Russian Telecommunications After the Revolution:
New Perspectives on Infrastructure Creation
An autumn 1992 study by Gordon Cook
Contents:This document was hastily converted from Word 6.0; there may be inaccuracies. Right now it's one huge file -- soon it will be broken up and structured.
Building the Russian Marketplace - October 1992Russia, in October 1992, is in chaotic transition from the disastrous effects of 74 years of Communist Party rule. While Lenin still rests in his Mausoleum in Red Square, he has been largely forgotten. The line to view his embalmed body -- once more than a mile long -- has understandably vanished.
Wandering by the Square one day at the end of my October visit, I saw that the Square was closed because the Mausoleum was open. So on a whim, I decided to visit. There was no wait because there was no line. I was able to stand for a minute or two inside and carefully scrutinize the leader of the 1917 revolution. Lenin looked thread bare, almost as though -- worn out -- he had been replaced with a cardboard imitation. The space inside the mausoleum was very very empty: symbolic of the tragedy of the inheritance left to this proud nation by the failure of the communist experiment. Russia lives and moves forward but it is hard to judge where its newest journey will end.
The dramatic changes introduced by the fall out from the coup of August 91 no longer are the primary focus of people's attention. Instead, usually of necessity, people focus on the "economic situation." Russia is lurching very unsteadily toward the building of a market economy. Income stratification is increasing dramatically. Unfortunately it is doing so both without the economic safety net features of most western economies and in a way that, by western standards, is absurdly skewed.
New Economic ClassesAndrei Sebrant, who was also my April host, reads me a short story on income distribution from the Russian newspaper Argumenty i Fakti. The lowest 25% of Russian incomes are those of 3500 rubles per month or less ($12). This includes not surprisingly pensioners, secondary school teachers and heath care workers However it includes all scientists, physicians and university professors. Somewhere in between this group and the highest 10% are to be found factory workers. But generally well above them in income are taxi cab drivers and workers in the oil and transport industries. The highest 10% (350,000 rubles and above - $1200) are those with management positions in foreign trade, state enterprise ministers and politicians. Such income distribution is not something likely to enhance long term social stability. Nevertheless it is the current fact of life for the Russian people in an environment that if anything seems more fluid and rapidly changing than six months ago.
As I watch programs on the television, read the local press, and talk to as many people as I can, what I see is kaleidoscopic in form. I begin to realize that the situation is too complex and too fluid to be totally grasped by someone who doesn't experience it first hand and with complete language fluency on a long term basis. As Masha says to me: "even though you have spent much time with us, you can not even begin to really understand what our life is like." Thinking about what Masha has told me, I am struck by the absurdity of the tendency of some American observers to attempt to simplify this complicated situation. When AT&T "hires" 50 or so fiber optic researchers for $70 a month, this is taken by some as an indicator of the acceptable professional salary for all educated Russians. This is absolutely untrue, and betrays an intellectual laziness that will not serve future Russian American relations well.
Meanwhile, having arrived in Moscow at 10 am Friday October 2, on Saturday the 3rd, I take the overnight train to Petersburg where on Sunday morning Victor Iukhtentko (whom I had previously "met" only by electronic mail) greets me.
Again we talk about the chaos and the economic situation. Victor says that inflation is increasing faster than people's income and that the decontrol of oil and gas prices in September 1992 will give inflation another powerful boost. (The decontrol appears to have been responsible for the dollar to ruble exchange rate more than doubling over the last sixty days with the rate of increase showing no signs of slackening.) And yet to a superficial observer conditions seem no worse, the street bazaars no larger and the lines no longer than in April.
Certainly advertising as a symbol of a generally agreed upon embracing of a market economy has increased. It has even spread to the public address system of the Petersburg metro. On television the sophistication of the commercial is approaching Western standards and the range of consumer products runs from Wrigley's Spearmint chewing gum ("original American quality" to Vidal Sasoon Shampoo. Meanwhile on the street corners, posters announce that "the famous Volvo cars now here." The increase in the apparent influx of western goods between April and October is startling. But Andrei assures me that economy is stratifying. The western goods advertised are affordable generally to only the most wealthy 10 to 20% of the population who are usually, either former officials of the old regime or those who have been the most successful in buying and selling imported products.
For sixteen years I have lived five doors down from an elderly Russian emigre. She has given me $200 and asked me to deliver it in Moscow to her sister, Tatiana Panteleevna. It turns out that Tatiania's husband Alexander is an official both of the old and new regime. He is Minister of Roads and Highways. Shortly before the last weekend I spend in Moscow they call and offer to take me out on Saturday in their chauffeured car. Since they speak almost no English, it will be good practice for my Russian.
While they are very pleasant people, they are very definitely members of the most wealthy segment of the population. Their Moscow apartment of three bedrooms, a living room and kitchen is palatial in comparison to other apartments I have visited. Fine furniture, a large library behind glass enclosed bookcases, Japanese stereo equipment and a collection of antique Afghan guns and knives adorn it. Nevertheless they assure me that they spend as little time as possible in it. From April to late November they stay at their country dacha from where Alexander is chauffeured to work every day. Still Alex complains that his salary has not kept up with inflation. On return to the US I learn from my neighbor that they will remedy this problem by renting their Moscow apartment to a western businessman for $2,000 a month - an amount of money that could provide adequate support for a family of four for a year!
With inflation getting much worse everyone is occupied in buying and selling. Short term activities only. A brilliant spectroscopist from Andrei's lab joined a group which flies to Singapore to get computer parts and returns them to Moscow where they make two new computers a day. His former lab colleagues make 1500 rubles per month and he 35000. According to Andrei, he now brings chocolate to his former laboratory friends. Under such inflationary conditions, long term investment in building or designing or creating is simply impossible.
Certainly, services to westerners for dollars and German marks abound. (The first taxi in Petersburg that I found was a sparkling new maroon Mercedes Benz with a meter denominated in dollars.) For those with the language ability and the contacts, the buying and resale of all manner of merchandise is very lucrative. For example, Andrei tells me that Sergei de la Cuesta, who in April had been engineering the error correction protocol into the cheap Taiwanese fax modem has given up on this venture and is reselling computers. And Dima Volodin -- one of the five top telecom experts in Russia -- chastises Andrei for using the network to talk to western school children when it should be used to earn dollars.
Service to the Customer -- an Unfamiliar IdeaWhile services may abound, the idea of having customers, finding out what they want, and giving them to keep them coming back for more is far too often missing. Two examples should suffice to make the point.
The country palaces of the Tsars and the Winter Palace that houses the world famous art collection known as the Hermitage are the most important tourist attractions of Sankt Peterburg. Many parts of them have fallen into significant disrepair and the Russians have taken to charging foreigners 800 rubles for entry and 600 for taking photographs. A native may visit for 20 rubles. Given the economy problems of the country it seems reasonable to have foreign visitors subsidize the cost of maintaining these priceless monuments.
But some bureaucrat who oversees the hours of operation has ignored an obvious source of additional revenue. All are closed one day a week. The Hermitage, in the heart of "Sankt Peterburg," closes an hour early on Sunday and is closed all day Monday. It seems reasonable to assume that keeping it open would provide more revenue as well as needed work for the custodial staff -- not to mention making for happier tourists.
The other example was a promised visit to Kizhi -- a 300 year old wooden church with 22 onion domes and certainly one of the most important and, because of its remote location, rarely seen architectural monuments in Russia. Thanks to the courtesy of Paul Polishuk, President of Information Gatekeepers of Boston and co - sponsor of the second annual Russian Fiber Optics and Telecommunications Conference, I had been offered a ticket to Conference which was to be combined with a cruise to Valam Island Monastery in Lake Ladoga, the city of Petrozavodts on Lake Onega and the fabled site of Kizhi on the other side of Onega.
The conference was of course the main reason for 23 Westerners and 150 Russians boarding the 340 foot long Vissarion Belinskii. The ship essentially was run on two fare classes. The Westerners paid roughly $200 a day and the Russians an amount in rubles which amounted to about $5 a day. If there were ever any question about weather making the visit impossible, service to the customer should have demanded that we go straight to Kizhi, the most important stop.
Instead we sailed from the bottom to the top of Lake Onega and arrived at Valam Island Monastery in absolutely beautiful weather. Left Valam at One PM enroute to the Svir Canal the 60 mile long channel connecting Lake Ladoga to Onega. We had at least 60 to 70 miles of open lake to cross and, before long, the boat was beginning to sway dramatically from side to side. By sundown we were still in rough seas with blue sky overhead. Two hours later we were in the Svir River and there was announcement about stormy conditions on Lake Onega which might make the visit to Kizhi impossible. That night, a midnight the boat anchored. At 6 am it started moving and at 8 am the passengers were awakened with announcement that if we continued directly to Kizhi we would not arrive until two hours after night fall. (No mention of the six hours without moving that had just been spent.) Because of uncertain weather conditions we'd continue for an hour to the settlement of Svirstroi where we'd dock for a day and return to Petersburg on the following day.
At Svirstroi we tied up next to an identical boat filled entirely with western hard currency paying passengers. It was continuing on to Kizhi in three hours and its management was positively contemptuous of our captain's reason for not continuing. Later in the day we were invited onto the bridge where the captain discussed the storm conditions. The discussion made it clear that the boat was operating well within its margin of safety, but it was also clear that protest would be of no avail. Our boat was managed by a different company than the hard currency boat. I can only speculate that, with the recent decontrol of fuel prices, the value of the fuel saved by traveling about half the length of the scheduled trip was substantial. An in Russia with the current hard times, the motivation of immediate gain can tend to outweigh willingness to make a longer term investment in future goodwill.
The Voucher Program -- Teaching the People CapitalismThe Russian Government, as part of the privatization of State run business and industry, has initiated a voucher program. Every Russian citizen including every child is to receive by December 1 from the Government, a 10,000 ruble voucher. Starting on December 1, these vouchers may be used to purchase shares in the former state run businesses. To ensure that people have a chance to spread their investment, shares may not be priced at more than a thousand rubles each. Early in 1993 the time for investment of vouchers will expire and enterprises will turn over to the government vouchers against which they have issued stock and be reimbursed by the government for the total value of the vouchers presented.
Andrei tells me that the conditions of the voucher program seem to be changing weekly. The latest he has heard is that Yeltsin wants to issue a decree to permit the vouchers to be used to buy land as well as shares in former state businesses. (See box this page 5.) A piece of land that can be farmed will mean much more to an average Muscovite than an abstract certificate of part ownership in a giant company. If Yeltsin can postpone the next meeting of the Council of People's Deputies from December 1st 1992 until March 1, 1993, the land purchase decree will become a fait accompli. The conservative majority in the Council is against permitting such a purchase for it fears that foreigners will buy up the majority of the Russian land. On October 21, the day after I return home, Yeltsin looses his bid. The Council will meet December 1st.
Meanwhile a market in buying and selling vouchers has already arisen. The first prices I hear quoted from Victor are 8,000 rubles. Ten days later in Moscow the street price appears to have sunk below 5,000. While the vouchers may yet play an important role in the privatization of the Russian economy, in November 1992, no one really knows the extent of the impact that they will have.
EntrepreneurshipVictor Iukhtenko, who is 44 years old, presents an interesting personal history of a would be Russian technical entrepreneur. He graduated from an aviation technical school with training in radio electronics. Continuing to study, he became an engineer who headed a group developing some early computer hardware and software. In 1978 or 79 when microprocessors first began to be used in Russia he began to write software for them. In 1981 he was promoted to a technical directorship. At this point he was expected to take a more active role in the communist party. He found that the party took on a much more intrusive role in his life and quickly became disillusioned.
The productivity of the enterprise was very poor. Victor analyzed why and recommended changes to his bosses. Unfortunately no significant changes were made. Meanwhile in 1980 he began doctoral research into the field of man-machine interfaces. He completed the Candidat Nauk degree in 1986. During the late 1980s he worked eight hours a day as a technical director and eight hours a day as a programmer exploring the development of artificial intelligence and expert systems. He soon found a new job at the technical state university where he organized a small four person research group in artificial intelligence. And then in 1991 they decided to separate from the university and go out on their own as the Intelligence Bank Company.
They now work in two fields. The first is software development using the Prologue language and PDC compilers from Denmark. They have developed a spreadsheet oriented program for businessmen to use for financial planning. They also have developed software that can be used to simulate concurrent processes. Because it is based on cellular automata theory it can be used in any field where there is a process that develops in discrete steps. They have developed a version of this used to simulate automated control systems in the power industry. The simulation system helps to build a bridge between the hardware and software developer. When they input hardware parameters into their simulation software, it helps to guide the authors of control software in their development work. Using the software it becomes possible to generate a natural language description of how to control the equipment by means of the software and computer system. Another piece of software they have developed will generate a flow chart from a PASCAL language program. Their second area of effort has been in the development of a special set of tools to be used with PDC Prologue. It includes a frame representation database and a frame editor.
Victor took an account on Sovam Teleport when he started the Intelligence Bank. Since them he has also become a Relcom user. In addition to electronic mail, he follows the Relcom advertisement conferences and finds himself beginning to take on a role of information broker connecting a contact in St Petersburg with the progress of a ship load of sugar as it travels up the Volga River. He reads the Usenet News Group on Prologue. I am there with him solely because of the computer network contact. In some ways the network has become more important to him in the conduct of his business than the telephone.
Victor apparently works the long hours familiar to Western entrepreneurs. His wife Yelena, says that she is glad I have visited because she will she a little of her husband, who she says not infrequently sleeps at his office. Victor points out that one of the "joys" with which he must cope is the requirement to report income and pay taxes every 90 days. One such period comes up during my visit and he spends an entire evening closeted with a woman who teaches economics and serves as his accountant on the side. Local laws appear to be in direct conflict with some national laws. Victor says that he will obey local requirements since the local authorities can breathe down his neck more easily than can Moscow.
While he spends long hours on his software business, he also has invested much time growing his own food on a small plot of land 75 miles outside the city. The results of the harvest are piled high in several corners of his apartment. Nevertheless he says that on the morning after my departure he will return to his "micro" farm to save 150 kilograms of potatoes that are endangered by the unexpectedly early cold snap and snow that has fallen. He sums up his situation by saying that he is economically worse off now than he was at the institute in early 1991. Nevertheless he knows he has done the right thing for he is significantly better off than he would have been had he stayed with the institute.
The Fiber Optics Conference - High Tech on Lake LadogaFiber Optics is a fledgling industry in Russia. The Russians do produce a 1300 nanometer fiber, but not in enough quantity to even begin to make a dent in the potential demands of a national telecommunications network. Problems for Western companies who are pondering whether to invest in helping the Russians to build a national infrastructure are compounded by the fact that 155 nanometer fiber is the smallest bandwidth that they consider to be of much use. CoCom remains an additional complicating factor.
Most anticipate that major CoCom restrictions will be eliminated by mid 1993. CoCom has actually invited the states of the former Soviet Union to join a new CoCom subgroup with the intent of rapidly easing export restrictions. Meanwhile 155 megabit per second transmission is permitted between cities and 560 megabit within cities. Nevertheless the picture is still somewhat confused, for a western telecommunications company in Moscow showed me a map that listed a fiber "forbidden zone" between the 38th and 58th meridians -- roughly from Moscow to the Ural Mountains.
The 150 Russians on the boat are mainly academic researchers many of whom, as their research institute's funds have dried up, are eager to try to commercialize some of the components that they have developed in their laboratories. About 10 exhibitors have their wares displayed on tables in one of the ship's lounges. A handful of Western companies are represented; Alcatel, the Italian company ASST, AT&T Bell Labs, Alcoa-Fujikura, Ericsson, Cable and Wireless, and two other English companies.
A large American maker of fiber optic test equipment also is there. By the end of the second day he is telling me that he has found Russians who could supply him with both with lasers and with other components that he needs for his test equipment. Components that cost him $100 in the US he can buy for not much more than $5 each from the Russians. He gives two different Russians $50 each on the spot as a trial order for some of the goods. If the quality is satisfactory, he says that he could buy as much as $10,000 a year in lasers from one supply and a smaller amount of parts per year from the other. (Later in Moscow, Andrei tells me that he suspects the reason that the prices are so low is that the supplies are still able to use materials bought by their labs at pre inflationary prices. When the supplies run out, he warns that the prices are likely to increase by three to four hundred percent.)
The "Fiberization" of RussiaBy far the most important insight gleaned from the conference is that the fiberization of Russia is likely to happen far more rapidly than anyone could have predicted even six months ago. Orgres is a division of the Ministry of Fuel and Energy of the Russian Federation formed several years ago to explore the development of communications systems for the ministry. For the past two years Orgres has been exploring fiber and especially fiber optic ground wire or "fog" wire. Boris Mekhanoshin, the Director of Orgres, gives a presentation on his plans at a session of the conference on the first day of the cruise. (As Director of Orgres, he is responsible for all fiber optic telecommunications activity undertaken by the Russian power industry. This includes the planning, financing, and implementation of all projects domestic and foreign.)
Orgres has completed the installation fog wire from Vyborg in Finland to Petersburg. The fiber is dark now but will go live in the first quarter of 93 with the installation of the necessary transmission equipment. They laid this fog wire at a rate of 200 kilometers in one month. The design of the Moscow -St. Petersburg and Moscow Bialystock routes began in early September. With the 1993 spring thaws they will begin to lay the cable itself. (The major point of the design is choosing the places for splice points. They must be accessible and generally at the tops of the towers in strong bullet proof boxes. Each reel of cable is normally about 6 kilometers long. However the necessity of properly siting each splice point means that each segment will seldom be exactly six kilometers.)
They signed, at the end of September, an agreement with the Polish government to interconnect the Moscow line with a system that Poland is building from Warsaw and connecting to Berlin. They anticipate completion of both lines by the onset of the winter. With such completion and with the completion of the underwater cable to Kingesip, by he end of 1993 satellite telecommunication to the Moscow and St Petersburg areas of Russia should become superfluous.
The Russian power company has the money from its current revenues to install the Moscow to St Petersburg and Bialystock links. It exports power to Finland and Western Europe and gains hard currency revenue from doing so. They have formed a company to manage the Moscow St Petersburg Bialystock routes. It has also formed a joint stock company to seek funds for the fastest possible installation that would enable the Trans Siberian Line (TSL) to be completed in a maximum of three years instead of the five it would take to acquire right of way and bury cable. They power company already has a high voltage right-of-way going all the way to Vladivostock. Alcoa Fujikura is ready to supply the cable.
The speed with which they will be able to implement the TSL will depend on their success in raising investment capital. If they are very successful, the line could be completed in two years. (They are just starting to talk to foreign phone companies.) They will need an operating license from the Ministry of Communications (Min Sviaz). However, they don't think they will have much trouble since, if they did, they would switch off Min Sviaz's electricity.
Boris points out that AT&T, MCI and Sprint have heretofore understandably assumed that Min Sviaz, acting as the Russian PTT, is the only partner for international telecommunication within Russia. Now, with Orgres, he adds that important new access and communication will develop. The Orgres joint stock holding company will obtain the operating license from Min Sviaz leaving Orgres free to sign whatever agreements it wishes with American IXCs or European PPTs. A telephone company can, from point a to point b, lease one or more of the fibers in the fog wire from Orgres which will be the owner.
Alcoa's motivation, according to Patrick Risen who has come from Alcoa- Fujikura's Brentwood Tennessee office, is to supply Orgres with the 11,000 to 14,000 kilometers of fog wire necessary. They are not prepared to give them credit. That is under the purview of Ex-imbank's, AID and other fundors. But they are prepared to do two things that will increase Boris' opportunity to get the capital he needs. He controls the production of some equipment that they can use in the production of their fog wire. Thus they can bargain and barter. Secondly the Russian power company has outstanding experience in stringing cable (whether it is ordinary or optical ground wire is irrelevant). Therefore Orgres and Alcoa-Fujikura will do their own joint venture in Argentina and again Orgres will have an opportunity to earn capital for use in investment in Russia. Risen estimates the cost of a fog wire Trans Siberian Line at $225 million -- $100 million for the cable, $25 million for installation, and $100 million for transmitter receivers.
Alcoa realized the potential and found that Fujikura was the only company producing it. They formed an Alcoa Fujikura subsidiary to produce the wire in the United States. The idea is to take the ground wire that is found on all high voltage power lines and replace it with a cable that performs the ground wire function but also has fiber optic cable inside an aluminum sheath at the very center. The MCI TVA project has 30 fibers. MCI gets 22 and TVA 8. project began early in 1990 and completed in early 1991 over a distance of 800 miles from Eastern Tennessee to Alabama, Mississippi and terminating in Western Tennessee. Alcoa is producing fog wire with up to 48 fibers. It will soon introduce 64 and 72 fiber wire. The wire is about 15 millimeters in diameter and must be designed so that it effectively the same weight as the old. About one tenth of fiber in the US is fog wire.
The speed record is on another MCI project in Georgia where they laid 70 kilometers in six days. The power company needs its own telecommunications system to monitor its output. In exchange for the use of the right of way, they get a state-of-the-art communications system. Laying the wire costs one half as much as buried cable. Once laid it is 8 times more reliable.
On an existing high voltage right-of-way, the ground wire is severed and the fog wire attached to the end of the ground wire. Several towers further down the line a winch is used to pull the old ground wire out and, as the pulling continues, to thread the new fog wire from tower to tower. The process is repeated and the fog wire is spliced together in the field. In places like Russia and Eastern Europe, fog wire is particularly attractive where you have great distances to cover, lots of power grids and a need to install the network rapidly.
Once the fog wire is installed, the telecommunications company and the electrical utility become natural allies in making sure that the fog wire is repaired because neither can afford to loose the communications it provides. The fact that the fog wire is visible at all times makes inspection and repair much easier than with buried cable.
The fact that Boris' plans for the use of fog wire are as of November 15, 1992 almost unknown outside of Russia is an interesting indication of how difficult it is to get a "handle" on the situation there. The October 1992 issue of the East European and Former Soviet Union Telecom Report (EESTR) has a story on page 3 called "TSL Returns."
There it states that "Intertelecom, the Russian and CIS long distance company, has brought the Trans Siberian Line (TSL) fiber optic project back to life." The project with an estimated cost of one billion dollars is to run from Hakhodka near Japan to St. Petersburg via Moscow with a spur from Moscow to Novorossiisk that will link with the Italitel sponsored cable that will run from there to Palermo Italy. Intertelecom plans two stages. The first stage is an upgrade and digitizing of existing microwave facilities to 140 megabits per second bandwidth. Revenues from the first stage will be used to support a 565 megabits per second fiber second stage -- by which time it is assumed that CoCom restrictions will no longer be operative. Min Sviaz is inviting the partners of the former consortium to sign on again in a new consortium. EESTR predicts that almost all either have done or will do so.
However EESTR also notes that a competing non Russian project Fiber Link Around the Globe (FLAG) that would link the UK with Japan via the Mediterranean Sea and Indian Ocean has obtained "landing rights in a number of key countries along the route." If completed before the TSL, FLAG could make the TSL no longer so economically attractive by siphoning off "key hard currency generating traffic between Europe and Asia."
Certainly with FLAG on the horizon, the plans of Orgres become extremely important for Western companies to evaluate.This is especially true since, according to sources at Owens Corning, no restrictions against the installation of 1550 nano-meter wavelength single mode fiber exist. Orgres can install this quality of fiber and can upgrade the equipment that transmits over it as CoCom restrictions are relaxed further. Currently 155 megabit per second transmission over 1300 nano-meter fiber is allowed. CoCom will meet again before the end of November 1992. At this meeting it is expected to approve at a minimum 155 over 1550 transmission.
Fiber MANs in Moscow and St Petersburg SubwaysAndrew Corporation of Orland Park Illinois has initiated a joint venture with the Moscow and St Petersburg subway systems to lay in the subway tunnels of each city, the fiber infrastructure for what can become a Metropolitan area network. Since the value of these MANs will increase dramatically, when Orgres completes its fiber linking the two cities to each other and to Western Europe, Macomnet, as the venture is known, is a natural ally for Orgres both for interconnection to its fiber and for possible investment in the effort. It will function as network for other communications companies that want to use it to provide services to end users. The agreement between Andrew and the Moscow subway, known as the Moscow Metropolitan, was signed at the end of 1991 and a subset of the network went live in April 1992. Andrew has been granted exclusive commercial right of way to all Moscow subway tunnels. In August of 1992 Andrew initialed a virtually identical agreement with the St. Petersburg Metropolitan. Harold Sohner of Andrew's Richardson Texas office informs me shortly before I leave that Andrew's Director of Macomnet will be in the US while I am in Moscow. However, he gives me the name of a Mr. Shislikov and the address and phone number of the Moscow office assuring me that he will talk to me while I am in town.
Andrei Sebrant tries to make the appointment for me while I am in St Petersburg. Unfortunately he runs into unexpected problems. It seems that even Mr. Shislikov is in the US and the only people in the Moscow office which he actually visits are Moscow Metropolitan Engineering staff. They are adamant that if Harold Sohner had wished any of them to talk with me he would have told them so. He has not and therefore they do not desire a meeting. They make it clear that their interest is in getting a fiber communications system for their trains, switches and signals -- period. Andrew has promised to handle all contacts with outsiders and it is my hard luck that no one from Andrew is on hand.
Patrick Bodnar is manager of Andrew joint venture with Moscow Metro. Chris Adams (Andrew Corp. Suite 100, 1850 N. Greenville Ave, Richardson Texas 75081) is their principal person in charge of Russian projects.
Chapter 2: Financing Network Infrastructure
The Emergence of RinacoOn October 14th I met with Iurii Krichever, Director of Computing for Rinaco, the investment company that now holds a controlling interest in the Relcom computer network. Rinaco has an entire floor of a rather non descript office building a few miles to the south of the main campus of the University of Moscow which itself is about five miles south of Red Square. There is a lot of open space in the Rinaco offices, something quite unusual for a Moscow organization where office space is extremely expensive. I sense that it has something to do with the image that Rinaco wishes to project as a kind of Russian Merrill Lynch.
Rinaco is the first Russian investment company to be fully independent of the Russian government. Its focus is on investment in the Russian economy as well as the economies of the former union republics. The founders of Rinaco include the Russian Commodity Exchange, the Russian National Commercial Bank, the Asian Commodity Exchange and several other commercial companies. Rinaco is capitalized at one billion 200 million rubles. Its interest is in investments, and it has a department of finance and technical specialists whose responsibility it is to evaluate investment plans brought to them.
Rinaco is also involved in the development of a Russian stock market. They have developed the first depository system for Russian stocks. Iurii adds that two months earlier a delegation from the United States Federal Reserve had visited Rinaco in order to give advice. All companies who want to be backed by Rinaco must play by their rules, use their accounting principals, their technology and their software. They have adopted the rules of the Group of Thirty used on the London Stock Exchange.
Iurii Krichever, Rinaco's Director of Information Systems, revealed Rinaco's ambitions: "While Kurchatov and Demos are the two largest nodes of the Relcom network in Moscow, we in Rinaco also want to be the third [Relcom node] and perhaps the most important node in Russia. Our interest goes beyond email. We want to provide our clients ad hoc access to western commercial databases. We have gotten a proposal from Demos to build a joint network channel to the West 50% paid for by each party."
"I am not sure that this joint project with Demos can be realized, because it is very hard to predict what will happen in this country. Demos' business [after its split with Kurchatov] is starting from scratch. We have had a talk with Borodko [the Demos Director] and after a few weeks, his intentions became fuzzy. I am afraid that we must now build the channel ourselves." Consequently Rinaco will go ahead with its own plans for a Western commercial Internet link. While they have VAX's, they cannot afford Wollongong TCP/IP software. Consequently they will use public domain TCP/IP software. Carneige Mellon has CMU-TEK for a $200 license fee. Two VAX 8350s (equipped with a "telecom controller" and nearly 15 gigabytes of storage) act as their main host.
The VAXes were bought for the maintenance of the stock depository system. But the predictions of their finance specialists about they volume of stock trading and issuance have turned out to be wrong. Consequently, even the VAXes are not needed and they are using very successfully a PC based version of their depository system. Having paid 25 million rubles for the VAXes, they must use them for something. (Iurii explains that there are some dilettantes at the top of Rinaco who think, if a company is to be important, it must have large expensive computers.) To try to take up the slack, they sell depository software to other depositories which are growing in number both in Russia and in the other Republics of the former USSR. "We have told them that we will link them together as nodes in a major financial network. They will function as the central node through which all the traffic from this depository network will flow. The VAXes will be necessary to support such a central node doing heavy financial data transfer. They currently have a trial connection for two depositories. This system must provide email among all the depositories as a first priority. We then want to provide on-line direct communication for real time financial data transfer."
Having an Internet node is not their main aim but more like an additional service. They want to make it possible for their users to get financial data from western databases as well as do real time automated trading of shares. Having spent a lot of money for their computers, they have not too much left over for networking. In addition they do not have enough money for VMS and RGB, the VAX database. Consequently they are trying to make deals with other Russian financial institutions in need of computing power in the hope of gaining enough resources to fulfill their ambitions.
I have brought Iurii a written quotation for a 64 kbs connection to the Commercial Internet Exchange. By the time all the components are added up (including the estimated $65,000 annual fee to Min Sviaz for its half of the annual satellite tariff) the yearly tab comes to almost $160,000. To the best of my knowledge it is the first written quote for this connectivity ever provided to a potential Russian customer. Unfortunately, the price far exceeds Rinaco's ability to pay.
Rinaco's View of the Evolution of RelcomThe joint stock company "Relcom" was formed with Rinaco having the controlling interest (37%), while the Kurchatov Institute of Atomic Energy (KIAE) has a 20% interest. However the position of the Relcom network has become very complicated because KIAE and Demos, the two Relcom founders, are currently each in control of a portion of Relcom. The programmers of Demos were very unhappy with their small share of the "Relcom" stock distribution and, as a result, Demos has split away from Relcom. Sergei Petrovich Borodko is the Director of Demos. The Demos and KIAE nodes of Relcom (both located in Moscow) are the largest in Russia.
Relcom is backbone network with two major nodes in Moscow (Demos and KIAE) and subscriber nodes from all over former Soviet Union. Only the Moscow nodes: Demos and KIAE had links to west. For two years they functioned as a single entity. However in July of 1992, when "Relcom" was established as a stock company, there was a struggle between Valerii Bardin and Aleksei Soldatov and Borodko in Demos. Demos then split into Demos+ and Demos*. Borodko heads Demos*. He began to function as a hardware reseller in Moscow becoming the sales representative for Hewlett Packard. Demos+ focused more on network services. But after a few weeks Demos+ was disbanded and Bardin established Relteam, a new fully based UNIX company. The Kurchatov arm of Relcom didn't like Borodko and Kurchatov actually disconnected from Demos. Iurii thinks the link has been reestablished.
A left over irony of the struggle is that Borodko owns Relcom as a trademark. Meanwhile the number of Relcom's nodes continue to grow. Relcom includes now about 3,000 organizations having a total of 30,000 hosts. The cost of using Kurchatov and Demos nodes is different, cheaper in Demos. Rinaco has connected to both Kurchatov and Demos in order to get Usenet newsgroups through Kurchatov and complete connectivity to everyone through both.
Chapter 3: International Networking for Russian Researchers and Educators
Academic Networking at the Mathematics Section of the Academy of SciencesDuring the summer Dmitrii Vulis, an emigre mathematician and networker, has introduced me to Nikolai Repin of the Information and Publishing Sector of the Mathematics Department of the Russian Academy of Sciences. I meet him on the 15th of October in his well furnished office on the 20th floor of the Academy of Sciences "palace". The building's windows are somewhere between gold and copper in color -- an ostentatious last gasp of "Soviet" state funded science. With him is Iurii Znamenskii, Director of the Laboratory of the Institute of Cybernetics. Iurii's second job is Director of Setin Ltd., a telecommunications consultancy and hardware reseller of Israeli made CISCO AGS+ class routers. (So much for one more CoCom restriction. See Box next page.)
Aerocom is a joint stock company that provides foreign telephone services, and the Headquarters of the Academy of Sciences has a barter arrangement that gets it a voice line or a 9600 baud data line to the United States in exchange for giving Aerocom office space in the prestigious Academy Headquarters building. Their line begins in the M-5 telephone switching center in Moscow and ends in the TRT offices at 888 Seventh Avenue in New York City. Aerocom has promised a microwave local loop so that they can avoid the city network in their connection from their office to the M-5 switching center. Next they want to install leased 19.2 data line. Then in 1993 a satellite line. They have looked at the possibility of using a Russian satellite. Under these plans Aerocom would pay for one half the channel and other Moscow companies that Repin and Znamenskii would bring together would pay for the remainder.
The Steklov Institute of Mathematical Sciences pays 600,000 rubles per year to Relcom for its connection. He estimates the entire Academy is paying eight to ten million rubles per year to Relcom for its connection. He believes that many of the institutes are paying the vast majority of their budgets for electronic mail.
While the domestic service provided by Relcom is fine, the question of international service is still a problem. RELARN (the Russian Electronic Academic and Research Network) is being created by the government as an academic, non commercial network so that its international traffic can be subsidized by the government. The government has promised RELEARN a six million ruble subsidy for 1992. Repin is not certain whether that subsidy has been paid. In April, May and June of 1992 Relcom made 700,000 rubles in credits available to academic institutions which then received their Relcom connectivity at half price. However, since then, these institutions have been paying full Relcom commercial rates.
Russian Access to the Internet -- A New American Policy MuddleI have brought them a quotation from JVNCnet to install a SLIP TCP/IP connection from 888 Seventh Avenue in New York City to the JVNCnet New York City POP. The quotation also explains the procedures and costs for expanding the SLIP connection to full 19.2 and then 64kbs TCP/IP connections. As I did at Rinaco I also attempt to explain the lack of a clear American policy on adding them to the NSFnet policy routing data base.
They situation becomes even more muddled when they show me an electronic mail quotation from a Patricia Boykin at a Washington area office of Advanced Network and Services. This document asserts that since ANS runs the NSFnet network, if the Academy of Sciences paid ANS $200,000 for a 64kbs connection to ANSnet, ANS could provide access to every college, university and research center connected to the NSFnet. I told Repin that it appeared to me that ANS was promising something that they would be unable to deliver. At that point I gave him the following policy statement from Steve Wolff, the NSFnet Director.
Date: Tue, 29 Sep 92 10:50:01 EDT
I had then asked Steve Wolff to explain how the FNC had answered his request. He responded that it had agreed to establish a committee to "study" the issue.
At this point Repin pointed out that the Moscow Institute of Theoretical and Experimental Physics has an IP line to the German Synchrotron Physics Network in Hamburg and from there Russians with accounts on the German network can telnet or ftp anywhere. I agreed that American policy seemed to be full of holes for the Russian Institute for Automated Systems (IAS) Sovam Teleport joint venture terminates on Pandora. Pandora is a San Francisco based system with a 56 kbs link to BARRnet and from BARRnet to the entire NSFnet. Any Russian user of Sovam Teleport having the money to pay the extra charges, may used the Moscow San Francisco leased line connection to log into Pandora. From Pandora such a user may then telnet or ftp to any part of the NSFnet.
Soon after my return to the US, I again asked Steve Wolff to comment on ANS' assertion of being able to provide complete access to the NSFnet. He replied that ANS could do what it liked with the commercial portions of its network. Did such commercial portions include all attached universities of a mid-level network that had signed the ANS commercial connectivity agreements I asked?
Very soon after I raised this question, (which Wolff refused to answer) John Cavallini, the Director of the Energy Sciences Network and member of the Federal Networking Council moved the debate to a different level with the following admonition to Wolff.
Date: Fri, 23 Oct 92 21:45:19 -0400
When I asked Cavallini for a definition of critical technology, all I received in return was silence. As with continuing CoCom restrictions, someone somewhere in the bowels of our bureaucracy is trying to lock the barn door after the horse has escaped. It is to be hoped that the new Administration, which at least is computer literate, will soon unlock this policy muddle.
Chapter 4: Business Communications-Russian and American Straws in the Wind
A Few Steps Towards the Modernization of the Communications EnvironmentTelephone directories are beginning to appear. In St. Petersburg Victor gives me an advertisement for a business directory that will be published in January 1993. (See Figure 5 page 22.) In Moscow a hardbound telephone directory smaller than the one for Trenton NJ sells occasionally in the subways for 180 rubles. Andrei tells me that it was published in late 1991 and that the cut off date for getting into it was January 1991. With numbers that are almost two years old he thinks its usefulness will be limited. He says that he has heard about the existence of a relatively up to ate business oriented directory. However its price of $20 in hard currency effectively puts it beyond the reach of most Westerners. Another option is provided by the Moscow Business Telephone Guide. (See Figure 4 page 17.) Published monthly in newspaper format and distributed free mostly in major hotels, it lists about 4,000 businesses by name address and telephone number. The businesses covered range from joint ventures, to moving companies, to movie theaters. While undoubtedly useful to a western businessman, the directory's utility to his Russian counterpart is very marginal.
Federal Express and DHL do service Moscow and St Petersburg. Unfortunately their prices are well beyond the reach of Russian users. The Federal Express price for example for a seven ounce envelop to the United States is $65.00. A five and one half pound box costs $88.00. Twenty two pounds for $314.00 and 154 pounds $1,820. In April of 1992 I saw one United Parcel truck on the street of Moscow. In October I saw none.
The postal system continues to be shunned. In St. Petersburg Victor had a letter for a contact in Moscow. He asked me to take it with me and called its intended recipient, giving the address of Andrei's apartment where it could be retrieved. Victor imports Prologue compilers and related software from Copenhagen. The shipping cost for a package of about 10 pounds is over $200. He tells me that if he has paid orders for two such packages it is less expensive for him to fly from St. Petersburg to Copenhagen and back to deliver them.
Transinform -- A Communications Joint Venture in Search of New FriendsI became acquainted with Transinform in April and found out more about them during the summer. Besides offering Glasnet a home (see my April Report), they operate the only x.25 network in Russia which as yet has no foreign partner. (The Central Telegraph Office has Sprint and IASnet has Cable & Wireless as partners.)
In July of 1992 Esther Dyson wrote the following about Transinform: "A new joint stock company called Transinform was organized in October 1991 to manage and resell capacity on the communication channels of the oil and gas industries and railways, and to offer a variety of information and data services over them. Getting access to these lines and to some others is easy since the major owners of Transinform with 20 to 25% each include: the Railroad Central Communications Station, the Industrial Association of Communication of Minneftegazprom (the oil and gas industry); the Central Station of Technological Communication of Gazprom, and Marine Computer Systems - the ICL Morflot personal computer production joint venture. (Morflot is the Maritime ministry which has its own communications facilities.) . . . ."
"The firm currently is run by Alexander Gromov, who comes from Marine Computer Systems where he ran Sovpak, the Marine Ministry's communications network that is now part of Transinform's dowry. Transinform has 40 employees. . . The concern has about 200 subscribers, including its founders, and various other exchanges and transportation companies. The services include not just raw communications facilities (including some capacity leased from Intertelecom and resold), but also fax, telex, email and information services. . . Estimated revenues for the first year of operations are 30 million rubles. The initial capitalization (raised in the winter of 1991-92 when it was worth about $8 million) is 46 million rubles."
Transinform is located in a Ministry of Railroads building at the Red Gates subway stop. Anatoli Voronov, the Director of Glasnet, has told me that Gromov and his deputies would be very interested in entering a joint venture with a Western company that wished to use the roof of its building for siting a satellite dish in exchange for a portion of the bandwidth. Transinform has issued the invitation that I used to obtain my visa. On Friday October 17th I meet with Victor Moskvitin, Manager of the Central Telephone Station of the Ministry of Railroads and Georgii Khmelidze, Executive Director of the Transinform Stock Company. (Khmelidze is Alexander Gromov's principal deputy.)
Moskvitin begins by explaining the purpose of his operation. He is responsible for the Central Communications Station of the Ministry of Railroads. This Station is the principal node for telephone communications for all railroads in all of Russia. The railroad telephone network has channels for coax and radio. The majority of the switching equipment is in the building in which we are meeting. Other radio transmission equipment is installed elsewhere in the Moscow area.
Turning to the reason for our discussion, he notes that they had already considered a project that would put a dish on the roof and had signed a contract for the project evaluation with a foreign partner and they were convinced that it would work. They analyzed how the signal from the dish could be connected to the x.25 network and to the telephone switching equipment. Such connections could have been not only to the railroads but also to the gasprom ministry. But unfortunately there was no success because the potential partner, a small European company, broke off the discussions and went home without saying why.
To what kind of a communications infrastructure could they offer to attach satellite bandwidth? Moskvitin explained that his operation focuses on intercity telephone lines, adding that it operates almost 1,000 such lines all throughout the former Soviet Union. Furthermore they operate an additional 60 lines for Gasprom and 120 for Min Sviaz. They also operate a local Moscow phone network with a switch that handles 10,000 numbers -- all 262 numbers and another 200 numbers for the 260 exchange. Connection to these exchanges could be done without significant geographic limitation by using their radio facilities if need be.
They are attempting now to develop additional services in radio communications which will allow them to bring in more customers. They offer communications services to roughly 100 large companies that would be users of international bandwidth. They supply new telephone lines to the various commodities and stock exchanges which are among their backers. In short they act as an independent telephone company. In effect they are a competitor of the Moscow City Phone Company.
The problem of course is that Min Sviaz issues operating licenses for any data or voice transmission network. But Min Sviaz has given Transinform an operating license and now they can operate as an independent provider. (The whole reason for the creation of Transinform was to unite the communications needs of different ministries in one entity that could operate independently of Min Sviaz.)
However the installation of a dish would require an additional license from Min Sviaz. They would assure their foreign partner that they would bear the cost of the license, the physical installation of the dish, and the connection of the signals from the dish to the local phone network and x.25 network and ask in return for a share of the profits. They suggest that after the testing of the installation is completed, the partner would receive income from both the incoming and outgoing calls, until the capital cost of the installation had been paid off. At that point they would charge for outgoing traffic and let their western customer charge for incoming which of course would be greater by probably at least a three-to-one ratio. They are prepared to be very flexible.
What, I asked, if the western partner expected the channels to be filled and paid for in full from day one? This is very difficult, Moskvitin responded. It requires a lot of thought because no one has tried it. It might be better to install a smaller dish. He thinks that Infonet is planning to install three dishes. Perhaps it may be a customer for the surplus bandwidth. Their American partner must understand that it will be a little more difficult to do business in Russia than it is in America.
In six months they could fill one 64kbs channel with paying customers. In a year, if they were fortunate, possibly as many as five. But they really feel unsure of what they could achieve because the market is really unknown. While they see their best market as small and medium sized businesses, in 1991 there were a lot of small businesses in Russia which were solvent but now 70% are bankrupt. Also we can't foresee what the major directions of government policy will be a year from now.
American Operators in Russia: US WestOn Monday October 19th, I met with Fred Skovberg, the Deputy Director of US West's Moscow Office which is located in the International Trade Center on the Moscow River about a kilometer from the Russian "White House." The building is relatively new and western in every respect from the Federal Express Office in the lobby, to the Otis Elevators, to the cold water fountains in the hallways. In the lobby one finds free business telephone directories in newspaper format and free copies of the daily English language Moscow Times -- published in English for the Western business community and filled with useful articles on Russian political and economic developments.
Fred starts by summarizing US West's Russian activities. They operate what they call MCC -- a cellular telephone system in Moscow. MCC currently has 1600 subscribers and is an MNT450 system. We went live three months ago and it looks like our biggest problem is going to be having to expand the system earlier than we had planned because of very strong demand. They are doing a similar cellular network in St. Petersburg. It is called Delta Communications and has about 1000 customers currently. For cellular customers who wish international connections they use both the local Moscow international switch and switches run by two bypass operators.
We are also putting in three international gateway switches two in Moscow and one in St Petersburg to connecting to a combination fiber optic line and digital microwave system that starts in Denmark and terminates in Kingisep on the Russian coast where it will go by digital microwave inland to St Petersburg and Moscow. Those switches will go into service some time in the first quarter of 1993.
"We have been in and out of the Trans Siberian Line (TSL). CoCom has caused us some delay in this project. What will finally come of it we are not sure." They are interested but not in a big way for they see too many obstacles. Fred had talked to technical people in St. Petersburg and it was his impression that all that was usable on the TSL was 34 megabit transmitters and 140 line speed fiber. Such an installation from the point of view of US West's needs is not useful.
"We are positive about Russia but on a long term commitment basis." We are not here to come in and put in some kind of by pass service or one of a kind project that we think we can make a quick buck on. "We are here for the long term and want to form a close working association with a number of Russian entities. We see ourselves here in the 15 to 20 year type of time frame. The communications infrastructure of Russia is not something that you can overhaul in two or three years. You are really looking at a network build from the ground up over a 50 year period. There is actually a Moscow telephone switch installed by Ericsson in 1936 that is still operational."
Andrew is laying relatively slow 34 megabit 140 line speed fiber in the Moscow subways. Fred advises me to find out whether the Fiber Optic Ground wire being talked about by the power ministry will be 1550 nanometer American made or 1330 Russian made. Russian 1330 nanometer fiber does not have the operational speed that would be necessary for US West to make certain routes economical for investment.
A Visit with MCIMCI is located about four blocks down a side street from the Belorusskaia Vokzal (Belorussian Train Station). I arrived very late in the day on October 19th and was warmly greeted by Jonathan Noland who runs a small but growing MCI operation. Earlier that afternoon he had just activated first international circuit link between Intertelecom and MCI. MCI had been renting circuits from other international carriers to achieve international connectivity for its customers. Now, for the first time it was running its own links.
John explained MCI's philosophy: First and foremost -- MCI doesn't want to be an operator. By this it turns out that while MCI wants to help Russian "operators" build infrastructure, it will be up to those operators to cope with the chaotic economic and political landscape and to see that users pay their bills.
MCI is a partner in the Copenhagen - Kingisepp fiber project and will be working with Infonet in putting in earth stations. Consequently, it is getting all the connectivity it needs. It wants just a simple correspondent telephone relationship between its customers n the West and Russian providers. What they do in Russia is almost entirely limited to what their customers in other parts of the world ask them to do there to help their needs. The Russians need to acquire capital to procure a network and then to get the best equipment possible not have poor equipment shoved down their throats.
The telephone traffic MCI brings in on its direct connections will help get them this capital. Voice traffic has an international settlement rate. The current rate is $2.60 a minute. Every time an MCI customer calls Moscow it pays $1.30 per minute to MCI and $1.30 per minute to the Russian PTT. There are more calls coming into Russia than going out. The exact number is regarded as proprietary information. But one could assume that for every ten incoming calls only four are outgoing. The positive balance of incoming calls generates a net hard currency inflow for the Russians.
Noland dislikes those who would talk of a quick fix and points out that the Russians "need stability, good honest advice, and a long term partnership." Cases exist where MCI customers want special service. Noland takes actions to meet these requirements as best he can. Sometimes within correspondent means and sometimes outside. In other words, on occasion, certain services are supported here through direct capital investment on the part of MCI. Such services give the Russian provider benefit from MCI technology, training, marketing, and so on. But this is done only when an MCI customer in the US asks MCI for help in installing a service requirement in Russia or elsewhere in the CIS.
They are frequently approached with all sorts of opportunities. When this happens, they ask does it benefit MCI customers? Does it add to the profitability of the Russian operator and is this something that fits in with MCI's long term goals? He is concerned that the Russians are falling for western schemes that will not benefit them in the long run. The bottom line is that connectivity is not as big an issue as equipment and switches and coax to the subscriber's business. Most important of all is the that hard currency generated must reside here and be employed here and implemented here rather than extracted from the country. But they will also make advice and information available to their Russian hosts as well as capital.
It is to be hoped that this desire to cement long term relationships will eventually extend into bandwidth for Internet connectivity. Signs are encouraging. As of mid November both MCI and Sprint have indicated an interest in opening a connection for Russian researchers and educators to the Commercial Internet Exchange. In the six months separating my April and October visits many significant things have happened to the networks I first became acquainted with in the spring. Relcom continues to grow, although not nearly as fast. Glasnet has considerably expanded its grass roots impact. However IASnet and Sovam-Teleport from the point of view of investment has had the most interesting changes.
Chapter 5: Russian Computer Networks: Where are They Six Months Later?
Sovam TeleportIn early June Cable & Wireless announced a $4 million dollar investment in the infrastructure created by the Institute for Automated Systems. Under the laws of the Russian Federation Sovam - Teleport became the operational corporation for a major x.25 network. Sovam Teleport has three owners: Cable & Wireless, the Institute for Automated Systems and the San Francisco Moscow Teleport (SFMT).
Under the pressure of rising telecommunications costs brought about primarily by the end of government subsidies, IASnet had shrunk considerably from several hundred users in 15 interconnected cities to nubs in Moscow and St Petersburg. The Cable and Wireless investment is being used to turn this around. A new x.25 net with PADs and sales and customer support offices in 40 cities throughout the former Soviet Union is being built. An American who will live in Moscow and direct this effort from there is expected to be on staff by the end of the year.
The other part of the venture is a 9.6 leased line connection between a host in Moscow and San Francisco. Known also as Sovam Teleport, this system has roughly 400 users in the US and 400 in Russia. The San Francisco host (Pandora) is connected to the Internet at 56 kbs. Users in Moscow may send email to Pandora or establish a direct x.25 login to the system. Those who are able to pay fees in the range of $20 per hour may use a set of menus to ftp and telnet anywhere in the Internet. In December the Moscow 386 33 MHz host will be replaced by a 486, UNIX, 50 MHz host with over two gigabytes of disk space, a net blazer and TCP/IP software to be run over x.25. A direct 64kbs Internet link to Moscow is a high priority.
The San Francisco Moscow Teleport appears to have evolved into a holding company for Russian telecommunications ventures. On October 20, 1992 another of its ventures, Sovintel, an international bypass telephone company received a $6.5 million dollar loan -- the first Russian commercial loan not backed by government guarantees. (See textbox page 19).
Relcom Matures and SplitsMy schedule did not permit another visit to Relcom or Demos. However in addition to the information on Relcom developments that I gained from Iurii Krichever at Rinaco and Nikolai Repin at the Academy of Sciences, a Relcom associate in Helsinki sent me the follow memo on recent Relcom activities and plans. (Note Also that Relcom has joined Eunet, the European Unix-based network and acts as Eunet's sole representative in the territory of the former Soviet Union.)
From: Oleg Tabarovsky <email@example.com>
DemosAs earlier sections of this report point out, the Demos Cooperative, which supplied much of the programming talent for Relcom, split away from Relcom at the end of the summer of 1992. According to a NewsBytes story filed in Moscow on October 2, 1992:
"The Demos/+ company has announced the availability of an electronic mail network alternative to the existing Relcom net. A number of business and legal questions are still open, however, and are creating turmoil among users and managers. Demos is offering complete "TCP/IP connectivity to the outside world," Dima Volodin of Demos said at a UNIX society meeting in St. Petersburg recently. Demos has entered an arrangement to use dial-up connection with the AlterNet network through the UUNET Technologies of Falls Church, Virginia."
GlasnetI asked Tolia Voronov, the Glasnet Director to summarize for me what had happened to Glasnet since April. He replied enthusiastically. "With the completion of the move to the Transinform premises in April Glasnet's situation improved dramatically. They acquired adequate telephone dial in for the first time with two rotary numbers with a total of sixteen lines and one of the "cleanest" telephone exchanges in Moscow. They have approximately 500 users eighty percent of whom are located n Moscow, with the remainder spread among 20 other cities. This twice the number of users at the beginning of 1992."
By the end of the year they should have close to 700 users because the will absorb into Glasnet in November, the entire small network known as Pilotnet which has more than 100 users among schools in Moscow and other cities. Pilotnet was originally sponsored by IBM which donated equipment for 100 schools which were connected together by a BBS system. "But they had difficulty in running the BBS and reached an agreement with us to take over their operation and service their users." They will "pay" for their new Glasnet service by giving Glasnet administrative office space in a building on the other side of the square from the Transinform building where the Glasnet machines are. In return the Moscow Pilotnet users will profit from having the same telephone access as Glasnet, while those in other cities will be able to use the Transinform x.25 network when it matures. Tolia adds that the Transinform network has currently accessible PADs in only two cities besides Moscow -- Odessa and Kiev.
Glasnet users in other cities either have to call Moscow long distance or use one of the three Iskra lines to which Glasnet has bought access. Iskra Two is now operating as an independent telephone company selling access to anyone who will pay in over two hundred cities in the former USSR. Note however that each user would have to buy his own access to Iskra in whatever city he happened to reside. Tolia says that access costs only 600 rubles per quarter while each call is charged separately.
Glasnet used to be dependent on American paid for direct high speed modem calls to San Francisco for its international connectivity. This is no longer the case. It has purchased access to international Iskra lines. Every two hours it calls Greenet in London and from there its messages are routed through the IGC network to the US and to the rest of the worldwide Internet.
The unstable political and economic situation are sources of continued concern for Tolia. While we talk he has to take a phone call. He becomes extremely agitated and even curses in English. Economic relations with the Ukraine have come to a complete breakdown because of maneuvering between Yeltsin and the Ukrainian president. He has just been told by his representative in Kiev that there is absolutely no way to pay the 150,000 rubles owed to him by Glasnet users in the Ukraine. He guesses that he will now have no choice but to remove his Ukrainian users from the system.
The modem taxes for the benefit of the local telephone company that were approved in April are now beginning to hurt. While the cost of an average year's use of Glasnet might be 40,000 rubles, the phone company wants a yearly fee of 50,000 rubles for every subscriber who uses a modem. They are beginning to be able to identify users who try to do so secretively and these users will be forced to pay or they will lose their phone service. Tolia fears hat they will find that they cannot afford to have their Glasnet usage costs more than doubled.
Chapter 6: Whither Russian Policy? The Role of the Ministry of Communications
An Interview at the Ministry of CommunicationsOn my last day in Moscow Glasnet's Anatoli Voronov finally succeeds in meeting a very difficult request that I had made of him. He has convinced Arkadi Golubkov, the Vice Minister of the Ministry of Communications, President of the State Committee on Informatics and soon to be Minister of Informatics (Data Communications) to grant me an interview. When we meet, it is quickly apparent that Arkadi, who appears to be in his forties, is very articulate.
I ask him for comments in four areas. First Russian Federation Telecommunications Law. Second the limiting of access to telecommunications because of prices rumored to be set artificially high. Third the question of a live connection to the Internet Fourth the question of what might be involved in finding a partner for Transinform.
Golubkov replied: "There is a telecommunications law which is now under consideration in the Supreme Council. Its name is the Communications Law. It will be 4 to 6 months before its text is finalized. The text will not be published while the law is still in draft form."
When I asked whether there is there is text of an existing law impacting the operation of computer networks that I could review, Golubkov obliquely replied that the various parts of the ministry did of course operate under sets of written regulations. I then asked about laws impacting pricing.
Golubkov answered: "We are just now transferring everything to the market economy. That is why the head of each enterprise is allowed to set his own price. The prices for telecommunications are not controlled. There is even a presidential decree to this effect. A stipulation that telecommunications prices will not be controlled will be included in the law."
I said that I had heard that prices tended to be rather high because I had heard that Min Sviaz charged enterprises very high prices for operating licenses.
Golubkov answered: "That's not true. Min Sviaz does not take any license fees because there is now no existing law that allows them to do so. They charge only a technical fee which covers not only the cost of the paperwork, but also all necessary technical advice. Normally Min Sviaz gives licensees on a tender basis. For example they announced a competition for bids on a cellular net in the range of 900 megahertz and the announcement included all the costs and payments necessary."
When I asked whether Arkadi could estimate what the technical fee cost might be for putting a satellite dish on the roof of the Transinform Building, that replied the necessary technical details were too complex. That the fee would be determined in part by the incoming and out going bandwidth or at least estimates of same as well as information on what will happen to the bandwidth after it leaves the dish. All these questions could be prepared in a hard copy memorandum for my next visit.
Golubkov continued: "For your information we are also working on a law on information and what in Russian is called law on informatization. This includes a law on information security. For example only ten days ago the law on the security of software and databases was published." They will give me a copy.
"The law on communications is rather difficult. As you know the United states has been developing this law since 1934." I ask if he could explain one or two of what for them are difficult points in developing the new law. Golubkov replied that the main question was that of long distance versus local telephone companies. He indicated that as a part of the on going process of privatization "the long distance telephone companies will be state controlled while the local phone companies will be privately run."
I say that I have heard complaints that Min Sviaz is both a regulator of telecommunications and because of the joint venture between Central Telegraph and Sprint is also a provider. Some claim that there is a conflict of interest between regulation and provision? "It is not a real conflict." Rather it is just a working situation where nothing existed before and now both sides are providing a service. The main problem is the question of payment for services. Because Sprint operates primarily with payment in hard currency, "for every dollar it invests it receives three dollars which it takes out of the country. We want to see our partners as partners on an equal basis, equally sharing all difficulties and all expenses as well as all profits equally. And we also believe that it is necessary to invest part of the profit into further development of network infrastructure."
I say that I have heard that their power ministry has already installed fiber optic ground wire from Vyborg Finland to St Petersburg and has very ambitious plans. I ask him to comment. He replied that while they are "glad to see the power ministry hanging fiber optic wire from their towers, we have many contradictions between ministries because all support and hardware necessary to send signals over the wires belongs to our ministry. We think these wires also are ours and perhaps we will make a deal with the power ministry to use their towers to hang our wires."
I ask whether he thinks that within the next year the plans to link St Petersburg, Moscow and the Polish border with fog wire will become a reality. He does not know and will have to ask questions. He believes that it will depend on the amount of investment that the Power Ministry receives. I say that I had heard Boris Mekhanoshin express confidence that he could do the Moscow Petersburg Bialystok portion out of capital from the operating budget of the Power Ministry. Would Arkadi please comment on this?
Arkadi responds that this may be the case but that they must also overcome some technical and operational problems. He adds that prices are very relative. For example local telephone service costs about the same as a loaf of bread. While it is true that computer networks are expensive to use, this is because prices here are set by those companies who provide the computer network service.
I wonder whether their prices are high because the technical fees that they have to pay Min Sviaz in order to operate are also high. Arkadi answers that part of the problem is that modernizing service at the local level (the so called last mile) is the most expensive while at the same time use there produces the least revenue. By the same token the cost of modernizing international service in proportion to the revenue received is small. If Min Sviaz fees are high, they should be thought of as a way of funneling money into local loop development. They are concerned about the computer networks (including Sprint) skimming only the cream from the marketplace. money from these international "cream- producing" operations must be gained and be used to improve the infrastructure of the local loop.
At this point Anatoli asks how users of his network who pay an average of 2000 rubles per month can be expected to pay an additional 50,000 rubles per year for the use of a modem. Arkadi responds that while a modem tends to occupy a telephone connection for a longer time than voice and therefore puts a greater strain on the network, that this is a matter between the local phone company and its customers -- one over which Min Sviaz has no control.
Arkadi then goes on to explain the Ministry's plans via Intertelecom for its own international fiber network, by means of which in the next two to three years, they will bring into Russia 45,000 international lines. From Copenhagen to St Petersburg there will be 15,000 lines, from Palermo via Italtel to Istanbul and Novorossisk 15,000 more and from Japan to Nakhodka and Khabarovsk another 15,000. Thus there will be a need to develop and infrastructure to support these major international trunks. "Thus with all these programs that we shall undertake our foreign partners will have many areas in which they may choose to participate. We are the only entity that can be held to be responsible for the coordination of the development of our telecommunications infrastructure from the local level, to inter city trunks and final to inter-connections with the modern, digital global telephone network. We try to sell that reasonable funds are invested in all these areas despite the fact that only the top most one of international connectivity looks the most attractive to our potential foreign investors. Under our regulations each level may exist and operate independently. However they may also charge each other for whatever services they offer to each other. And we at Min Sviaz will also take 20% of each transit dollar and redistribute it partly to local companies and partly to long distance infrastructure. This in short is the system which we are creating".
Golubkov continued: "Now your last question about an Internet node for Russian scientists is a very interesting and important one. This could be a non profit network. I am ready to approach this problem and discuss it on a practical basis." I explained what I had done in bring price quotations to Nikolai Repin at the Academy of Sciences and Glasnet and Transinform and Arkadi expressed his approval. I also mentioned that I had met Marat Guriev in April. Golubkov immediately pointed out that Guriev was only a user and that any network for Russian scientists "would be established only on the basis of the existing infrastructure of Min Sviaz. Because we have you know Russian telecommunications satellites." But how will you connect from a Russian satellite to an American ground station I asked? "Well that is a problem and we must work on that," Golubkov answered. I asked what I should tell American network providers and officials when I returned to the United States. Arkadi replied: "Tell them that we are ready to discuss all reasonable ideas. We are working toward the creation of a Russian Information Center and Teleport that will be based on our experience with networks like Relcom, and Glasnet."
Chapter 7: Some Concluding Thoughts on the Russian Enigma
Moscow Through the Eyes of AndreiIn early November Andrei sent me the following: "This fall a real winter cold came to Moscow unusually early. The city looks strange even for us who have been living here all our life. Green leaves frozen in the ice of deep puddles like huge insects in the amber. Chary sunshine filters through hazy clouds in the pale-blue sky. Golden domes of tall cathedrals burn like candle lights above the old cake of Kremlin. Strange again, there is no birthday today.
Last Sunday all our family: Marina, Patty, Masha, and I visited Gorky Park. All attractions usually closed for the winter were still open and it was a strange fun to ride a roller coaster with icy cold seats. It was a pleasure to go upside down - at that moment your rear part was not so pressed against cold iron and felt slightly warmer. Watch lead grey Moskva river from a big Ferris wheel... water so cold that it looks like it cannot wait to freeze and relax. On the small ponds in the park the ice has already formed thin and transparent laces near the banks and the ripples magically disappear when they approach the land... You almost cannot see the ice itself, you see just impossibly smooth surface...
The park was almost empty - surprisingly so, because at warmer times there always were long lines to every ride or attraction. The cold could not do that - it's a little bit difficult to scare Russians with a mild frost. I got some answers when had to pay for the tickets at the roller coaster. After spending three hours in the park with the family I left there 1/3 of the salary the State pays me a month. The craziness of Russian economical situation quietly crept into golden Sunday afternoon filled with laughter of those who still have money to visit amusement parks.
To compensate for the cold, political life is hot like volcano fuming before the eruption. And stinking accordingly. The eruption itself is scheduled for December 1, the Congress of Peoples' Deputies is to open on that day. The President has asked the Supreme Council to delay the Congress till spring. Councilmen have voted down that appeal saying they are fed up with the Government and want it to stop experimenting with 200 million of living souls. As though these guys from the Supreme Council know another way out of this insane situation we're in or can one read about it in a textbook? The President got angry and said he would not forget this impertinence.
People are watching all that on TV and consume hassles instead of calories. Looks like they get enough, for you will not see starving faces in the rush hour crowd. Nor will you see happy or smiling faces - as a result of this diet. Fortunately, kids prefer Disney cartoons to political debates and therefore are strata of the population that laughs most often.
Inflation is the real ruler of this country now. Twice a week Commercial Currency Exchange changes the exchange rate for rubles in respect to Western currencies. At the moment, ruble price for dollar becomes higher every week by 30 or 40 rubles. In night news on TV two hours ago they said it was 393 rubles per 1 US dollar. By the moment when you read this, it will be well above 400, of course. Many people are too frustrated to go on with their work. They prefer easier ways - and crime rate grows even faster than exchange rate. And beggars sit at every corner of Moscow metro stations, under all that luxury of endless colorful marble.
On the other hand, more and more people realize that they should not sit and wait until their salaries will make some sense. In order to survive, you have to find second and third jobs - and earn money from private companies. Sometimes it is funny to see that university students are dressed much better than their professors and look much more confident. Young and adaptable, students have already learned how to make quick money. Professors are less lucky. They try to make money by research or teaching - but who will pay them for either? And many leave the country. I find it very difficult to locate a seminar on my field of physics still open in Moscow. I have no one to discuss science with - unless I use Internet e-mail to connect to former Moscovites who are now residents of Israel or U.S.A.
FromPhysics and Biology, students drift to Economy and Trade. Will Russian banks in the next century be as powerful as our H- bombs now? If yes, all that maybe is not in vain. On the other hand, will there be a population to use the banks - or only tourists from abroad? Many of them Russian speaking..
Speaking seriously, I am afraid for the future of science here. If I can survive now - this is because before I was working 10 to 14 hours a day in the lab - and it was the real school that polishes a puppy to a professional scientist. I could afford doing science all day long - now that pays me back. But those who are entering the field today just cannot work in this style - they must learn how to juggle three jobs at a time. A useful skill, but it remains to be seen if they can become professionals in any meaningful sense.
The traditionally slow pace of local life has changed dramatically. Events, news, and money - everything is flying by at ever increasing speed. Maybe there have been so few people on that roller coaster in the park because our life is a huge one now? And no safety bars and the design has never been tested - it's a full scale field test now in progress - and God save the passengers!
And God comes to Moscow. Many different Gods, in fact. Preachers of all possible confessions come here to tell people where the truth is or when the end of the world will come. One group promised that it would happen on October 28 and covered half of Moscow with their posters.
Some kids were really scared. Another half of the city was covered with posters advertising Billy Graham as a person who has an answer to every "Why?". His commercials on TV are between the ads of electronic lottery and one more newly born private bank. On October 29 one of the central newspapers published an article with a headline: "Supreme Council Session Took Place Instead Of Previously Announced End Of The World". This is a modern joke, Russian style. Or Russian mass media style.
Fall is a strange time. Snow falls and melts and freezes into dirty ice. It will be some time before everything is covered with a white blanket hiding the mud. But snow or ice outside, it is still warm in our rooms and hearts. Laughter and hope never give up - they just move to secluded places. Computer networks among them. The concept of seclusion changes with time, you know.
Some Concluding ThoughtsWith the election over it is to be hoped that the new adminsitration will be focusing on fresh policy towards Russia. Current policy is a disgraceful muddle. Only two things separate Russia and the CIS from the status of a third world country: nuclear weapons and the brain power of an exceedingly well educated populace.
Andrei points out that in general foreign scientific journals have been almost entirely unavailable for more than two years. Science is an international field. To do science one must read the international literature one's own specialty. To be unable to do so is to be cast adrift and relegated to a new dark age.
Russia's ability to maintain its scientific and technical brain power is in danger in at least three critical areas. First is emigration -- many brilliant minds are simply leaving the country. Second those who saty behind will have a more difficult time learning because teachers of English French and German can no longer afford to teach science students foreign languages. For if these teachers are to survive, they find it necessary to put their language skills to work for joint ventures. Third the message is science is no longer relevant. Become an importer or some kind of a trader if you want to prosper
It is in no one's interest to destroy Russia's ability to function as a self-sustaining modern society. Yet given the current apparent western indifference to Russian events one could even begin how, if the pay were good enough to the restore the journals of his field to Russian libraries, a Russian scientist might even consider it patriotic to work for a Qaddafi. The new adminsitration must focus on ceate plans to deal with these problems and as a first priority must do every thing possible to facilliate direct Russian links to the NSFnet.
In view of American governmental indifference it is encourgaing to see huge amounts of priavte activity. It can only be hoped that the exploitative activity will fail and that activity that provides real capital investment and growth and gives Russian needed technical and managment training will succeed.
Certainly in view of the current unsettled situation, it is likely that success will go to those who are prepared to innovate. Bureaucratic conservative approaches are unliely to get far. In this context the role of the Mnistry of Communications still seems unclear. Arkadi Golubkov is undoubtedly a very intelligent man. Let's hope that he is also flexible. Some of the remarks he made could be interpreted to indicate that Min Sviaz is unprepared to be by-passed in any situation -- even if the good of the nation were oviously at stake in a solution not of Min Sviaz's making.
Russia needs to do in five years what the United States has done in 60 years. Simultaneously it must adopt new technology, built a modern infrastructure, develope markets and regulatory bodies, define national interests and develop national policies and goals. If it is unable to for any reason it may find that the "market" does this for it.
Ewing NJ -- November 15, 1992