Anyone who has tried to book a call through a Russian phone exchange knows how rude and capricious the telephone operators can be. The slightest pause or misunderstanding and they will hang up. But booking a call this week, I heard what I think is a harbinger of change.


The operator was punishing me brutally for a slight hesitation in answering her question, "Come on, come on. What are you thinking about so long," she chided.


But the lady was then interrupted by a work supervisor, "That's not polite," he said. "You cannot talk like that to customers." The operator obeyed and changed her tone, "I'm sorry. I didn't think I was being rude," she told me.


This is not intended to be another column devoted to how hard or easy life is for expatriates in Moscow. The point is that there is obviously a campaign at my local telephone exchange to make the operators more responsive to customer needs.


For a long time, Russia had the world's best rocket technology and a 1930s phone system. But over the past two years, investment, restructuring and even competition have started to change this. It is also throwing up a whole range of problems about the most efficient way to handle the task.


Since the dissolution of the Soviet Union, Russia's phone system has been split into 86 independent regional phone companies who are responsible for local calls, and one long distance and international phone company, Rostelekom.


The government has allowed these new, more or less private firms much more flexibility in the pricing of services. Rostelekom and the regional firms have used their position to raise prices exorbitantly.


But free prices have also opened up a source of financing for upgrading the local and national networks. Rostelekom, for example, has started increasing the number of lucrative international phone connections. Fiber optic lines have been laid linking Japan and Korea to Khabarovsk and Denmark to St. Petersburg and Moscow.


The new policy has also allowed Western firms into the market. About 600 licenses have been issued, mostly to firms that offer specialized services such as high quality business lines, cellular phones and paging systems.


But a lot of questions remain unanswered about what this flurry of development will mean for Russia's telecommunications picture.


Russia now has 86 regional phone companies each developing its own service. This has raised concerns over whether these systems will be technologically compatible.


But the relationship between Russia's groaning old telephone system and foreign entrants remains unclear. Yet it is crucial because foreign investment will be the quickest way to improve the system.


On the one hand, if the Russian phone network improves quickly, it could attract high paying customers away from foreign firms. This could jeopardize investments which this year will run at about $300 million.


Given the huge problems in the Russian phone system, this scenario is not all that likely. But the gap between a technologically advanced and profitable Western sector and a retarded and capital-starved Russian network could create other problems.


The Russian government may be reluctant to continue issuing licenses to Western companies which are skimming off the cream of the clientele without investing locally.


These issues will be crucial in developing the much-heralded 50 by 50 project on which the Communications Ministry, AT&T, Deutsche Telekom and France Telecom just signed a memorandum of understanding.


This project is supposed to put switches in 50 Russian cities, link them and the rest of the world with 50,000 kilometers of fiber optic cable and add 20 million phone lines for high-paying business customers.


Towards the end of the year, the partners in the 50 by 50 consortium hope to establish a formal company structure which will be granted a long-term license. This would amount to the creation of a private long distance phone system.


According to Rostelekom executives, they will be a major shareholder in the 50 by 50 consortium. But, at this stage, it remains unclear as to whether the relationship between the two companies will be one of competition or cooperation or what the rules of the game will be.





Geoff Winestock is a Moscow-based correspondent for the Journal of Commerce.