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ICT Market in Belarus: Trends and Analysis

(October, 2003)

Author: Mikhail Doroshevich

Introduction

In the course of the last years Belarusian government has been stating its adherence to the strategy of liberalization of the telecommunications market. Giprosviaz, a Ministry of Communications subdivision, have worked out the draft concept of liberalization of electric communications services. Ministry of Communications has been working on the programme of creation of the common market for Belarusian and Russian telecommunication services.

According to the information announced recently by the Vice-Minister of Communications the process of privatizing Beltelecom will be initiated in 2007. This decision was taken by the government in order to meet the requirements of the World Trade Organization in order to become a member of that organization. During the WTO-Belarus negotiations in Geneva in January this year, about 15 foreign countries expressed their interest in Belarusian telecommunications and accepted 2007 as the beginning of the privatization process

But still Beltelecom, the republican state-owned association (RSA) founded by the ministerial decree in July 1995, is the only national telecommunications operator

The government started the process of restructuring the telecommunications sector in 1992 when it got a EBRD (European Bank for Reconstruction and Development) purpose loan of 38,8 mln. USD The loan was used to modernize telecommunications network on the basis of SDH technology, to install fiber optic communication channels and to upgrade telephone lines network on the basis of digital technologies. Major communication channels are equipped with STM-1, 4, 16. 75 km Minsk backbone is to be modernized and equipped with STM-64.

At present extension of fiber optic communication networks totals 4000 km. By 2005 it will spread by 10000 more km. The extension of intercity channels totals 16000 km., with 50% of fiber optic channels. 54% of channels are digital.

Part of the EBRD credit was spent on the installation of X.25 and Frame data transmission networks in cooperation with Sprint Networks. During the last couple of years this infrastructure has been used for Internet access services. According to the ACC (Association of Computer Companies), 775000 PCs were in use in Belarus by the end of 2002.

By the beginning of 2003 Ministry of Communications has granted 2839 licenses: 281 - for telecommunication services, 920 - for frequencies, 283 - for installation of communication networks. The high number of licenses is conditioned not on business activities but by the numerous regulation requirements.

1. Governmental Strategies

Governmental strategies in the ICT sphere is based on the following legal documents

  • Law on the foundations of state scientific and technical strategies (19.01.1993 2105-XII);
  • Law on Communications (05.10. 1994 3273-XII);
  • Law on Inforamtization (06.09. 1995 3850-XII);
  • Law on Electronic Document (10.01. 2000. 357-);
  • Presidential Decree on Some Issues of Informatization in the Republic of Belarus (06. 04. 1999 195);
  • Presidential Decree on Governmental Support of IT Development and Export (03. 05. 2001 234);
  • Presidential Decree on National Legal Internet Portal in the Republic of Belarus and about Changes in Presidential Decree of 30.10.1998 (16.12. 2002).
  • Presidential Decree on Foundation of Interagency Committee on Informatization in the Republic of Belarus (07.12.1998 591)
  • Council of Ministers' Decree on State Registration of Information Resources (28.08.2000 1344)
  • State programme "Advanced Information and Telecommunication Technologies" for 2001-2005 adopted by the Council of Ministers of the Republic of Belarus on 01.02.2001 (141)
  • Council of Ministers' Decree On the List of Information Resources of Public Importance (29.01.2001 784)
State programme of informatization in the Republic of Belarus for 2003 - 2005 "Electronic Belarus" was adopted by the Council of Ministers on 27.12.2002 and published in February 2003.

The objectives of the programme are

  • creating of "an information space" in Belarus as the step towards information society,
  • increasing efficiency of economic structures, government and local administration structures through the introduction and dissemination of a large scale of information and communication technologies.
Major areas of activities in the targeted "E-Belarus" programme are:
  • creating of national "computer-assisted information system"
  • improving telecommunications infrastructure and of infrastructure for a public access to open sources
  • improving ICT and growth of IT industries export
  • providing legislative basis and improving regulatory activities in the IT sphere
  • upgrading the activities of state and local government bodies as the result of ICT use
  • developing e-commerce
  • education and development of personnel capacity
  • supporting the development of cultural projects and mass media on the basis of ICT use
  • improving national security system on the basis of ICT use.
The budget of the programme for 2003-2005 totals 32100 mln BYR (~16mlnUSD).

In the framework of the Programme 97 projects are to be launched.

The full implementation of the programme should bring about the following results

  • The volume of ICT export will be increasing by 5-10% annually
  • E-commerce operation will save from 20 to 40% funds spent on tender and purchase operations
  • The number of Internet-users and the volume of Internet services will grow up significantly
  • Fees for the Internet access will be reduced by 30% in 2005.
The Programme indicates some obstacles which should be overcome in order to carry out projects successfully, in particular unelaborated legislation regulating ICT activities, telco monopolies and ICT illiteracy.

According to the decision of Council of Ministers as of June 2003, Foundation for Financial and Technical Assistance for Informatization is to be created. It is planned that state financial and technical assistance to companies will foster development of ICT market infrastructure and will promote expansion of ICT systems and networks.

Representatives of National Academy of Sciences, State Committee on standardization, of Minsk City Executive Committee, Belarusian Science and industry Association, Cisco Systems, Belsoft company, of non-governmental organization Information Society and of other institutions and organizations gathered in Minsk on the 15th of October to analyze and to improve such national state programmes as E-Belarus, E-Minsk, Belarusian Development Portal, Online Municipal Payments.

It is planned to launch governmental portal by the end of 2005. This portal will be created in the framework of E-Government programme and will provide citizens with governmental information and with the possibility to fill in and submit online forms to governmental agencies.

E-Readiness

In August 2002, the World Bank and Belarus National Academy of Science signed an agreement to allocate E45,000 in funding for an assessment of the ICT infrastructure in Belarus and of the e-readiness of the country (E-Readiness Grant). This is not the first ICT project in Belarus supported by the World Bank. In 1999 Belarus received a grant from the World Bank to tackle the Y2K problem.

The object of E-readiness research is the sector of information and communication technologies (ICTs) of the Republic of Belarus. Priorities for ICT development in Belarus are to be drawn out on the basis of the findings of the assessment

In May, 2003 the European Bank for Reconstruction and Development (EBRD), the Information Development Programme (InfoDev), the National Academy of Sciences of Belarus, and the Belarusian Information Fund published their report on ICT Infrastructure and E-Readiness Assessments in the Republic of Belarus. The InfoDev-sponsored E-readiness assessment has been carried out by Belarusian experts in the framework of a Grant # ICT 015 scheme.

The analysis was made regarding:

  • Information infrastructure, stage of Internet Availability and Internet affordability;
  • Network speed and quality of the information transfer while accessing the Internet;
  • Hardware and software availability and service and supports for ICTs;
  • Schools' / education institutions access to ICTs and enhancing education with ICTs;
  • Developing the ICT workforce and ICT employment opportunities;
  • Remote on-line access to organizations and locally relevant content of information resources;
  • Level of using ICTs in everyday life and in the workplace;
  • Developing electronic commerce and electronic government;
  • Telecommunications regulation and ICT trade policy.
As a result of research a detailed description or a detailed charted map of ICT potential of the Republic of Belarus, as a point of reference in ICT development planning has been obtained.

The E-readiness assessment has been carried out by using officially approved and advised international methodologies: questionnaires were elaborated with reference to methodologies of Harvard University's Center for International Development and according to some variables approved for an estimation in the course of implementation of e-Europe program.

The report consists of six parts: Network Access, Networked Learning, Networked Society, Networked Economy, Network Policy, Belarus Networked Readiness Index.

According to the report, the defined Belarus Networked Readiness Index is 3.19, which gives the country a ranking of 61 out of 76 countries. Other parameters were indexed as follows: network use component - 65th; network access - 67th; information infrastructure - 67th; hardware, software, and support -63rd; network policy - 73rd; business and economic environment - 66th; ICT Policy - 76th; networked society - 51st; networked learning - 66th; ICT opportunities - 66th; social capital - 26th; networked economy -65th; e-commerce - 64th; e-government - 72nd; and general infrastructure - 47th.

Below are given some other parameters for E-readiness assessment presented in the report:

Rank Index from 1 (min) to 7 (max) Numerical value
Network use 51 2.97
Percentage of computers with Internet connection 32 1.89 7.39
Internet Users per host 45 6.94 15.8
Estimated Internet users per 100 inhabitants 35 1.91 9.07
Cellular subscribers per 100 inhabitants 63 1.34 4.54
Teledensity 36 3.42 30.50
PCs per 100 Inhabitants 38 1.79 7.77
Software piracy, 2001. 63 1.82 87
Internet access cost (Average annual ISP cost for 20 hours of monthly Internet Access as percentage of GDP per capita (PPP), 2001) 65 5.31 22.95
Income per capita (PPP), 2001 75 1.05 1.120
Perceived effect of telecommunications competition on quality and price 53 3.6
Perceived effect of ISP competition on quality and price 56 4.1
Legal framework supporting IT businesses 76 3.0
ICTs as overall priority for the Government 72 3.2
Country's relative position in technology 49 3.4
Government effectiveness in promoting the use of ICTs 72 2.6
Availability of online government services 68 2.0
Extent of Government websites 66 2.9
Business Internet-based interactions with government 75 1.4
Prevalence of Internet startups 70 2.9
Use of Internet-based payment systems 67 2.5
Sophistication of online marketing 25 2.5

The survey also states that Minsk is the leader in the ICT development sphere, and that higher educational institutions have more opportunities for e-learning than secondary schools. Furthermore, the report also says that the scope of ICT application in country's economy is very small. Belarus has a developed telecommunications infrastructure, but because of the high cost of access to the internet, people with lower incomes are underserved. Taking into consideration the results of the survey, the Belarusian government plans to update its E-Belarus programme and to develop an action plan on the basis of the e-readiness assessment recommendations.

It is expected that the state programme "E-Belarus" will further ICT sector development. Still, as the programme is aimed not to reengineering but to automatization of existing bureaucratic procedures, it seems problematic that ICT will fundamentally changed opportunities for economic and social development in the near future.

2. Fixed-line telephony

Belarusian Ministry of Communications pursues socially oriented policy. Its priorities are: extension of fixed-line telephony in rural regions and low tariffs. The state - owned Beltelecom holds monopoly as the only provider of fixed line telephony services in Belarus.

Teledensity in Belarus is the highest among the CIS countries: 28,7 per 100 inhabitants or 73,5 per 100 households. Penetration rate average 34,6% in urban areas and 18,9% in rural areas. In April 2002 Beltelecom registered 3000000 telephone subscribers. It is planned that by the year of 2005 penetration rate of 32,1% will be achieved and 360 000 telephone numbers will become digital. At present 28% of automatic telephone exchanges are digital.

Recently Beltelecom has introduced a so called "intelligent platform" to render such services as:

  • interactive polls
  • service telephone cards
  • telephone cards
  • subscribers' accounts
On February 24, 2003 Belarusian telco Beltelecom has introduced a new service called 'green number'. Like a toll-free number, if a person calls this number, the telephone call is paid by the receiving party. It is expected that transport and tourist companies will take advantage of the new service. It is also in great demand by advertising campaigns and 'hot lines'. The price of a 'green call' is equal to intercity connections, or E0.01 a minute. The system of short numbers has been introduced.

Being a monopolist, Beltelecom will not reduce prices for international calls. Its numbering plan will not become a strategic resource until alternative operators appear in the market. Despite significant efforts of company's management, analogues equipment and obsolete infrastructure noticeably hinder the modernization of Beltelecom.

3. Mobile telephony

In 2003 the mobile communications market experienced an impressive subscriber growth from 500000 in February to 700000 in June.

According to expert assessments, mobile phones sales volume totaled 12.5 mln. USD in December 2001 - May 2002. Whereas in May-August 2002 it ran up to 8.7 mln. USD In 2002 120.000 mobile phones were sold and it is expected that in 2003 this number will grow up to 300.000.

According to Samsung its share of mobile phone market makes up 17%. While Nokia and Siemens have 33% and 22% respectively.

At present there are three mobile operators in Belarus:

  • Belcel;
  • Velcom;
  • MTS.
In June 2003, Belarusian Minister of Communications announced that competitive bidding for a third GSM operator license would be organized in near future. And the priority in this context is expansion of mobile phone services in rural regions.

The governmental decision to increase state capital share in Belcel and Velcom has become the major event in October. But in contrast to the Council of Ministers solution Ministry of Communication made momentous decision not to increase state share in Velcom authorized capital stock. The Ministry spokesman informed that decision on Belcel would be announced in six month. It should be mentioned the scheme of shares redistribution hasn't been developed yet.

Belcel http://www.belcel.by

Joint stock company Belcel was founded by Beltelecom subsidiary companies and by British Cable & Wireless Plc. Recently a 50 per cent stake in Belcel belong to a Dutch company CIB BV At present Commstruct International Belarussia B.V. (CIB BV)has 50% of shares of Belcel, Infobank (Infobank) - 17%; Minsk City Telephone Network and Minskobltelecom, Beltelecom subsidiaries, have 17% and 5% respectively.

Belcel began its commercial operations in 1993. Belcel renders NMT-450i standard services. According to Belcel, the company has 20000 subscribers but Ministry of Communications gives another figure - 13000.

In August 2002, the State Commission for Radio Frequencies has granted Belcel with permission to develop its CDMA2000 (IMT-MC-450) network. According to the permission agreement CDMA-450 will begin operating by February, 2003. Belcel is to initially install 26 CDMA450 base stations.

This is the third CDMA-450 network in Europe (the other two are in Romania and Russian St. Petersburg).Chinese manufacturer Huawei Technologies equips the network, while Russian company CBOSS provides the billing system.

At present, Belcel's CDMA2000 (IMT-MC-450) covers 62 per cent of the country's territory and 72 per cent of the population (79 per cent in cities). This existing network will continue to operate at least until the end of the year, while changing over to the new standard network

While changing NMT to cdma2000 subscribers will retain their telephone numbers. In order to attract subscribers for the new standard Belcel offers direct Minsk numbers, internet services and free calls within its network.

Russian telco Deltatelecom, operating under the brand Skyline, and Belarusian telco Belcel have launched IMT-MC 450 (cdma2000) network roaming in June, 2003. Other IMT-MC 450 operators are expected to join the roaming agreement shortly. It is important to stress that major Russian NMT-450 and IS-95 operators switch of to cdma2000 as well.

By the end of 2003 Belcel plans to become a major cdma2000 operator leaving behind MDS and MTS. It is expected that by the end of 2003 Belcel will have 5000 cdma2000 subscribers.

Velcom http://www.velcom.by

Mobile Digital Communication (MDC) with Velcom© and Privet© being its trademarks, the first operator of a GSM-900 mobile digital standard in the Republic of Belarus began its commercial operations on April 16, 1999. Velcom is a joint stock venture between a Cyprus company SB Telecom (49 per cent), Beltelecom (31 per cent) and Beltechexport (20 per cent).

At present (as of 29 October 2003) the company handles 580 000 subscribers. It is predicted that by the end of 2003 this number will grow up to 700 000.

The Belarusian State Commission on radio frequencies approved changes to the Mobile Digital Communication (MDC) (trademark Velcom) license, allowing the company to use the 1800 MHz radio frequency, making Velcom a GSM 900/1800 dual-band mobile network.

By April 2003 Velcom has invested $135 mln. USD into network construction. According to Velcom general manager Juri Akimov by the end of 2003 the company will invest another 75 mln. Thus total amount of investments in 2003 will make up USD 210 mln. instead of 185 mln. USD planned before more.

The service area of Velcom network is permanently expanding; today it covers the area of inhabitance of more than 87% of the urban population. Velcom cellular communication network is accessible in more than 95 Belarusian cities and settlements, at Minsk 2 international airport, on the major highways such as Brest - Minsk - Orsha, Brest - Gomel. The company carries on operations in order to provide for cellular transmission at Minsk -Grodno, Minsk - Oshmayny, Minsk - Gomel highways, and at customs and border points with Poland, Lithuania, Russia and Ukraine. Velcom network will soon be available at all Minsk underground stations.

MDS strategic partner Ericsson equips the network, in particular, switchboards and base stations for E17m

In 2002 Velcom installed 5 switchboards in regional centers, 150 base stations (50 - in Minsk). At present Velcom network embraces 300 base telephone sets, 105 of them provide for communication in Minsk. By the end of 2003 Velcom plans to have 500 base stations (200 - in Minsk) with a network capacity of 1m

In early June 2003 Velcom introduced GPRS giving to subscribers an opportunity of wireless access to the Internet and WAP-resources. For the period of test operation - from February, 24 till March, 31, 2003 - service GPRS was given free-of-charge.

MTS http://www.mts.by

On 25 September 2002, Russian Mobile TeleSystems was announced as a GSM 900/1800 GSM license winner. On April 30, 2002 "Mobile TeleSystems" (MTS), a joint stock venture founded earlier that month got a license allowing the company to use the 1800 MHz radio frequency. The shareholders of S JSLC are The Intercity Communications, a republican unitary company (Belarus), which possesses 51% and S ("S" in Russian stands for 'International Telephone Networks"), an open joint stock company (OJSC, Russia), which possesses 49% of the authorized capital. MTS has been building its network infrastructure since April 4, when it was registered as a limited liability company with authorized capital stock of E5.5m.

Chief manager of the company, Eduard Makariev earlier worked for St.Petersburg network of MTS.

Mobile TeleSystems launched its mobile network in June. At the launch, coverage extended to the larger part of Minsk and surrounding areas near the national airport. More than 20 base stations, supplied by Siemens came into operation along with a switch exchange of 100,000 lines.

By 2003 the company installed 150 base stations and launched networks in Brest, Grodno and provided cellular transmission at Smolensk - Minsk highway.

The company has now (29 october 2003) over 300,000 subscribers in Belarus. By the end of 2003 MTS will have built 395 more stations and the company hopes to increase the number of subscribers to between 260,000 and 300,000 having covered the area of inhabitance of more than 87% of the urban population. At present mean income per subscriber is 14$-15$ in Belarus and $25 in Russia.

In 2004, MTS is planning to build another 800. Currently, Belarusian ARPU is E14 and Russian ARPU is E23. The company has 12m subscribers in Russia, Belarus and Ukraine

According to MTS that company has now 160000 subscribers in all the regions of the country. The number of MTS's subscribers grows rapidly because of numerous cheap tariff scales.

At present MTS has 3 mobile phone shops in Minsk and hopes to open its sales centers in every regional city by the end of 2003.

In February 2003 MTS and Belarusian government negotiated sale of 2% shares belonging to The Intercity Communications. A special governmental commission has been created in order to estimate the cost of shares intended for sale.

Belarus is a major portal for MTS expansion to western markets, according to Vladimir Ermoshin, MTS director in Belarus and former Prime Minister, who made comments to such effect at a launch ceremony of the MTS network in Vitebsk, Polock and Novopolotsk. By 2004, According to Ermoshin, the MTS network will cover 90 per cent of Belarusian territory. In order to reach this goal, the company has had to change its investment plans. The sum of E186m will now be invested in building a network over the next year, and not over a ten-year period from 2002 to 2012, as it had been previously announced. Having performed the task Mobile TeleSystems would become major investor in Belarus leaving behind Russian Gazprom.

MTS hasn't launched ISSA SMS-gait at mts.by yet which was planned for October 2002. The main reason for that is the necessity to settle some legal uncertainties. But the company hopes to launch such services as WAP Internet access and SMS - paging later this year.

As for the quality of connection, MTS gives the pass to Velcom so far.

Interconnection

One of the major issues regarding mobile operators' relationships is agreement on interconnection.

In June 2002 Velcom blocked the interconnection with MTS immediately after MTS began operating in Belarus. Velcom management said that the move was taken due to the absence of agreement between the operators, which is a requirement by law. However, the main basis for the conflict is traffic payments. According to the licence terms all the incoming calls should be free for clients. Thus MTS would pay for MTS clients' calls to Velcom clients. But, in Belarus the two operators do not have a direct channel and both use the Beltelecom channel. In this case MTS has to pay both Beltelecom and Velcom. On the 6th of August, the Ministry of Communications in Belarus ordered the country's two GSM operators, Velcom and MTS, to establish interconnection by the 8th of August. If either of the operators fails to comply with to the order, it will have its license withdrawn. According to the Ministry, the two companies should come to an agreement about interconnection as soon as possible. Government officials ruled that payments for interconnection should be based on prices established by Beltelecom. Again, if either of the companies refuses to accept this condition, their license will be withdrawn. Only by 12th of August the interconnection was established.

Belcel faced the same challenge after the company had launched cdma2000 network on 6th of February 2003. MDS announced that Belcel dissolved an agreement of interconnection in November 2002, therefore Velcom blocked the cdma2000 network traffic. But on 12th of November the dispute was settled and the traffic between MDS and Belcel was restored.

It is predicted that by the end of 2003 the number of mobile phone users will grow up to 800.000-1.000.000. And the list of services will be extended by all the mobile operators. The government has considerable share of capital in all the three companies: from 33% (Belcel) to 51% (MTS).

4. Internet

Setting into operation Unibel backbone (UNDP and OSI joint project) was major contribution into Internet promotion in Belarus. Minsk higher educational institutions, NGOs and governmental structures access Internet through this backbone. But the quality of network leaves much to be desired because of low capacity and because of the fact that Unibel uses Beltelecom outer channel.

Beltelecom makes everything possible in order to preserve its monopoly for outer channels. At present commercial use of terrestrial and satellite bilateral channels is forbidden for commercial use for companies other than Beltelecom.

Total installed capacity of Beltelecom outer channels is 79 /c. In 2001 Beltelecom signed partnership agreement with telco Metrocom (45 Mbit) http://www.metrocom.ru. In October 2002 Beltelecom signed an agreement with US based telco Sprint for rendering the 34Mbit internet channel. In December 2002 the Belarusian telco, has connected up its second outer internet channel through Sprint, reaching connection speeds of 34Mb/s.

According to The Action Program for Communication Facilities Development for the Years 2001-2005 elaborated by the Ministry of Communications in 2001 total capacity of internet access channels should increase by 5 times by 2005. This year Beltelecom has launched 2300 ports and dial-up Internet access points in all regional cities, 160 ADSL-access ports in Minsk and in regional cities. A new backbone has been built in Minsk enabling Internet access through the nearest automatic telephone exchange.

Beltelecom is active in the Internet access services market, providing such services as dial-up access (analogous and ISDN) and digital dedicated lines access. Beltelecom has been providing password-less internet access since February 1999. And the popularity of this service has been growing constantly. Thus in 1999 the average number of monthly bills for password-less internet access for 'non-password users', or those who have not registered with the ISP, accessing Beltelecom internet service, totaled 1341; in 2000 - 9587;in 2001 - 21459; in 2002 - 49446. Yet in February 2003 alone the average number of monthly bills was 100579 and in June 2003 - 106000 (for comparison in 2002 the number of bills totaled 796530).

The company predicts that by the end of this year that number will grow up to between 150,000 and 200,000.

70% 'non-password users' are households. Though the service is accessible almost in any region of the country (90% of territory), half of these non-password users reside in Minsk. 100% telephone subscribers in Minsk region and 97,7% in the rest of the country can use the service.

Fees for the service for private persons (from 0,5 USD per hour to 2 USD per hour) depend on the time of the day.

ISDN infrastructure is used for dedicated lines access (128 kBit/s). Subscribers pay from USD145 (14.400 kBit/s) to USD664 (128 kBit/s) per month. High prices often prevent NGOs and small businesses from using leased line access.

Fees for CIR (committed information rate) access for providers and companies depend on the speed of connection. 64 kbit/sec will cost 967 USD (1207 USD before October 2002). 8mbit/sec will cost 38079 USD (47397 USD before October 2002).

Monthly fees for connection to access points depend on the speed of connection chosen by user. 128 kbit/sec. will cost USD1652 (USD1836 before April 2003) and 2 mbit/sec. will cost USD13975 (USD15547), i.e. by 10%. And fees for installation of an international digital channel has been reduced by 20%.

As of 1.11.2002 the Ministry of Communications issued 56 licenses for rendering data transfer services. As a rule, it means rendering Internet network access services. There are about 30 actual providers, majority of these providers operate in Minsk. Average ISP possesses modem pool of 100 ports connected to Beltelecom with the speed of 128 kbit/sec.

ISPs render complete array of internet services. High-speed solutions, digital dedicated lines, dial-up connection and ISDL are available. The majority of users can subscribe for optional services, which differ in connection speed, grade of service, security, quality and price.

ISPs provide services based on wireless technologies though absence of permission for using 2.4 GHertz frequency impedes expansion of the service. As distinct from Beltelecom ISPs provide wider range of services and various discounts. Besides many of the providers has launched content projects.

In June 2002 the Belarus state telco, introduced ADSL in Minsk (3 nodes) and extended the service to regional cities (one node in each city). In order to develop the quality of dial up services, new servers in Minsk were connected up to automatic telephone exchanges through the backbone In the regions ASDL nodes are connected to regional BelPak nodes.

ASDL nodes are equipped with ZyXEL AES100, P642R. Fees for the service depend on the speed of connection chosen by the user - 1kbit/sec. will cost 5 USD/mo (without VAT) for ISPs and judicial bodies and E2/mo ((without VAT) for educational and governmental institutions. Because of high fees this service is not available for individuals.

In 2001, Beltelecom prevented providers from introducing ADSL by refusing to settle the issue of telephone line ownership.

It is expected that a number of ISPs which have got licenses earlier will start operations soon.

At present interest in telecommunications businesses is declining because of demand saturation in Minsk, because of high costs and low profitability, and because of lack of investments.

At present there are 5 local internet providers in Belarus.

In March 2003, Cosmostv, a Minsk cable TV operator, introduced test operation of broadband internet services to the city. Initially, the new service will only be available for a micro-district in Minsk. Customers can choose 64 Kbit/s and 128 Kbit/s access, and must pay for traffic volume. At he package includes connection and a cable modem, for a charge of E118.

At present there are 96 cable TV operators in Belarus but 80% of infrastructure is obsolete and cannot provide broadband access.

Because of the low reliability and high costs of Beltelecom leased lines ISPs have to use technologies of asymmetric access provided by satellite systems. And Beltelecom, trying to preserve its monopoly, stipulates in the licenses that incoming and outgoing traffic should go only through Beltelecom nodes.

Monthly volume of dial-up access totals 1MUSD. And Beltelecom has 60-70% share of this market.

Corporate networks based on ATM and Frame Relay technologies has been launched in Belarus.

Beltelecom monopoly entails difficulties for ISPs interrelations and impedes establishment of direct peering for Minsk ISPs though there are no legislative restrictions on this issue. Technically providers are ready for peering and a number of ISPs used Unibel network for that purpose. In 2002 Delovaja Set' (DS) installed IXP (internet exchange point. DS as well as Beltelecom is entitled to connect ISPs.

On the other side, Basnet (an academic network) has a license for outer satellite channel. The capacity of the channel (connected to Tide) is 1.5 Mbit/sec. for outgoing traffic and 10 Mbit/sec. for incoming traffic.

State monopoly for outer channels makes it possible to exert control over the traffic. Thus during presidential voting on the afternoon of September 9, internationally placed websites had their IP addresses blocked by the Belpak router. From that point on, Belarus users then could not gain access to a number of political opposition web-sites.

Further expansion of Internet in Belarus depends on new regional providers. In order to attract foreign investments it is necessary to restructure state monopolist - Beltelecom to liberalize ICT market and to develop legislative basis.

5. Users

According ITU (http://www.itu.int/ITUD/ict/statistics/at_glance/Internet02.pdf) there were 815 000 Internet users in Belarus by the end of 2002. And every month the number of users increase roughly by 3,5. The E- readiness assessment report gives another figure for the end of 2002 - 905500 users. This figure has been obtain as a mean value of

1) 1027600 users according polls held by Independent institute of social, economical and political research (IISEPR) held in 2001. As for active users IISEPR gives the number of 500000;

2) 1041000 obtained on the basis of questionnaires distributed by Internet advertising agency Mediareclama in Nivember 2001 and data presented by Beltelecom;

3) 648000 obtained from reports of major statistic servers Yandex (http://www.yandex.ru) and Akavita ( http://www.akavita.by)

But the problem is that results of sociological polls held in Belarus are not quite reliable because of data scattering. The scatter of data is conditioned by the fact that all corporate networks connected to leased lines have proxy-servers and dial-up accounts used by all the employees of the companies. Therefore 550000-700000 are more realistic figures. Number of internet users in Belarus increase by 3,5% every month.

Most of internet users (60-70%) reside in Minsk. And majority of them are university students.

The assessment of the number of internet users on the basis of international methods and schemes is a vital issue. Such an assessment will enable potential advertiser to estimate internet audience.

6. IP - telephony

In February, 2002 Beltelecom launched an IP-telephony service initially for calls to Moscow and the Moscow region St. Petersburg and the St. Petersburg region. By June 16 2003 this service became available for calls to Bulgaria, Britain, Greece, Denmark, Slovakia, Finland, France, Croatia, Czech Republic, Switzerland, Germany, Italy, Israel, USA and Canada. Further expansion of the scheme is planned by Beltelecom. But licenses for secondary provides forbid IP telephony services.

In December, two Belarusian businessmen had their property seized and were sentenced to 5 years in prison for illegal IP-telephony usage. Intercom, their company, accessed international telephone communications by illegally side-stepping Beltelecom, the Belarusian telecommunications monopoly. Intercom's activities (1,198,101 connections) resulted in losses to Beltelecom totaling E119,305 (BYR379,560,000). Without any law specific to telecommunications-based crime, the businessmen's activities resulted in severe punishment, where elsewhere the sentence would have been more lenient.

In April, 2003 a Belarusian company's CEO has been convicted of illegally accessing international telephone communications for his company without going through the state telco. Illegally side-stepping Beltelecom - the state telco - Westline accessed international telephone communications via IP telephony. Westline's activities resulted in losses to Beltelecom totaling approximately E37,000. Westlines' chief manager may get up to five years in prison for the crime

Expansion of IP - telephony in Belarus is restrained by Ministry of Communications restrictions. Private companies have to look for illegal solutions in order to take in these restrictions.

7. Domain names administrations

Domain BY was registered by Open Contact in May, 1994. Since During the last two years control over BY domain distribution has been exerted by the State Information Security Centre (http://www.tld.by). The second level domains became accessible only in 2000. Domain registration fees is about 50USD. A one year domain maintenance charge is about 50 USD. Domain names administration is governed by provisional rules and regulations work out by State Information Security Centre (SISC) and not by the laws.

The procedure of domain name registration is complicated and it is not clear. SISC gives initial permission and Open Contact sets up contract and provides technical support. At the same time Open Contact does not bear responsibility for the service.

Open Contact has stop lists, but does not provide whois service.

In August 2002 regulations for on-line application for domain name registration were changed. A number of domain names have been acquired by such brands as RollsRoyce, Rolex, HarryPotter and others.

There are three major factors which may improve the situation: more active participation of government bodies in domain names administration, simplification of registration procedure and reduction of fees.

8. E-commerce

SHOP.BY chain and a bookshop OZ.BY are the major e-shops in Belarus. Shop.by started operating three years ago and now has 60 independent shops using its services. The company said the most popular items bought online include electronics, CDs, books and GSM mobile phones through the internet. On average, customers spend more than $100 (E111) on a single purchase. In 2001, the company said overall turnover exceeded $2.6m (E2.9m), and $400,000 (E445,000) at Christmas. Combined, all the shops belonging to the system generate about 20,000 hits daily in 2001.

E-shops do not accept payment cards. The number of SSL server installations is insignificant.

Banks are not active in providing on-line services for private persons. The only exceptions are Technobank http://www.tb.by and Priorbank http://www.priorbank.by which introduced Visa-internet in 2001.

600 000 cards circulated in the country by the end of 2002: 100 000 - Belcard and 50000 - Visa, Europay and local bank cards. 350 ATM were set into operation in Belarus.

In April 2003 Priorbank (Belarus) signed licensing agreement with Alcor Payction (Russia). According to the agreement Priorbank acquires right to use internet system PayCash in Belarus. At present this system is used in Russia, Ukraine, Latvia, the USA and in Europe.

Legislative basis for the agreement mentioned above has been laid by the National bank of Belarus regulation "On minimum requirements for e-money emission and banking operations" (151 ,26.07.2002)

Priorbank is planning toe emit e-money and to use them for banking operations (converting into cash, internet payments and transactions) in the near future.

"Vlasova and Co" is the only law firm which specializes in e-commerce issues ( http://www.vlasovaandpartners.by/ru/services/e-commerce.shtml)

Frameworks for B2B and B2G activities have been worked out by National Marketing and Market Prices Center (NMMPC) founded by the Ministry of Foreign Affairs ( http://www.icetrade.by). NMMPC holds annual international conferences "E-commerce in the CIS countries and in Eastern Europe".

Two major factors will foster e-commerce expansion: legislative basis improvement and active involvement of banking structures.

9. Content projects

In 2002 TUT.BY. celebrated its second anniversary. After being online for two years, the Belarusian portal Tut.by has recorded a profit, and return on investment (100KUSD) is expected in 2-5 years.

More than 20,000 users visit the portal daily. TUT.BY offers internet, educational, cultural and other resources. Services offered by Tut.by include information on job openings and pager messages.

In addition, Tut.by offers hosting and e-mail services to 300 companies and organizations. Furthermore, the scope of the portal's advertising services is constantly growing onliner.by., a project intended for mobile phones users, celebrated its two years anniversary in February 2003.

In 2002 sites Naviny.by (Belapan information agency) and litara.net, dedicated to Belarusian literature, were launched in 2002.

The major event of 2002 - game project "Combat" (http://www.cx.by). Participants of the game fulfill the tasks offered online.

Participants of monthly meetings of PDA computers created the largest online archive on this topic in the CIS http://www.pda.by..

Other significant projects has been launched by Belarusian newspapers and magazines:

www.bdg.by offers two services (since January 2003): free access to news reels and subscription to e-versions of paper editions.

Belarusian search engine All.by, the first search engine of ByNet, was launched in 1999.

Renamed Poisk.open.by at the end of last year and integrated into Open.by, the search engine now indexes 5000 websites. It is the most popular Belarusian search engine. More than 2000 sites are rated by the engine.

Rating systems and statistics servers ( http://www.akavita.by, http://br.by, http://www.open.by) are popular in Belarus.

Lack of investments and absence of strategic business planning have negative effects on quality of content projects. Much depends on investments. Online projects intended for solutions of offline issues and for Internet community consolidating enjoy greater popularity.

10. Online advertising

Online advertising sales on Belarusian sites reach E39,986 by the end of 2002. This figure doubles 2001 online advertising sales which totaled E19,993. Prices for 1,000 banner impressions range from E0.19 to E0.49.

3 mobile phones operators have been major advertisers. But at present producers of cigarettes and tobacco become more active. According to some sources BAT (British American Tobacco) spent more than 3KUSD for online advertising in January-February 2003.

Almost all popular resources do not use banner networks and offer their own banner impressions.

Internet resources (mainly corporate sites) are advertised on radio and on TV, in public transport and on big boards. Such projects as "Combat" and Onliner use car stickers for advertising.

The major deterrent factor for the development of the Belarusian online advertising market is the lack of sound and popular internet resources. Advertisers are not quite aware of the potential offered by specialized resources for Internet community (car drivers, mobile phone users, designers, pop music fans, computer science specialists and etc.).

11. Civil society organizations

Belarusian national non governmental organization Information Society (IS) was founded in the year of 2000. IS holds annual Belarusian Congress on Telecommunications and on Information and Banking technologies. In 2001 'Information Society' has founded the National Association of Internet Providers (NAIP). But NAIP as well as Association of Computer Companies (ACC) founded by 15 Belarusian companies later on, are inactive and keep a low profile.

In November 2002 the 4th Belarusian Internet Forum announced creation of "Internet society" - a non governmental organization.

'BY 2003', Belarus' fifth annual internet forum, took place in Minsk in March 2003. In order to promote co-operation of private and public sectors in the ICT sphere, a new initiative was launched that will organize a round-table discussion of ICT-related issues for internet providers, representatives of computer companies, and governmental officials and members of parliament.

Other key issues discussed at the Forum included ISP activities, internet penetration in the country and Belarusian content.

200 representatives of various bodies and organizations and private individuals participated in the forum, with members of parliament taking part for the first time.

In June 2003 a two-days workshop "Information society in Belarus" was held in Brest. Another event of June is the action of "Fostering economic reforms' group formed by the deputies of Belarusian parliament. The deputies had an out session in Internet cafe and answered the questions of journalists an on line queries.

12. Mass media and advertising

There are 134 radio broadcasting companies and 60 TV broadcasting companies in Belarus, the majority of them (125) are state owned. There are three national TV channels in Belarus : BT (First National Channel), ONT (Second National Channel), Lad and one Minsk channel (STV).

BT has been broadcasting since 1956 and covers 98% of territory of Belarus. ONT (www.ont.by) was founded in 2002 according to the Presidential decree (15th of February 2002).Ministry of Information (51%), a state owned Belarusbank (29%) and Information Technologies Factory private company (20%) are the shareholders of the channel. ONT covers 98% of the territory of the country. The third national channel Lad launched in October 2003 covers 77% of the Belarusian territory.

Two Russian channels RTR and NTV cover 76-82% and 44% of the territory of Belarus respectively.

Founders of major broadcasters in Belarus

Broadcasters Radio TV Total
Ministries and state departments 1 1
Local administrations 97 9 106
Local councils 50 2 52
State institutions and organizations 13 13 26
Private companies 15 45 60
Joint ventures 1 2 3
Non-governmental organizations 3 3 6
Mass media companies 23 - 23
Individuals 3 2 5

93 companies have licenses for cable TV broadcasting.

Advertising

Belarusian advertising market is estimated at 8 - 16MUSD per year. Advertising agencies share 40-60% of the market, producing companies share 15-20%, marketing departments of companies' share - 10-15% and freelancers share 5-10% of the market.

Market share (%) of various types of commercials are represented in the table

TV commercials 31
Branding, positioning 26
Promo actions and samplings 21
Radio commercials 9
Image advertising 7
Outdoor advertising 6

TV advertising

At present companies allocate for TV adverts for about 30% of their total advertising budget.

BT Commercial and Advertising Board and VIdeointernational - Minsk Company provide services for TV (BT, ONT, NTV, RTR (Russsia) and radio (First National Radio Channel, Radius-FM, Stolitsa, Culture) advertising time distribution.

Rates and Discounts.

One minute of TV advertising costs from 200 000 BR (morning) to 700 000 BR (prime time 21.00-22.00) for residents of Belarus. All the others pay from 100 USD to 350 USD per minute. The price of the first, the next to last and the last positions in commercial break is 20% higher. Allocation of time for commercials in specific programmes and films will cost 10% more. Alcohol and cigarette adverts rates are 1.2 times higher.

Discounts (in Belarusian rubles and in hard currencies) depend on the net-budget and vary from 25% (net-budget of 5%KUSD or 10 mln.BR) to 78% (net budget of 400KUSD or 800mln BR).

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