a3g 19oct eng 10

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ASSOCIATION IMT-MC Cellular Communications: Development Perspectives in Russia WE WELCOME PARTICIPANTS OF THE INTERNATIONAL WORKSHOP October 19, 2004 - Moscow, Russia

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SPECIFIC ISSUES IN THE MIGRATION TO THE NEXT GENERATION OF CELLULAR COMMUNICATIONS IN RUSSIA Andrey Skorodumov Executive Director 3G Association Russia

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Simultaneous operation of different standards systems Significant concentration of subscribers in Moscow and North-West regions Boost in regional activities of major operators Overloading of frequency spectrum intended for cellular networks Shortage of competitive equipment produced by home industry Drawbacks in effective legal regulation of cellular services market Inadequate level of digitalization of the public communication network Cellular communications development in Russia

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Subscribers, mln. Russian Cellular Market Breakdown, Sept. 2004 Subscribers & Penetration of Russian Cellular Networks, Sept. 2004 50% 40% 30% 20% 10% 0% Penetration Total subscribers of cellular communications in Russia: ~ 60 mln. Gross additions in September 2004 accounted for 3,05 million subscribers as compared with August 2004 Penetration Moscow: 85% Source: J’son & Partners MegaFon 19% Others 13% VimpelCom 33% MTS 35%

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Source: Svyazinvest, AC&M Research Source: AC&M Research Penetration of Wire and Wireless Services in Russia ARPU in Russian GSM Domains US$ per Month

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Current situation with cellular communications development in Russia Subscribers boom Nationwide (federal) networks Capitalization increase in operating companies Regional projects in Russia, CIS projects Network support services New services New technologies

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Factors promoting the introduction of 3G networks in Russia Subscriber demand for services of cellular networks Forming new market of services Developing the industry of mobile content Further involvement of the population in the world information environment Capability for accelerated construction of a multiservice packet switched public communication network Limited resources of existing cellular communication networks; tendency for loss in per user revenue of operators Responsiveness of equipment suppliers to entering the Russian market Capability to deploy 3G networks gradually (or by fragments) and further development of competition between operators using different cellular network technologies

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Factors limiting the introduction of 3G networks in Russia Uncertainty of situation with allotting necessary frequency resources, when the 2 GHz band is loaded with radio electronic facilities of different purpose and lack of program for its conversion Lack of a clear definition of the procedure and timeframe for licensing Insufficient level of development of the public broadband digital network Lag in developing legal and regulatory bills of general and specialized nature

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THIRD GENERATION TELECOMMUNICATION NETWORKS OPERATORS ASSOCIATION (3G ASSOCIATION) Established in December 1999 with the assistance of the Ministry for Informatization and Communications of the Russian Federation President - Alexander KRUPNOV, Ph.D. Executive Director - Andrey SKORODUMOV, Ph.D.

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3G ASSOCIATION OBJECTIVES Co-ordinating activities of parties involved in establishing and developing perspective cellular networks Representing interests of 3G Association members in communication’s administration of the Russian Federation and international communications organizations Defining principles for perspective cellular networks deploying and developing in Russia R&D organization and supervision Furnishing information for 3G Association members on technologies of perspective cellular networks

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3G ASSOCIATION MEMBERS ASSOCIATED MEMBERS NIIR - PS AMT Group EastWind Peter - Service Huawei Technologies Lucent Technologies Nortel Networks NEC Ericsson Alcatel Operators, operator’s union Manufacturers R & D Institutes Others CBOSS Siemens J’son & Partners

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3G ASSOCIATION WORKING GROUPS 3G networks construction

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ASSOCIATED MEMBERS Participation in 3G Association activities and task groups Information Workshops for 3G Association members Partcipation in deploying and trial operation of perspective cellular networks

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Preparing for the introduction of 3G networks in Russia: Key phases

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R&D ACTIVITIES: Principles of 3G network construction in Russia Principles and procedure of licensing UMTS operators’ activities Effect of licensing procedure on the process of shaping 3G service market Concept for shaping 3G services market in the Russian Federation Ways and means of networks deployment Principles of shared use of 3G networks by operators Interoperability with networks in common use and cellular networks being in operation Testing in 3G network trial zone Analysis of frequency resource utilization to solve compatibility problems in UMTS networks in Russia Frequency bands for maintenance of UMTS trial zone fragments Provisional limits for frequency and distance separation of UMTS networks radioelectronic facilities and governmental ones

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Concept goals and objectives List of basic services Ways for shaping 3G services market Procedure for Concept implementation Concept for shaping 3G services market in the Russian Federation Designed to stimulate the shaping of 3G services market. Will permit to shape the supply market for content providers. Is of recommendation nature. Voice telephony Emergency calls High-speed access to data transmission networks Multimedia messages SMS Facsimile messages Global situation with 3G services market forecast for Russian market Legal and regulatory framework for shaping 3G services market

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Key factors of 3G networks success Diversified services provided at competitive and transparent tariff plans taking into account needs of different categories of subscribers Wide choice of terminals, both affordable and easy to use Unhindered coverage and availability of inter-network and international roaming

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R&D NOW BEING IN PROGRESS - 1 Choice of the standard for 3G federal network 3G federal network as a part of the Unified Communications Network Technical characteristics of the 3G federal network Functioning. Roaming, etc.      Normative and technical requirements to the equipment for 3G networks Composition of network and radio access equipment. Subscriber terminal Requirements to functionality and technical characteristics of equipment Tests programming and methods Requirements to transit networks for 3G cellular communications Architecture and functionality Interoperability with GSM/GPRS, IMT-2000 networks being in operation Requirements to interfaces and protocols of interoperability, to management systems and quality, etc. General outline of deployment and development in Russia of the federal 3G cellular mobile communications network

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R&D NOW BEING IN PROGRESS - 2 Provision of the information security in 3G networks The concept of the information security Legal and normative basis Requirements Means of defence   Electronic payment system project for 3G networks Legal basis Recommendations on security, testing and certification System and business processes models        Interoperability of WLAN and 3G networks Worldwide experience, international bodie’s recommendations Principles of the interoperability. Roaming. Handover. Billing. Legal regulation Satellite segments & HAPS in 3G networks Technological basis Spectrum availability Economic & management issues

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3G Association priorities in 2004 - 2005 Participate in the process of finding solutions for: Implementation of the Concept for shaping 3G communication services market in Russia Problems concerning construction of mutually complementary 3G and WLAN networks Possibilities of using the satellite segment and HAPS coordinated creation and development of networks using different technologies of cellular networks release radio frequency spectrum in 2GHz range and its allocation among operators interoperation between 3G and existing communication networks licensing operators’ activities equipment certification information technologies information security

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Thank you Contact : Andrey Skorodumov Executive Director 3G Association Russia www.a3g.ru e-mail: a3g@a3g.ru 6, 2nd Spasonalivkovski lane,, Moscow, 119991, Russia Tel: + 7 (095) 748 3174