Western-style bid to persuade its subscribers to make more international calls, analysts said.

"Rostelecom understands that even without competition, their network is not being fully occupied," said Price Waterhouse telecommunications expert Alan Gamburg. "This is a normal way of trying to get people to make calls off-peak by giving discounts."

With some of the highest tariffs in Europe, Russia is ripe to replicate a worldwide trend in which long-distance and international calls get cheaper and local calls more expensive, industry watchers say.

"In part, rates have to come down because the cost of investing in equipment is decreasing," said Carlos Del Bo, chief of Italian telecommunications firm STET in Moscow. Large network switches, for example, have come down in price from $500 in 1990 to $150 to $180 this year, he said.

Although it controls international calls, Rostelecom doesn't sell the calls itself; instead the rate cuts are passed on to customers via local providers such as Moscow City Telephone System.

Russians aren't in the habit of calling overseas, so "the hope with these discounts is that after a few months, people will use the telephone more," said Diana Zehetner, a London-based telecoms analyst with the Flemings investment fund. "Russia has the most underdeveloped traffic levels in Eastern Europe."

But "it's possible that these tariff decreases will hurt Rostelecom in the short run," she added. She estimates Rostelecom's calling volume at 360 million minutes in 1996, up from 290 million in 1995.

Rostelecom's International Rate Changesas of Jan. 1, 1997

All International Calls

20% flat savings at all times, rates vary by country

Operator-Assisted Calls 70% discount from 8 p.m. to 8 a.m., holidays and weekends

30% discount all other times

EXAMPLE: Five-minute operator-assisted call to Paris

Daytime: 8,400 rubles x 5 min = 42,000 rubles

Off-peak: 4,200 rubles x 5 min = 21,000 rubles

Previously each call would have cost 63,000 rubles