Legal response: Authorities close loophole for unscrupulous providers
Providers will no longer be issued licenses without connecting to the system of operational search activities, sources told Izvestia and confirmed by the Ministry of Finance. Previously, operators could start work by submitting only a plan for installing the devices necessary for the operation of SORM, but unscrupulous players often had the installation stretched out for years or not carried out at all, market participants said. Experts believe that the new licensing rules will help in the fight against fraud.
Why do they want to change the procedure for issuing licenses
Through the system of operational investigative measures (SORM), law enforcement agencies gain access to telephone networks and Internet channels as part of investigative actions. Now the Ministry of Finance proposes to oblige operators to install SORM equipment before obtaining a license. The agency intends to introduce such a rule into the legislation, three sources familiar with its plans told Izvestia. This also follows from the reference materials for the draft amendments to the law developed by the Ministry.
The company will be able to start servicing subscribers only after the equipment has been accepted by law enforcement agencies. For non-compliance with the requirement, operators can be deprived of their license out of court, the Izvestia interlocutors noted.
Currently, according to current legislation, in order to obtain a license, it is enough for an operator to have an agreed communication network scheme, which specifies the SORM facilities — both already installed and planned to be installed, a source in the communications market said.
The requirement to connect SORM before the start of customer service is, in fact, an attempt to close a loophole that has been used by unscrupulous players for years, said Alkhas Mirzabekov, CEO of the operator of JSC YESK. According to him, such companies created a legal entity, obtained licenses and operated without SORM, and then closed the business and registered new legal entities, again obtaining licenses. From the point of view of security and control, the logic of innovation is clear, he believes. However, any additional protection measure has its price: the new requirements will also affect bona fide operators.
— The cost of implementing the minimum SORM package starts from 5 million rubles. For a small local provider with a fleet of several thousand subscribers, this is comparable to the annual network development fund. If the requirement is introduced immediately, without a transition period and without differentiation in terms of business scale, then it is necessary to reduce the negative effect for bona fide operators," he believes.
Megafon declined to comment. Izvestia sent inquiries to MTS, Vimpelcom and Rostelecom.
One of the measures discussed at the site of the Ministry of Finance is the introduction of a requirement according to which a company does not have the right to start providing communication services until the requirements for connecting to SORM are met, the department noted. They consider this requirement to be justified: in Russia, communication services can only be provided on the basis of a license, and the operator must comply with the licensing conditions established by law.
The introduction of SORM is one of the key requirements: the system allows solving serious crimes and countering fraud using telecommunications networks, the Ministry of Finance explained. The ministry added that the issue is still being worked out and no final decisions have been made.
SORM is an expensive equipment, so operators try to postpone its launch as long as possible, Leonid Konik, a partner at ComNews Research, agrees. The current rules allow the network to be launched without SORM by agreeing on a two-year implementation plan for the system.
— The regulator obviously wants to ensure that not a single minute in telephone networks and not a single megabyte in data transmission networks passes by SORM, which is probably justified by the geopolitical situation, — the expert believes.
According to him, the key problem with the equipment is its high cost. An oligopoly has developed in the Russian market: only a few companies produce such equipment, while its cost is ten times lower than the selling price, the expert claims.
For example, for a telecom company with annual revenue of about 100 million rubles (and the vast majority of such operators in the Russian Federation), a complete set will cost more than 10 million rubles. Leonid Konik estimates that another 20-25 million rubles will have to be spent on an Internet traffic storage subsystem with a storage depth of 30 days. Technical support of the equipment costs 10% of its cost per year, he added.
Will the new rules help fight fraudsters?
The discussion on licensing reform in the communications industry is indeed underway, said Igor Bederov, founder of the Internet Search company. The structural reconfiguration of the market is still being discussed: from reducing the number of license types to increasing financial requirements for operators.
— The need for changes is dictated not by someone's desire to "tighten the screws", but by technological reality. The previous requirements for SORM were quite framework-based and did not always keep up with the development of networks and services. The government is closing the technological gaps that have accumulated in recent years, and making the data collection system not only comprehensive, but also more "intelligent" in terms of processing requests, he explained.
If an operator obtains a license and starts working, but is not actually connected to SORM, it creates a "blind spot" for the law enforcement system. This is especially sensitive in conditions where unscrupulous players can use schemes with frequent changes of legal entities to work for years without the necessary equipment, the expert emphasized.
The innovation under discussion assumes that the operator must confirm the actual readiness of the infrastructure before starting commercial activities. This is a really serious barrier for small companies: the costs are associated not only with the purchase of SORM equipment, but also with its maintenance, integration with accounting systems and provision of communication channels with authorized bodies, Igor Bederov listed. The idea of stripping operators of their licenses without a court decision for repeated gross violations is perhaps the most sensitive part of the discussion, he added.
Obviously, the refusal to issue licenses before the installation of SORM will increase the effectiveness of the fight against cyberbullying and other illegal manifestations, says Denis Kuskov, CEO of TelecomDaily. It's no secret that some small operators have been dragging their feet on its implementation for years — this opens a window of opportunity for cybercrime, he stressed.
Oleg Yablokov, an NTI expert on wireless communications, noted that it is important to think in advance about the procedure for transferring subscribers to another operator in case the provider is deprived of its license. If it is withdrawn from the only provider in the village, the main question for residents will be who will continue to serve the network, he explained.
According to Igor Bederov, large federal players are likely to be able to meet the new requirements thanks to the available resources. The main impact will be on small regional providers. According to industry experts, there are about 1.5 thousand small providers operating in Moscow and the Moscow region, serving about 30% of home Internet users. If administrative barriers force them out of the market, competition will decrease, and the remaining players will have more freedom in tariff policy, he believes.
For a small provider that is just entering the market, the main consequence of the new requirements is the need to invest in SORM even before receiving the first revenue, Oleg Yablokov believes. At the same time, in his opinion, by itself, the transfer of these costs to an earlier stage will not lead to a widespread increase in tariffs. Home Internet may become more expensive in areas where residents will have less choice due to new requirements, the expert concluded.
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