Country Readiness Assessment Report – Kyrgyzstan . connected to the general network) was 7.5 per 100 people. In other words, with an average number of four people per family, only about 30% of households have telephones. If coin and state-owned telephones are excluded from this calculation, then the density is lower still. The International Monetary Fund considers telephone density as one of the most important economic indicators of a country’s level of development. Such a low level of telephone installations can be explained partly by features of the Kyrgyz landscape. Almost 67% of the population resides in rural mountainous areas, making telephone installation very costly and requiring substantial capital investment. Accordingly, telephone density in Kyrgyzstan is unevenly distributed. On one hand, the low level of telephone installations indicates a potential growth market for telecommunications. On the other hand, it necessitates heavy capital investment, namely foreign investments as Kyrgyz internal investment capabilities are very low. As in the majority of the former Soviet Union countries, Kyrgyzstan has a low volume of general telephone traffic per line. At the same time, almost all local traffic is free of charge. Only a small proportion of institutions, organizations and enterprises are charged for such traffic. Diagram: General traffic in minutes per line, per month (data from a statistical survey) 250 20 Eastern Europe Kyrgyzstan Kazakhstan The low traffic per line, 10 times below identical indicators in countries of Eastern Europe, underpins the theory that the communications market has substantial reserves of potential revenues. While tariffs for international communications are the tariffs for local and national long-distance services are, by contrast, very low. They constitute a social rather than economic burden, and do not cover costs - especially those of local communication links. As a result, the present tariff system of “Kyrgyztelecom” does not allow for expansion and modernisation of the telecommunication network. In terms of revenues, the Kyrgyz telephone network is one of the poorest among the CIS countries. Recently, new services such as pager, data transmission, Internet, and cellular communications, are developing in the communication market. The Memorandum of the World Bank does not assign a fundamental role to the participation of the National operator “Kyrgyztelecom” in the development of such market niches. The role of “Kyrgyztelecom” is to establish and provide a transport network for private operators. 24