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 KAZAKHSTAN International Business Magazine №3, 2008
 Internet in Kazakhstan.Despite a Wide Range of Choice
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Internet in Kazakhstan.Despite a Wide Range of Choice
 
By Aleksandr Vasilyev, editor-in-chief of the Profit website
 
The topic of the Internet has been generating significant interest in Kazakhstan in recent months. Various studies have been conducted, television programmes have been made and conferences and roundtables have been held on this topic. The Internet market is developing rapidly but it is still at the beginning of its path. The main questions that everyone is currently trying to answer are: How should we improve the .kz zone? How should it be developed? How can Kazakh sites be made more attractive? How can the Internet penetration rate be increased? Of course, these are rather rhetoric questions, but let us try to answer them.
 
Problems
 
Askar Yeserkegenov, chief commercial director of Kazakhtelecom, believes that there are a number of main reasons that prevent the Internet from expanding in Kazakhstan. These are: the boring content of local Internet sites; the absence of competitive hosting; the expense of registering domains and the lack of development of electronic payment systems.
 
Despite this, only the first reason is particularly serious and it has a significant impact on the situation (in addition to the tariffs to access the Internet, which the Kazakhtelecom official did not mention). The rest are populist statements because the influence of these factors on the development of the Internet is almost zero.
 
Mr Yeserkegenov told the Internet Alternative 2008 conference that the majority of Internet users in Kazakhstan use Russian or foreign resources which lure them away from the Kaznet zone. He said that as a result of this Kazakh companies have to pay foreign providers considerable funds for foreign traffic. Comparing the Russian Internet access market with the Kazakh one, we can single out one key difference – the development of local content for which Russian operators do not pay, and, as a result, the contribution of these costs to the production cost of Russian services is zero. That is why Kazakhtelecom aims to improve the content of the Kaznet and create attractive conditions for developing domestic websites. Meanwhile, Mr Yeserkegenov said, about 80% of traffic originates outside Kazakhstan and only 20% in the country.
 
Of course, content should be developed and we will discuss this issue later. Nevertheless, blaming everything on low-quality local content seems to be not quite correct. The priority aim is to acquaint people with the Internet. After that, as the number of users rises, business mechanisms will start working. Competition for traffic will start and the supply of content adequate to the growing demand will appear. It is like talking of developing quality local television programmes when the majority of the people do not watch television at all because many people still do not have “television sets” (read “computers”).
 
On the other hand, this process should not be left without control when people start using the Internet for themselves. This is exactly when demand should be encouraged, offering convenient and interesting services because it is impossible to force people to use the Internet (as some politicians have proposed).
 
Chronic diagnosis
 
Generally, if we look at the issue of the local content widely, we will realise that this situation with the Internet is not uncommon. The same can be said about the press and television. A larger part of the traffic for these channels of communications is also provided by foreign information suppliers. And this is not surprising because they are more competitive and more professional. Why? Because they are initially designed for another audience, another scale which is dozens of times greater than ours. Therefore, bigger production budgets and stricter requirements for the final product.
 
That is precisely why the main competitive advantage of domestic content should be local relevance. Popular projects aimed at mass audiences, such as Facebook, should not be copied. Kazakh users are quite comfortable with the existing projects. Local “Googles” should not be invented either – the existing search engines are already solving problems successfully. We need services which can be applied primarily by Kazakhs, helping them solve specific problems.
 
It is sufficient to look at the leaders of the CountZero.kz rating. These are the Kolesa and Krysha websites (that ease the process of buying or selling cars and property), the kino.kz website of cinema showtimes and the Tsentr Tyazhesti online forum, which has become a database of knowledge of different aspects of the life of Kazakhs. This list also includes job websites, other reference material websites, news portals and so on. All of them allow their visitors to solve certain problems in the minimum time. At the same time, all of them are examples of convenient services, and when a person fully realises all comforts and possibilities opened up for them by the Internet, the issue of its penetration into the masses will be solved naturally.
 
Broadband breakthrough
 
We should not of course forget about the affordability of the Internet. It is the high tariffs that have long remained a serious obstacle to the spread of the Internet in Kazakhstan. This is proven by the snowballing growth of the number of subscribers to Kazakhtelecom’s Megaline broadband services (which are based on ADSL technology) after its tariffs were lowered and aggressive advancement on the market. As a result, in June 2008 the number of Internet users of Kazakhtelecom reached 847,426 subscribers, including 456,260 broadband subscribers. By comparison, the company had only 57,858 broadband users in the middle of 2007. This means that the figure had grown by almost eight times in one year.
 
No-one expected such an explosive growth in the market. For example, the iKS-Consulting agency estimated that the number of broadband subscribers would only exceed 480,000 in Kazakhstan by 2010. Obviously, this point will be crossed in the near future with Kazakhtelecom clients alone. There are several more major Internet providers on the market.
 
Still, failed forecasts do not belittle the significance of iKS-Consulting’s study entitled Internet Access Services Market in Kazakhstan in 2007-2010: Current State and Development Prospects. It estimated that the market would be valued at $175m in 2007, including $140m (80.2%) raised from broadband connections, which rallied the market. In the first quarter of 2008, revenue from Internet services totalled 7,415.2 million tenge, of which 80.6% (5,976.7 million tenge) was generated by broadband users and 19.4% (1,438.6 million tenge) by dialup users. Broadband connection was provided to 29,700 enterprises and 148,000 households in Kazakhstan in the first quarter of 2008.
 
According to the iKS-Consulting study, 2006 and 2007 were a period of the initial saturation of the market. By that time, a highly-profitable, but small in volume, segment of major and medium-sized enterprises had already been covered by broadband Internet connection. This means that new growth possibilities should be sought in the segment of individual users and small businesses. In order to preserve the current growth dynamics of the client base Internet providers should actively promote mass products with an attractive pricing component, like what is being done by Kazakhtelecom.
 
At the same time, we should not forget that the growth of broadband subscribers is taking place not because of new users but largely a switch from dialup connections. That is why the total number of Internet users is growing slowly, but their “quality” is growing remarkably, because broadband users spend far greater time surfing.
 
Kazakhtelecom’s absolute leadership on the Internet services market is also confirmed by the TNS Gallup Media Asia company’s research (information was obtained from those polled in Kazakh towns with a population of over 200,000 people who used Internet services for the six month period prior to September 2007). According to the poll results (on the chart), Kazakhtelecom was a large gap ahead of other providers in terms of such important indicators as knowing the provider (88% of respondents), using its services (67%) and intention to use them in future (40.7%). Moreover, among all services of Kazakhtelecom, it was Megaline that occupied leading positions in terms of awareness and use.
 
Wireless rivals are gearing up
 
We can consider wireless connections as the main alternative to ADSL Internet connections. It also makes it possible to bypass cable-based infrastructure, which is mainly owned by Kazakhtelecom. Although the number of Wi-Fi locations is constantly growing and Wi-Max projects are popping up, the main hope is being pinned on the 3G technology (the GSM-1800 mobile communications standard). This is connected to a high mobile penetration rate (it is close to 100% in Kazakhstan) and the wide spread of devices (almost any modern mobile telephone supports the GSM-1800 standard). As a result, the only thing a subscriber needs is to sign up for Internet access. Key to this is an affordable tariff. For a long time the problem depended on obtaining a licence because the tender for GSM-1800 frequency bands had been repeatedly postponed, although mobile operators have said many times that they are ready to launch third-generation networks.
 
And now, finally, the long-awaited event has taken place. Frankly speaking, it was decided to distribute bands among the existing operators without a tender. In response to a Cnews.kz question, spokeswoman for the Kazakh Information Technology and Telecommunications Agency, Aynagul Zhunubayeva, said: “At a Kazakh interdepartmental commission for radio frequencies (28 May 2008 meeting minutes No 17-37/I-321) in regard for distributing 1,800 MHz radio frequencies it has been decided to order the Kazakh Information Technology and Telecommunications Agency to distribute frequencies with a 5 MHz bandwidth (reception/transmission) between the existing GSM mobile operators in Kazakhstan in frequency ranges of 1,710-1,730.2 MHz and 1,805-1,825.2 MHz with a one-off payment worth 2.5 billion tenge and additional licence obligations by 1 September 2008. Based on all this, the tender to distribute frequencies has not been held.”
 
The current level of the saturation of the domestic mobile market requires the development of operators – not at the expense of expansion in their client base – but through improving the quality of services and developing new services. That is why telecom companies have repeatedly expressed their readiness to accept any requirements set by the state regulator, which took a form of a payment to the tune of 2.5 billion tenge ($20.83m) for a licence. However, Cnews.kz said, the agency failed to specify whether this was the combined cost of packages or the cost of each lot separately. For comparison, a licence fee for each of 100 lots of GSM-1800 was RR45,000 or about $180,000 in Russia in 2007.
 
The Kar-Tel company (operating under the Beeline brand) was first to announce that it had obtained an official licence to offer GSM-1800 mobile services in Kazakhstan. Other operators have not yet announced the purchase of licences yet.
 
As a result, we will very soon see interesting offers to connect to the Internet from mobile operators. Given the high level of recognisability and loyalty of subscribers, mobile companies have good chances of claiming a significant share on the Internet market.
 


Table of contents
We Look Forward with Optimism  Viktor Schukin 
· 2016 №1  №2  №3  №4  №5
· 2015 №1  №2  №3  №4  №5  №6
· 2014 №1  №2  №3  №4  №5  №6
· 2013 №1  №2  №3  №4  №5  №6
· 2012 №1  №2  №3  №4  №5  №6
· 2011 №1  №2  №3  №4  №5  №6
· 2010 №1  №2  №3  №4  №5/6
· 2009 №1  №2  №3  №4  №5  №6
· 2008 №1  №2  №3  №4  №5/6
· 2007 №1  №2  №3  №4
· 2006 №1  №2  №3  №4
· 2005 №1  №2  №3  №4
· 2004 №1  №2  №3  №4
· 2003 №1  №2  №3  №4
· 2002 №1  №2  №3  №4
· 2001 №1/2  №3/4  №5/6
· 2000 №1  №2  №3





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