January 2001

Estonia

This is the final WWW Indicators report on the Estonia as the ESIS project ended in January 2001. It covers the whole period of the ESIS project surveying the Countries of Central and Eastern Europe, March 1999 - January 2001 inclusive. 

During the period June 1999 - December 2000 (inclusively) stable development in the field of web pages continued. Representation rate increased in all categories but one. Since new statistic data was published the total number of organisations was adjusted: number increased from 1945 to 1961. When numbers in other categories did not change significantly, that of museums rose from 117 to 179.

Results of the survey show that representation in the Internet doubled - from 14.3% (June 1999) to 29.5% (December 2000). During the survey period organisations in categories 'Ministries' (100%), 'Universities' (76%) and 'Regional and local authorities' (67%) were best represented in the Internet. Libraries have the poorest representation rate (4%), for the rest the representation rate lies near the average (29.5%).

During the examined period the indicators increased most in categories 'Regional and local authorities' (from 31% to 67%) and 'Primary and secondary schools' (from 14% to 38%).

Rapid increase occurred in the category 'Regional and local authorities' in the beginning of year 2000 (31% in March, 60% in June) but one has to keep in mind that during previous periods there was no comprehensive thematic directory. Even local governments, which had web pages, did not necessarily register them in leading search engines and directories. Therefore the rapid increase can partly be explained by underestimation during previous periods.

The Open Estonia Foundation as the biggest financier of www pages' creation and organiser of non-profit www pages' competitions has supported the organisations to represent themselves in Internet. Even though the foundation has altered its spheres of interest during 1999 and 2000, it has significantly influenced the development of www pages that support civil society, raised public awareness and in this way had a positive impact on the number of Internet users in previous years. As the result understanding www as normal means of mass media side by side with traditional written and audio media has spread among the public.

Most local authorities are connected to a joint data communications network within the framework of the data communication development program 'Külatee' ('Village Road', an information technology program started by county governments, State Chancellery and Estonian Informatics Centre). Project supporting state institutions' Internet connections is 'Peatee'.

According to the Estonian ESIS expert team the necessity for pithy, purposeful web pages is being realised. As an important positive trend the development of web pages, which up to now was mostly quantitative is becoming qualitative. WWW pages are becoming an important new tool in developing e-marketing and organisational information environments. The long process of generating / forming pragmatically structured, comprehensive and user-friendly web pages has begun in 1999 and 2000. Certainly the rapid development of e-business has been a vital factor. Comprehensiveness and use of web pages in companies’ activities is an important matter of discussion.

AS Emor organises regular surveys (twice a month, pool 1,000 people, see also ESIS II Database) with the purpose to study the Internet usage habits of Estonian inhabitants. From the results of a survey published in October 2000 35% of Estonians aged 15 to 74 turn out to be Internet users (persons who had used e-mail or other Internet services during last 6 months). The rate of PC users was 43% and PC owners - 19%. Most of home computers are connected to the Internet by dial-up services.

The number of Internet users in Estonia is estimated to be 380,000. Compared to the data from the end of 1998 (168,000) a rapid increase can be noticed.

Source: Graph prepared by ESIS based on RIPE Network Coordination Centre

The number of computers connected to the Internet rose to 39,107 units (table 3). Compared to the beginning of the reference period (June 1998) the number has doubled.

Source: RIPE Network Coordination Centre

When product markets are more traditional and resistant to the application of New Economy mechanisms and less adoptive also in Estonia, then the service markets being traditionally more open for innovation are developing very rapidly. A summary of actions taken by the State to regulate the area is to be found in 'Regulatory developments report. December 2000' (§2.6.).

3.3.1. Financial services

One of the most popular electronic services in Estonia is Internet banking. At the end of year 2000 there were almost 240,000 Internet banking contracts concluded. Hansapank announced the number of their Internet bank clients to be 174,000, Ühispank - 60,000 and Optiva Pank - 8,000. Since summer 2000, Merita bank provides Internet bank services to the clients of its' affiliated branch in Tallinn. In January 2001, Eesti Krediidipank opens its Internet bank as the last small bank.

Considering the small number of Estonian population (1.4 million) one has to note that Internet banking has become a very popular service quite rapidly. However, the above mentioned statistics do not express the distribution of clients into individuals and enterprises and possible overlapping of clients in different banks.

The rapid development of Estonian Internet banking is discussed in Wall Street Journal (February 11, 2000). According to the article Estonia is the absolute leader concerning Internet banking among former Eastern Block Countries and outdoes a lot of Western European countries as well. Despite of the fact Estonia being a relatively poor country (average salary is about USD 300), approximately every tenth person transacts over the Internet. In the article phenomenon is explained by simple-to-use software of two leading banks (Hansabank and Ühispank) and free of charge transactions during the services' introducing time to the market. Possible impact of Nordic countries' IT culture on Estonia is one of the factors mentioned as well.

Internet banking is also taking serious steps towards mobile banking. At the beginning of June Ühispank started the first WAP-bank in Baltics which enables transfers of funds. It was quickly followed by the WAP services of Hansapank. In Nordic countries Merita-Nordbanken offers a similar service. Ühispank is co-operating with several mobile operators (EMT and Q-GSM) in order to provide the service.

3.3.2. Electronic Commerce

Despite of the rapid spread of Internet connections, relatively high level of users and extensive investments into Internet stores the turnover of electronic commerce is insignificant. Even the turnover of the largest Internet stores does not exceed 60 kEUR per month by the end of year 2000. The total annual turnover of Estonian B2C e-commerce lies between 1.3 and 2 million EUR.

Factors impeding the development are sustainability of buying habits, limited product range in Internet stores, inconveniences in paying for goods and deliveries and security risks when using bankcards. Forming a new electronic commerce culture is a world-wide problem and in this light Estonian developments are in line with the most successful European countries. One of the strongest Estonian advantages in these developments is the widespread Internet banking (favours the rise of positive attitude towards e-commerce); the most important discouraging factors are the smallness of the potential market and conventional shopping habits.

Still, there are several successful B2B projects operational in Estonia. It is expectable in the light of above-mentioned aspects. One the examples is the wholesale company of medicals Magnum Medical which started to develop its Internet based ordering system in 1997. Currently the share of electronic commerce has raised to 13 million EUR per year; it counts for half of the total turnover of the company.

3.4.1. Survey 'Estonian Tiger Leap into the 21st Century'

A comprehensive survey 'Estonian Tiger Leap into the 21^st Century' (1998) which among the rest analysed Estonian web pages, was carried out by BMF Gallup Media on the commissioning and financing of the Estonian branch office of United Nations Organisation.

Amongst other conclusions it stated the number of working unique institutional homepages in Estonia at the end of 1998 to be 1,755 and as there were 37,688 registered institutions and enterprises at the moment it lead to conclusion 5% of the Estonian enterprises and institutions had their own homepage at the time.

Attention was paid to the fact that the institutions of non-profit nature were better represented in the Internet compared to for-profit enterprises. Most highly represented were organisations of following sectors:

• Government-related institutions (88% of the total number);
• Computer-related industry (77%);
• Institutions of higher and profession education (40%).

From following sectors more than 10% of the registered enterprises and institutions were represented in the Internet:

• Secondary education 24%;
• Accommodation 19%;
• State and local governmental institutions (in general) 16%;
• Travel agencies 15%;
• Publishing 14%;
• Advertising 13%;
• Financial services 12%.

As the result of the survey it was stated that the best performance of public administration organisations was shown by state institutions, followed by cities and other local governments.

Despite the fact the survey was carried out in 1998, according to the ESIS expert team the distribution between categories and development trends have remained similar till the end of 2000.

Groups represented best in the Internet are continually government institutions and ICT companies. However the representation rate has grown in all categories, updated data on some categories can be found in table 1 (Table 1. The number of web pages as of December 18, 2000).

3.4.2. Survey by NetEntrance

In the first quarter of 2000 the company NetEntrance carried out another survey among representatives of 70 enterprises and concluded that 32% of Estonian enterprises have not benefited from owning a web page. One of the explanatory factors could be inconsistency in updating and developing web pages, as 44% of web pages had not been updated during last six months.

Considering the overall developments (please see other reports about Estonia as well), ESIS expert team predicts following possible processes in the field of www sites.

The Parliament approved of the Freedom of Information Act (Avaliku teabe seadus) on November 15, 2000 (was taken to proceedings in June 2000). The Act stipulates the conditions, order and ways to access public information, causes for refusing and restricting accessing public information as well as superintendence over access enabling. The Act is not applied to state secrets and responding to applications when responding includes analysing or synthesising recorded information or collecting and documenting additional information. With adoption of the Act state institutions and local governments are obliged to provide access to document registers and documents over the Internet. With the enforcement of the Act number of web pages in category 'Regional and local authorities'

(at the moment 65.6%) should increase remarkably. By becoming more comprehensive the web pages create a favourable environment for the development of participation democracy in Estonia.

The State has supported development of the field by creating a legal base for evolving the Public Key Infrastructure (PKI) and starting a corresponding central national database. Digital Signature Act (Digitaalallkirja seadus) entered into force on December 15, 2000. It enables wide usage of electronic documents and digital signatures as well as several new electronic services.

The private sector has taken the initiative in speeding up these developments: Hansapank, Ühispank, AS Eesti Telefon and AS Eesti Mobiiltelefon signed a contract concerning co-operation in developing the Public Key Infrastructure in May 2000. In March 2000 AS Eesti Telefon, AS Eesti Mobiiltelefon and Privador AS announced of the intention to elaborate a Public Key Infrastructure together. It would enable to order and use services of AS Eesti Telefon and AS Eesti Mobiiltelefon safely via Internet.

It has lead to an active public discussion about legal and organisational aspects of organising e-business and aggregation of e-services to special portals.

An e-accounting system based on electronic bills (e-bills), digital signature and adequate legislative amendments would create a considerably more favourable environment for economic development (and so have a favourable effect on enterprise and work culture developments in Estonia). Therefore electronic accounting services, so called e-bills have become a hot issue. Since the beginning of the year 2000 the Tax Board offers an electronic income tax declaration submitting service for individuals. Since autumn the services of e-Tax Board are open to legal persons as well (after entrance into a respective contract).

According to experts creation / application of an e-bills’ standard accepted by individuals, enterprises’ accounting standard and the Tax Board as well as legal institutions is necessary for daily use of e-bills. The enforcement of the Digital Signature Act supports these positive developments.

According to experts the most significant e-business development hindrance is lack of trust towards e-services; www based customer services are still rare. Without doubt the development of commensurate organisations’ work culture takes time because of e-business technologies’ novelty. From the other side the evolution difficulties of e-business enterprises are seen as an obstacle (the marketing manager of the company being responsible for e-business; complicated technological solutions; insufficient finances; underestimation of problems by e-business arrangement). Weakness of logistic systems and lack of convenient deliverance mechanisms also discourage wide spread of B2C services.

The number of offered e-business services is widening; existing portals are under constant reconstruction and some new ones created. B2Bnetbroker is a new virtual brokerage. It sends e-mails containing offers from clients' areas of interest to its clients every day. The online credit information database OCI gives the customers an opportunity to use information registered by others to avoid economic losses from operations with unsound partners.

Modifications of service prices raise the popularity of Internet usage. A good example is September 1999 when Levicom Broadband OÜ (TELE2) as the first operator introduced free dial-up service, starting thus the process of reducing prices as other operators went along with the campaign. AS Eesti Telefon (ETC) lowered the leased line Internet connection ADSL price: starting October 1, 2000, the one-time connection fee was reduced by 2/3 and monthly payment about 40%. Service is mainly directed towards private consumers.

State is also developing public libraries' Internet connections next year. Altogether 220 kEUR will be invested; the project is part of data communication development program of counties. Currently 86 out of 577 public libraries are connected to the Internet with the help of local governments, more then 30 of them received financial help from Open Estonia Foundation as well. Considering this the number of web pages of libraries should increase; at the moment only 4.3% of libraries have their own web pages.