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The explosive growth of the Internet in Russia is a unique development in the context of the last decade's overall economic crisis. An entirely new sector of Internet services emerged almost from scratch in Russia in the early 1990s reaching a turnover of hundreds of millions of dollars by the middle of 2000. Studies of this sector of the information industry is an absolutely new avenue of economic geography.

While an integral part of the global Internet, the Russian Internet has particularities of its own. In terms of net development, Russia lags considerably behind the developed economies. As of the beginning of 2000, there were about 265 million Internet users in the world; of which number Russia has so far accounted for an insignificant share only - as of November 1999 no more than 5.7 million people used the Internet in Russia 1. The Internet coverage (share of the adult population connected to the Internet) is very small amounting to a modest 5.2 percent (as of November 1999)2 compared to 35-45 percent in the USA, Canada, Scandinavian countries etc. At the same time, Russia is one of the world leaders in terms of annual Internet growth: where in 1999 the total number of Internet users grew by close to 40 percent the world over, in Russia Internet growth rates exceeded 100 percent. In 1995-1999 the number of Internet users at least doubled every year.

Such growth rates are especially amazing considering the fact that, unlike countries of Western Europe and North America, Russia had had no prerequisites for such an explosive growth. As of the early 1990s in Russia there were no information or computer technology capacity, no developed civilian telecommunication networks and no market of potential Internet users. The main particularity of Internet development in Russia is that alongside net development as an innovation (the way it is in developed Western economies), the challenge is to create the previously non-existent modern telecommunication facilities: both trunk inter-regional communication channels and intra-regional and intra-city networks. Instead, by the beginning of the 1990s Russia had developed a numerically large stratum of qualified information and computer technology specialists (mostly programmers) whose existence has enabled an explosive WWW growth.

On the whole, in Russia Internet development follows the same scenarios as in developed economies although with a considerable time lag: starting from the late 1990s the Internet in Russia is the same Internet that existed in Europe and North America in the mid-1990s. The average time lag between Russia and the West in terms of the development of various areas of Internet technology is about 3 to 5 years. This gap is additionally underscored by the current rates of net use growth in Russia: similarly high growth rates were observed in Europe and North America in about 1993-1995 when the potential net user market was growing rapidly exactly the way it does in today's Russia. Unlike in Russia, however, in the West there were almost no obstacles to Internet development.

As a result, the market of potential Internet users had to be created almost from scratch throughout the 1990s. In the early days of Internet development, interconnection costs were so high that massive Internet use was out of the question. This is the reason why in 1993-1995 Internet users mostly included various financial companies and banks which needed reliable data transmission networks and were ready to invest therein. The lack of reliable and high-quality trunk data transmission lines to be used both inside Russia and for linking up with international networks made Internet providers use satellite communication channels which inflated costs of service provision. Only very large companies could afford creating high-quality and reliable surface trunk telecommunication lines. Eventually, only the inter-regional communication monopoly AO Rostelekom succeeded in this effort when in 1995-1999 it created the country's only large nation-wide telecommunication network offering inexpensive surface channels for interconnection with international networks. The construction in 1996 of the Moscow - Khabarovsk Trans-Siberian Radio Relay Communication Channel, which was replaced with a fiber optic line in 1999, was an event of great significance for Internet development in Russia.


The decade of Internet development in Russia has gone through three major stages: the initial (pre-Internet) stage, the stage of Internet spread in the capital cities (Moscow and St. Petersburg), and the current stage when the Internet is penetrating Russian regions.

At the initial stage (1991-1994) when Russia had no permanent access to the Internet, except for a small channel via Finland to the EUnet, what actually developed in Russia was not the Internet per se, which was accessed only sporadically, but other nets, primarily the FIDO net, electronic mail nets, USENET electronic conference nets and regional data transmission nets. In 1991-1991 all large modern commercial nets were created in Russia including EUnet/Relcom, Sovam Teleport, Glasnet, FREEnet and others whose services were mostly limited to electronic mail. Having originated in Moscow, all these nets also had an extensive regional infrastructure. In the regions, their representative offices and partners emerged mostly thanks to enthusiasts from numerous computer clubs or advanced technology centers under universities.

In 1992-1994, regional data transmission nets were developed in the regions. Normally those were established on the basis of local telephone companies or their subsidiaries with the support of the US-based company Sprint (less frequently they were a part of the Rospak or Rosnet systems). The regional data transmission nets (e. g. Sibnet in the Novosibirsk Oblast, Burnet in Buryatia, Bashnet in Bashkortostan etc.) formed the Rosprint net providing services to the numerous financial organizations that burgeoned at that time. Until 1995-1996 regional telephone companies incorporated in the Svyazinvest holding company had been effectively isolated from the Internet development at the regional level because their services were mostly oriented at large corporate clients (mostly banks and exchanges) which required high-fidelity data transmission while communication lines were in poor shape. Not only were the banks first to make a broad use of telecommunication services, but they were also the only large payers. In the early to mid-1990s, the nets which developed in Russia used the x.25 protocol (Rosprint, Rosnet Rospak etc.) rather than TCP/IP.

The second stage of Internet development in Russia (concentrated in Moscow and St. Petersburg) started at the very beginning of 1993 when Relcom acquired permanent access to the EUnet. It is since then that the Internet appeared in Russia in its present form. The main particularity of this stage is high concentration of Internet services in Moscow and St. Petersburg and first attempts at creating academic and training nets across the rest of the country.

In 1994-1995, other large Russian nets acquired access to the Internet as Relcom had done before. Relcom's regional partners or representative offices (or, less frequently, those of Sovam Teleport) became the first providers which started to provide access to the Internet not only in Moscow but also in the regions in 1994-1995. Many such companies managed to affirm their positions on the regional markets and soon became leading market players (this happened, for instance, in Udmurtia, the Komi Republic, Orel, Vladimir, Arkhangelsk and Penza Oblasts). In 1995-1996 other companies were effectively taken over by regional telephone operators (in the Amur and Tula Oblasts, Mordovia etc.) which in 1996-1997 became very active in penetrating the Internet access market. Having developed regional data transmission networks (which were amalgamated with the Rosprint / Global One Russia net in 1996), they became virtual monopolies in a number of Russian regions. The regional telephone companies and their subsidiaries' "U-turn" from large corporate clients (banks and exchanges) to individual Internet users was largely determined by the crisis that had begun in the banking sector by that time.

1994-1996 was a period of emergence and dynamic development of academic nets (Radio-MSU, RUNNet, RELARN-IP, MSUnet etc.) which linked together all large Russian academic and higher education institutions. Their development was assisted by the Russian Academy of Sciences, Ministry of Education, Russian Federal Property Fund and the Soros Foundation - Open Society Institute which established Internet centers at 33 Russian universities in 1996-1999. Many of those universities3 later became the pilots sites which enabled Internet development at the regional level. Universities and academic centers made a great contribution to Internet development in the regions by creating Internet services markets and infrastructure in large Russian cities. This enabled Internet centers under universities to become leading Internet access providers in many regions of Russia, including the Tver, Novgorod, Murmansk, Kursk, Belgorod, Kurgan Oblasts, Karelia, Altai Krai etc.

Research institutes, especially those conducting research in the area of physics and, especially, nuclear physics, brought the Internet to many Russian cities. The majority of previously classified nuclear research institutes were among the first to get Internet access and registered their independent systems as early as 1994-1995. Those included the Joint Nuclear Research Institute in Dubna (JINR net), Institute of High Energy Physics in Protvino (IHEP net), Russian Federal Nuclear Center in Snezhinsk (VNIITF net) and others. In addition to physics institutes, Internet pioneers in Russia included research institutes specializing in information technologies. For instance, one of Russia's oldest servers is located at the Program Research Institutes of the Russian Academy of Sciences in Pereslavl Zalessky (Yaroslavl Oblast) (BOTIK net).

As the Internet developed in 1994-1997, providers faced the problems of the absence of regional markets of Internet services; lack of developed communication networks ensuring adequate transmission throughput and quality, which resulted in a broad use of satellite communication channels and, consequently, very high inter-connection costs. All this resulted in slow Internet development in Russia (except for Moscow and St. Petersburg) in 1994-1996. Until 1996, the two capital cities accounted for more than 90 percent of all Internet users in Russia.

The third current stage of Internet development began in 1996 when the Internet started to gradually develop across the rest of the country. The 1996 "great leap" in Internet development in Russia was mostly enabled first by the interest to the Internet services market demonstrated by regional telephone companies of the Svyazinvest group. Second, supported by the other regional telephone operators Rostelekom created the Moscow - Khabarovsk Radio Relay Communication Channel which made it possible for regional providers to have a reliable surface link to their Moscow-based counterparts. Third, Internet Exchanges (the so called M-IX and SPB-IX) started to operate in Moscow and St. Petersburg enabling mutual IP-traffic exchange among Russia's largest providers. Besides, largest providers established the RU Domain Coordination Group, which became the first step towards Internet development regulation in Russia.

All these factors generated a robust Internet growth not only in Moscow and St. Petersburg, but also in other large cities, primarily Samara, Novosibirsk, Yekaterinburg, Perm, Nizhny Novgorod, Irkutsk, Khabarovsk, Vladivostok, Rostov na Donu etc. (mostly the cities where first university-based Internet centers had been opened). As a result, the share of Moscow and St. Petersburg in the total number of Russian Internet users decreased to 75 percent by the end of 1996 and to 19 percent by the end of 1999 (Table 1).

The Internet was spreading across Russia in accordance with the hierarchy of the population structure: first it appeared in the two largest cities, Moscow and St. Petersburg (in 1993-1994); then in cities with a population of more than one million, Novosibirsk, Nizhny Novgorod, Yekaterinburg, Perm, samara etc. (in 1995-1997); then to cities with a population of more than 500,000 (in 1997-1998); and finally in cities with a population of more than 100,000 (in 1998-1999).

In spite of the gradual shift from the two capitals to other large cities, Moscow and St. Petersburg still have the broadest Internet coverage. Besides, the two capitals are considerably more advanced in terms of Internet services and infrastructure development than the rest of the country. It is still in Moscow and St. Petersburg that the majority of the Internet audience are those who use the net permanently rather than occasional users like in other regions.

In the rural areas, the Internet has not spread due to low telephone coverage and extremely low incomes. The 5 percent of Internet users in rural areas represents the effect of their living close to cities and Internet access is so far provided mostly within large urban agglomerates.


The Internet does not cover the whole territory of the country but rather is concentrated at isolated growth points. The larger is the city and the earlier it had the Internet connection, the higher is the net development level there. Besides, the Internet services and infrastructure sector (web-design, hosting, web-advertising, regional reviews, regional catalogues of Internet resources, regional news and financial information sites, comparative provider lists, regional Internet services and much more) do not develop by themselves but in tandem with the market infrastructure development. Moreover, the Internet infrastructure itself is a component of the market structure. In each region, there takes place a lengthy process of Internet infrastructure formation: from the emergence of first providers and amateur sites to a full-fledged Internet services market with real money and serious competition.

The net per se is most developed in cities with a population of more than one million - primarily in Moscow, St. Petersburg, Novosibirsk, Nizhny Novgorod, Samara and Yekaterinburg. Then follow the cities with a population of 300,000 to 500,000 (such as Irkutsk, Vladivostok, Rostov na Donu, Khabarovsk, Yaroslavl etc.). In cities with a population of less than 300,000 and especially in rural areas the Internet services sector is extremely underdeveloped.

An extremely high differentiation of Internet development by region is obvious. While in Moscow and St. Petersburg (and, to a lesser extent, in the Moscow Oblast) the Internet development levels are comparable to international standards, talking about Internet development somewhere in Evenkia or Ingushetia is pointless because there is no Internet there. The most backward regions are the autonomous okrugs (except for the Khanty-Mansiysky and Yamalo-Nenetsky Okrugs) and North Caucasian republics, i. e. the least developed agrarian regions with extremely low per capita incomes or extremely sparsely populated regions. The more urbanized and industrialized a region is, the higher level of Internet development would normally be there (Table 2). The Internet is most developed in the regions with largest shares of the tertiary sector: it is these regions that have become the nation's largest Internet centers. These include primarily Moscow, St. Petersburg, the Moscow, Nizhny Novgorod, Novosibirsk, Sverdlovsk, Samara and Perm Oblasts (Table 3).

In the late 1990s, several large inter-regional Internet centers emerged in the regions which promote Internet development in the neighboring regions. In addition to Moscow and St. Petersburg, such centers include Novosibirsk, Yekaterinburg,, Nizhny Novgorod, Samara, Irkutsk, Khabarovsk, Rostov na Donu and Vladivostok. Local providers' predominant orientation at Moscow and, to a much lesser extent, at St. Petersburg, is gradually replaced by the orientation at these inter-regional Internet centers where Rostelekom, the main inter-regional communications operator, operates trunk fiber optic and radio relay channels. Largest hubs of academic nets, main hubs of the Global One Russia net, and main hubs of the emerging nets of the Ministry of Railways and RAO EES Rossii are also located in these cities. Regional IP-traffic exchange points have operated in Novosibirsk, Yekaterinburg, Samara and Perm since 1999.

Internet development in the regions is mostly concentrated in regional capitals, but in some autonomous okrugs the role of main Internet centers has been assumed by other large cities: Surgut in the Khanty-Mansiysky Autonomous Okrug and Novy Urengoy in the Yamalo-Nenetsky Autonomous Okrug.

In most regions, Internet development is still confined to the regional capitals, although some regions already have second most important Internet development centers. Normally, these are largest cities like Tollyatti in the Samara Oblast, Novokuznetsk in the Kemerovo Oblast, Nakhodka and Ussuriysk in the Primorsky Krai, Taganrog in the Rostov Oblast, Sochi in the Krasnodar Krai, Pyatigorsk in the Stavropol Krai, Magnitogorsk in the Chelyabinsk Oblast, Severodvinsk in the Arkhangelsk Oblast, and Cherepovets in the Vologda Oblast. In Tollyiatti and especially in Cherepovets and Novokuznetsk Internet development levels are comparable to those in Samara, Vologda and Kemerovo respectively. In many cases, second largest regional Internet centers access the Internet bypassing their regional capitals either directly to Moscow or via other large centers. For instance, Pyatigorsk, Tollyatti and Sochi have direct links to Moscow, Magnitogorsk has a direct link to Samara, Ussuriysk a direct link to Khabarovsk and Severodvinsk a direct link to St. Petersburg.


As trunk communication lines, mostly those operated by Rostelekom, developed, the problem of having high-quality and affordable connection between regions and Moscow and St. Petersburg creased to be the main obstacle for Internet development in Russia. However, another, even more serious problem emerged: the lack of high-quality modern intra-city communication channels. The existing telephone lines (mostly made of copper) do not comply with the contemporary data transmission speed and quality standards. Creating modern fiber optic intra-city lines requires a tremendous amount of investment because such lines must reach every building and every apartment - the last mile problem. This is where the second major constraint comes into play - the low level of personal incomes which cannot provide investment resources required for the development of communication lines in the cities, leave alone rural areas.

What makes Russia qualitatively different from the developed economies in the Internet services sector is the last mile problem: while in Western economies cable television channels serve as the main vehicle of Internet interconnection and Internet access is provided as part of a broader service package, in Russia the majority of private users access the Internet via low-quality municipal telephone lines. If telephone companies introduce time-based billing, that will put an end to private use of the net. Cable television has not developed in Russia and cannot be used for Internet interconnection purposes.

As of the beginning of 2000, Moscow was the only city where investors had supported the creation of a semblance of an integrated high-quality municipal telecommunication network which can serve as a vehicle to provide various services ranging from cable television to Internet connection. Even in Moscow bringing that network to every apartment is still at the design stage. It is likely to take too long to have similar networks in place in other cities.

Satellite inter-city and international communication channels used for Internet inter-connection purposes are being phased out with surface communication lines, mostly fiber optic ones. As of the end of 1999 there were several fiber optic lines in Russia operated by Rostelekom: VOLS Moscow - St. Petersburg accessing Finland and Tallinn; Moscow - Novorossiysk via Black Sea to Istambul and on to Palermo; the Moscow - Vladivostok Trans-Siberian Fiber Optic Line via the Sea of Japan and on to Pusan. Operating Russia's only trunk communication lines, Rostelekom occupies a virtually monopolistic position on the market of inter-regional communication services. The expensive satellite connection is the only alternative available to most providers to the use of Rostelekom-operated trunk communication channels4.

However, the situation in the area of inter-regional traffic may change in the next few years as a result of implementation of communication projects by the Ministry of Railways, RAO EES Rossii and Gazprom. Represented by the company Transtelecom, the Ministry of Railways is deploying fiber optic lines along railways, while RAO EES Rossii deploys fiber optic lines along electricity transmission lines; and GAZPROM - along the Yamal - Europe gas pipe-line. By the end of 1999, the Ministry of Railways was most advanced in implementing sectoral telecommunication development plans: the Moscow - Murmansk, Moscow - Novorossiysk/Adler, Moscow - Nizhny Novgorod and Samara - Syzran fiber optic lines have been constructed already. By the end of 2002, the Ministry of Railways plans to complete the construction of a fiber optic line to Khabarovsk and have its telecommunication network linked up with operators in Denmark, Germany, Turkey, Italy, China and Japan5. Once these projects are implemented and have entered the market of inter-city and international communication services, Rostelecom's monopoly may cease to exist.

Further development of trunk communication networks on the Russian territory will provide an opportunity to use them as not only domestic Russian lines, but also as international transit communication lines linking Europe and Asia. This is promoted both by Russia's geographical position and Internet development in Japan, Korea and China.

Insufficient throughput of communication channels linking Russia to international networks has long been one of the serious problems confronting the Internet in Russia. This problem has not been finally resolved yet, but large Russian providers are constantly introducing new communication channels with international networks or expand the existing networks.

In the early years of Russian networks development, international networks were accessed mostly through Finland; later high-capacity networks were created linking Russia with the United states, Canada, other European countries (the Netherlands, Germany, Great Britain, France, Italy, Sweden, the Czech Republic etc.) as well as Brazil and Israel. Large Russian commercial providers (such as Relcom, Sovam Teleport, Metrocom, WEBplus, Comstar, Demos, Rosprint etc.) have Internet channels mostly through large international telecommunication companies and channels6, whereas academic and education networks are connected to the Internet mostly via international academic nets (UUNet, NORDUnet, Lawrence Livermore Lab etc.).

Outside Moscow and St. Petersburg, only few regional nets and private providers have direct access to international lines. These are mostly the nets operated by nuclear research facilities (the JINR, IHEP and VNIITF nets); as regards commercial providers, the only one worth mentioning is the Sakhalin-based SNC net connected to the US-based Verio net. The majority of regional providers are secondary providers, i. e. they are connected to central hubs in Moscow or, less frequently, St. Petersburg.

Providers' interconnection structure is reminiscent of that of multi-pointed star with the center in Moscow, but in 1997-1999 some of the points of the star developed little stars of their own with hubs in inter-regional Internet development centers. For instance, many providers in Siberia and the Far East are linked to Novosibirsk, those in the Volga Region - to Samara, in the Urals - to Yekaterinburg etc.

Large Moscow-based providers serve as Internet inter-connection vehicles not only for Russian regional providers but also for providers of most CIS countries due to the fact that excepting the Baltics Russia is the most advanced country of the former Soviet Union in terms of Internet development with Ukraine occupying the second place. There only few Ukrainian, Kazakhstan and Georgian providers having a direct access to international nets bypassing Moscow. Russian is the most widely-used language of Internet communication on the territory of the former Soviet Union (excepting the Baltic states). the overwhelming majority of all information resources in other CIS countries are produced in the Russian language. Moreover, in other CIS countries users are predominantly using Russian information resources, including catalogues, search engines, news services, weather forecasts, financial information services, free electronic mail providers etc. CIS countries are effectively a part of the Russian information space and, being extremely underdeveloped, their own national nets are still very far from being independent. A special concept of the Russian Internet area, or Runet, has emerged covering all the CIS countries. However, one should not exaggerate the Internet's significance as a factor keeping together the entire FSU territory in light of fact that in other CIS countries the Internet is extremely underdeveloped.


As a whole, the market of Internet services is heavily monopolized with not a single provider occupying the dominating position. The only reason to account for this situation is the fact that Internet development is at its highest in large cities, while the situation in many regions, especially far from large cities, is entirely different. In the regions, regional telephone companies enjoy virtually monopolistic positions on the Internet access markets. However, considering the fact that the majority of Russian Internet users (64 percent as of November, 1999) are located in large cities with a population exceeding 300,000 people, regional telephone companies do not have a significant share of the Internet access markets nation-wide.

In a number of regions, local telephone companies (or their subsidiaries) are virtually undisputed monopolists on the Internet access market (this monopoly is especially pronounced in the Chukotsky Autonomous Okrug, the Magadan and Amur Oblasts, Jewish Autonomous Oblast, several Central Russian Regions and the Ulyanovsk Oblast etc.), while other providers (private firms or high-technology centers under local universities) play only an insignificant part (Table 4). Private providers have not developed outside large cities not only due to the lack of advanced telecommunication and high construction costs, but also because potential markets of regular Internet users remain very small.

In most Russian regions a system is in place whereby the market is dominated by the regional telephone companies and two or three large providers (one of which normally being the Internet center attached to the local university). In the regions where Internet development is at its highest (excepting Moscow and St. Petersburg, such regions include the Moscow, Leningrad, Nizhny Novgorod, Sverdlovsk, Samara and Novosibirsk Oblasts), the Internet services market monopolization is quite low. The more demonopolized the regional Internet services market is, the higher is the Internet development level. This is the reason why regions with the regional telephone companies serving as sole providers normally have very low Internet development levels.

As of June 2000, there were 42,000 primary level domains (.su and .ru)7 registered in the Russian Internet, while the overall volume of information available in the Russian Internet exceeded 210 GB as of May 20008. Having had about two dozen sites in 1994, by the middle of 2000 the Russian Internet had more than 100,000 sites.

In Russia, the potential Internet market is tremendous, because, as noted above, the Internet covers only 5.2 percent of this country's population with an overwhelming majority being occasional users. It is expected that by the end of 2000 the number of Internet users will grow to 8 million and by 2004 the number of active Internet users will reach 10 million9.

Low incomes is a very important particularity of the Russian Internet - more than 80 percent of Internet users do not use the net from their homes but enjoy Internet access at work or at education institutions or their friends' homes (Table 5). This is also the reason why in November 1999 the number of permanent Internet users stood at a modest 29.8 percent of the total (1.7 million).

It is the combination of low household incomes and high inter-connection tariffs, especially at day time, that makes permanent Internet connection affordable to a privileged few. This is the main Internet development constraints which is going to determine Internet development in Russia for at least the first decade of the 21st century.

»» Table 1.
Russia: Internet User Distribution by Settlement Type, November 1999

»» Table 2.
Russia: Internet User Structure by Region, November 1999

»» Table 3.
Internet Development Levels in Russian Regions as of the Beginning of 2000

»» Table 4.
Russia: Degree of Monopolism on Regional Internet Services Markets as of the Beginning of 2000

»» Table 5.
Russia: Internet Access Location, November 1999


Translated from: Perviliyev Yuri, Internet v regionah Rossii // Regiony Rossii v 1999 g. - Moscow, Carnegie Moscow Center, 2000, pp.346-356 (Перфильев Юрий, Интернет в регионах России // Регионы России в 1999 г., М, Московский Центр Карнеги, 2000, c.346-356)
1. Monitoring.ru. Russian Internet Monitoring. An All-Russia Poll. IV'99 - http://www.monitoring.ru.
2. Monitoring.ru. Russian Internet Monitoring. An All-Russia Poll. IV'99 - http://www.monitoring.ru.
3. The first Internet centers were opened in 1996 under the Novosibirsk, Yaroslavl, Far East and Rostov State Universities.
4. Saveliev A. Fizichesky Uroven Interneta // Mir Internet, 1999. - # 1. p.20-22.
5. Yeliseev I. Telekommunikatsionnaya Truba Dlya Rossii // Computerworld Rossiya, 1999. - # 46., p. 7-9.
6. MCI (USA), Sprint (USA), Digital Island (USA), Deutsche Telecom (Germany), IBM (USA), Teleglobe (USA), Lycos (USA), BBNPlanet (USA) etc.
7. RosNIIROS server, http://www.ripn.ru.
8. Yandex search engine, http://www.yandex.ru
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