Assessing the fixed-line landscape

The development of major urban hubs and demand for reliable broadband services is driving a latent demand for fixed-line services in the Middle East.

With the rapid development of GSM networks and wireless technologies such as WiMAX, fixed-line networks often seem to have fallen out of the limelight. But with major urban developments throughout the region, including residential areas and business hubs being built from scratch, fixed-line operations now appear to have greater potential for operators.

Milan Sallaba, director and office head of Oliver Wyman, a global strategy and operations consultancy, tells Comms MEA why fixed-line operations will remain relevant and explains some of the challenges ahead.

 

Are mobile networks a direct threat to fixed-line?

GSM and fixed-line are trying to do very different things, historically and traditionally. There are some areas where fixed and mobile also come together, which is in the backbone. If you have a mobile network, it is not mobile all the way - it will be fed into some sort of fixed-line infrastructure at some point.

Are mobile and fixed-line operations converging in this way in the Middle East?

In the region, there hasn't really been much investment in that historically, because the international gateway and the international routes have been, by and large, government owned and controlled.

All of the traffic goes through a gateway, which is basically a monopoly. This was true for most Middle East and GCC countries in particular.

Do you think this situation will change?

There is a lot of pressure for this to change, and in more liberalised countries, any company can have its own gateway, so one of the main trends, to a certain degree, is for mobile operators to invest into fibre backbone.

One example of that is Mobily, which recently tried to acquire Bayanat in Saudi Arabia. Obviously they are trying to do other things with that, but basically it is for capacity backbone infrastructure.

Companies in this position may then try to roll that out to buildings, both commercial and residential. They could serve businesses and residential areas more evenly than in the West where the population is more dispersed.

Here, everybody lives in apartment blocks, and businesses are in free zones or economic cities, so what we see is a big push to invest in state-of-the-art fixed-line infrastructure - for high-speed data connectivity in particular and for dedicated lines such as VPN, not just internet access.

Why was this not done sooner, in your opinion?

The reason this has not been done historically is because there has been a recent boom and there wasn't much fixed-line infrastructure in the Middle East to start with.

Penetration rates are extremely low compared to anywhere else in the world.

This explains some of the recent boom in the mobile sector, which has leapfrogged the traditional fixed-line technologies.

Now people are thinking 'OK, we want to have broadband access so how are we going to do that - either by rolling out fibre to the buildings' - and this is where the other part of the debate comes in - or by rolling out fixed-wireless access such as WiMAX or any of the competing technologies.

There wasn't much fixed infrastructure in the past and therefore the services associated with fixed infrastructure - particularly broadband access - have been severely underserved and now with the boom in the region, people are looking at how to catch up.

Hence the debate of purely fixed technologies versus fixed wireless access such as WiMAX.

Has the cost of building fixed-line infrastructure also held the sector back at all?

The fixed-line sector was a monopoly and has not been liberalised. Only government was allowed to actually invest in fixed-line, so you don't have any private investments.

The second thing is fixed-line tends to be expensive.