Central Europe Review The International OSI Policy Fellowships (IPF) program
Vol 2, No 27
10 July 2000
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Baltic Internet

Latvia Logs On
Arnis Gross

That Latvian President Vaira Vīķe-Freiberga was asked to officially open the Baltic Information Technology and Telecommunications (IT&T) 2000 conference this year highlights the importance of the rapid growth of the IT sector in the Baltics. The Baltic governments have begun to realize that the limited and finite resources of the raw materials and energy sectors will not be enough for the Baltics to survive in the new millennium. With the IT sector growing at 30 to 50 percent annually, this industry will become more significant than the current business trends in as little as three years.

Estonia is leading the way in both IT investment and Internet usage. Microlink, which started as a local PC manufacturer, has branched out and forged new alliances with several other IT companies in the Baltics. Microlink also launched the first Baltic Internet portal, Delfi, last November, with localized websites in Estonia, Latvia and Lithuania. Although there are currently only 75,000 Internet users in Latvia (which is approximately a quarter of those who use the Internet in Estonia), forecasts reveal that this number will more than triple by the year's end, as more Internet portals and services are introduced.

A necessary synergy

During 1999, there was a rush to consolidate Internet Service Providers (ISP). Parks, LVNet Teleport and Microlink combined to form the Baltic-wide Delfi service, and LatNet, which is the oldest Internet Service Provider in Latvia, joined the Finnish Finnet Group. Apollo, which is among the younger players, remains a force to be reckoned with, as it has the backing of its parent, Lattelekom, and with its aggressive strategies for high-speed Internet access. And Telia Latvija is offering attractive pricing packages, including unlimited Internet access from LVL (Latvian lats) 30 (USD 50) for three months.

The most popular Internet access method is still the 56Kb/s dial-up connection and the rather expensive ISDN connections. An emerging high-speed but low-cost alternative is the 2Mb/s radio link, which many Latvian businesses are now using. Lattelekom is planning to introduce its new ADSL service by July 2000, and pricing is expected to start at LVL 50 (USD 83) per month.

Various Internet surveys have revealed that the typical Internet user is surfing the Web at work or at university facilities. Although there have been several "FreePC style" offers (for about LVL 25, or USD 41.5, per month you get a PC and Internet access. Apollo is even offering free Internet access between the wee hours of 02:00 and 06:00), users still have to contend with local timed calls, which can significantly add to the monthly bill of Internet users. The good news, however, is that ISP fees continue to drop and are now approaching levels similar to the rest of Europe. It is expected that an additional 100,000 PCs will be sold this year alone in Latvia, with prices starting from as low as LVL 500 (USD 832).

Internet banking will be another reason for Latvians to get onto the Internet. Just about every major bank in Latvia has jumped on the bandwagon. For example, Latvijas Unibanka, Latvijas Krājbanka, Pirmā Latvijas Komercbanka, Trasta Komercbanka, Hansabanka, Saules Banka and many others now offer online banking service. There are already 150,000 Internet bank customers in Estonia, where Hansapank serves the majority, with nearly 110,000 customers.

Unibanka has only recently begun to offer Internet banking and already has 3500 clients, or about half of the total current users in Latvia. Unibanka is expected to attract over 10,000 customers by the end of the year. The service is free and it only takes a few minutes to register and get connected. The only drawback (although it is a necessary security precaution) is that you have to apply in person at a bank branch to agree to the "terms and conditions" and receive your specially coded card.

Most of the banks are using a "double security" system. In addition to the login name and password given to each customer, there is also a list or card containing one-time-use codes, which need to be tracked every time a customer accesses the Internet banking facility on the Web.

Redefining commerce

With the increasing penetration of the Internet in Latvia, e-commerce applications should become more popular in the very near future. Currently, there are about a dozen Internet shops,
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including Lulū Pizza which offers pizzas, Diena, a daily Latvian newspaper, Jāņa Rozes Grāmatnīca, an online bookshop, I-Tirgus, an online marketplace, Platforma, a music store, and Delfi, which offers a bit of everything. Two independent card-processing centers service Latvia – Pirmā Latvijas Komercbanka (formerly Rīgas Komercbanka) and Bankserviss – but neither provides credit card insurance, should the order "go wrong."

The most popular items transacted are books, CDs, computers and other electronics, but most Internet stores are yet to record roaring trade. It is interesting to note that the highest turnover item from Estonia's Delfi shop is building materials. Very few of the stores currently offer their wares outside Latvia, because of the difficulty in getting products through Latvian customs. To top it off, with the recent rate hikes for international postage and courier delivery (in some cases up to 100 percent) it is not anymore enticing for international customers. For example, a customer can purchase a beautiful children's book for LVL two (USD 3.3), but it will cost you up to LVL 45 (USD 75) to have it delivered via courier. Latvijas Pasts would be wise to reintroduce the less costly EMS courier option.

And further down the road...

Among the various booths at the Baltic IT&T exhibition, the largest one was also the most fun. Latvijas Mobilais Telefons (LMT), which keeps coming up with innovative services for their mobile subscribers, was offering to replace your telephone ring with a popular Latvian melody (Melodija Tavam tālrunim – Melody for your Mobile) or to have you own customised logo or graphic uploaded to your mobile phone. Although it may seem a bit of a gimmick, LMT continues to grow strongly, having signed its 200,000th customer earlier this year.

Baltkom, the only other mobile telephone operator in Latvia, has the rest of the 100,000 customers and also offers the exclusive and popular "Zelta zivtiņa" prepaid calling package, which is ideal if you are only visiting Latvia for a short period of time. Mobile phones can be purchased from as low as LVL 49 (USD 82), and the usage figures are quite significant, when compared with Internet users. It is no wonder everybody is talking about Wireless Application Protocol (WAP) – a new protocol that allows a user to view Web pages on a mobile telephone.

Earlier this month, an Estonian company began to offer a TV program service that could be sent to
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any WAP-enabled mobile phone. WAP phones are still quite expensive in Latvia (about LVL 300, or USD 499, for the Nokia 7110), however, Hansabanka is not prepared to wait and is already sending bank balances and currency valuations to its clients using SMS (Short Message Service), available on just about every phone today. As soon as WAP becomes more widespread, mobile users can expect to get the latest news flashes, up-to-the-minute hockey results, price movements of their favorite stock and many more information services.

Stoking the start ups

On the Web scene, the current trends revolve around more serious investment in newly launched websites. Both www.perc.lv (an online auction site) and Tildes Internet TV have used traditional media extensively to market their new websites. This is an important moment for the Internet in Latvia, since, up till now (with some exceptions), Web space has been the realm of enthusiasts who often show off their talents by launching gee whiz Flash-enabled websites but do not care much about a marketing campaign, high-quality content or where they plan the site to be six months down the road.

Many websites in Latvia are still developed and maintained on a sponsorship basis, and, without regular funding and a strong business model, only the well-visited sites will survive into the future. website developers in Latvia need to be more conscious of the potential audience they may be locking out (as much as 40 percent) by assuming that only one computer platform and one particular browser is used. websites that require plug-ins, the latest version of a particular browser or high-speed Internet connections may lose valuable visitors, if an alternative, simplified version is not available via a mouse click. More English-language content is also needed, so that the story of Latvia can be told to the rest of the world.

Web programmers in Latvia are now refusing six-month contracts in Silicon Valley, opting instead to stay at home to command salaries of up to LVL 1000 (USD 1664) per month (approximately five times the national average). The buzzword around Rīga is "portal," made evident by the rush to register new ".lv" domain names. In an article about ordering books online (LatBits no 29, February 2000), it was noted that the domain name "books.lv" was still available. There are still many good names available, and it will probably not be too long before the more popular ones are traded at an online auction. The new LETA News Agency site has been the exception and has registered under the well known ".com" domain. The Delfi portal has instead chosen to register its name in each of the Baltic countries, but missed out on the ".com," which was snatched up by a Danish company.

With the amazing potential made possible by the web, the year 2000 will continue to see further exciting Internet developments in Latvia, including e-government and the "internetization" of schools, among others.

Arnis Gross, 10 May 2000

This piece was originally published in LatBits, no 31, April 2000. We thank them for allowing this reprint.

Arnis Gross is a principal at DekSoft, which specialises in Baltic software for Windows and Macintosh, and has been involved with the Internet in Latvia since its inception in 1990.

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