Life in the slow lane

GITEX boots up this week but is the Middle East stuck in the wrong lane on the information superhighway?

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By  Andrew White Published  September 6, 2007

There are lies, more lies, and statistics. Look at the figures. Today, the Middle East and Africa is the fastest growing region on Earth with regards to the number of internet users. According to comScore World Metrix, the Middle East and African internet population grew from 29.3 million in May last year, to just over 35 million in the same period this year - a 20% increase. Yet while the MEA region remains the fastest growing, in total it hosts just 4.5% of the world's internet population of 772 million.

Tightening our focus, the Middle East accounts for 2.9% of world web users, with over 19.5 million online, which represents growth of 494.8% since 2000. According to the latest figures from industry tracker, the region registers 10.1% internet penetration among its population of just under 200 million. However, that figure still only defines its internet audience as anyone aged 15 or above, who has been online in the last 30 days. Does one-in-ten, perhaps just once-a-month usage indicate that the region is in the fast lane of the information superhighway?

"Penetration rates are well below international benchmarks, and in some cases the rates are particularly bad," Phil Reynolds, chief legal officer of virtual network operator Friendi Mobile, and former head of technology at international law firm DentonWildeSapte, tells Arabian Business.

According to Reynolds, this weakness is largely a result of the region's high prices, which are "way, way above the European, US and Asia-Pacific benchmarks," and kept there by a lack of real competition in Middle East telecoms markets.

"The bottomline is that there's now scope for further competition in the market - however, the reality is that prices have not fallen, and operators are admitting that prices are relatively stable at the moment," he explains. "That indicates that full competition is not happening, as in a fully competitive environment, prices do tend towards cost."

Reynolds argues that as a result of a dearth of true competition, innovation has suffered and services have not advanced as quickly as they were expected to. Governments have focused so closely on introducing second or third operators into the market, that the region has merely seen the introduction of "cosy oligopolies, with a lot of price following occurring". Consumers are not getting the deal they deserve, and it will take the intervention of regulatory authorities around the Gulf, to kick-start the revolution.

"The next phase of competition has to occur where service-based competition comes in, as a layer underneath facilities-based competition," Reynolds suggests. "What we will see is regulators becoming frustrated with pricing and services, saying ‘we want some more competition, so you guys need to open your networks now to independent service providers, so we can get more innovation, and get the prices down a bit more'. The key is to move towards services-based competition, as opposed to network and facilities-based competition.

"The problem with all the operators at the moment is that they are trying to be all things to all people," he continues. "You don't have the niche players in the market, for example a DSL provider who is focused on the internet and provides a highly competitive data service. The regulators have really got to get themselves into gear, and facilitate some more competition."

Last week, there were encouraging signs in this direction, as the UAE's Telecommunications Regulatory Authority (TRA) warned that it wanted to "open the door for competition" between the country's two operators, Etisalat and du. Currently, Etisalat does not have access to internet or fixed-line customers in Dubai Internet City and media free zones and nearby residential districts, while du is largely restricted to these areas.

"From now until the end of the year, both operators are obliged to cover the whole of the UAE and customers will have the right to shift from one to another," a TRA spokesperson said. It is at least a step in the right direction, and perhaps a hint that the regulatory body is warming towards the benefits of effective competition.

Reynolds' views are echoed by Jawad Abbassi, general manager of the Jordan-based Arab Advisors Group, a consulting firm focused on the communications, media and technology markets. However, Abbassi also identifies another issue that may have more long-term repercussions for the Middle East internet market. Put simply, does the region really need high broadband penetration?

"If we want a success story similar to the cellular story, we will not have it," admits Abbassi. "The internet market is a harder nut to crack, because unlike the cellular market where illiterate people can use the technology relatively easily, you have to have certain prerequisites to get the internet.

"You have to be able to afford a PC or a laptop, you have to have some level of English, and you have to be computer literate," he continues. "You have to have some level of disposable income to spend on the internet service, and you have to have the need for it. For many people there isn't the need - what need does a poor street vendor in Egypt have for email?"

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