The Landscape of Information Technology in Latvia:

Telecommunications Infrastructure²  

 

 

Overview:   The foundation upon which an information society is built is the telecommunications infrastructure.  The task of the State, which is also recorded in Latvian law, is to set up the infrastructure to ensure that all members of society, regardless of their place of residence, an equal opportunity to obtain information12.      The Latvian law "On Telecommunications," which was adopted in 1993, granted a monopoly in the provision of basic telecommunications services for 20 years (until 2013) to the limited liability corporation, Lattelekom.  The goal of this action was to ensure investments that provide an opportunity to replace the technologically backward and technically worn out telecommunications network inherited from the USSR.  The decision facilitated the establishment of modern infrastructure in Riga and several other Latvian cities, but the monopoly status has also hindered reductions in the price of services and their improvement in quality.  Telephone-call tariffs in Latvia, in relation to the income level of the population, are two to three times higher than elsewhere in theworld12.  Now, with the arbitration in an international course regarding the end of the monopoly, still more uncertainty lingers about the future of telecommunications in Latvia.  Progress has continued, but at a slow pace.

 

 

In Latvia in January 2000, there were 77 Internet connections per 10,000 inhabitants (Source: RIPE, quoted in “Estonia- Your new source of IT solutions”, EIKAS 2000).   

Please see the table below for a summary of the density of main telephone lines among the Latvian population (from the International Telecommunication Union, 1999¹¹):

Population		GDP		Main telephone lines
Country Total (M) 1997	Density (per km)        1997	Total (B US$)        1996	per capita (US$)     1996	Total (k) 1997	per 100 inhabitants
2.48	39	5.1	2,053	748.0	30.16

However, the provision of communications is significantly higher in urban areas than rural areas: at the end of 1998, there were 40 primary telephone lines per 100 inhabitants in urban areas, and only 19 per 100 inhabitants in rural areas¹².  Mobile penetration (subscriptions) were at 10.6% at the end of 1999 (Source: ESIS; ITU; quoted in EIKAS 2000), and the number of mobile phone users had doubled every year from 1996 until 1999.  On average, there was one mobile telephone for every five land lines¹².  Yet this figure is still smaller than in other Baltic countries and smaller than average in Europe.  Please also refer to the "Computing and Internet Diffusion" section for additional information about the nation-wide distribution and usage of other forms of technology.

According to Contreras and Kasemaa (2001)²:

The ITTE sector in Latvia still remains comparatively small, even though it has been developing at a quicker pace over the past few years. The telecommunications industry is young and has a strong foreign participation in the form of ownership and supply, yet the high quality standards and innovative solutions required have not yet allowed the Latvian companies to play an important role.  Several persons interviewed by Contreras and Kasemaa² commented that the Latvian telecommunications industry has not had the right environment for competition and right incentives for development in place. Some of the reasons mentioned were:  

• Lattelekom’s monopoly extends to international calls and usage of fixed lines for mobile operators and Internet suppliers. Lattelekom’s high fees have motivated some bypassing efforts on the service providers’ side (e.g. call back and IP telephony);

• The late introduction of the second operator due to the state agreement of five years exclusive rights to LMT and the fact that Baltkom is still not present in the whole country means that there is no real competition in the rural areas;

• The third license has still not been granted due to an unclear government position;

• There has not been enough enforcement from the government to fulfill the agreements signed with the “licensees”.

The main players in the Latvian telecommunications sector are: Lattelekom, LMT and Baltkom GSM:

Lattelekom, the monopoly company in fixed public telecommunications services, has invested close to US$550 million to substantially upgrade the national telecommunications network.  Over the last six years they have managed to get 46% digitalization of the telephone lines, added close to 10% lines to the network (from 667,000 to 733,160) and reduced the line waiting list by over 85% (from 130,626 to 19,139).  The company is losing potential clients to mobile operators, especially in the countryside, because of the cost of providing fixed line services that would be transmitted to the customers.  In 2000, the Latvian operator  modernized its network significantly, and this work is continuing.  Among other things, Lattelekom announced a broadband service of the ADSL type as well as other Internet services.  The company will continue to make outlays on developing production equipment, systems and services in 2001.  

Latvian Mobile Telephone (LMT), the market leader in mobile telecom, was the only mobile telecommunications operator in Latvia from 1992 till 1997. Its NMT network has covered 2/3 of the national territory. The company introduced GSM services in 1995 and currently covers more than 3/4 of the territory offering mobile communications opportunities to 90% of the Latvians.  LMT has invested altogether 42.8 million LVL in the development of the network and has its own fiber optical loop; due to the fact that the usage of Lattelekom’s administered bandwidth services are too expensive.  There has recently been formed a department that will work on service-market development and market analysis.

LMT organizes its operations directly with the international suppliers’ home companies (e.g. Nokia-Finland for networks equipment and Ericsson-Sweden), even though it gets some support from those companies’ representative offices in Latvia.  LMT uses international experience and transforms/adapts it to local needs (working with Sonera and Telia on the experts’ level). On the software development side, LMT has very high-skilled people that give the company flexibility and reasonable prices compared to outsourcing (e.g. they have developed their own software for the billing system as well as some WAP solutions). LMT has some co-operation with related industries: IT, electronics (e.g. electronics in network planning) and content providers- media services, directories, databases, banks.  LMT has been continuously expanding its service portfolio, recently developing services in some cases together with the customers. An example of such cooperation is the weather forecast service developed for the Road Department. 

Baltkom GSM, the second of the current two operating providers of mobile telecommunications, even though granted its license in March 1996 did not start its commercial activities a year later. Following the company’s much-criticized development and operations due to an unsuccessful joint venture (US – Latvia), the new owner is planning to invest 50 million USD during the coming 2-3 years into the development of networks. The company has so far invested close to LVL 20 million. In 1999, Baltkom had about 47% of the gross new market connections, for the year 2000 the forecast was about 50%. The company operates GSM 900 network providing coverage on the main roads and biggest cities of Latvia with approximately 147 base stations. There is some co-operation with Baltcom TV, Latvian Railway and LMT in backbone networks. The network is integrated with access networks of Latvian Mobile Phone  and Baltcom TV. 

The company claims to have brought along a revolution in mobile communications with the introduction of prepaid cards in Dec 1998 - mobile communications turned from being a high-status business symbol to a day-to-day event. Their pre-paid cards can be connected to data and can be used with WAP for payments, for example. Baltkom has introduced the mobile bank service, offered together with the First Commercial Bank of Latvia (using a WAP phone and having a contract with one of the two bank customers of Baltkom you can transfer money immediately - service for high business segment). Recently a new chat-service was introduced that has been more popular than expected. Baltkom’s technological systems have been bought from abroad (e.g. networks equipment from Nortel-Sweden and complicated software from Converse- JV from Israel and US – that is tested by its own internal group/software designers). Baltkom’s team works together with the international experts and no software development is outsourced (for proprietary reasons). The company positions itself as a more marketing-oriented company compared to LMT, working constantly on the brand with frequent advertising campaigns (2-3 every month).  

Below is a brief summary of the activities of these key actors².

 

Operator	Current Status	Service offering	Distribution	Owners’ “other” areas of activity	Cooperation and coordination	Future
Lattelekom	Exclusive rights in fixed telecommunications	Fixed local & international, lease of lines and Internet & data transmission	Own shops	Mobile telecomm-LMT.		Unknown future of monopoly (until 2003 or 2013), dependent upon the ruling of international arbitration
LMT	One of two mobile network operators	Basic service (voice transmission) to value added (data transmission, e.g. weather forecast)	i) Own shops ii) > 100 Official dealerships that allow full service (> 250 p.o.s.163 ). iii) Recently p.o.s. for prepaid	Telia: Radio & TV Internet & data communication Wholesale traffic, pipes of IP traffic.	Direct contact with international suppliers (e.g. Nokia networks) Local adaptation. In-house software development. Some co-op with IT & electronics (e.g. network planning) and content providers (e.g. media, directories)	Focus on existing technologies for more advanced services (e.g. banking, M commerce) Will outsource some software development to be more efficient (cheaper & wider offer)
Baltkom GSM	One of two mobile network operators	Basic service (voice transmission) & data transmission for corporate clients	i) Own shops, higher quality service ii) dealer network, mostly countryside. iii) > 300 p.o.s. for prepaid	Holding: Leaders in Cable TV Paging	Direct contact with international suppliers (e.g. Nortel networks) Local software adaptation (e.g. Converse: US-Israel banking) Marketing company (frequent advertising & brand campaigns)	With new owners have started reducing prices. Objective: skim market before 3rd operator. Develop other value added services for prepaid. Wants to set up Internet portals & media services.

 

   

In addition to these three main players in the Latvian telecommunications sector, there are other contributors as well (source: Survey of ITTE sector in Latvia, Phare, 2000):

• 43 Cable television networks

• 41 Internet service providers

• 8 Specialized networks

• 6 Mobile walkie-talkie networks

• 2 Pager networks (Info and Baltkom Plus)

• 20 permits issued by the Department of Communications for satellite networks

 

 

Last updated December 13, 2001