It has been about seven years since the disintegration of the Soviet empire. During that time, some former Eastern bloc countries have built a thriving telecommunications business despite obstacles.
Cellular and wireless local loop services are being implemented as quick, economical alternatives to post-communist wireline networks, which are technologically obsolete, short on capacity and offer sparse coverage.
In Russia, there is a 10-year wait for a phone in some areas. In Poland, there are 10.3 telephones per 100 people; the network is better in Bulgaria, where there are 26.1 phones for each 100 people, reported Economic & Management Consultants International Inc. in London.
But launching wireless service is only the beginning of the race to make up for lost time. Other pieces of the puzzle, such as billing and advertising, must move forward as well.
Some nations are caught up in obvious struggles. Cellular bills are delivered by hand to subscribers in the Ukraine because the postal system is considered inefficient.
But other countries, such as Poland and the Czech Republic, have built strong subscriber bases as well as launched revenue-generating services such as Calling Party Pays. Operators in these countries are working on new billing strategies and report they want to offer customers a variety of service options-all departures from the traditional communist-bloc style.
In fact, several of these countries have notably forged ahead, according to a report by International Technology Consultants in Bethesda, Md.
Hungary today has 200,000 cellular subscribers; it had 45,000 in 1993.
The Baltic states are experiencing enormous growth in digital cellular based on Global System for Mobile communications technology. Estonia’s market has increased 150 percent in subscriber base and coverage since 1994.
At least one GSM network has been licensed by Latvia, Lithuania, Hungary, Estonia and Bulgaria. The Czech Republic and Poland each have licensed two additional GSM operators.
Hungary and the Czech Republic are building large fixed wireless networks.
Cellular services in Eastern Europe grew 201 percent in 1994 and 100 percent in 1995.
At the end of 1995, there were about 672,000 subscribers in Eastern Europe, which equals .21 percent penetration. Penetration is expected to reach 1.85 percent by 2001.
Paging service is growing, yet use of inferior technologies and greater need for wireless telephony has kept paging’s reception moderate. Standards being used include POCSAG, ERMES and various independent protocols.
A new approach
Many governments in Eastern Europe and the newly independent states still control telecommunications, but are taking small steps to liberalize their markets. Across the region, government operators are forming partnerships with private businesses, opening markets to more than one operator, upgrading systems to digital and welcoming foreign investment and expertise.
Reflecting a strategic change for the region, wireless isn’t being sold only to wealthy and big business users, said Gene Prilepski, senior analyst for ITC.
“In addition to being competitive, the wireless markets in Central and Eastern Europe and the newly independent states are becoming increasingly sophisticated,” Prilepski said.
Central and Eastern European operators are entering into new forms of marketing and strategic alliances designed at capturing small-and medium-size business accounts, he said. Broader advertising campaigns and more flexible service plans tailored to meet the specific needs of customers are being tried, ITC said.
But still, some slow cogs remain.
Numerous countries lack a developed, sophisticated retail sector.
Customer credit history and credit verification systems are rudimentary.
Operators are not confident about using distributors. ITC reports that Hungarian and Czech cellular operators refuse to allow more than 50 percent of service sales through distributors. Some operators are concerned that distributors are not adequately focused on selling service contracts, ITC said.
Also, increased commercial activity can be a boon and a problem at the same time. For instance, the Czech Republic is increasing telephone line capacity and improving its obsolete network. But at the same time, increased commercial activity has brought about demands that have strained existing service; improvements can’t keep pace and the overall impression is that the system is worse than it was three years ago, said ITC.
Attracting the West
Large European operators, such as Munich-based Deutsche Telekom, are interested in Central and Eastern Europe as well as Russia. When the Russians formed a telecom state holding company (AO Svyazinvest) and offered a bit of it for sale, Deutsche Telekom, France Telecom and Italy’s Stet were at the starting gate, along with U S West International. The entire deal fell through when the highest bidder, Stet, and the Russians couldn’t agree on details.
WLL to the rescue
Several nations have jumped into wireless local loop. Hughes Network Systems Inc. installed a system to cover 6,000 people in the Czech city of Prague, which has more than a million people. It plans to boost the system up to cover 50,000 subscribers in the near future.
The Czech government sees WLL as a way to provide mass-market telecom service and leapfrog its wireline system while it is under reconstruction.
These launches will move WLL systems beyond the experimental stage, ITC said.
