Russia’s telecommunications licensing reform could wipe out thousands of small internet providers

Thousands of smaller telecom players could exit the market as the Ministry of Digital Development prepares reforms, Royal Bank of Canada has learned. The department intends to leave just three licenses, instead of the current 17 licenses – so there will no longer be a single regional operator for each of the 27 regions.

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Nikolay Mikhailov, chairman of the Domestic Software Telecommunications Committee of the Association of Software Product Developers (ARPP), said that due to the upcoming reforms of the Ministry of Digital Development, thousands of small companies may withdraw from the communication services market. Igor Dorofeev, chairman of the Association of Data Center Industry Participants, said that segments of companies that provide services to mass users will be eliminated and new services will not be launched. In Russia’s 27 regions, regional telecom operators may disappear completely, as only 21% of companies will be able to meet statutory capital requirements; Alexey Leontyev, director of the Association of Telecommunications Operators (ASTO), calculated that 12% of the regional market will decline by 30-49%, and 22% to 31-50%.

The Ministry of Digital Development is currently gathering feedback from industry players on the initiative, but no decision has yet been taken on changes to operators’ working conditions. The organization strives to leave only reliable companies in the market that can invest in network modernization. The reform involves the introduction of three types of licenses: the basic license does not allow the provision of Internet access and telephone services and requires an authorized capital of 5 million rubles; the general license allows the establishment of business in one to six regions and provides telephone services and Internet access with an authorized capital of at least 30 million rubles; and the general one at the federal level, with an authorized capital of 100 million rubles. There are currently no requirements for authorized capital – according to the general rules for limited liability companies, the authorized capital should be at least 10,000 rubles. Market participants are concerned that the price of home internet could rise as a result of the reforms.