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June 15, 1999
Web posted at: 8:57 a.m. EDT (1257 GMT)

by Jeanette Borzo

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(IDG) -- While the number of people using the Internet in Russia increased some three times between 1996 and 1998, growth in future years should be more modest, according to market researcher International Data Corp. (IDC).

Recent figures from IDC's Moscow office indicate that the Russian Internet market grew to a total of 1.2 million users last year, up from 384,000 users in 1996. The number of Web sites that offer local language information has also grown strongly, IDC added. While the economic crisis that hit Russia last year didn't negatively impact the size of the country's Internet market, it will likely stymie market growth this year, the market research company said.

"In our monitoring of dial-up access, there wasn't a huge drop-off in traffic," said Robert Farish, IDC's research manager in Moscow. "But the [Internet service providers] have all had to lower their prices considerably since the crisis."

Since last August, the number of businesses operating in Russia has fallen along with the usual rate of investment that keeps a business market growing. Russian consumers and businesses have less money to spend, which is naturally hurting investment in the country's telecommunications market, IDC said.

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"In many parts of Russia, the main factor constraining future [Internet] growth is the poor condition of the local telecommunications infrastructure," Farish explained. "Many of Russia's telecommunications operators had been actively investing in the country's telecom infrastructure prior to the 1998 economic crisis," he added.

"Not only is Russia now seen as a much less attractive target for foreign investors, but Russian operators will now find it very difficult to raise capital abroad," Farish said.

As far as the country's electronic-commerce market is concerned, IDC said it is still too small a market to measure accurately. Current barriers to Russian e-commerce include a low level of credit-card usage, as well as a national lack of the necessary infrastructure for the physical delivery of merchandise at a quick and reasonable cost, Farish said.