Golden Telecom: "Business Cannot Exist Without Internet"

Ukraine is no exception in the major global trend of moving into a new information society where the role of the advanced communication technologies is increasing at a neck-breaking speed. Information itself has become an indispensable tool of the effectual business. Anyone who either dares to doubt its significance or simply does not have funds to create an access to it finds oneself as an evident outsider.

Ukraine is currently striving to keep up with one of the major realities of the XXI century, namely the Internet access and service availability. Presently there are about 200 Internet service companies operating in the area. But most of them deal with the individual clients. There are very few companies that provide Internet services to the business clients even though the market for them is much bigger. It to the large extent stems from the higher demand of the corporate clients to the quality of the services as well as its cost efficiency for the Internet Service Provider.

"Computers Review" narrates an interview with the commercial director of Golden Telecom Business Solutions Vitaliy Hnatenko. Here are some excerpts from the interview deal with the issue of the Internet Service Providers and their current situation in Ukraine:

At first Vitaliy, could you please make it clear how Golden Telecom distinguishes "Corporate Internet" and "Internet for Businesses"?

This classification is quite relative, for example, there is no difference between the technical characteristics of either one. Scale and services differ slightly. In other words, "Internet for businesses" is the access service employed by the business structures. Today, enterprises are the most stable clients of the Internet services. In fact, they are the engines of this particular market sector that stimulate ISPs to keep on evolving: develop infrastructure, expand lines, and improve quality.

"Corporate Internet" tends to denote the leased line rather than dial-up connection. However, dial-up connection is not limited to the individual usage. As a matter of fact, the "Svit on Line" (Golden Telecom service trade mark) offers the roaming possibilities for its customers. Many big companies apply the service that enables them to have an access to the I-net throughout Ukraine, in the NIS and in many countries abroad. Besides, companies enter the data exchange world gradually, and as a rule dial-up connection serves as a starting point.

How do you evaluate the success of the Internet Service Providers in Ukraine?

Well, I outline three major aspects that contribute to the ISPs' success:
1. Technical characteristics: ISP infrastructure, its external and local lines, equipment etc.
2. Marketing and sales
3. Customers' support

The first aspect is dominating in Ukraine and it is due to "Ukratelecom's" original monopoly in the data exchange. The network of the Internet service providers is created within the Ukrtelecom's framework. The quality of the service offered might vary from one provider to another. It depends on their capability of sustaining the required levels of the aforementioned aspects. And apparently the commercial data exchange networks have the advantage in this case.

Nevertheless, the dial-up service cost is of concern to the customers? Do you think it might be going down in the future?

I suppose that dial-up connection service cost cannot become substantially cheaper. I guess the cost has already reached its bottom line. The thing is that ISP's profitability directly depends upon the number of clients. For example, to maintain the cost at $0,7 per hour a company must have thousands of customers. But even then the cost cannot go down without affecting the service quality. We should also take into account that an average Ukrainian client with the unlimited dial-up access spends about 5 hours a day in the I-Net. It amounts to the $50-80 per month for the ISP that provides high quality connection and client's maintenance. Therefore, I don't see any possible ways how the Internet unlimited service price can go lower than $20 monthly. I doubt its possibility even if the number of the Internet users increases considerably. To compare, for instance in the United States the similar service is available for $15-20 per month while the time in the I-Net of a regular user is approximately 1-1,5 hours per day. The ISP's cost totals around $12 monthly that is a profit guarantee. Besides, the profit from advertising in the western countries is much higher than in Ukraine. The situation with the Internet-Unlimited service might change after the Internet will vastly spread among population. However, the Internet access for the corporate clients comes down to the cost of the leased line.

So, how do the Ukrainian enterprises find the cost of the leased line?

It appears that with the enterprises' growth its communication requirements increase. The 64 Kbps line can not only improve the Internet connection quality but also make the online access to the internal enterprise data from outside viable. Presently our corporate clients use the 64 and 128Kbps lines. Their relatively high price prevents them from being common in Ukraine. However, it is reasonable for most of the small and medium enterprises. The monthly bill for the leased 64 Kbps line is $270 (including the 1 GB traffic).

And, what about the ISDN and XDSL? Do you believe they will ever enter Ukraine?

The ISDN services that are quite wide spread in the West did not settle in Ukraine. The services of the ISDN are very similar with those offered by the dial-up connection. Moreover, the quality is also pretty much the same. I believe, that there is a chance to skip the ISDN and move to the XDSL that opens broader opportunities for the clients. In part, it can provide the data exchange speed of 8 Mbps. I am convinced that the future is with the XDSL. However, some specific ISDN services like logging the Automatic Telephone System on the ISDN PRI (30 independent 64 Kbps lines) can be requested.

How do you evaluate the prospects of X.25 and Frame Relay?

X.25 is primarily applied in the banking network. It remains the only access protocol to the various services and resources, like S.W.I.F.T, Western Union, processing centers etc. And that is about it as to the X.25 application in Ukraine. But I believe that for the further improvement of the banking network the Frame Relay is the must. Though Frame Relay is more sensitive to the errors on line than X.25 but it enhances the service quality as well as allows achieving the higher data exchange speed.

Does it all mean that the Ukrainian telecommunication and Internet service market will grow?

Sure. It will grow even despite the economic progress. In today's world the effectiveness of any business depends on the Internet as the major communication and information source. I think the market will grow due to the increasing demand for both the dial-up and leased line connection as well as Web services (site creation, hosting etc.). As the result of the e-commerce and content projects' advent in the far future the market will also expand.

Are the content projects really the prospects of the far future?

Yes. The content projects' profitability is very low. The small investment that they have drawn so far does not allow considering any serious business in the area. The lucrative on-line business has not been created in Ukraine yet.

Does Golden Telecom have any plans to embark on the content projects that will target the business audience?

In the future-yes. Some work is being done on that now. But so far we mostly offer the hosting services and major investments are made in the infrastructure development. We have our own 150 km optic-fiber line in Kiev that connects numerous access points. Also after the merge with "Sovam Teleport", "Golden Telecom" became the owner of country scale digital network. It covers 20 major cities in Ukraine and its transmitting speed is about 2 Mbps. The access to the Cable & Wireless and Teleross networks provides a way to the international and Russian network resources.