Macedonia Seeks an Affordable Way to Log On

International Herald Tribune – April 4, 2006

Nicholas Wood – N.Y. Times

Thirteen-year-old Nustreta Mimovic's hand trembled as she placed it over the computer mouse. Slowly she dragged the mouse and watched the screen as her fellow students looked on.

"I'd love to know how to use it, but I don't have a computer," she said, giving up the controls to another pupil.

Nustreta's unfamiliarity with technology is common in Macedonia, a poor republic where it is estimated that as little as 4 percent of its two million citizens have regular access to computers and the Internet.

Within a year, if the government has its way, those figures could be turned around with the creation of a wireless Internet network covering the entire country.

Supporters said the network, which already has been installed in some schools, will deliver more than just a means of mass communication. They hope it will provide opportunities to ordinary people, students and businesspeople in communities like Kanatlarci, one of hundreds of remote villages.

Government officials have said they believe affordable access to the Internet could help transform a moribund economy, but that is proving difficult to achieve.

The cost of going online with the country's main service provider is prohibitively expensive - about $1.30 an hour for a dial-up connection, a substantial sum in villages like this one, where workers earn an average of $150 a month, mainly through agriculture. The cost of a broadband connection is beyond most people's dreams at $45 a month for the most basic service.

The source of the problem, representatives of service providers and technology-based businesses said, is that access to the Internet is dominated by the country's main telecommunications company, Makedonski Telekomunikacii, known as Maktel.

Formerly a state-owned monopoly, Maktel now is partly privatized, with 51 percent owned by Magyar Telekom, the Hungarian subsidiary of Deutsche Telekom.

Maktel users said that, while they depend on the company, they believe it is stifling competition to maintain its substantial profits.

It is a battle that can be seen throughout the developing world, and in some developed economies, too, where incumbent telecom operators, often state-owned, appear reluctant to allow competition from rival Internet service providers, most notably with the arrival of low-priced phone calls made over the Internet.

In Macedonia's case, telecommunications analysts, including the industry's main regulator, said the government's desire for fair competition also was being undermined by the substantial dividends - worth more than $51 million in 2004 - it receives from Maktel.

While the possibilities offered by the Internet may seem remote to most of Macedonia's population, a fast-growing technology industry based around the capital, Skopje, already has begun to show that jobs can come from outside agriculture or heavy industry, now the main sectors of employment.

One company, FX3X, which does computer animation, worked on the Hollywood film "The Aviator."

"Most people's dream is some form of job in an old-style communist industry or to be employed in a state bureaucracy where you might as well be retired as soon as you start work," said Milivoje Gjorgjevic, the manager of FX3X. "We are creating a clean industry. It's changing the mind-set."

Last year, the government introduced a law opening Internet access to increased competition, but Internet service providers still depended on Maktel for access to customers and said that reliance gave Maktel too much power over pricing.

It was partly to avoid Maktel's costs that Macedonia's new wireless network was created.

In a project called Macedonia Connects, the U.S. Agency for International Development paid $2.5 million to provide 461 schools, including the one in Kanatlarci, with Internet access. The most affordable means was through a wireless network.

The creation of the wireless network, the most affordable method, has shown than an alternative can exist independently of Maktel and offer substantially lower costs.

"One of the benefits of the Macedonia Connects project is that pricing for broadband connectivity went from nearly €120 to €23 per month due to the creation of a separate networking infrastructure completely independent of Maktel," said Glenn Strachan, the director of Macedonia Connects. He said Maktel had to cut its prices to compete.

Susanna Karolyi, Maktel's communications director, said senior executives were unavailable for interviews and disputed suggestions that the company was abusing its dominant role in the marketplace. "We work based on international professional standards and act in line with the local rules of this country," she wrote in an e-mail.

Newcomers in the industry can now compete more freely against Maktel but fear that the government does not regulate the business fairly.

The main government telecommunications regulator agrees. "We have a bottleneck," said Kosta Trpkovski, director of the regulatory authority. He said his agency did not have sufficient powers to prevent Maktel from trying to restrain fair competition.

Providers of telephone calls made over the Internet, usually at a fraction of the cost of a normal phone call, complain that Maktel has disrupted their lines.

On.net, the local private company that worked with the U.S. aid agency to create the network for schools, tried to set up a low-priced Internet phone service last summer, but it found that few of those calls actually got through.

Maktel's contracts with both business and private subscribers expressly forbid the use of Internet-based calls, a demand that violated the new telecommunications law. Maktel has, however, recently signed an agreement with the U.S. company Nextel, which allows these kinds of calls.

Maktel says this latest deal shows it is open to increased competition. Still, Trpkovski said his agency needed more teeth to help take on the giant phone provider. "For the opening of the market, it is not enough for this agency to work alone," he said. "It needs some consensus within the government."

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