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Middle East broadband uptake continues to be narrow

New research covering 17 Arab markets reveals that Egypt has the lowest residential broadband (ADSL) costs at US$24 per month while Syria is the highest at US$135. The regional average cost for a 256 Kbps line still stands at US$80 per month, a high figure by global standards which is limiting the uptake.

New research covering 17 Arab markets reveals that Egypt has the lowest total cost of residential broadband (ADSL) service in the region. Syria lies on the opposite extreme with the highest cost.

The regional average cost for a 256 Kbps line stands at US$956 per year (US$80 per month), a figure that is high by global standards which is limiting the uptake of broadband internet in the Arab World while quite a few countries still do not have broadband. The remedy, as the Egyptian example shows, is infrastructure-based competition between operators.

“In the Arab markets where there is competition, Internet service providers (ISP) either act as resellers of the incumbent’s DSL infrastructure [like in Jordan], or have their own DSL infrastructure and even their own international gateways [like in Egypt]. The first scenario is common, while the second scenario currently exists in Kuwait and Egypt. It will be soon the case in Saudi Arabia as a result of the recent liberalisation of the fixed datacomm market with the award of two data licenses. In monopoly markets like the UAE, Qatar and Oman, the ISP is also the monopoly operator,” explains Sami Sunna’, research manager, Arab Advisors Group.

When comparing the ADSL rates on the regional level, the total annual cost of residential ADSL services (for a 256 Kbps downstream speed) in the Arab region ranges from a minimum of US$290 per year in Egypt (US$24 per month) to a maximum of US$1620 per year (US$135 per month) in Syria.

Syria is the most expensive followed by Kuwait, Sudan, Saudi Arabia, Bahrain, Algeria, Jordan, Qatar, UAE, Morocco, Oman, and ending with the lowest ADSL cost in Egypt due to the recent broadband initiative in Egypt.

For instance, in matured markets such as the US, service providers like AOL offer unlimited broadband starting at as low as US$14.95 per month with a 45-day trial thrown in and a range of freebies. Similarly British Telecom (BT) in the UK offers a 512 Kbps line for US$35 per month with a free modem, and installation. For this kind of price elasticity, the end-user will have to wait for another 12 to 18 months says the research firm.

“The ongoing liberalisation of the Arab datacomm markets [which are WTO members] by 2005/2006, should enhance the infrastructure-based competition in these countries. Allowing for international long distance competition in these Arab countries will also lower the overall bandwidth costs which will allow the internet and datacomm providers to start offering more advanced services at much lower rates,” adds Sunna’.

Arab Advisors Group compared the total cost of the residential ADSL rates in twelve Arab countries according to their deviation from the average total cost (specific to the region), in addition to comparing these rates with the GDP per capita in each country (specific to the country).

The comparison only includes those countries that have special residential ADSL packages. Tunisia was excluded from the comparison since its ISPs only offer corporate ADSL packages at high prices. Residential ADSL packages will be introduced in Tunisia by November 2004.

“Egypt is the star in the Arab World in having the lowest ADSL cost. The major ISPs in the country are allowed to negotiate their own international bandwidth agreements and not be tied to getting the bandwidth from the incumbent fixed operator [Telecom Egypt],” says Jawad Abbassi, Aab Advisors Group president.

“Moreover, these ISPs are allowed to collocate at Telecom Egypt’s exchanges and use its unbundled copper wires at reasonable rates. They, therefore, own their infrastructure for the most part. Freed from monopoly pricing, and with government encouragement to spread ADSL service in the country, Egyptian operators are giving the best ADSL value in the region. Anyone that doubts the effect of infrastructure-based competition (and local loop unbundling) on lowering ADSL rates should look no farther than Egypt,” he claims.

When including the GDP per capita in the analysis, the Arab Advisors Group concluded with the ADSL Affordability Measure. Basically, the total annual cost of ADSL in a country was calculated as a percentage of that country’s GDP per capita.

This calculation indicates that Sudan has the least affordable service, followed by Syria, Jordan, Morocco, Algeria, Egypt, Saudi Arabia, Bahrain, Kuwait, Oman, UAE, and ending with most affordable (i.e. lowest as a % of GDP per capita) in Qatar. Clearly, the income level of the country is also a major determining factor in addition to the absolute price level.

While Egypt’s rate is low by regional and international standards, the price remains steep for many middle and low income Egyptians.

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