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Broadband emerges as major web access revenue driver in GCC

Broadband contributes to 12% of the total revenue generated from internet access connections in the Gulf.

Internet connections in Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE) grew by 33% during 2002, according to IDC. By the end of 2002, total internet access connections in the six countries stood at 1.32 million. While broadband only accounted for a meagre 3% of the total connections, its revenue approached 12% for the year.

Penetration rates vary across the region and by customer type. According to IDC, large and medium businesses enjoy high penetration rates, while employee sites and small office/home offices (SOHOs) have the lowest penetration rates. In terms of households, Kuwait enjoys the highest penetration at 38%, followed by the UAE at 31%, Bahrain at 26%, KSA at 16%, and Qatar at 10%.

“Clearly, connections growth, going forward, will hinge on the ability of ISPs in the respective countries to market internet access connections to the least penetrated market segments. In most of the countries, this means increasing penetration in the consumer and small business segments,” says Mohsen Malaki, senior analyst of Telecommunications Group, IDC CEMA. “For ISPs to be able to tap into these two segments, an understanding of the main inhibitors of internet adoption within each segment is required,” he adds.
Two deterrents to internet adoption among small businesses are targeted pricing strategies and internet literacy. “ISPs need to formulate prices that take into account the bandwidth usage patterns of small businesses, which will result in lower prices for this segment,” says Malaki.

Among consumers, PC penetration, affordability, and internet literacy are the key inhibitors for continued growth. “Remedying [this] requires a more coordinated approach between policy-making bodies, telecom operators, and ISPs,” adds Malaki. Looking ahead, IDC expects the total Gulf internet market to exhibit a compound annual growth rate of 14% for connections and 18% for revenue over the 2002-2007 period. In 2007, the market will reach 2.6 million connections and revenue of US$1.1 billion, with the largest driver of growth in connections and revenue being broadband. g

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