The TMT sector in Russia is heavily regulated, and is to a very large extent driven by political and lobbying efforts. Such unpredictability also contributes to the sometimes-controversial evolution of the regulatory landscape.
Thus, on the one hand, the governmental authorities are working on reforming the TMT sector in Russia and introducing a set of new principles that could have a significant impact on all sectors of the communications market (including by way of simplification of the licensing regime, efficient allocation of frequencies, development of communication infrastructure and universal access to telecommunications services).
On the other hand, taking into account the current political context in Russia, recent trends in the TMT market in Russia are mainly focused around increasing legislative pressure on market players, restricting foreign investment and strengthening state control over operators, media companies and customers.
i The regulators
The main regulator in the TMT sector in Russia is the Ministry of Communication and Mass Media of the Russian Federation (Mincomsvyaz).
Broadly, Mincomsvyaz is in charge of elaborating and implementing state policy in the TMT sector. It also, inter alia, participates in the legislative process (namely, by submitting bills to the government) and adopts secondary legislation in the area.
Furthermore, three state agencies that fall under the auspices of Mincomsvyaz:
- the Federal Service for Control over Communications, IT and Mass Media (Roscomnadzor) is the main licensing authority in the telecommunication sector and is in charge of mass media registrations. It also monitors the compliance of telecom operators with the established regulatory requirements;
- the Federal Print and Mass Media Agency; and
- the Federal Communications Agency, which is in charge of certification in the telecom area.
ii Main sources of law
The main regulatory acts in the field of telecommunications are the following (this list is not exhaustive):
- Federal Law No. 126-FZ 'On communication', dated 7 July 2003 (Communication Law), is the key legislation in the telecommunication sector. The Communication Law provides for quite detailed regulation in the areas of communication networks and interconnection between them, licensing of telecommunication activities, allocation of frequencies, etc.
- Federal Law No. 128-FZ 'On licensing of particular types of activities', dated 8 August 2001, provides a general legal framework for the licensing of various types of business activities in Russia, including the provision of telecommunication, TV and radio broadcasting services;
- Federal Law No. 184-FZ 'On technical regulation', dated 27 December 2002, provides a general legal framework for the standardisation and certification of various equipment, including telecommunication equipment, being subject to specific regulation provided by secondary legislation;
- Federal Law No. 144-FZ 'Law On Investigative and Search Activities', dated 12 August 1995, is the main legal act that governs the obligations imposed on network operators in the area of monitoring and interception of communications;
- Federal Law No. 149-FZ 'On Information, Information Technologies and Data Protection' dated 27 July 2006 (Information Law);
- Federal Law No. 152-FZ 'On Personal Data' dated 27 July 2006; and
- other resolutions and orders of the government, acts of Mincomsvyaz, etc.
The media sector, being traditionally subject to a separate area of regulation under Russia's laws, is governed by the following main legal acts:
- Law of the Russian Federation No. 2124-1 'On Mass Media', dated 27 December 1991 (Mass Media Law), is the core legislation in the media sector. The Mass Media Law, inter alia, governs in detail the activities of mass media companies and organisations, mass media registration procedures, broadcasting licensing issues and limitations on foreign participation in mass media companies (for more detail, see Section II.iii);
- Federal Law No. 436-FZ 'On Protection of Children from Information that May Be Harmful to Their Health and Development', dated 29 December 2010, introduces additional requirements and restrictions on mass media aimed at protecting children from any kind of destructive and inappropriate information; and
- Federal Law No. 57-FZ dated 29 April 2008 'On the Procedure for Making Foreign Investments in Companies which are of Strategic Importance for Ensuring the Country's Defence and State security' (Strategic Law). It is important to note that in terms of the Strategic Law, certain types of TV and radio broadcasting activities are viewed as strategic and, therefore, certain transactions involving the shares and assets of the companies involved in such types of activities are subject to control by state authorities and additional clearance requirements (for more detail, see Section II.iv).
iii Regulated activities
As regards the telecommunication sector, further to the Communication Law, a licence is a necessary prerequisite for providing telecommunication services in Russia.
More specifically, Regulation of the Russian Government No. 87 dated 18 February 2005 sets out an exhaustive list of communication service licences that must be obtained by communication service providers wishing to conduct business in Russia. This list includes the following 20 types of communication services:
- local phone services;
- intercity and international phone services;
- phone services in a dedicated network;
- intrazone phone services;
- local phone services via payphone units;
- local phone services via public access points;
- telegraph services;
- personal radio call services;
- mobile radio communication services in a public communication network;
- mobile radio communication services in a dedicated communication network;
- mobile radiotelephone service;
- mobile satellite services;
- provision of communication channels;
- data transfer (excluding voice data);
- transfer of voice data;
- telematics services (including internet services);
- cable broadcasting services;
- on-air broadcasting services;
- wired broadcasting services; and
- postal services.
In accordance with the current legislation, the licensing authority for the above-mentioned communication licences is Roscomnadzor.
A communication service licence may be granted on the basis of an application or as a result of auction or tender proceedings. An auction or tender is held where the provision of a given communication service involves the use of RFs and the competent state authority establishes that the required RF allows for only a limited number of network operators to be active within the relevant territory; or the public communication network on the territory has limited resources and the Ministry of Communication and Mass Media of the Russian Federation (Mincomsvyaz) establishes that the number of network operators active within this territory should be limited.
Furthermore, additional authorisations are applicable to undertakings active in the media sector:
- media broadcasting programmes and channels are subject to registration as mass media carried out by Roscomnadzor;
- a broadcasting licence is required to distribute (broadcast) mass media products in Russia. Such licence may be held either by the holder of the mass media registration itself, or by the licensed operator acting on the basis of the broadcasting agreement with the holder of the mass media registration provided that the mass media product is broadcast by the operator without any changes to the broadcast content.
There are two main types of broadcasting licences provided by the Mass Media Law:
- a universal broadcasting licence that may be obtained by broadcasters registered as an editor of a TV channel or a radio channel. Licence holders are entitled to conduct different types of broadcasting in various environments (satellite, cable, on-air, etc.) over the whole territory of the Russian Federation; and
- a licence that allows holders to broadcast in a particular broadcasting environment only.
Normally, broadcasting licences are issued for a term of 10 years (unless an applicant indicates a shorter term in the application form) with a possibility of renewal.
Should the provision of the services or broadcasting of mass media products also imply the use of the RF spectrum, it is also necessary to obtain specific approval on the allocation of a frequency band (for more detail, see Section IV).
iv Ownership and market access restrictions
Communication licences are only granted to Russian entities, and a foreign company cannot itself apply for a licence. The main restrictions and limitations in the TMT area in Russia relate to foreign participation and investments, namely:
- in accordance with the Mass Media Law, foreign investors cannot hold more than 20 per cent in a mass media company (i.e., a company holding a mass media registration, or a broadcasting company);
- restrictions on foreign participation also exist in the area of audience measurement for the TV sector. Thus, in terms of the Mass Media Law, foreign participation in the company in charge of audience research and surveys (to be appointed by the state authorities) is also limited to 20 per cent; and
- additional limitations on foreign participation exist in the area of online audiovisual services (online cinemas). Thus, audiovisual services2 can be owned by Russian legal entities or Russian citizens (who do not hold citizenship of other countries) only. Foreign investors are normally allowed to own such Russian legal entities, being the owners of audiovisual services. However, the ownership limitations are imposed on specific foreign operators, namely those foreign operators who own an informational resource whose number of users in Russia is less than 50 per cent of its total audience (number of users). Such foreign operators are entitled to own, manage or control, directly or indirectly, a share exceeding 20 per cent in the Russian owner of an audiovisual service, provided that such ownership has been cleared by the relevant government commission.
v Transfers of control and assignments
As regards the transfer of licences, it is noteworthy that the Communication Law explicitly prohibits any full or partial transfer of a communication service licence to another legal entity or individual.
M&A transactions involving media and telecommunication companies are subject to general merger control requirements and thresholds set forth by the Russian antimonopoly (competition) legislation (namely, Federal Law No. 135-FZ 'On Protection of Competition', dated 26 July 2006). If the respective transaction is subject to merger control in Russia, an application must be filed by the acquirer to the Federal Antimonopoly Service (FAS). It normally takes from one to three months to receive a FAS clearance decision.
In addition, under the Strategic Law, certain TV and radio broadcasting companies are viewed as strategic. Therefore, transactions aimed at the acquisition by foreign investors (including Russian companies controlled by foreign investors) of control over such broadcasting companies or more than 25 per cent of their assets are subject to the prior approval of a governmental commission chaired by the Prime Minister (Commission).
The procedure for the review of applications under the Strategic Law is rather cumbersome and time-consuming, as the Commission only holds sessions two to three times per year. Furthermore, in terms of the Strategic Law, foreign investors are required to inform the Russian authorities on any acquisition of 5 per cent or more in strategic companies.
As regards the telecommunications sector, the Strategic Law applies to the operators (holders of communication licences) that are dominant in certain Russian telecommunication markets (for instance, the all-Russian communication market, the fixed phone services market covering more than five Russian regions or all Russian federal cities).
III TELECOMMUNICATIONS AND INTERNET ACCESS
i Internet and internet protocol regulation
From the regulatory perspective, there is no specific regulation for internet services as such under Russia's laws.
Communication services provided over the internet are normally subject to telecommunications licences, such as a telematics services licence or a data transfer services licence (excluding or including transfer of voice data), for the provision of communication channels.
The government adopts further rules regarding the provision of specific services so that each licence holder must provide its services under the licence according to such rules. For instance, the government has adopted specific rules for data transfer services (contained in Regulation No. 32 dated 23 January 2006) and telematics services (contained in Regulation No. 575 dated 10 September 2007). However, these rules do not provide for very detailed regulation of internet services that would significantly distance them from the existing regulations for other types of communication services.
ii Universal service
The principle of universal access to communication services was incorporated in the Russian legislation (and, namely, in the Communication Law) in 2003. Encouraging universal access to communication services is one of the paramount priorities of the government's policy in the TMT area, and is mainly aimed at ensuring access to communication services in rural areas and hard-to-reach regions of Russia (which are quite numerous due to the vastness of the Russian territory).
Currently, in terms of the Communication Law, universal service includes the following types of telecommunication services:
- telephone services accessible via public payphones (coin stations) or interactive kiosks, which should be available in all residential areas all for all residents within a maximum one-hour walking distance;
- data transfer services and access to the internet via public access points ensuring internet access (at 10Mbit/s speed) in all residential areas with more than 250 inhabitants (project on 'bridging the digital divide').
One of the biggest Russian telecoms operators, JSC 'Rostelecom', is in charge of the project aiming at ensuring universal access to the communication services, which is currently ongoing.
It is also important that all Russian communication services providers are obliged to pay contributions to the Universal Service Fund – a specific fund established for the purpose of financing universal communication services.
iii Restrictions on the provision of service
Under the general rule set forth by the Communication Law, operators are free to determine the prices for their telecommunication services. That said, prices for certain types of telecommunication services are subject to state regulation, such as:
- under Federal Law No. 147 'On natural monopolies', dated 17 August 1995, as well as Government Order No. 637 'On rate regulations in public telecommunication and mail services', dated 24 October 2005, the rates for public telecommunication and mail services are subject to state regulation;
- universal communication services are subject to state regulation on the basis of Government Order No. 242, dated 21 April 2005; and
- following Article 20 of the Communication Law as well as Government Order No. 627, dated 19 October 2005, prices for accession services and traffic transit services rendered by operators occupying an important position in the public communication network are also subject to state regulation.
As regards customer terms and conditions, it is noteworthy that general terms and conditions for certain types of services are set forth by the government and should be complied with by service providers. For instance, the following governmental acts provide for such general terms and conditions: Government Resolution No. 575, dated 10 September 2007, sets forth general terms and conditions for providing telematics services, including mandatory provisions to be incorporated into the customer agreements; and Government Resolution No. 32, dated 23 January 2006, relates, inter alia, to data transfer services.
Restrictions on the content accessed by customers (network users) are mainly based on security considerations (see below).
Furthermore, the Information Law contains a complex procedure as to blacklisting of websites containing information the dissemination of which is prohibited under Russian law. Roscomnadzor is in charge of holding a specific Unified Register of Domain Names, Universal Page Selectors and Internet Addresses whose dissemination is prohibited in Russia (Register).
The Information Law also imposes additional regulatory obligations on operators providing internet access to their customers. Thus, telecommunications operators (providing internet services to their customers) should have access to and regularly upload information from the Register, and restrict access to blacklisted websites within 24 hours starting from the moment when such website is included in the Register.
Furthermore, the Information Law specifically prohibits the use of technologies that allow access to blocked websites (for instance, VPN services, anonymous search engines, etc.).
iv Privacy and data security
Overall, the right to privacy of correspondence, and telephone and other messages and communications, is based on Article 23(2) of the Russian Constitution, further to which the limitation of this right is admissible only based on a court decision, or if expressly provided for in federal laws.
To this end, the principles regarding data privacy restrictions are stipulated in the Communication Law, Federal Law No. 144-FZ 'On Investigative and Search Activities', the Code of Criminal Procedure, other statutes containing the necessary prerequisites, and numerous government and administrative regulations that deal with the technical aspects of lawful interception monitoring (LIM).
In terms of these regulations, network operators must cooperate with the law enforcement agencies and ensure their access to data transferred via the network. It is important to note that the current LIM regulations, known as the system of investigative and search operations (SORM), allow the Russian law enforcement agencies access to almost all types of information transmitted via a communication network. Thus, SORM covers wire-tapping on telephone lines, including mobile communications, internet traffic, as well as the collection, long-term storage, analysis and processing of customers' and statistical data. From a technical perspective, the LIM standards imply a passive role on the part of operators, who are not supposed to know which customers are being controlled at any given time.
In addition, the Information Law provides for specific rules and restrictions aimed at minimising anonymity on the internet.
Thus, in terms of the Information Law, Roscomnadzor enjoys considerable powers in the area of bloggers' activities: it monitors bloggers' activities on the internet, runs a register of bloggers and requests data enabling their identification from hosting providers.
The Information Law introduced a broad definition of organisers of dissemination of information over the internet'(organisers) that covers all persons responsible for the functioning of information systems and software designed and used for the receipt, transmission, delivery and processing of electronic messages via the internet. Persons falling under the category of organisers are required to comply with significant regulatory obligations. The main obligation imposed on organisers is the requirement to store users' data (as regards receipt, transmission, delivery and processing of voice data, texts, pictures, sound information or other electronic messages, as well as information on the users) in Russia within one year as from the termination of such actions, and provide such data to the law enforcement and public security bodies, if necessary. Furthermore, from 1 July 2018, organisers have to store the actual content of text messages, voice data, pictures, videos, sound information and other electronic messages within six months as from the processing of that data. Since 1 January 2018, operators of online messaging services are required to identify the users of the messaging services, store this information in the territory of Russia and provide it to investigative authorities on request. Furthermore, in terms of the Yarovaya Law (Federal Law No. 374-FZ dated 6 July 2016, being a set of amendments to the anti-terrorist law and legislation governing the telecommunications industry, including the Communication Law and the Information Law), telecom operators are required to:
- store in Russia for a period of three years information on the fact of the receipt, transmission, delivery or processing of voice data, text messages, pictures, sounds, video or other communications of customers (i.e., metadata);
- store in Russia for a period of six months the actual contents of communications (voice data, text messages, pictures, sounds, video or other communications); and
- provide at the request of the law enforcement agencies the above information on users and the services rendered to them, as well as any other information necessary for these authorities to achieve their statutory goals. When using message encryption and encoding, owners of internet resources will be required to provide the Federal Security Service with the keys for decoding them.
Furthermore, telecommunication services providers can also be required to cease the provision of services to a user (further to a request of the law enforcement authorities) if the user's identity cannot be confirmed (i.e., the information regarding the user that appears in the agreement with the operator is different from the data of the actual users).
It is also important to note that in terms of Federal Law No. 152-FZ 'On Personal Data', dated 27 July 2006, when collecting personal data (including via the internet), an operator of personal data will be required to ensure that the recording, systematisation, accumulation, storage, clarification (updating, modification) and retrieval of Russian citizens' personal data is conducted in databases located within Russia.
There is also specific regulation aimed at the protection of children from destructive and inappropriate information provided by Federal Law No. 436-FZ 'On Protection of Children from Information that may be Harmful to Their Health and Development', dated 29 December 2010. This Law introduces additional requirements and restrictions on mass media (for instance, to classify mass media products and to place specific marks on them carrying information on any potential child-restricted content) and applies to any telecommunication network.
Furthermore, as a result of possible computer attacks, a special law was adopted that deals with specific measures and requirements to be implemented and adopted to ensure the safety of the critical information infrastructure (Federal Law No. 187-FZ 'On the Safety of Critical Information Infrastructure', dated 26 July 2017). Although the practical application of this new Law is still not fully clear, the general idea behind it is that all critical infrastructural objects will be categorised depending on their economic, political and social importance (that is, there will be three categories of importance). Depending on the relevant category of importance, specific rules and requirements will apply with respect to security measures to be implemented.
Finally, the Sovereign Internet Law was adopted (Federal Law No. 90-FZ 'On Amendments into the Communication Law and the Information Law') in May 2019 and on 1 November 2019 the majority of its provisions will come into force in Russia. The main purpose of the Sovereign Internet Law is to create an autonomous system that can support the operation of the Russian segment of the internet in the event of disconnection from the global network.
The Sovereign Internet Law imposes a number of obligations on certain categories of persons (communication service providers, owners of various communication networks' infrastructure as well as information dissemination organisers (e.g., social networks, mail services), as well as establishing a specific register of internet exchange points ('register'). The obligations imposed include:
- providing certain information to Roscomnadzor, information on the purpose of using a communication line that crosses the Russian border, and the means of communication installed on it;
- participating in drills arranged by Roscomnadzor;
- restricting interaction between networks (e.g., by allowing only the use of the internet exchange points listed in the register) and prohibiting owners of internet exchange points from connecting communication networks to internet exchange points when such networks fail to comply with the requirements of the law; and
- installing hardware and software tools that enable Roscomnadzor to monitor traffic, including access to resources blocked in Russia.
Separately, the Sovereign Internet Law addresses threats to the stability, security and integrity of the internet in Russia. At present, no list of these possible threats has been adopted. However, the main idea is that, in response to the threat, Roscomnadzor can centrally manage public communication networks by issuing mandatory instructions to persons subject to the requirements of the law or through special technical means. These technical means will be mandatorily installed by communication service providers. The Law provides for the adoption of a number of regulations surrounding its application.
IV SPECTRUM POLICY
The allocation of frequency bands and frequencies in Russia is based on the following principles:
- the use of specific frequency spectrum is granted by licence;
- there is a gradual move towards bringing Russian regulations on frequency allocation into line with international regulations on frequency allocation;
- the state shall have priority in terms of frequency allocation;
- the use of the frequency spectrum shall be provided on a commercial basis (i.e., for a fee); and
- frequency bands, frequencies and RF channels may only be allocated for a fixed period of time.
The Communication Law establishes that electromagnetic spectrum shall be allocated by the State Commission for Radio Frequencies (Frequency Commission), subject to the approval of the government.
The frequency allocation table adopted by the government further specifies which frequencies are intended for fixed satellite services, broadcasting satellite services and mobile satellite services; and which frequencies shall be used for government purposes or civil purposes, or which are intended for shared use.
RF bands are assigned for 10 years or for a shorter term. At the request of the user of the RF spectrum, this term may be extended or reduced.
As a general rule, the following permissions must be obtained to use frequency bands in Russia: an individual decision of the Frequency Commission regarding the allocation of a frequency band; a telecommunication service licence (or licences, as the case may be); and a permit from Roscomnadzor to use specific frequencies within the allocated frequency band.
The regulatory landscape in this area has not changed much during the past few years. However, there have been some simplifications made in respect to the allocation of certain frequency bands (see below).
ii Flexible spectrum use
Although Russian laws and regulations in this area are rather strict and do not provide for much flexibility, the frequency allocation procedure has been simplified in certain ways.
For instance, very small aperture terminal stations operating in the Ka-band and Ku-band do not require individual decisions of the Frequency Commission provided that certain technical requirements and limitations are met (under Decree of the Frequency Commission No. 10-06-01-3, dated 19 February 2010, and Decree No. 10-06-01-2, dated 19 February 2014).
However, despite the above, this area is quite heavily regulated and does not provide much room for manoeuvre. As regards the growing demand for spectrum for the next-generation services, the Russian governmental authorities are still reluctant to shift their priorities from the state interests to the development of new technologies. For instance, in August 2019, the state authorities refused to 'clear' 3.,4–3.8 GHz frequencies for 5G developing technologies by keeping them at the disposal of the Ministry of Defence and the Russian Federal Space Agency.
iii Broadband and next-generation mobile spectrum use
General rules apply to the allocation of spectrum for next-generation mobile services, and all necessary authorisations for such services are normally granted via tenders.
For instance, while deploying 4G infrastructure in Russia, several major mobile communication network operators and state-owned telecommunication companies have expressed strong interest in building their own 4G networks, which resulted in a strong conflict of interests in the Russian telecom market that involved communication authorities at all levels, the FAS and top state officials.
As a result, four Russian telecommunication operators have been granted authorisations for 4G services in Russia.
5G services in Russia are at the early stages of development.
Thus, the governmental authorities as well as major Russian communication operators are still investigating the most efficient scenarios for the development of the 5G infrastructure, and, as a result, the deployment plans are subject to changes. For instance, it was initially expected that 5G infrastructure would be deployed in the five largest Russian cities by 2022. However, this plan has been abandoned for the moment, and it is now expected that 5G deployment will be started in certain industrial zones first.
In addition, some of the territories for testing of 5G infrastructure ('pilot zones') have been identified, and it is expected that 5G services will be launched in some of them by the end of 2019 (including in some areas of Moscow).
Furthermore, it is expected that incentives (including state financing) will be provided to local (Russian) telecom producers to develop and launch the production of 5G equipment in Russia. Thus, it is expected that the required research and design work will be completed between 2019 and 2021 and production will be launched between 2022 and 2024.
iv Spectrum auctions and fees
Tenders are held when the required RF allows for only a limited number of network operators to be active within the relevant territory.
The Russian legislative acts on communication also establish that users of frequency spectrum shall pay both a one-off fee and an annual fee for the use of frequencies. The level of the fees and the payment procedures are established by the government.
i Regulation of media distribution generally
Content restrictions imposed on the mass media are mainly driven by moral and security reasons. For instance, the following content is prohibited:
- the calling for and promotion of violence, terrorism, any extremist activities and any type of criminal offences;
- influencing the unconscious mind;
- disclosing information and secrets protected by law; and
- the promotion of narcotics, psychiatric substances, drug precursors, etc.
Under certain circumstances, network operators may be also held liable for the content of the media that is distributed via their communication network.
ii Internet-delivered video content
The Information Law regulates the activities of the owners of online audiovisual services (online video services, online cinemas).
The Information Law, as amended in July 2017, defines the owner of audiovisual services as the owner of a website, website pages, an information system or computer programmes that are used to create or organise the distribution of audiovisual works on the internet, subject to the following criteria being met: access to such audiovisual works is provided for a fee or on the condition that the viewers also watch advertisements, or both; and the audience over 24 hours exceeds 100,000 users that are located in Russia. Certain exemptions are listed by the Law. For instance, online mass media that are registered as such in Russia, search engines and information resources where users primarily publish or post their own works and materials by themselves (social networks) are excluded from the scope of the new regulations.
In a nutshell, the owners of audiovisual services are subject to a number of obligations and requirements, namely:
- not to allow the dissemination of certain information such as extremist materials;
- to install specific software that determines the number of users;
- to make publicly available a valid email address to receive legally significant messages, as well as details of the owner of online audiovisual services; and
- to provide for age-based classifications of content.
Roscomnadzor maintains a specific register of audiovisual services, and may request from the potential owners of unregistered audiovisual services all information that is required to add the service to the register.
There is also a number of ownership requirements and limitations as to foreign participation in the owners of online audiovisual services (see Section II.iii).
VI THE YEAR IN REVIEW
The main trend and key legislation and policy developments in the TMT sector in Russia relate to further amplification of state control in the sector. For instance, the highly debated Sovereign Internet Law was viewed by the business community and wider public as aimed at censoring and isolating the Russian internet from the global worldwide network.
VII CONCLUSIONS AND OUTLOOK
The development of the TMT sector in Russia is to a very large extent driven by the political context, and is mostly aimed at strengthening state control over the communication sector and limiting privacy.