Finding solutions: A new corridor and fibre-optic networks give signs of promise

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With one of the best internet infrastructures in the region, Mongolia is a technological surprise. Speeds are high, latency is near zero and restrictions are few. In tests done by Ookla, a broadband performance testing company based in Seattle, Washington, Mongolia’s download speeds were clocked at 11.89 megabits per second (Mbps) at the end of 2012. The country ranked 46th globally in terms of download speeds, ahead of Thailand, Malaysia, Indonesia, China, Vietnam, and even Ireland and New Zealand. The past two years have seen the introduction of e-ID cards and an e-voting system was introduced in June 2012. Mongolia has quietly achieved significant performance and is positioned fairly high in IT-related indices on international rankings. In the World Economic Forum’s Networked Readiness Index 2012, it was 63rd, ahead of many regional peers. In the UN’s E-Government Readiness Index, it was 76th, ahead of China, and ranked third in terms of information and communications technology (ICT) affordability.

KEYS TO SUCCESS: Part of Mongolia’s success is a function of its freedom. The government has started to exert control over the internet, but it appears to be strictly targeting intellectual property violations and pornography only after the offending site has been identified. It is not checking all activity as it hits the web. Connections from Mongolia appear to pass to the international circuits without having to first get through an internal firewall or internal security apparatus, like those found in China.

The unusually fast and problem-free performance of Mongolia’s internet is also a function of active efforts on the part of the government and private industry. Much has been done over the past 17 years to develop Mongolia’s internet services. Mongolia Telecom — which traces its origins back to the operation of a telegraph in 1898 — was established after the end of socialism from what had been the Mongolian Telecommunication Ministry. The UB Railways began installing digital switches in 1995, and the first mobile company, MobiCom, and the first internet service provider, Datacom, were formed in 1996. Analogue microwave connections were then replaced with digital technology and very small aperture terminal links were established.

DEVELOPMENTS: The Communications Law was amended in 2001 and the Communications Regulatory Commission (CRC) was set up in 2002. Two years later, the Information and Communication Technology Authority (ICTA) was established. In 2005 the EMongolia National Programme (2005-12) was launched by the ICTA with the aim of achieving a wide range of objectives for the sector, including affordable internet, one PC per home, and e-mail, smart cards and mobile phones for all citizens. Now operating as the Information, Technology, Post and Telecommunications Authority (ITPTA), next on the agenda is "ICT Vision 2021", the aim of which is to build a knowledge-based society. A working group is due to publish a report on the programme in 2013.

SHOWING FLEXIBILITY: Above all, Mongolia has been practical in its approach to the internet, openly accepting help and allowing private investment and multilateral programmes to support and augment official campaigns. The World Bank, for example, provided $6.2m beginning in 2005 in the form of investment and consultancy to help the country achieve universal internet access through the establishment of base stations in soums (districts), the installation of public satellite phones in remote locations beyond the range of mobile networks, and arrangement of internet links for rural schools, companies and internet cafes. Japan’s Policy and Human Resource Development Fund also provided $2m.

The Mongolia Internet Exchange is another example of how the sector was able to grow by allowing a wide range of stakeholders to contribute. Founded in 2001 as a non-profit project by the IT consultancy Infocon, the exchange allows internet service providers (ISPs) to connect to each other directly at the local level rather than via Hong Kong or the US, thus reducing latency and saving on bandwidth costs. The exchange demonstrates the pragmatism at work in the country; as private companies committed to building an entity for the public good, the ISPs have agreed to cooperate and give up a certain level of their individual control. The exchange itself is located in the Mongolia Telecom offices.

PRACTICALITY: Most important to the sector has been the work done on the domestic fibre-optic network and its connection to the global network. Deployment began in 2000 and was primarily undertaken by the government (although the assets are now held by the Information Communication Network Company) and Railcom, a subsidiary of UB Railways, which developed a 1338-km fibre-optic link along its tracks running from Sukhbaatar, at the Russian border, with Zamyn-Uud, at the border with China. MobiCom, the cellular provider, and Gemnet have also developed fibre-optic networks in the country. Mongolia is now connected from north to south and east to west by high-capacity cables. The domestic systems have been integrated with the global grid via a number of agreements, with TransTeleCom Russia (majority owned by Russian Railways), China Unicom, and Singtel and CNC Hong Kong. Gemnet also signed a commercial agreement in 2009 with Level 3 Communications of Broomfield, Colorado to provide internet protocol services.

Pragmatism here was especially important. As Mongolia is landlocked, it has to deal with neighbouring China and Russia to connect to the global fibre-optic networks, and its relations with both have been bad at times. After two years of negotiations, an agreement was finally signed for a link with China to give Mongolia a data pipe running south. The nation can now proudly declare its total outside connection bandwidth of 12 gigabits per second.

MONGOLIA TRANSIT ROUTE: An accident of geography has helped. It turns out that Mongolia is on the shortest practical cable route between East Asia, particularly Hong Kong, and the financial capitals of Europe. Indeed, the Hong Kong-Beijing-Ulaanbaatar-Moscow-London corridor is being actively developed by service providers seeking to reduce the time it takes for banks, brokerages and law firms to communicate with stock exchanges, clients, branches and other institutions. The “Mongolia Transit” route can achieve round-trip data exchanges between Hong Kong and London of 176 milliseconds, or about 20 milliseconds less than the more traditional undersea routes via the Suez Canal. The growing interest in this option could result in significant investments in Mongolian IT, including in the cables themselves as well as indirectly in businesses that could take advantage of the country’s high-speed connections.

The market has continued to develop. The ITPTA, for example, was formed in 2009 to replace the ICTA and it reports directly to the prime minister. A National Data Centre project was established in 2009 with the help of the Korean International Cooperation Agency. Additionally, the Universal Service Obligation Fund was founded in 2001 and initiated in 2007. All communications service providers contribute 2% of their taxable revenues to the fund in order to finance rural and remote ICT access. In the first four years of operation, MNT10.6bn ($7.4m) was collected, primarily from telecoms companies, with the majority of this disbursed. Then, in 2011, a Chief Informations Officers Council was formed.

ON THE UP AND UP: The industry is well established, growing and competitive. As of the end of 2011, the country had 1400 km of digital microwave links and over 12,100 km of fibre-optic cable. According to the ITPTA, the total value of IT imports was up 35% in 2011 after rising 78% in 2010, and the number of servers imported grew 50% in 2011 after a 200% increase in 2010. According to the CRC, the number of internet subscribers grew from 199,849 to 457,642 between 2010 and 2011. That number was up from 17,329 in 2007. CRC data also indicate that revenue in the ICT sector more than doubled from 2007 to 2009 while the number of people employed in the industry was 7650 at the end of 2011. There are now some 70 ISPs in the country. “The ICT sector is growing very fast,” said T. Naranmandakh, the director of the legal, information and administration department at the CRC. “The internet is growing very fast.”

TRAFFIC PROBLEMS: There are challenges facing the IT sector and these are of concern to planners. Some issues in the sector are very much linked to its success. Because of the fast and virtually frictionless connections to other nations, the vast majority of the internet traffic goes abroad. For Mongolians setting up e-mail accounts, accessing the cloud, running servers or downloading music, it can be just as easy and fast to utilise providers overseas. The lag time is so low, it is almost as if the Mongolian customers are in the US, Hong Kong or Europe. As a result, local capacity in the sector is relatively low. While there are cloud services, e-commerce sites and online banking available in the country, a critical mass has not yet been achieved and most major internet services are hosted elsewhere. “All the traffic goes outside and goes to US companies,” said P. Margad-Erdene, the executive director of the Information Communication Network (Netcom), the state company given the task of controlling the national fibre-optic network.

CHANGING WINDS: Lately, there are indications that this might be changing and more internet activity might be moving onshore. The Asia Pacific Network Information Centre, the internet registry for East Asia, deployed a name server in Mongolia in 2011, suggesting recognition that the country has sufficient traffic to justify making it one of the name server locations and that it is reliable enough to take on the responsibility. Also in 2011, Google’s executive chairman Eric Schmidt visited Mongolia and told the country’s leaders that Google’s Translate would soon accommodate Mongolian (though it had not as of the end of 2012) and that the company might even consider establishing a data centre in the country. In 2012, the Internet Corporation for Assigned Names and Numbers indicated that Mongolia would be allowed Cyrillic domains names, making it the fourth after Kazakhstan, the Russian Federation and Serbia. Still, the country recognises that until it has domestically hosted and developed content, most of its internet potential will remain dependent on innovation and capabilities coming from the West.

“We need Mongolian content,” said Z. Enkhbold, the vice-chairman of the Information Technology Post Telecommunication Authority.

FOUR OUT OF FIVE: According to Alexa, a web information company owned by Amazon, four of the top five visited sites in the country are of foreign origin: Facebook, YouTube, Google and Yahoo. The fifth most-visited site is a Mongolian search engine. A local news site (news.mn) is number six and google.com (the English-language main site rather than google.mn) is number seven. Some steps are being taken to encourage development of local content and applications. Skytel localised the Android operating system to cooperate with Google. It also held a contest in late 2011 to see who could make the best Android application. It is also worth noting that Mongolian language websites as a percentage of all websites went from 0.007% as of December 1, 2011 to almost 0.13% at the end of 2012 – a small proportion but still a huge rise, indicating an increase in local creation and persistence. Mongolia has significant potential as a centre for innovation. In addition to having good internet connections, it is a free country where ideas move quickly and people have high contact with the outside world. It also has a long history of technological education and development. During the socialist era, it received assistance from the Soviet Union and benefitted from that country’s investment in the sciences, while central planning emphasised science and technology in economic management. Mongolia had a communications college in 1937, an earth station in 1970 and a mainframe computer in 1975 – a Minsk-32 at the Central Statistical Authority.

HIGH HOPES: The government hopes that the National Data Centre will encourage technological development in the country. Construction began on it in 2006 with the help of KT, Korea’s second-largest mobile operator, and it has been operational since 2009. The goals for the centre are ambitious. According to Enkhbold, the government wants the core of the centre to be developed in-house, so that no single group has control over the architecture.

All government departments and agencies are to be connected to the centre, and it is being designed to force transparency so that corruption becomes impossible. Additionally, the data centre is seen as promoting software, content and application work locally, and exposing more people to IT, as every citizen will interact with their government via the internet once the system is fully functional.

While the core will be created, administered and controlled by government employees, the connections, client interfaces and various tools related to the database might then be open to private enterprise, which could stimulate sector growth. It is a high-minded venture that is being pursued for practical reasons in the hopes that it will also help to bring about a number of societal reforms.

“It will be very effective and everything will be transparent,” said Enkhbold. “We are developing the systems very carefully. We are making sure it will not be controlled by one group.”

TOO MUCH DATA: Sceptics have some concerns about the viability of the project, at least as it is currently envisioned. The supporters want more than 100 entities to sign on and turn over their data to the centre, and the prime minister is backing this push. But various data holders are said to be resting the idea. They are worried that by giving up their information, they will lose much of their power. They also wonder whether their data will be secure. The whole idea of a centralised data warehouse raises many legitimate risk management issues. Having so much data in one place could increase the chance of theft or failure, regardless of what precautions are taken. IT experts also question the usefulness of the venture. Transferring information to a single set of servers does not mean that it can be put to work. It may be possible to store it in different ways and access it using alternative protocols. “Just putting all the data in one place does not address the functionality of the database,” L. Ariunaa, the CEO and founder of Intec, an IT consulting firm based in Mongolia, told OBG.

RESULTS OF MINING: Other factors are expected to hamper technological advancement in the country. For example, while growth in the mining sector has been a great help to the economy, it could end up having a mixed effect on IT.

Mining will certainly bring in funds that might be used for relevant investment and could employ many people in technology-related fields, such as programming. However, at the same time, it threatens to crowd out investment in riskier, less profitable ventures and it may force wages to continue increasing. According to Ts. Buyantsogtoo, the president of software development company United Solutions International, the monthly wage for programmers has gone from $300-400 per month to $600-700, largely because of the mining boom. His company used to work on programming for Japanese clients, but has since stopped being involved in that business. Mongolia no longer has the luxury of being a low-cost centre for outsourcing and services following the recent transformation of its economy.

“Because of the mining boom, we have a serious lack of human resources,” Buyantsogtoo said. “The harmful thing is that mining increases salaries. Therefore, we cannot compete in the market.”

OUTLOOK: Some of the hurdles the country is facing are no different than those that challenge all nations. How the government manages its dealings with the private sector will be crucial to development, as the public-private partnership structure is vital to many upcoming projects and initiatives. Managing long-term development will require training qualified and adaptable staff. “Technology is changing so fast,” Naranmandakh of the CRC told OBG. “We do not know how to plan for even the next two years.”

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The Report: Mongolia 2013

Telecoms & IT chapter from The Report: Mongolia 2013

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