In the loop

A push towards local loop unbundling in Bahrain has revealed a widening gulf between the views of Batelco and the TRA.

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By  Roger Field Published  May 4, 2009

A push towards local loop unbundling in Bahrain has revealed a widening gulf between the views of Batelco and the TRA.

With two mobile operators, several WiMAX players and a liberal policy towards VoIP, Bahrain is widely viewed as one of the region's most dynamic telecom markets. And with the country's regulator having launched a public consultation on local loop unbundling (LLU), the country appears to be on a path towards greater liberalisation of the fixed sector.

But not all players are convinced of the merits of LLU in Bahrain, partly owing to the country's relatively small population of about 730,000 people. Not surprisingly, the issue of LLU appears to have polarised opinion between Batelco and the TRA, with the incumbent operator arguing against it, and the TRA optimistic that it will benefit the market.

Bahrain's TRA appears convinced of the potential benefits of LLU in the country, although the organisation insists that it will wait for feedback on its consultation documents in May before deciding whether to proceed with LLU and how to implement it.

"The idea of LLU is to increase competition, enhance broadband and allow the end user to benefit from competitive offers and more innovative offers," said Adel Darwish, manager for market and competition at Bahrain's TRA.

Darwish thinks that in Bahrain, unbundling would mainly be used by operators to offer broadband services, rather than fixed voice, a trend that would be partly driven by the country's liberal VoIP policy, which spurs many people to take a broadband connection.

"I believe it would be mainly broadband but considering the market trend towards VoIP, a package of broadband and VoIP would be most commonly conceived by all the operators," said Darwish.

He added that Bahrain's fixed services that are delivered using WiMAX are restricted in this respect, and that LLU could help address this issue. "If you look at WiMAX, because it has a certain frequency, there are limited frequencies that we can give out to operators, so it is very dependent on frequency and the technology using that frequency," he said.

This is an area where disagreements from Batelco regarding unbundling come to the fore, with the incumbent's CEO, Peter Kaliaropoulos, arguing that the company already faces huge competition in the fixed line sector, largely from WiMAX players.

But Kaliaropoulos' main gripe about unbundling is that the Bahraini market is too small to sustain greater segmentation of the fixed-line sector.

According to Batelco's chief, Bahrain has about 203,000 fixed lines, and the figure has changed little in the past four years. He added that there are about five operators that have expressed an interest in unbundling, and with three other national operators using WiMAX, Kaliaropoulos' fear is that LLU could lead to too many fixed-line operators competing over a limited supply of customers.

"If you take the existing market which hasn't grown, and you divide it between the seven or eight players, we are all going to have 25,000 lines each and this is not sustainable for an operator to have a definite business model. We have always said that once you come down to LLU, there is no sustainable business model," he said.

Kaliaropoulos reinforced his point that there is a lack of demand for LLU by pointing to the limited success of bitstream, which allows other operators to offer services using Batelco's infrastructure, but falls short of full LLU.

"With bitstream there has only been one customer for the last four years, so the point we make to the TRA is these are wonderful concepts but Bahrain is a micro market and there is no substantial demand."

He added that operators making use of LLU would have to make significant investments in the network, making the business case untenable, particularly given that these operators might not be able to predict how many customer they expect to gain.

But not everyone agrees. Mohsen Malaki, an independent telecoms consultant based in the UAE, said that LLU operations are scaleable, and that any company looking to compete as an LLU would only need to invest in DSLAM (Digital subscriber line access multiplexer) equipment in target areas where they expected demand.

Malaki said that small markets can sustain competition. "An operator might come in and say they are interested in a certain area of Manama, invest in some DSLAMs and rent some space from Batelco's local exchange to provide broadband and voice services to customers in that area," he said.

"Once there is enough additional investment, they would be able to go to other areas as well. It is scaleable. It would increase competition, so in the end it is better for the customer in that it allows more competition."

Jacobo Garcia-Palencia, an analyst with consultants Delta Partners, said that while LLU must be implemented correctly in smaller markets to avoid creating potentially unsustainable operators, it can be achieved by setting the right pricing structures and by allowing for broad services such as triple play.

Overall, the additional competition is likely to help develop the market, he added.

Garcia-Palencia said: "What we have seen in more developed markets is that this competition has created service evolution which has been beneficial for the end clients and in the end market has consolidated all these small operators."

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