According to the officer, a working group created in the Department plans to make a decision in summer on the necessity to move cables underground, which will be followed by the operators reconstruction of the network. “The method will be selected by the group together with the operators as this is one of their primary concerns,” he emphasized.

The working group considers a number of key options, including the possible use of the present cable system of OAO Moscow City Telephone Network (MGTS, part of the MTS Group) by the operators or construction of their own cable system that could to contain the lines of all market participants.

Today, Gorbatko says, the Government and the operators do not have a opinion whether it is worth to give up the overhead lines and how the transition should go. Moreover, the operators haven’t voiced their suggestions yet. “Our task is to bring everyone to the table,” Gorbatko believes, adding that the Government of Moscow does not want to make the operators solve the problem of a “clear sky” above Moscow.

Today about 25,000 km of communication lines in Moscow are laid on the roofs. As Gorbatko informs, the major volume of these lines belongs to Akado, Vimpelcom (RTS: VIMP) and Rostelecom (RTS: RTKM) – about 7,000 km owned by each of those, the rest– by small and medium-sized operators.

Viktor Koresh, President at Akado, said at a Tuesday press conference that the Company will need about RUB 12bn to dismantle its lines. These costs will later be added to the operators’ service fees and will be paid by the subscribers, he said. The Company press service explained that the total length of Akado air lines is about 4,500 km, while the major part of its lines (15,000 km) is already under the ground.

Artem Kudryavtsev, President at TransTeleCom (a telecommunications “daughter” of the Russian Railways), added that the costs of such a transition will be unequally shared by the city market participants; hence, the tariffs of some operators will be uncompetitive.

“Modernization may result in the growth of the service cost, which is absolutely unacceptable,” Gorbatko agrees. The Deputy Head of the IT Department of Moscow notes that the problem should have a non-linear solution; in particular, “we should treat the operators with legally and illegally acquired lines differently”.

Gorbatko disagrees with the Akado opinion. Speaking on how much it will cost to rerun the networks according to the Moscow Government, he declined to name the exact amount, although he added: “Half or even less than a half (of the amount announced by Akado). The officer explained that the operators who make the assessments, also include expenditures on the renovation of the technological equipment into the investment amount, which means existing modernization investments. “The amounts announced include a major part of activities that are already being conducted,” Gorbatko said. The IT Department of Moscow basically uses the assessment of about RUB 150k per each house, as the Department informed. Thus, the total investment amount may be about RUB 6bn. “It is not such a big sum for the operators,” Gorbatko believes.

Vimpelcom seriously considers a possible liaison with MGTS, the current cable monopolist, when it comes to swapping air for the underground. “If a decision to abandon overhead wire networks is made, then we should work with the monopolist”, said Anatoly Smorgonsky, Marketing Director, Vimpelcom, Moscow Region. “Moscow is not boundless, neither is the cable system”, he said. He also added that an urgent switch may cause malfunction of the networks and services.

Last November, when the city authorities announced that they may oblige operators to use underground communications only, Vimpelcom also announced a need to compensate the costs for the overhead cable dismantling. The majority of the operator’s communication lines were built by Corbina Telecom Company, which later joined Vimpelcom.

All operators generally admit the advantages of the underground infrastructure over the overhead lines. MGTS, owning the underground cable system in the capital, totally supported the idea of getting rid of the overhead cable; other companies pointed at the necessity to work out the mechanism of transition to the underground cable system, but admitted that it was much safer. For instance, Megafon (RTS: MEGF) mentioned ‘ice rain’ risks that do not affect the underground lines.

Today the Moscow Broad Band Access market is dominated by MTS with 920,000 subscribers by the end of the first half-year (according to AC&M Consulting end-2Q statistics); Akado with 686,000 subscribers comes second, followed by Vimpelcom with 653,000 and Megafon with 360,000 subscribers following the purchase of NetByNet provider.

Project Group №5