Internet in Ukraine
The partly liberalized Ukrainian telecommunications market is not fully developed.
Fixed-line penetration remains low (27.8 percent), 4 and the telephone system requires
modernization. The demand for mobile services has expanded rapidly, to reach a penetration of nearly 50 percent. The largest telecom and top-tier ISP, Ukrtelecom, has
92.86 percent state ownership. President Viktor Yushchenko has announced the forthcoming privatization of the state-owned telecom operator Ukrtelecom. The sale of the
operator, however, has been delayed a number of times. The government envisages
that 50 percent of the shares will be sold for USD 3 billion, though analysts predict a
much lower figure. The outdated equipment of Ukrtelecom makes the company less attractive to investors. 5 The state monopolies Ukrtelecom and Utel, the latter controlled
by Ukrtelecom, together own 95 percent of the long-distance and international call
market. 6
State-owned Ukrtelecom is the largest ISP in the country, but it does not decisively
control the other major ISPs. Ukrtelecom dominates the fixed-line sector 7 and possesses Ukraine’s primary network, trunk, and zone telecom lines. Alternative telecommunications providers are dependent on leased lines, because Ukrtelecom owns the
majority of the infrastructure and many alternative providers do not have sufficient
resources to build their own networks and consequently have to rely on Ukrtelecom’s
infrastructure. Prices for long-distance and international calls of local operators made
over Ukrtelecom lines were regulated by the Order of the Ministry of Communications
of November 21, 1996, No. 234, on the basis of revenue sharing (which depends on
the number of lines, equipment used, and administrative costs). New interconnection
rules were introduced in January 2007, under which interconnection fees are calculated on the basis of traffic volume.
Although ISPs have considerably reduced their access costs (by, for example, leasing
outdated or redundant infrastructure from Ukrtelecom) and a few providers offer free
access during the night, most Ukrainians cannot afford to use the Internet. Internet
penetration increased to 14.6 percent in 2008. 8 With regard to frequency of connecting to the Internet, local sources 9 estimated that in March 2009 almost 8 million Ukrainian users accessed the Internet on at least one occasion over the course of the
previous month. 10 There is a significant urban-rural digital divide: As of December
2008, 41 percent of Internet users lived in settlements with more than 50,000 inhabitants. The share of Internet users in rural areas is very low. 11 The majority of users are
concentrated in large cities, with Kyiv accounting for nearly 60 percent of Internet
users, and the next seven largest cities a further 30 percent of all users. 12 Obstacles
impeding expansion include high access costs, poor infrastructure in the regions, high
call rates, and low levels of PC ownership.
Ukraine
251
The partly liberalized Ukrainian telecommunications market is not fully developed.
Fixed-line penetration remains low (27.8 percent), 4 and the telephone system requires
modernization. The demand for mobile services has expanded rapidly, to reach a penetration of nearly 50 percent. The largest telecom and top-tier ISP, Ukrtelecom, has
92.86 percent state ownership. President Viktor Yushchenko has announced the forthcoming privatization of the state-owned telecom operator Ukrtelecom. The sale of the
operator, however, has been delayed a number of times. The government envisages
that 50 percent of the shares will be sold for USD 3 billion, though analysts predict a
much lower figure. The outdated equipment of Ukrtelecom makes the company less attractive to investors. 5 The state monopolies Ukrtelecom and Utel, the latter controlled
by Ukrtelecom, together own 95 percent of the long-distance and international call
market. 6
State-owned Ukrtelecom is the largest ISP in the country, but it does not decisively
control the other major ISPs. Ukrtelecom dominates the fixed-line sector 7 and possesses Ukraine’s primary network, trunk, and zone telecom lines. Alternative telecommunications providers are dependent on leased lines, because Ukrtelecom owns the
majority of the infrastructure and many alternative providers do not have sufficient
resources to build their own networks and consequently have to rely on Ukrtelecom’s
infrastructure. Prices for long-distance and international calls of local operators made
over Ukrtelecom lines were regulated by the Order of the Ministry of Communications
of November 21, 1996, No. 234, on the basis of revenue sharing (which depends on
the number of lines, equipment used, and administrative costs). New interconnection
rules were introduced in January 2007, under which interconnection fees are calculated on the basis of traffic volume.
Although ISPs have considerably reduced their access costs (by, for example, leasing
outdated or redundant infrastructure from Ukrtelecom) and a few providers offer free
access during the night, most Ukrainians cannot afford to use the Internet. Internet
penetration increased to 14.6 percent in 2008. 8 With regard to frequency of connecting to the Internet, local sources 9 estimated that in March 2009 almost 8 million Ukrainian users accessed the Internet on at least one occasion over the course of the
previous month. 10 There is a significant urban-rural digital divide: As of December
2008, 41 percent of Internet users lived in settlements with more than 50,000 inhabitants. The share of Internet users in rural areas is very low. 11 The majority of users are
concentrated in large cities, with Kyiv accounting for nearly 60 percent of Internet
users, and the next seven largest cities a further 30 percent of all users. 12 Obstacles
impeding expansion include high access costs, poor infrastructure in the regions, high
call rates, and low levels of PC ownership.
Ukraine
251