Internet in Eastern Europe

Internet household penetration in central and eastern Europe (CEE) will grow quickly over the next five years, from just over 5% now to 21% in 2005, according to a new Yankee Group report, "Promises, Promises: Internet Will Flower in Eastern Europe, but Only in Patches."

However, penetration will continue to lag well behind western European levels, and within the CEE region there will be very wide variations in takeup.

"There is no doubting the enthusiasm for the Internet in eastern Europe," says the report's author, Graham Finnie. "Eastern Europeans are generally well-educated and technically literate." But, according to the report, there are formidable barriers to the kind of mass-market takeup seen in the West. In particular, low household incomes, slow regulatory reform of telecommunications, and income disparities mean that the Internet is still too expensive for most households.

The report finds that the five "first wave" countries that have been accepted as candidate members of the EU (the Czech Republic, Estonia, Hungary, Poland, and Slovenia) offer the most fertile ground for entrepreneurs. Other countries in the region, especially Bulgaria and Romania, lag far behind, though penetration is now climbing.

B2C e-commerce also remains largely embryonic; barriers here include low incomes, lack of trust in the Internet, and lack of fulfilment mechanisms such as credit cards. However, there are also plenty of factors driving growth. These include major programs of regulatory reform in most countries, a flood of external finance and expertise, high PC penetration in offices, and a steady improvement in telecommunications infrastructure.

All articles 2006-22 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.

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