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Challenges and Opportunities for Telecommunications Reforms in the MNA Countries Trade and Knowledge Economy: Focus on MNA Countries Samia Melhem. Outline. Status of telecom reforms in MENA countries: mobile duopoly

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Challenges and Opportunities for Telecommunications Reforms in the MNA CountriesTrade and Knowledge Economy: Focus on MNA CountriesSamia Melhem

outline
Outline
  • Status of telecom reforms in MENA countries: mobile duopoly

The need for a second phase of telecom reforms in MENA countries: the competitiveness agenda

A possible way forward: organic growth of the access and production of information and knowledge services

mobile networks are rapidly overtaking fixed networks for the provision of access to voice services
Mobile networks are rapidly overtaking fixed networks for the provision of access to voice services
overview of telecommunications sector liberalization status in selected mna countries

Table 2.2: Overview of telecommunications sector liberalization status in selected MNA countries

Liberalization

Algeria

Egypt

Jordan

Morocco

Tunisia

UAE

Fixed telephony

No

No

No

No

No

No

Mobile telephony

Yes (2001)

Yes (1998)

Yes (2000)

Yes (1999)

Yes (2002)

No

Number of mobile operators

3

2

2

2

2

1

Leased lines

No

Partial

No

No

No

No

Data and VAS

No

Yes

Yes

Yes

Yes

No

ISPs

Yes

Yes

Yes

Yes

Yes

No

Number of ISPs (Main)

15

11

8-25

20

2 (+5 regional)

1

VSAT

Yes

Yes

No

Yes

Yes

No

Number of VSAT operators

3

2

N/A

3

2

N/A

Overview of telecommunications sector liberalization status in selected MNA countries
slide8
Limited liberalization of ISPs in the MNA region may also explain the low level of Internet penetration
slide9
Lack of competition in the provision of leased lines is inhibiting the development of the leased line market
the textile supply chain

Garment

Factories

Tunisia

Morocco

USA

Europe

Egypt

Syria

Egypt

USA

Europe

Raw

Material

Fiber

Brand

Companies

Apparel

Textile

Companies

Spinning

Weaving

Knitting

Marketing & Distribution

Department Stores / Outlets

Contractors

Raw

Material

Synthetic

Fiber

Trading

Companies

Overseas

Buying Offices

Germany

The Textile Supply Chain
challenges
Challenges
  • First phase of reforms took place is specific circumstances: maturity of GSM technology and “friendly” capital markets.
  • Second phase of reforms will have to focus on fixed and data services to address the competitiveness gap. Data and corporate services remain largely untapped.
  • These reforms (licensing strategies and regulations) will have to be designed in a way that takes into account local specificities and new technological and business conditions in the IT sector (convergence, innovation in services, riskmanagement). Attempts to re-create past successes have failed (SNO licenses).
licensing approaches
Licensing Approaches
  • Mobile agenda: GSM3 (2G? 3G?)
  • Fixed agenda:
    • SNO? Focus on voice or data?
    • WLL? Nationwide or local WLL licenses?
    • Unlicensed spectrum (WiFi) policy—interaction with WLL
    • Rural licenses? Regional licenses?
    • International gateways; international licenses
international experience
International Experience
  • No single model for introducing competition
  • Licensing strategies are built on various distinctions and concepts (Fixed/Mobile; LDI/local; Basic services/Enhanced services;…)
  • The requirement to provide competitive services to the business community (corporate networks) has been a major driver of reforms (exceptions: MNA and AFR)
  • Objective was to introduce innovation and competition in services without “destabilizing” incumbent
a global telecoms crisis
A Global Telecoms Crisis

Last Mile includes: Verizon, BSC, US West/Qwest, Bellsouth, Comcast, AT&T Broadband, Cox, Cablevision, Adelphia, Charter, Rhythms Netconnections, Covad, Northpoint. Access includes: AOL, Earthlink, MSN. Carriers includes: Qwest, AT&T Business, Sprint FON, Level 3, Worldcom, Cable & Wireless, Global Crossing, Genuity.

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Network operators

Service providers

Nature of competition

Oligopolistic

Close to “perfect competition”

(multiplicity of market players)

Capital requirements

Large infrastructure investment required

Low startup costs required

Barriers to entry

High

Low

Business drivers

Economies of scale

Innovation and

Customer orientation

Business model

Return on investment logic

Long-term vision

Product diversification and diffusion logic

Short-term vision

Investor classes

Institutional investors and bank consortia

Venture capital and private equity firms

Distinctions between data network infrastructure and service providers: new business model; value in service innovation

Source: Analysys

corporate network provision in selected mna countries

Table 2.2: Overview of telecommunications sector liberalization status in selected MNA countries

Right to Build Infrastructure on the Public Domain

YES

NO

LICENCE

DECLARATION/FREE

Network operators

Incumbent

Mobile Operators (if they have right to own infrastructure)

YES

Value Added Services Providers

ISPs…

Services Open to the Public

Private Networks

(“on premises”)

Alternative Infrastructure Owner

Independent Networks

NO

AUTHORIZATION

FREE/DECLARATION

Corporate Network Provision in Selected MNA countries
the provision of private data networks in selected mna countries

Private network

Morocco

Tunisia

Jordan

Right to develop a private network

Company and its subsidiaries.

Company and its subsidiaries.

Company and its subsidiaries. (Group of companies)

Geographical domain

No limits. Public domain can be used, including spectrum.

No data.

No limitations. Public domain can be used, including spectrum, but an agreement with telecommunications operators needed.

Right to install private networks

(Maroc Telecom).

Sotetel, other network installers.

Jordan Telecom only.

Interconnection to PSTN

Not allowed.

No data.

Allowed. Retail rates apply. Interconnection regulation discipline only relationship among public operators.

Leased line regulation

Some regulations on QoS and maximum delivery time. Lack of enforcement. Cost-oriented tariffs.

Detailed regulation on the provision of leased lines.

Detailed regulation on the provision of leased lines, with TRC approval of tariffs and procedures. Wholesale prices. However, persistence of long delivery time.

The provision of private data networks in selected MNA countries
blocked growth cycle

SERVICE PROVISION

SERVICES PROVIDERS REWARDS STREAM

Multiplicity of Competitors

Inadequate Revenue Sharing schemes

=

Lack of Incentives for Investment in Infrastructure

Limited Infrastructure Roll Out

=

Limited Reach to Customers

BLOCKED

INFRASTUCTURE PROVIDERS REWARDS STREAM

INFRASTRUCTURE BACKBONE

Oligopolistic Competition

Blocked Growth Cycle
corporate network provision in mna mostly provided by incumbent

Table 2.2: Overview of telecommunications sector liberalization status in selected MNA countries

No infrastructure sharing

High cost of leased local, national and international lines for service provider

Take-up of broadband slow and expensive

Chicken and egg issue: Impact on content

Corporate Network Provision in MNA: Mostly provided by incumbent
competition increases takeup of basic ict services
Competition increases takeup of basic ICT services

New ICTs go hand in hand with competition

Percentage of countries worldwide allowing competition, for selected ICT services, 2002

Source: ITU World Telecommunication Regulatory Database.

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Cable modem - Countries where incumbent telecommunication carrier owns cable network or share of cable network

2.5

DSL - Countries where incumbent telecommunication carrier owns cable network or share of cable network

Cross ownership and broadband penetration, subscribers per 100 inhabitants

2.0

DSL - Countries where incumbent telecommunication carrier does not own cable

Cable modem - Countries where telecommunication carrier does not own cable

1.5

… and slow to grow

Cross ownership economies are late to launch…

1.0

0.5

0

1999

2000

2001

.. in particular, cross-ownership between the incumbent and broadband providers appears to hurt broadband penetration
  • Countries where incumbent telecommunication operators have stakes in companies offering competing broadband services have significantly reduced levels of broadband penetration.

Source: Reproduced from OECD, Broadband Access for Business, 2002.

how does competition occur competitors buy some services from the incumbent

New entrant

Incumbent

How does competition occur ? Competitors buy some services from the incumbent

IP Transit

Internet

IP Router

Wireless Access(LMDS, Microwave, WiFi etc.)

ISP server

SDHADM

SDHADM

SDHADM

SDHADM

SDHADM

IP Router

IP Router

SDHADM

SDHADM

Fixed Access(leased line, fiber etc.)

End-user computers

what are useful indicators
What are useful indicators ?
  • Retail prices (lagging indicator: low price usually indicates competition, high take-up, and good regulation)
  • % population taking service
  • $/Mbps
  • Cost of monthly broadband cost/monthly income
  • Broadband cots/GDP/bit/sec (alternative)
opportunity creation of new markets for providers attached is subscribers total numbers
Opportunity : Creation of new markets for providers (attached is subscribers total numbers)
  • Japan  9,228,000USA  8,243,000China  7,817,000South Korea  7,069,000Germany  4,252,000France  2,429,000Taiwan  2,374,000Canada  2,027,000Italy  1,672,000Spain  1,433,000UK  1,414,000Brazil  837,000Belgium 706,000Hong Kong  660,000Netherlands  643,000Sweden  508,000Denmark  416,000Switzerland  383,000Israel  358,000Australia  333,000
  • (Source: Point Topic/DSL Prime)
slide29
Even if the price of broadband is quite similar in many countries,income disparities are as wide as ever

Source: ITU Internet Reports – Birth of Broadband (Sep 2003) - only selective countries shown, based on lowest broadband price offering

policy recommendations
Policy Recommendations
  • Giving service providers a “telecom” status
  • Extending rights of service providers (conditional bypass + sharing)
  • Alternative infrastructure holders (second mobile + utilities)
  • “Flexible” closed user groups
regulatory recommendations
Regulatory Recommendations
  • Revenue sharing regulatory levers—wholesale regime
  • Access regulatory levers—Rewarding infrastructure deployment
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SERVICE PROVISION

SERVICES PROVIDERS REWARDS STREAM

Multiplicity of Competitors

Services providers seize licenses’ opportunities

INFRASTUCTURE PROVIDERS REWARDS STREAM

Roll-out obligations in license conditions

Internalizing distortions into licenses (international)

INFRASTRUCTURE BACKBONE

Oligopolistic Competition

Licensing Recommendations: Priming the Pump Tailor opportunities to: local players, regional operators, private equity players
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