Mission broadband

The development of broadband across the Middle East region remains well behind the rest of the world. However, attitudes regarding the importance of broadband are developing and policy-makers, network operators, internet service providers and users all seem closer to sharing a common understanding of the benefits it provides

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By  the Gitex Times Staff Published  September 26, 2005

|~|mission1.jpg|~||~|Headline figures regarding the development of broadband services across the Middle East initially paint an overly pessimistic picture of the situation, given the low penetration rates and generally high cost to ADSL in the region. However, upon closer examination of the markets, it becomes clear to see the buds of competition and product differentiation have begun to blossom, with regulatory constraints also beginning to relax and end-user expectation beginning to rise. As of September 2004, ADSL was available in 13 Arab countries, namely; Algeria; Bahrain; Egypt; Jordan; Kuwait, Morocco; Oman; Qatar; Saudi Arabia; Sudan; Syria; Tunisia; and the UAE, according to Arab Advisors Group. Across the Arab world, the implementation of broadband infrastructure varies widely between market leaders such as Bahrain, Qatar, the UAE and Kuwait and the laggards such as Iraq, Lebanon and Palestine. The UAE probably offers the lowest price per minute for ADSL access in the region despite being a monopoly internet provider, while countries such as Morocco show a general inertia to internet access, with a penetration rate of just 0.33%, though 62% of those are ADSL subscribers, according to Arab Advisors Group. While it makes sense that the small Gulf states with their small geographic area, and population combined with their high GDP per capita would top the list of broadband markets in the Middle East region, the state of broadband markets in more sizeable markets such as the Kingdom of Saudi Arabia are more representative of the regional state of development. According to Arab Advisors Group, Saudi Arabia had an internet penetration rate of 4.16% in terms of the number of subscriptions towards the end of 2003, with an equivalent ADSL penetration rate of 1.48%. The low ADSL penetration rate in Saudi is not on account of a lack of demand, but rather the fact that many applications to the service are turned down on account of technical constraints. “The low (ADSL) penetration is as a result of 70-80% of broadband activation accounts being turned down,” estimates Jawad Abbassi, founder & president of Arab Advisors Group. “Users need to be within a 5 kilometre radius of the local exchange to receive ADSL and many prospective subscribers are not. This situation has given rise to the development of large grey and black markets for broadband services, offered through VSAT and satellites.” Despite these teething problems, Saudi Arabia is on track to grow its broadband penetration through progressive moves such as the award of two data communication licences to compete with the incumbent operator Saudi Telecom. The licences provide for the two new providers to receive their own international bandwidth, with the first provider set to launch service in the coming six months and the second in about a year’s time. The Kingdom also hosts five VSAT providers and counts more than 20 ISPs. The cost of broadband services remains a significant barrier to adoption, with Arab Advisors estimating that the average monthly ADSL charge in the Arab region is around US$80 with a median charge of US$79. The effective monthly cost of residential ADSL services (for a 256Kbps connection) in the region ranges from a minimum of US$24 per month in Egypt to a maximum of US$135 in Syria. “Bahrain, Jordan and Saudi are all markets I expect to see a drastic fall in (broadband) pricing as competition improves,” Abbassi says. ||**|||~|mission2.jpg|~|Compelling content will drive broadband adoption, says HP Middle East’s Amr Salem.|~|Earlier in the year, Jordanian ISP Wanadoo announced a 35% reduction in the cost of monthly residential ADSL charges. Commencing April 1, Wanadoo’s residential ADSL access charges fell to between JD160 (US$226)-JD400 per annum, down from charges that ranged between JD250–JD600. Wanadoo claims a 50% market share of broadband subscribers in Jordan. “We have seen this reduction in broadband pricing [in Jordan] because the incumbent can see the entrance of competition is just around the corner,” says Abbassi. The Wanadoo price cuts followed the reduction, by Jordan Telecom, of bandwidth charges by 85% in 2004, which prompted a cut of up to 50% in retail charging by ISPs. Egypt is often cited as the market that has gone the furthest in fostering an enabling environment for the penetration of broadband services. The country boasts the lowest face-value cost for ADSL in the Arab world, with major ISPs allowed to negotiate their own independent bandwidth. The providers are allowed to collocate at Telecom Egypt’s exchanges and utilise the telco’s unbundled copper wires at reasonable rates. “Access to ISPs is offered at close to carrier rate and Egypt has developed a progressive broadband market,” Abbassi says. Other markets in the Middle East have also been making significant progress in improving the availability of broadband services. Earlier in the year, Alcatel announced it was in discussions with Omantel to provide all the necessary support for the further development of DSL solutions in the sultanate. The duo have since set about jointly marketing Omantel’s expanding value added services portfolio. In Bahrain, Lightspeed Communications, a local ISP, came to market promising a triple play offer of voice, video and high-speed internet services. It is the entry into the market of companies such as Lightspeed, which are focussed on the provision of new services and innovation in the way they package and price products, which analysts believe shall fuel further broadband adoption. “Once internet becomes intertwined with daily living, that’s when you’ll witness rapid adoption,” Abbassi comments. Bahraini telco Batelco has signed a US$4 million co-operation agreement with the Chinese vendor Huawei Technologies for the development of Batelco’s broadband infrastructure in the kingdom. The agreement forms part of Batelco’s Broadband Bahrain programme, which is aimed at providing fast broadband internet access to Batelco subscribers, and which is estimated to see the operator spend US$55.7 million over the next three to five years. Even in relatively underdeveloped telecoms markets such as Yemen, investment in broadband infrastructure has now become a priority. In February, Yemen Telecom awarded Alcatel a contract to supply equipment for the deployment of a DSL network across the country. Under the terms of the contract, Alcatel will provide DSL lines over a period of years with the first phase of the agreement covering the installation of 3,000 DSL lines, which were put into commercial operation shortly after the announcement was made. At the time of the contract announcement, Alcatel had shipped more than 54 million lines and its broadband access solutions were prominent in the networks of over 120 service providers worldwide. Amr Salem, general manager of the Gulf and Eastern Mediterranean region for HP Middle East is in little doubt that the offer of compelling content, tailored for broadband delivery will be a key driver of broadband demand and therefore, supply. “I believe Bahrain is probably the most wired country per square kilometre as far as fibre infrastructure. Everywhere in Bahrain has access to fibre, but do you actually feel it when you are there? No, the bandwidth is there, but there’s nothing running on it,” he says. The liberalisation of telecoms markets across the Middle East, together with the investment in new technologies, places the region in the perfect position to fast track the development of broadband networks, according to Enrico Deluchi, managing director, service providers, Cisco Systems Italy. “Investment in IP is happening like crazy in that part of the world,” he says. “Renewing their networks means that service providers in the Middle East and Africa can leapfrog one generation of technology so they are moving and making huge investments in IP and converged networks.” Cisco says that sales of what is describes as ‘advanced technologies,’ which include voice (VoIP), security, wireless, storage and optical, have been growing at an accelerated rate across the EMEA region, with the Middle East and Africa being the main drivers of that growth. This shows an openness and hunger for innovation, according to Deluchi, though service providers continue to look for the best way to leverage the technology to generate services that can be profitable for them and compelling for their end-customers. “This is one of the major focuses we have especially in the Middle East and Africa, trying to help service providers in creating services in such a way that they make money and end user receive a benefit out of it,” Deluchi adds. And while much of the focus remains squarely on DSL as the main bearer of broadband, other technologies are also playing a part in pushing penetration higher in the Middle East. There’s a large adoption of VSAT services in Saudi Arabia as a substitute technology to ADSL, for example while internet via satellite bypasses national proxies and is gaining traction. Over in Bahrain, MENA Broadband Services, a satellite access service provider dedicated to providing high-speed WAN connectivity, has announced it had become the first fully licensed broadband supplier in the Gulf after being certified by the Telecommunications Regulatory Authority of Bahrain earlier this year. The company, which signed the regulatory agreement in November 2004, is committed to providing high speed data and voice connectivity and enabling internet access through a two-way satellite service network throughout the MENA region. With the efforts of firms like MENA Broadband Services and others in the region, the day when broadband becomes a part of everyday life in the Middle East is fast approaching. And, when it does, the current lag between the local market and the rest of the world will soon disappear and both business and home users across Arabia will enjoy the many benefits broadband provides.||**||

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