Internet and e-commerce industry in Ukraine

We are to talk today about one of the former Soviet Union republic, Ukraine. The country is bordered by the Russian Federation to the east, Belarus to the north, Poland, Slovakia, and Hungary to the west, Romania and Moldova to the southwest, and the Black Sea and Sea of Azov to the south. Since the collapse of the USSR in 1991 when Ukraine got independence, the country continues to maintain the second largest military in Europe, after that of Russia. That year also gave a start to a period of transition to a market economy, in which Ukraine was stricken with an eight year recession. But since then, the economy experienced a high increase in GDP growth. However, Ukraine was caught up in the worldwide economic crisis in 2008 and the economy plunged, suffering GDP drop of 20% from spring 2008 to spring 2009. So let’s see how much the Internet and e-commerce market has managed to deploy.

The Ukrainian telecoms market has been evolving, with steady steps taken to liberalize the market. A lot of attempts have been made to privatize the government’s stake in Ukrtelecom, the incumbent operator. However, all the attempts failed.

Meanwhile, Ukraine can boast about a sizeable Internet market, with broadband representing a growing proportion of total Internet access subscriptions. Broadband services are available via ADSL, cable, FttH, LAN and wireless platforms such as WiFi and WiMAX, with a strong competition amid various operators.

ADSL services are available from numerous broadband ISPs. However, the cost of services has resulted in low take-up. The largest DSL provider in Ukraine is Ukrtelecom. Several other local ISPs also successfully operate on the telecom market. Particularly, the capital of the country Kiev is served by the cable provider Volia.

Alternative operators also offer services although the incumbent is still very much the dominant player in the fixed-line market, which is characterized by a low but growing fixed-line penetration rate.

The cable operators actually have a significant presence throughout the country due to large number of operators although the lack of investment is preventing them from offering broadband and digital cable services.

WiMAX service has recently been launched, and is now offered by a number of operators. So, the wireless sector is facing increased activity as the number of WiFi ISPs has increased, and a mobile operator plans to launch fixed-broadband services using frequencies previously used by analogue mobile services.

The Internet country code top-level domain (ccTLD) for Ukraine is .ua, administered by Hostmaster Ltd. The prices for two years registration under the domain is acceptable: $ 199.00 for .ua or $ 149.00 for .com.ua, nevertheless, local presence is required.

Registration is also available directly at second-level, such as:

• com.ua - commercial organisations
• edu.ua - educational organisations
• gov.ua - governmental organisations
• net.ua- network service providers
• org.ua - other organisations (non-commercial)
• 2nd level domains provided by ServiceOnline
• co.ua - commercial organisations
• biz.ua - business organisations
• in.ua - domains for individuals
• me.ua - personal domains
• pp.ua - people or private persons domains
• odessa.ua (od.ua), kiev.ua (kv.ua), donetsk.ua (dn.ua), etc – represent geographical (local) domains

Registrations are also possible at third level beneath second-level labels (generic and geographic), but there appear to be some direct second-level registrations for trademark holders.

Internet penetration in Ukraine is low, less than 23% at present, due to the lack of telecom infrastructure, high fees and low PC ownership. Nevertheless, the country is amid Internet top 10 European countries, occupying the last position, with almost 10.4 mn subscribers. These digits may be compared to the statistics data seen during the previous years. Thus in 2000 only 0.4% of Ukrainians can get access to the web, by 2005 the volume of Internet users in Ukraine soared to hover 11%.

Rapid deployment of Internet and related services in Ukraine has led to increasing e-commerce activity mostly due to investment in the Internet and e-commerce that has surged dramatically. However, a number of obstacles still suppress sharp growth of ecommerce sector. But most of them has been eliminating.

Eventually, like in majority of Internet developed countries the awareness of convenience and importance of e-business, including online shopping, online auctions, e-banking, e-signatures, etc, is escalating.

According to Gemius research, amid 98% of Ukrainians characterized by high awareness of online shopping only 29% have ever made an online purchase. Supporters of the online shopping name less time taken for accomplishing the purchase, cheaper prices, complication amid main advantages. As far as the behaviour of Ukrainian e-shoppers is concerned, they generally prefer online stores to auctions. Even though both online shops and auctions are popular places for Ukrainians to buy books, CDs, films (47% and 27% respectively) and brown and white products (43% and 27% respectively), auctions are preferred in case of computer hardware (26%) and online shops in case of phones and accessories (49%).

Though Ukraine’s Internet market appeared not to be developed enough in comparison with other European countries, the country managed to reach relatively high level of Internet and e-commerce related services, the number and quality of which is constantly growing.