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. Last Updated: 07/27/2016

Rostelekom to Turn ISP, But Can It Give Service?

For the last two years, business has been good for Moscow's Internet service providers, or ISPs, the companies that provide connections to the Internet. Spurred on by fashion and marketing, every month a greater number of Russia's personal computer users are giving the Internet a try.

But in the next 12 months the Internet access market in Moscow could experience a big shake-up. The sleeping giant of Russian telecomms, Rostelekom, plans to launch an Internet service this summer. Its provisional announcements suggest that the company plans to make life very difficult for all of Moscow's ISPs.

Apart from the investment vehicle Svyazinvest, Rostelekom is the largest telecommunications carrier in Russia. If you call abroad or outside your own city, the chances are that somewhere along the line Rostelekom is routing your call.

Much of the international capacity used by ISPs in Moscow is already channeled through Rostelekom's lines. The company says it has recently leased 12 international, two-megabyte-per-second channels for use by its new Internet service. This means that when it launches its service this summer, Rostelekom will be offering more international Internet capacity than all of Moscow's other ISPs combined.

Having access to so much capacity and coming late to the Internet market, Rostelekom says it plans to price its services aggressively. It has even suggested that it may offer U.S.-style tariffs -- a flat rate of $20 per month for unlimited Internet access. Anyone with an Internet connection in this city today will understand that this is really cheap.

Were this to actually happen it would seriously undercut all of Moscow's other ISPs and within a short space of time it could even push them all out of the business.

There is, however, a big question mark in my mind over whether Rostelekom can pull this off. It has the money, the hardware, the international capacity and -- of course -- all the right licenses. But does it have the right company culture and experience to successfully provide all of Moscow with Internet access?

Traditionally, Rostelekom has been a supplier of capacity to other telecommunications companies. It leases parts of its network to companies which in turn sell this capacity packaged with user services. Consequently, Rostelekom has not been much involved in marketing or selling direct to subscribers.

The carrier business is deal-oriented. You have a relatively small number of customers, and generally they come and visit you. Adapting itself to run a subscriber-oriented business such as Internet access will be a huge challenge for Rostelekom. Even seasoned U.S. operators AT&T and America Online have struggled with ramping up a large Internet access business.

For Rostelekom, these problems will be of a totally different order of magnitude. Also very significant is the fact that, in its former life, Rostelekom was part of the Soviet bureaucracy. It may employ over 35,000 people, but how many answer the telephone with the words "Rostelekom, how can I help you?"

What you want from your ISP is access to knowledgeable, helpful and responsive support staff, ideally 24 hours a day. This particularly applies to novice users just opening their accounts and for businesses, which sometimes depend heavily on their Internet connections.

Soviet-era organizations have a legendary reputation for making life difficult for their customers. I find it difficult to imagine how Rostelekom can suddenly shed its old Soviet clothes.

Robert Farish is the editor of Computer Business Russia. e-mail: