Russia picking up the pace with broadband internet

The use of broadband Internet has expanded rapidly in Russia since 2004, with good prospects for e-commerce, Internet advertising and e-government. Broadband Internet will help Russia to connect its vast territory and improve the business climate. However, infrastructural problems need to be overcome to reduce the regional digital divide.

• The share of Russian households with broadband Internet enabled computers grew from 1.9% in 2004 to 31.8% in 2009. The sheer size of the Russian market makes this development and the room for more growth, very promising;

• However, development has been unequal, with Internet users in Moscow and St Petersburg benefitting most from greater competition, lower prices and faster connections. Fixed-line telephony is dominated by the government-owned Svyazinvest (100% state-owned since July 2009) and its subsidiaries.

Chart 1. Possession of broadband Internet enabled computer, broadband Internet subscribers and Internet users in selected Eastern European countries: 2009

% of households / ‘000



Source: Euromonitor International from trade sources/national statistics
Note: Size of bubble denotes the number of Internet users

Implications

• The post is still one of the main methods of communication in Russia, with consumer expenditure on postal services accounting for 13.7% of total consumer expenditure on communications in 2009. This was 1.1% in Poland. Consumers and businesses could save time and money through electronic communication;

• Greater access to the Internet will encourage entrepreneurship and contribute to knowledge exchange and efficiency. Opportunities are also abundant in online advertising and sales. According to a survey by the Public Opinion Foundation (FOM), a Russian non-profit research organisation, the share of Internet users going online at home grew from 32% in 2002 to more than 80% in 2009 (conducted in the first quarter of 2009 and included 42,000 respondents and 8,000 face-to-face interviews);

• The US$2.4 billion government programme, E-Russia 2002-2010, sought to improve administration and state management through information and communication technologies (ICT). Many public services should become available electronically throughout 2010, reducing bureaucracy, red tape and corruption, thus improving the ease of doing business.

Nonetheless, problems remain with Internet infrastructure:

• Internet penetration is the highest in Moscow and St Petersburg. In 2009, only 59.6% of Russian households had access to a fixed-line telephone. The wireless solutions of WiMAX (Worldwide Interoperability for Microwave Access) and Wi-Fi hotspots have been mostly launched in Moscow and St Petersburg. As a result but also due to the lack of competition, Internet rates in the Kamchatka region (in the Far East) were between 350-1,700% higher than in Moscow and St Petersburg in 2009, according to Russia's Federal Antimonopoly Service;

• In the 2009-2010 Networked Readiness Index of the World Economic Forum's Global Information Technology Report, Russia ranked particularly low for burden of government regulation (124 out of 133), property rights (121 out of 133) and presence of ICT in government agencies (121 out of 133). Russia's overall ranking was 80 out of 133.

Chart 2. Networked Readiness Index: 2008-2009 and 2009-2010
rankings



Source: World Economic Forum
Note: The ranking is made up of three components – environment, readiness and usage. 133 countries were included for 2009-2010 (134 for 2008-2009) and the lower the ranking the better.

Prospects

• The first Russian Internet Governance Forum will take place on 13-14th May 2010. As part of e-government plans, 74 of the most requested public services will be provided electronically by 2012;

• The Federal Antimonopoly Service is targeting monopolistic Internet providers. Consumers will benefit from this, with the number of broadband Internet users continuing to rise, most likely with the help of new technologies such as 3G and 4G. Where cable infrastructure is not sufficiently developed, telecom companies are planning to expand access by building 3G transmission towers, allowing Internet access on the go. Relatively low penetration rates will ensure growth potential in the medium-term.


Source: www.euromonitor.com