MTU-Intel, now the IT-market leader in Russia, sees a future in ADSL and e-commerce

Nikolai Repin, a "veteran" of MTU-Intel, joined the company in 1997. He never dreamed specifically of working in the IT sector, but in 1994-1997, he headed a successful Moscow Internet project financed by the Soros Foundation. Repin’s project was such a success that MTU-Intel invited him to work for them.

Now 44, he still has plenty of energy and sees the future of the Internet as being about being able to choose from a wide range of options. Until recently, he ran MTU-Intel and oversaw the merger with PTT-Teleport Moskva in 2000. In June 2003, he took over the newly created Internet and Data-Transfer Network Department at Sistema Telekom and will now run MTU-Intel on behalf of the main shareholder.

Under Repin’s management, MTU-Intel has made a tremendous surge ahead and now provides a full range of Internet services. The company is the Russian market leader among Internet providers in terms of number of users, number of dedicated lines and revenue generated by providing Internet access. The company’s main rivals are Golden Telecom and RTkomm, which come in second and third, respectively, on the Moscow market.

MTU-Intel specializes in mass dial-up access and broadband access for private individuals and legal entities. MTU-Intel states its mission as being to make the Internet accessible for all and has a carefully planned strategy to go with it. Unlike many telecommunications operators, MTU-Intel focuses on the mass market.

Repin said that the Russian Internet market is three to four years behind the European market. "We have less solvent demand, slightly less demand for information technologies as such, and we are lagging when it comes to payment systems for small sums of less than $5," he said. "But, just as in Europe, success in the market is measured by the number of dial-up users, and we have 400,000 of them. The 9,000 modem lines that we have in Moscow alone make it possible for clients to connect after two to three tries, even at peak load hours."

Repin said that one of MTU-Intel’s priorities is to develop mass broadband access for individual users. Through a project developed together with Moscow fixed-line operator Moscow City Telephone Network (MGTS), MTU-Intel can offer high-speed permanent Internet connections (six to seven Mbits/second) using the ordinary city-telephone line of any of the telephone network’s more than 4 million users.

Competition in the Internet market is intense, and the company faces a daily battle for new clients. Repin said the company should concentrate on providing high-quality professional service, support for users, competitive prices and speedy work on orders.

The most-promising Internet development today is access using ADSL technology. Research company Yankee Group predicts that the broadband-access market in Western Europe will grow by an average of 68 percent a year until 2006 and, within three years, will top $18 billion, of which DSL technology will account for $16 billion. MTU-Intel provides these services to both corporate clients and private individuals.

"We will gradually bring down access costs for corporate clients," Repin said. "At the moment, the cost matches the services we provide. We will be able to reduce prices as we get more customers and our equipment pays itself off more quickly. Access for private individuals is growing at very fast rates and has been increasing since November 2002. The company now has around 5,000 users in this category and a growth rate of around 1,000 new connections a month. The price level in this segment is targeted more at financially secure people, because they are the only ones who can afford to spend more than $60 a month on Internet access."

MTU-Intel also provides services for less-well-off clients, and, while developing ADSL services, it is also working on collective access for entire apartment blocks, referred to as home networks. By the spring of 2003, MTU-Intel’s home network covered more than 1,000 apartments united in 50 networks that represent more than 1,000 apartment buildings.

MTU-Intel has more than 7,000 corporate users who connect to the Internet through high-speed channels, and the company provides round-the-clock access for 140,000 corporate employees. The company works together with well-known firms such as Alcatel, Cisco Systems, C&W and others.

MTU-Intel’s corporate clients include small businesses, for which it provides the service of organizing a telephone number using Internet-VoIP channels.

"It’s no secret that, using the traditional approach, it’s easy enough to create 20 or more new numbers for an office, but operators find it completely unprofitable to create one to four new numbers," Repin said. "It’s much cheaper to use Internet network channels as our specialists do. The quality is good and it takes only a few days to install."

Broadband access is not just about getting connected to the Internet. It can also be used to develop new projects. "Above all, this concerns multimedia projects – TV broadcasting is all the rage now," Repin said. "Monaco Telecom, for example, is creating and promoting a project called Sezam TV, which provides TV broadcasting services (including video on request) using the ADSL networks. MTU-Intel’s technical potential would allow it to set up similar projects over the next year or two in Russia. The company plans to use ADSL networks to offer users all kinds of access to video information. The ADSL channel speed is sufficient for watching a film in mpeg2 format while downloading information from the Internet at the same time. The telephone line, meanwhile, stays free, and so the user can continue to make and receive ordinary phone calls."

The company also plans to develop a system of thematic video information circles that would enable users to view all the information on a particular subject in real time. Repin said that there is large demand, for example, for information on new Russian legislation, bills going through parliament and the president’s work and activities.

"At the moment, we’re adding video footage and reports from Channel One to this service, but we will soon extend our cooperation to cover all the national television channels," Repin said. "Information will be provided in two formats: A condensed format, in which we will broadcast three to five minutes’ worth of the most-essential information, and full format, where we will give a broad view of events and full video coverage of various conferences, themed discussions and meetings. The video footage can be downloaded to any computer connected to the Internet, from a desktop work station to a small notebook or palm pilot."

MTU-Intel also plans to offer users access to a series of programs on specific subjects such as education, religion, science and technology.

"There is limited demand for these subjects," Repin said. "It wouldn’t be profitable to set them up on national or local channels, but it is possible to broadcast them over the ADSL network to a target audience at a substantially reduced cost. We also plan to create a business channel, and we already have an agreement on this between MTU-Intel and RosBusinessConsulting. Our marketing studies show that corporate clients are willing to pay for 24 hour operational business information about world markets and business news, and that they would pay up to $5 per work station that would receive the information. Given that there are tens of thousands of computers in Moscow, this would make for a large and solvent market."

At the moment, MTU-Intel is working on offering its users global Internet roaming. The company is in the process of signing an agreement with U.S. company GRIC, which owns a global Internet-access network covering more than 150 countries with more than 12,000 connection points. Once this agreement is signed, MTU-Intel clients, when in other countries, would not have to register with a different provider or call their provider using an international number. They would just choose the closest point of connection in the network and work through it. GRIC clients can already use MTU-Intel connection points.

The Federal Electronic Russia Program now has the attention of all Russian Internet providers. This is not surprising, as it concerns relations between IT companies and the regulatory bodies. Repin said he considers the program positive overall and that it represents some progress in bringing order to relations between market participants and the state.

"But it is an ambitious program that requires serious financial resources and training for a lot of state officials," he said. "There is a still a lot to do here, and this is all work for the future."

The program may also have an impact on the development of e-commerce. Repin said, however, that there are two factors holding back e-commerce in Russia. "The first is that, although a law on digital signatures has been passed, it is proving impossible to implement because the necessary infrastructure is lacking, in particular, trust centers. Second, there is still not a big enough market. Both of these are developing actively, though; the market is growing, and the required infrastructure is being developed."

Repin said he is optimistic about the future. As well as developing new access technology and improving its services, MTU-Intel is now looking at the regions. "We will have various strategies for development in the regions," Repin said. "Everything depends on the specific region, on the position of its authorities and on the local communications companies and infrastructure. Russia is such a huge country that it is hard to unify procedures. Maybe it will be easier in some places to buy an existing Internet provider, while in others we will have to create a new company," he said.

Repin said the market in Russia is changing fast. "We are ready to introduce the most modern and progressive technologies for our users," he said. "The main thing is to prepare the market."