What the internet in Ukraine will be like in three years - photo 2

Deputy Minister of Digital Transformation Oleksandr Shelest told UBR.ua in an interview why one should not expect 5G in Ukraine before the end of 2020. However, he gave hope that in three years, not only the latest mobile communication standard will be operational in our country. Shelest outlined a picture of universal internetization for at least 70% of Ukrainian households. And, most importantly, he shared his vision of where to get the money to implement such ambitious plans.

Immediately after your appointment as Deputy Minister of Digital Transformation, you announced the government's near-term plans for 5G. Does the government have an understanding of why we even need the "fifth generation"?

The main task of 5G is to develop useful "use cases." After all, we are used to looking at 3G or 4G as just fast internet. From the user's point of view, everything is clear. But the "fifth generation" is intended primarily for business.

In your opinion, where will 5G be useful in Ukraine?

Telecom equipment manufacturers are only just developing such solutions. But the need for 5G has already emerged in Ukraine. For example, in agriculture, companies are already interested in using unmanned tractors.

But the "fourth generation" can quite handle such tasks, can't it?

No, because the main difference between 4G and 5G is latency. In the "fifth generation," it is practically non-existent. Therefore, the use of unmanned transport is practically impossible with 4G.

So, Ukraine does not need to rush the launch of the "fifth generation" of mobile communications?

I think that real 5G usage will appear here in three years. Ukrainian mobile operators have expressed the same assumptions. The head of the National Commission for the State Regulation of Communications and Informatization, Oleksandr Zhyvotovsky, stated that tenders could take place earlier. But in 2020, there will definitely be no working 5G networks in Ukraine.

On what frequencies will this standard be developed here?

In my opinion, Ukraine should use the same bands as in Europe: 700 MHz, 3.4-3.8 GHz, and 27 GHz.

The Cabinet of Ministers explained when 4G internet will work throughout Ukraine

The "lowest" 700 MHz band is occupied by Zeonbud, the operator of digital terrestrial television, whose ownership structure the state cannot definitively establish. What and how will you resolve this with them?

We met with the National Council on Television and Radio Broadcasting, and it is planned that the conversion plan—freeing up frequencies and transitioning to new ones—will be ready this December. Its implementation is still being discussed.

The National Council on Television and Radio Broadcasting stated that it has very limited influence over licensees. In this case, over Zeonbud.

Given that things are moving a bit faster with mobile operators, I hope that we will be able to work more effectively with the National Council. And in the coming year, 2020, we will resolve the issue of freeing up the first (790-862 MHz) and second (694-790 MHz) digital dividends.

And how much did Zeonbud ask for to free up frequencies for mobile communications?

In 2016, they mentioned a figure of about 300 million UAH, but they did not provide the method for how this amount was calculated.

What changes in the management of such a scarce resource as radio frequencies can be expected from the Ministry of Digital Transformation in the near future?

I hope we will be able to convince the people's deputies to amend the Tax Code and revise the rates for the use of radio frequency resources (RFR). It is necessary to equalize the fees across all bands where mobile networks already operate and can operate. And raise them to the level that Kyivstar, Vodafone Ukraine, and lifecell pay—that would be fair. This is European practice.

When should we expect such changes?

In 2020, but you shouldn't expect them from January 1st. Changes to the Tax Code are needed, and as a responsible state, we must be predictable. We need at least six months before any tax rate increases come into effect.



At the same time, will the government not touch the frequencies on which the "big mobile three" operate? Or will you raise them again?

We do not plan to raise these rental rates. But there are some issues that concern mobile operators.

We believe that for additional motivation in the 900 MHz band, it is advisable to introduce increased coefficients for fragmentation and spectrum concentration. Today, there is already one coefficient for fragmentation. But the problem is that it is quite formal—1.2. That is, paying 20% more is not such a significant amount.

5G is just one high-speed data transmission technology that will rely on a powerful fixed foundation. What are the government's plans for the country's internetization?

The government's goal for five years is to cover 80% of households with fixed broadband internet. Moreover, we mean not just providing the opportunity, but at least 70%—specifically connecting and using the services. Official statistics show that our fixed internet penetration rate is about 30-35%.

Broadband should become a universal service. So far, this has not been achieved because the state has never implemented compensation mechanisms.

Do you mean the universal service fund?

Not necessarily. Many years ago, the issue of a separate tax for operators was discussed, through which this direction could be financed. But I am against such an approach. After all, telecom market participants already pay significant sums, for example, the 7.5% contribution to the Pension Fund (PF).

It was once introduced as a "luxury tax." But talking about some premium status of mobile communications in 2019 is quite strange. Why not use part of this money to build fixed broadband networks?

As of today, there is no ready-made government solution on where to get money for the development of internet access in Ukraine. But I believe that part of the PF contributions or the rental fees for the use of radio frequencies can quite well be used for this purpose.

How will you distribute this money? Through tenders?

In my opinion, the most effective mechanism is targeted subsidies. That is, the targeted allocation of funds to those who cannot afford a fixed internet connection for financial reasons. But there are other options as well. It is better to have the opportunity to choose from a palette of tools.

Please explain how this should work?

For example, let's take a small town where internet is connected in apartment buildings. That is understandable, because there is a high density of consumers, and it is profitable for providers to go there.

But there is also a large private sector where no one is pulling internet because it is expensive. In such a case, the state could compensate those who live in their private houses for the cost of either the connection or the monthly subscription fee.

How does the state intend to issue 5G licenses? And will they already be technology-neutral?

At a tender; I don't know a better way. Yes, it is necessary to provide for technological neutrality for mobile communications in the 700, 800, 900 MHz bands, and so on—in general, in all bands where mobile operators already work. And it would be good to include all potentially attractive bands. Let the companies themselves choose which technologies to launch.

How will this be done? By making changes to the Radio Frequency Resource Usage Plan?

One could, using IT terminology, partially solve this issue with "crutches." That is, make changes to this Plan. But Ukraine has been living with outdated laws on telecommunications and RFR for 15 years. Obviously, the regulatory framework requires changes. Work on a new draft law has already begun in parliament.

When do you expect it to be adopted?

I would very much like to pass at least the first reading in the Verkhovna Rada before the end of 2019.