FOCUS: Govt’s milder stance on data laws could save operators 98% of costs

By Yekaterina Yezhova

MOSCOW, Jan 30 (PRIME) -- Clamor of Russian telecom operators and Internet companies to soften the draconian laws on data retention has started to bear fruit, as the government said it could allow the firms to store information partially to cut corporate expenses as much as 50 times. Analysts said the market favored the move, but is still on guard.

Deputy Communications Minister Alexei Volin said earlier in January that there are agreements and understanding that the required volume of stored information could be reduced by 10 times by excluding IPTV, torrents and Internet video.

The initiative could curtail overall one-time expenses of operators to 100 billion rubles from some 5 trillion rubles needed to store the whole flow of information. Operators’ annual spending could reach about 1–1.5% of their turnover with partial data storage, Volin explained to PRIME.

The idea follows President Vladimir Putin’s orders to slash costs of implementation of the laws. The communications and trade ministries held consultations with law enforcement entities, Volin said at a January 19 meeting of an expert group at the Open Government Affairs Ministry.

The group was summoned to consider a public request to cancel the laws, obliging connection operators and Internet companies to store content of calls and messages for up to six months from July 1, 2018. Metadata must be stored by connection operators for three years and one year for Internet companies from July 20, 2016.

The body dismissed the petition, but crafted instead recommendations for the government and the parliament’s lower house, the State Duma, to lessen the burden on business.

Although, even despite the possible cuts, the laws can drive the operators’ costs through the roof.

Ruslan Ibragimov, vice president of MTS, one of the country’s top mobile operators, said that complying with the laws in their current wording would force the operator and its fixed-line arm, MGTS, to dole out 1.7 trillion rubles.

“After I saw a suggestion of an expert conclusion to reduce the types of traffic and volumes by 80%, we tried to calculate our expenses in this case. Approximately, they could be over 400 billion rubles,” he said, also suggesting a test of data storage first.

Nearly half a billion of rubles exceeds MTS’ nationwide annual revenue, which was at 391 billion rubles in 2015 and 297 billion rubles in January–September 2016.

Mobile operator VimpelCom estimated expenses on the laws at 1 trillion rubles. If some traffic is excluded, expenses will fall by 60%, but they will still exceed the company’s annual revenue, reaching 278 billion rubles in 2015 and 204 billion rubles in January–September 2016.

“Regardless of the fact that connection operators’ outlooks on costs of storing data differ, the ministry’s new estimate reduces, but not eliminates potential risks originating from the laws,” brokerage BCS said.

Investment group Aton sees any developments softening the laws as positive for the telecom operators. “However, there is still much uncertainty regarding the final requirements, while we note that higher needed capital expenditures put the sector’s typically strong dividend payments at risk,” Aton said in a research note.

Dmitry Petrov, head of government relations at mobile operator MegaFon, said the company supports the authorities’ readiness to discuss and revise the data retention laws. “They should be significantly adjusted: types and volume of stored information should be specified, and, the most important thing, a roadmap of giving functions to the government to collect and retain traffic should be worked out,” he said in a statement after the expert group’s meeting.

“It would improve effectiveness and safety as all activities would be concentrated in the hands of a single body using only one technology. Perhaps, such measures could delay the validity of the laws.”

Volin said at the meeting that it was agreed to expand the period of data storage gradually: from 12 hours up to a week, then a month and so forth to the obligatory six months. The idea could eliminate woes over operators’ rising expenses and even possible bankruptcies, the official said.

The government believes the laws would trigger modernization of connection networks, creation of big data storage facilities and development of domestic software, as Volin said.

Sergei Plugotarenko, director of the Russian Association for Electronic Communications (RAEC), who participated in the meeting, said if the group’s suggestions are turned into bylaws, many negative consequences of the data retention imperatives could be neutralized.

(60.3196 rubles – U.S. $1)

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