Light years ahead

The issue of the commercialisation of voice over IP (VoIP) was a contentious one in the Middle East region throughout 2006 and this trend looks likely to intensify in 2007 as national regulators attempt to protect the interests of incumbent operators while at the same time promoting the introduction of disruptive technologies.

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By  Administrator Published  December 31, 2006

Sheikh Abdulla Khalid Al-Khalifa, managing director of Lightspeed Communications, a Bahraini internet and IP telephony provider is a keen supporter of the argument that incumbent telecoms providers need to adapt their business plans to cope with the entry of new, disruptive, technologies such as VoIP.

As one of the first countries in the region to deregulate its telecommunications market Bahrain stands as a good example of the effects other national regulators and the markets they preside over can expect as the industry opens up. In Bahrain, Lightspeed Communications marked its debut in March 2005 with the launch of its flagship ‘iVault’ solution. The data centre – driven by technology provided by Gulf Business Machines (GBM) – was the first to enable financial institutions and others to securely host their mission-critical systems.

Following global regulatory trends such as the Sarbanese-Oxley Act and the Basel II Accord, the Bahrain Monetary Agency issued guidelines for financial institutions in the country to meet tight standards for business continuity. To address this need, Lightspeed Communications created an outsourcing model to assist organisations to meet these tight standards.

According to Al-Khalifa the launch of iVault, represented a significant step forward in allowing organisations to economically meet their business continuity needs.

“We began this project to set up a premium data centre in 2004, and we wanted to appoint a technology solutions provider who could meet our own stringent requirements – Gulf Business Machines/IBM was a natural choice,” Al-Khalifa said at the time of launch back in 2005.

Initially iVault offered what it claims was a flexible, future-proof data centre to organisations both large and small. Offering everything from instant-access single racks to custom-built dedicated business suites, iVault combines complete security and control with optimum business performance and value.

Options have been extended to services such as portal hosting and content delivery and remote management services as well as crossborder disaster recovery facility services.

Beyond data centre solutions, Lightspeed Communications' position is that globally, voice services are increasingly becoming bundled as part of multiple solutions, such as broadband internet access and IPTV, with operators feeling that voice is no longer viable as a separate business. Speaking in Dubai in December Al-Khalifa pointed out that if operators in the Middle East do not fall in line with the current trends toward voice bundling then they will find themselves in the wake of new, progressive, entrants.

“VoIP is a basic product which should be given when you liberalise any market.

In Bahrain we are talking about access issues, we are talking about bundling, new business models are being introduced such as fixed mobile convergence and IPTV, this is growing in line with international consensus and we should be in line with global practices not be left behind,” he says.

According to Milan Sallaba, director of the Dubai office of Mercer Management Consulting in most countries in the region, commercial use of VoIP currently is not available. “If you look at the US and Europe, VoIP has eaten big time into fixed line provider revenues, that is for sure.

Something similar would happen if you were to fully liberalise that and you would not just have planners buying usage here and there, which may not be blocked at the central gateway,” Sallaba explains. “One of the reasons why it is blocked is to obviously avoid the erosion of revenues and there is a little bit of a governance issue in the region between ownership of telecoms providers and regulation. I think as regulator in the UAE becomes more independent, you will see more pressure on making available alternative services,” he adds.

Al-Khalifa argues that markets in the Middle East have an uneven playing field with governmental bodies reluctant to leave the market to its own dynamics and refrain from the deployment of interventionist policies that limit market evolution. He contrasts this with Bahrain, as an example of a GCC market adopting a Hong Kongstyle market capitalistic model, providing consumers with a high level of choice and attracting investment from international sources.

“There is so much difference in the Bahrain market. It is up to you there. You take care of relations with the incumbent and your operations and you take care of the legal matters. Our point of view is that this approach and the impact of VoIP have brought a real improvement. For example, having international companies bid for the WiMAX licence in Bahrain is a very good thing to see,” Al-Khalifa says.

Sallaba agrees and describes this point in time, in the telecoms sector in the Middle East, as one in which markets are being liberalised, where there is the introduction of new players particularly in the mobile area, and not a very strong fixed infrastructure in the region. “Mobile has overtaken fixed, primarily sponsored by government driven or government owned projects,” he suggests.

The key to driving the market forward is simple for Lightspeed Communications.

Proper legislation needs to be introduced to legalise VoIP and make sure the licences are available and Al-Khalifa voices dismay at incumbents who are trying to suppress VoIP for as long as they possibly can, while concurrently rolling-out network infrastructure such as cable and 3G without a solid business plan. “It is not a case of saying ‘I have this technology, how about you?’ It is about trying to compete in the market and creating a decent business model,” he says.

Also speaking in Dubai last month, Mohammed Al-Wohaibi, CEO of Oman incumbent Omantel, discussed VoIP in the wider context of disruptive technologies. He outlined how such technologies instigate a pattern of events in an industry; beginning with incumbents at the outset initially dismissing a new development – leaving it to occupy a niche in the market - and ending with the new technology penetrating the mainstream as a thriving business model.

Al-Wohaibi states that major companies are often needlessly caught off-guard by the introduction of disruptive technologies, which initially appeal to lower-end customers who seek less costly versions of a product.

The resource allocation, processes and systems of industry leaders are designed and perfected to support sustaining innovations, so incumbents are motivated to move upmarket and rarely extend their scope to new or low-end markets that appeal to pioneering developments such as VoIP, Al-Wohaibi believes. The inability to embrace new innovations leads to company failures.

“Incumbents need to use two strategies to deal with such disruptive technologies. One is to improve their services that are already well established and make money and the other is to run a new business model in parallel that embraces disruptive innovation; either by creating business units or subsidiaries that apply the new wave of technologies or by investing in small companies that work on technologies such as VoIP,” says Al-Wohaibi.

Al-Wohaibi believes that market-changing technologies are an inherent part of the telecommunications industry, comparing the industry’s current reaction to VoIP to the initial dismissal and repression of telephony a century ago. He warns incumbents that they need to learn from past mistakes and employ strategies to adapt to the market changes VoIP is facilitating.

The Omantel CEO is hoping that the network Omantel has been building in its own back yard can be used as a good example of value to export overseas. “As an incumbent we have inherited lots of networks, and we had many legacy systems we had to take care of,” explains Al-Wohaibi.

“But at the same time we also have to move to being more customer centric, more effective in terms of tariffs.” He says one of Omantel’s primary focuses now is broadband, pushing high-speed internet to all corners of Oman.

A broadband initiative that started last year saw a growth in subscribers of almost 300%, with Omantel closing 2005 with around 10,000 DSL lines. “But we thought we were not as aggressive, because we were testing the market,” Al-Wohaibi says. A further 100,000 DSL lines are being added to the network over the next few years, and Al- Wohaibi is determined to extend broadband coverage even to the more remote reaches of the country. “To have an alternative to DSL (in remote areas) we’re working with broadband over VSAT technology. I think this is going to be around soon. We’re also working on wireless broadband over WLL (wireless local loop) and WiFi.” Al-Wohaibi says that WLL will target the rural areas, reaching around 200 villages across the country. “We are addressing all the needs of the market, because it is not always easy to connect everyone via cable.” But those not receiving their broadband through the normal means will not have to pay more for their connection.

As for Al-Khalifa, he believes the fiveyear business plans of the past are no longer viable in such a rapidly expanding and global market. “Incumbents have to change their business model, we live in a global village now, you have to change it, if not every year then every quarter,” he says.

“People have to understand the effects of VoIP and not just think of it as a taboo.

Incumbents need to shift their focus, the market is now open, new market trends are coming up and they should not be left behind,” he adds.

Lightspeed background

Lightspeed Communications is a solutions driven company in the field of advanced communications services. Lightspeed is positioned as the next generation voice, video and high-speed internet provider.

It carves a niche in the industry as Bahrain’s first alternative fixed-line telecommunications operator, offering valueadded, new and innovative services designed to meet a complementary range of business and residential broadband requirements.

Lightspeed Communications initially launched its flagship “iVault” solution, a data centre, which is the first of its kind to enable financial institutions and others to securely host their mission-critical systems. Fundamentally modelled on IT outsourcing, Lightspeed’s distinct range of services - available in any combination - aim to assist, support and accommodate government and financial services markets in effectively reducing costs, risks and overall, general enhancement of the reliability of systems, networks and applications.

In addition, further offerings will now include a ‘Triple Play’ offer of IP voice and video Telephony services together with high-speed internet access. Additional developments will also include new converged fixed-mobile services.


“VoIP is a basic product which should be given when you liberalise any market. In Bahrain we are talking about access issues, we are talking about bundling, new business models are being introduced such as fixed mobile convergence and IPTV, this is growing in line with international consensus and we should be in line with global practices not be left behind”


“It is not a case of saying ‘I have this technology, how about you?’ It is about trying to compete in the market and creating a decent business model”


“People have to understand the effects of VoIP and not just think of it as a taboo. Incumbents need to shift their focus, the market is now open, new market trends are coming up and they should not be left behind”

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