International Telecoms Eye Central Asian Mobile Market

International telecoms are eager to expand their presence in Central Asia, their hopes buoyed by low, but growing penetration rates and the absence of a quality fixed line infrastructure. Researchers, meanwhile, are finding that mobile phones are preferred over the Internet as a means for receiving information.

Global telecommunications companies are spurred on in Central Asia by the success of mobile phone penetration in Russia, where the latest figures indicate there are now 106 mobile phones for every 100 citizens. Telecoms research analysts now describe Central Asia as an "obvious opportunity."

An annual review by OFCOM, the British regulatory body, characterized China and Russia as powerhouses in the global telecoms sector, both in terms of money and also technological advances.

Some analysts believe Central Asia is poised to follow the Russian model of mobile phone development. "The mobile market in Central Asia is getting quite competitive, while the fixed market is still bugged by slow liberalization and the lack of modern infrastructure," said Bakhyt Weeks, an analyst with the telecoms advisory company, Pyramid Research.

"The situation in the fixed markets [in Central Asia] is quite similar to that in Russia, if not worse," Weeks continued. "The incumbents still control all of the local telephone markets; some competition exists in the long-distance and international [spheres]. The development of broadband is held back by the low fixed-line penetration and low digitalization. Additionally, the lack of competition due to the absence of the local loop unbundling (LLU), keeps the prices high, preventing better adoption."

This environment creates ample opportunity for mobile providers to expand their positions in Central Asia. Already, greater competition and cheaper services has resulted in an "explosion in mobile phone usage" said Weeks.

"Kazakhstan’s mobile penetration grew from around 42 percent to almost 69 percent in 2007. Uzbekistan’s penetration doubled from 10 percent to 20 percent in 2007. … This trend is set to continue in all of the markets. The entrance of MTS, Vimpelcom, and TeliaSonera in some of the markets will significantly boost competition, lower prices, and widen the range of services," she said.

Beth Kolko, a professor at the University of Washington’s Department of Technical Communication, is conducting a three-year survey of information and communication technologies in Central Asia. She said demand for mobile services had risen swiftly since they were introduced in the late 1990s.

"The growth throughout the region has been phenomenal both in terms of the number of subscribers and the number of providers," she said. "The mobile phone takes root pretty rapidly because of infrastructure issues. Where landlines are difficult to acquire or expensive, mobile phones find a very friendly audience. You can see that throughout Africa and Asia … and Central Asia is no different."

Kolko’s preliminary research in Kyrgyzstan, Kazakhstan, Uzbekistan and Tajikistan reveals distinctive usage patterns. The Internet remains too costly for most, and as a result, the mobile phone has taken on a unique role as information tool, she said. "What we see in usage is primarily voice and SMS. There’s not much mobile web, a little in Kazakhstan, but generally - even though the services are available in Tajikistan and Kyrgyzstan and the people I’ve interviewed know it’s available - it’s just too expensive, said Kolko.

The growth in Internet users appears to be leveling off, while the number of mobile phone subscribers continues to increase, according to Kolko’s early data. A possible explanation for the flat Internet numbers is connected with governmental desires to control the flow of information and maintain firm grip over the political spheres in the respective countries.

A recent survey issued by the political rights group Freedom House found Central Asian states to be among the world’s more repressive regimes. [For background see the Eurasia Insight archive]. Leaders in many Central Asia states, most notably in Turkmenistan and Uzbekistan, have managed to establish a large measure of control over the Internet, mainly through the tight management of service providers. Officials have not managed to impose the same level of control over mobile phones. Explanations for the continued growth of mobile phone usage include the possibility that they are a lucrative source of income for ruling elites; that officials simply have not gotten around to focusing on the mobile market; or perhaps authorities have found the market is so large that new methods of control must be developed in order to harness the flow of information.

Kolko suggests another major factor at work is the relative user-friendliness of mobile phones over the Internet for the peoples of Central Asia. "Oftentimes people will group information and communication technologies into one bucket, but we are seeing a divergence of attitudes towards the Internet and towards mobile phones," Kolko said. "People are seeing mobile phones as much easier to use. They’ll describe the language barrier as similar for both the Internet and mobile phones, but they still perceive the mobile as easier to use."

People in Central Asia are using mobile phones not just for conversations, but to obtain information, Kolko found. "There are some very sophisticated information resources available in certain parts of Central Asia, and from certain providers where subscribers can access directory services et cetera via text messaging. These are things that people use with some frequency."

Kolko added Central Asia’s track record could only inspire confidence in the sector. "They don’t have the 3G bandwidth that you see in other countries, but if you look at the map of coverage across the countries, you can see that huge parts of the region are in fact served by mobiles in early 2008. That wasn’t the case in 2003 or 2004, but it is now."

Author: Deirdre Tynan, freelance journalist who specializes in Central Asian affairs.

Posted January 18, 2008 © http://www.eurasianet.org