In the period of March 1 — 5, 2004 the enlarged board meeting of the Ministry of the Russian Federation for communications and informatics was held. The meeting was titled «Results of the operations in the communications and informatics sector in 2003 and objectives for 2004». On March 2 a round table session on telecommunications took place during which the Commercial Director of Rostelecom Mrs. Gyulnara Khasiyanova delivered a report on the subject of optimization of inter-carrier settlement scheme.

In her report Mrs. Khasiyanova summed up the results of the re-shaping of the inter-carrier settlements in 2003 and accounted for plans for the year of 2004.

The basic highlights of the activities performed by regulatory authorities and Rostelecom in the said sphere in 2003 were:

• Alteration of the inter-settlement scheme with regards to the domestic long-distance traffic passage between fixed-line carriers;
  
• Alteration of the inter-settlement and tariff-setting schemes pertaining to the traffic passage between fixed-line and mobile subscribers;
  
• Establishment of a unified price-setting pattern, reflecting the balance between tariffs for passage of various types of traffic.

The outcome of the efforts was introduction of a new inter-carrier settlement scheme for long-distance traffic passage. The new settlement scheme conforms to the international standards and ensures inter-settlement transparency, creates equal conditions for all market players and is an incentive for implantation of new communications services as well. Owing to introduction of the new system, Rostelecom's inbound international traffic increased. The traffic termination cost to Russia in the internal and external markets was balanced and the competitive positions of the Company became stronger.

Alteration of the inter-carrier settlement scheme required changing of service tariffs between fixed- line and mobile subscribers: equal tariffs were set up between fixed- line subscribers and ditto and mobile subscribers.

As a result of the above reform, a unified price pattern was established that provides for a balance between tariffs for passage of different types of traffic.

When placing emphasis on further efforts to develop the inter-carrier settlement scheme, Mrs. Gyulnara Khasiyanova pointed out subsequent steps that would include:

• Alteration of the inter-settlement principles and identification of the traffic passage cost for carriers, interconnected with regional operators on the local level;
  
• Optimization of the inter-settlement scheme and tariff-setting of services rendered to fixed-line def-code subscribers;
  
• Adaptation of settlement rates to market level (value of linear and termination rates) for purposes of traffic transit settlements.

The Commercial Director also underlined the demand for further development of the inter-settlement scheme and tariff-setting under the traffic transit between fixed-line and mobile subscribers and in particular evaluation of the potential change over to payment for the connection with the mobile subscriber by the calling fixed-line subscriber.

Background information

At the start of 2003 there existed several inter-settlement schemes for long-haul communications contingent on the type of traffic involved (mobile network traffic, fixed-line subscribers' traffic of regional operators, intelligent network traffic etc.) Until recently all inter-settlement schemes for long-distance services were based on payment for outbound traffic only, while inter-settlements for international services nowadays rest on revenue allocation and are not tied up to the number of transit minutes. Analysis of the on-going inter-settlement schemes shows that despite the variety of their forms, disbursement for three services is the footing of any such scheme: originating, transit, termination. Therefore to establish equal conditions for the operators, penetrating the market and to preclude from creation of bypass traffic schemes it is urgent with a transparent inter-settlement system based on the above three services irrespective of the source or type of traffic.

Pursuant to the decision by the Ministry of antimonopoly policies the integral settlement rate was nullified and the new inter-settlement system was established for long-distance traffic transit between Rostelecom and regional telecomm operators as of August 1, 2003.