Collecting on Callers: Ukrtelekom and Ukraine's Lagging Telephone Communications Industry  

It is often alleged that electronic communication is developing much more slowly in Ukraine than in other countries, including neighboring Russia. Yet the rates charged for these inferior services exceed those in many locations, including Russia. As Ivan Halenko, the Chief of the European Security and Conversion Institute, says, "The rates of payment in Ukraine are higher than in Poland by a factor of 10-12, whereas the average salary in Ukraine is much lower… Our domestic "craftsmen" have turned the means of communication into a means of easy profit. This state of affairs is similar to that in colonial countries and countries with strong authoritarian regimes…"
The company charging those rates for those services is the Ukrtelekom Open Joint-Stock Company, a government monopoly. This is Ukraine's main provider of Internet services and only provider of local telephone services. It is also a company that is notorious for "surprising" the public with such things as privatization problems and sharp increases in the telephone service costs.
There are some theoretical alternatives to Ukrtelekom, at least in the large cities, though these private operators must still rent their telephone lines and primary networks from Ukrtelekom. Only then can they develop their own local networks by hooking up houses, apartment blocks,
businesses, and so forth. The rates these operators charge, therefore, will first include the cost they pay for Ukrtelekom services. To make any profits at all, some of these operators resort to illegal and unethical practices, such as charging several users for a "wideband" telephone line while, in actuality, only providing them with an ordinary voice-band cable with a data transmission rate of 8,000-12,000 bps.
Yet even with the threat from these unethical local operators, the greatest problem for ordinary users is still Ukrtelekom's services rates. Take Kyiv for example: Kyiv City State Administration recently announced that the number of private telephone subscribers in the capital dropped by 90,000 families. In addition, about 200,000 families are estimated to be trying to stay within the free monthly limit of 175 minutes when using their home telephones. These are staggering statistics for an economically growing capital that proudly calls itself a European city. What can explain this weak demand for phone services? Perhaps a comparison can explain the difference: In Kyiv, the average payment for using a private telephone line ranges from UAH 30 to UAH 200 (the latter with Internet). In Moscow, the relative figure does not exceed UAH 15.
Journalist Dmytro Babych makes a further comparison with Russian, calling the situation there Ukraine's "opposite." He said, "In 1999, Moscow Mayor Yuri Luzhkov prohibited the per-minute rating of residential telephone services.. His reason: Russian schoolchildren and students would be at a disadvantage in comparison with their
western counterparts if they could not use information and Internet communication resources. In other words, Russia's losses in terms of intellectual potential would exceed the profits of Rostelekom."
World Bank experts say that since the introduction of IP-telephony, Ukrtelekom has actually started losing money on international communications. This may help explain why it has decided to raise rates on internal and electronic communication. In addition, Halenko sees a political side to the problem: "Let us recall when it was that Ukrtelekom first sharply raised its communication rates. It was on the eve of the presidential election campaign in 1999; [the next time was] before the parliamentary elections in 2002… Apparently, certain politicians needed support for their campaigns, so the rates went up. Transportation fares and residential rentals also increased at that time. Many small private companies went out of business simply because they could not afford to pay the rent on offices or the cost of communication services."
It should be noted that the price hikes Halenko cites were not the final ones. Of late, the rates have been raised again, this time by about 40%. Ukrtelekom calls this move "optimization" and explains that the additional revenues will be spent on developing the rural network. But what villager will be able to afford such expensive communication?

Bohdana Kostyuk