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Cablegate: Moscow Wi-Fi: Hotspots Amid an Internet Trend

VZCZCXRO6664
RR RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD
DE RUEHMO #3339/01 1901159
ZNR UUUUU ZZH
R 091159Z JUL 07
FM AMEMBASSY MOSCOW
TO RUEHC/SECSTATE WASHDC 1916
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHZN/EST COLLECTIVE
RUEHLN/AMCONSUL ST PETERSBURG 4290
RUEHVK/AMCONSUL VLADIVOSTOK 2239
RUEHYG/AMCONSUL YEKATERINBURG 2542

UNCLAS SECTION 01 OF 02 MOSCOW 003339

SIPDIS

SIPDIS

DEPARTMENT FOR OES/STC (DAUGHARTY), EUR/RUS (SIKKORA, GREENSTEIN),
EB/CIP/MA (GIBBS)

E.O. 12958: N/A
TAGS: EINT ECPS ECON TINT RS
SUBJECT: Moscow Wi-Fi: Hotspots Amid an Internet Trend

MOSCOW 00003339 001.2 OF 002


1. SUMMARY: Internet in Russia is slowly gaining ground across the
country, albeit impeded by limited provision of broadband service
and lack of personal computers. Wireless and high-speed Internet is
taking hold in larger cities such as Moscow and St. Petersburg.
Wi-Fi hotspots are increasingly visible throughout Russian cities.
As disposable income grows, even more users will acquire computers
and access to the Internet. END SUMMARY

----------------
Regular Internet
----------------

2. In March 2007, there were an estimated 23.7 million Internet
users in Russia (representing 16.5 percent of the population
according to Internet World Statistics). This was up by 664.5
percent compared to 2000. Internet use is highest among students
(51 percent), top managers (45 percent), and qualified specialists
(41 percent).


3. The number of broadband subscribers in Moscow passed the 1.2
million mark in the first quarter of 2007, as reported in
Kommersant, quoting the research company IKS Consulting. This
represented a 15 percent increase in comparison with the fourth
quarter of 2006, equivalent to 160,000 new customers. Forty percent
(600,000 households) of all home Internet users in Moscow connect
via dial-up, according to the business newspaper RBK (Russian
Business Consulting). Half of these users are reported to be
satisfied with the service. Almost 30 percent of dial-up users in
Moscow, representing approximately 150,000-170,000 potential
customers, say they would switch to broadband if it were available
-- which, due to technical issues, it is not.

4. Analysts predict that Internet providers should expect their
customer numbers to rise continuously, as the Internet penetration
rate in Moscow has just reached 30 percent. It will take
approximately three years to reach a market saturation point of
70-90 percent. Corbina Telecom (a domestic alternative
telecommunications operator) predicts that within two years some 90
percent of all Internet connections in Moscow will be
broadband-based.

5. Dial-up Internet in Moscow remains slow and difficult. With the
advent of high-speed Internet connection, many websites have
upgraded their graphics, pictures, and fonts to be compatible with
broadband or high-speed Internet use. Dial-up users are left
waiting minutes, sometimes hours, for websites to load -- many of
which never do, according to anecdotal reports. Newer model
computers capable of high-speed Internet operation are less
productive than they could be due to shortcomings with Internet
access.

6. The use of laptop computers in Russia is limited. They are an
expensive purchase and are primarily used by businessmen and
students. The Russian Internet Forum, which held a conference April
5-6 in Moscow, was attended by over 1,000 Internet entrepreneurs and
computer specialists, almost all of whom brought their own laptops.
Many Russians either own one household desktop computer, or they
access the Internet at work. Older model computers are not
compatible with high-speed Internet because they cannot process
information quickly enough.


-----------------
Wireless Internet
-----------------

7. Wi-Fi has become increasingly popular throughout the country in
recent years. Wi-Fi is an example of Wireless Local Area Network
(WLAN) where users with wireless capability are able to access a
network. Requiring no plug or cord, wireless Internet is quick and
convenient. Wireless Internet works like an invisible bubble. If
individuals are located within the bubble, they can connect so long
as they have the correct password and computer capability. A
wireless card located within the laptop or desktop computer will
enable a user to access wireless Internet. Depending on the
environment and usage patterns, wireless Internet varies from user
to user. Desktop computers are more likely to be on a wireless
network if they are in a large, public Internet caf or in a
residential setting. Mobile settings, such as busy restaurants and
cafes, are more likely to be used by clients with laptops.

8. Moscow has the highest concentration of Internet access in the
country. Currently, 61 percent of all Internet hotspots -- venues
that offer Wi-Fi access -- are located in the capital city. Many
other cities within Russia have hotspots also: Saint Petersburg

MOSCOW 00003339 002.2 OF 002


(106), Novosibirsk (37), Yekaterinaburg (34), Tolyatti (28),
Vladivostok (24), Izhevsk (23), Rostov-on-Don (17), Samara (17),
Chelyabinsk (15), and Perm (13). Thirty-two percent of the hotspots
in Russia are free of cost; however, many areas in Moscow require
payment.

9. There are approximately 290 total hotspots within the city of
Moscow serviced by a few providers. There are 206 wi-fi hotspots
supported by the company Yandex in Moscow (www.yandex.ru). Most of
the Yandex-supported hotspots are in restaurants or cafes (173) and
usage is free with the purchase of food. Yandex hotspots are also
located in car dealerships (11), movie theaters (5), beauty salons
(5), and a shopping complex (1). Additionally, Internet cafes are
scattered throughout the city. They charge per hour or per amount
downloaded.

10. A select few metro stations have wireless Internet available
within the station itself; however, this is mainly for the use of
Internet via mobile devices such as Internet-enabled telephones.
Currently, Comstar's wi-fi service is available in three underground
metro stations - Okhotniy Ryad, Teatral'naya and Ploschad'
Revolyutsii. There are currently 21 hot spots covering an area of
two square kilometers, including waiting halls, passages, escalators
and entrance halls. Tunnels between stations are not yet covered by
this network. Comstar claims that the network capacity allows for
the simultaneous access of 48 users at a speed of 128 Kbps, and that
it plans to increase network capacity following increased demand for
the service. Service is pre-paid per minute through MTC SMS
services or pre-paid wireless Comstar cards. Mobile phones in
Russia are cheaper and more accessible than mobile phones in the
United States; Internet providers are already looking to a future of
Internet-ready mobile phones.

11. Another company, Golden Telecom, has also launched wireless
Internet services around the center of Moscow. Certain areas of the
service are free to access; other areas require subscription to the
Golden Telecom service.

12. COMMENT: Wireless Internet in Russia is just beginning to come
on-line, but appears to have a bright future. The number of
Internet users continues to rise across the country. In order to
promote computer literacy, the GOR, through the Ministry for
Information Technologies and Communications and the Ministry of
Education and Science, has instituted a new program to provide every
school in Russia with computer access by the beginning of the
2007-2008 school year. Additionally, the government hopes to put
computers in every town (mostly in the Post Offices) in order to
reach a broader audience. The increase in disposable income will
provide more citizens access to computer technology via home
computers and personal laptops.

BURNS

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