16 April 2007
"DSL is coming." It's a phrase that can elicit raised eyebrows, smirks of derision or serious belief depending on who you talk to. For context, it's important to know that the Telecommunications Ministry planned the first DSL pilot project in 1999. The project was shelved in the political fallout of a change in government but eight years later, the country is still waiting. Even more ironic perhaps is the fact that according to the ministry, the infrastructure and framework are all in place and the service could have begun to be offered, at least from its side, four to six months ago. The reason it didn't offer the service when it could was to avoid having an advantage over the private sector or a "misuse of monopoly," according to Abdel-Monhem Youssef, director general the Telecommunications Ministry and of Ogero, the state-run fixed-line telephone company.
If the public is awaiting DSL with an eagerness sharpened by eight years of dashed expectations, then the private sector seems just as eager for the state's monopoly of the sector to give way to liberalization. It too has had a long wait. Youssef was keen to point out that Internet services opened to the private sector completely in 1996 and that Lebanon was the first Arab country and one of the few countries in the world to begin private sector Internet services in 1994. But behind this rosy picture of free market activity lies the hard fact that from the beginning until now the state has held a monopoly on the sale of international bandwidth or access to the uplink.
The repercussions for the private sector and the public have been enormous. From the former come complaints of overpricing and delays caused by bureaucracy as well as a proliferation of illegal private sector activity.
"If with such a situation and such a monopoly position the ministry would have at least elaborated a policy and defined regulatory principles it would have been acceptable, but the catastrophe is that they decided that they are the only people who have the right to define the policy and principles for regulation but they never did," said Riad Bahsoun, CEO and general manager of Telecommunication Information Technology. "This opened the large highway for illegal providers, using any kind of infrastructure transmission support to provide illegal Internet services."
"Many times, over and over again, every other year, Ogero and the government go and cut the cables and stop that business," said Rony Kaddoum, general manager of data-service provider Pesco Telecom. "But again it's so difficult to control. Weeks later they flourish again and pop up like mushrooms." Unlicensed Internet service providers (ISPs) - and there are dozens of them - tend to get their bandwidth directly, and illegally, through satellite dishes, added Kaddoum.
Maroun Chammas, executive director of Internet service provider IDM, said that the issue was mainly due to government pricing as it used to charge very high fees. "Now [that] the government has lowered their fees, it doesn't make commercial sense," he told The Daily Star. Like Kaddoum, he sees the advent of DSL as a final nail in the coffin of illegal activity since it will make Internet available to the public at low starting fees.
For its part, in April 2006 the ministry decreased the cost of international bandwidth by 70 percent. Prices are now the lowest in the Middle East, according to Youssef. "We don't have the will to lower them further," he added. "They are very low."
While some, like Bahsoun, are highly critical of the insufficient quantity of international bandwidth available to the market, the ministry is confident that it has taken steps to ensure that current and future needs will be met. Youssef pointed to the signing last month of a pact to join the new I-ME-WE submarine cable, as well as a second agreement with Telecom Italia and Cypriot operator Cyta concerning a cable between Cyprus, Italy and New York. These two contracts, along with the upgrading of existing cable Cadmus and other capacity enhancements, will "offer Lebanon its bandwidth needs for the next 10 or 15 years," he said.
In addition to lowering costs, Youssef said that the application process for bandwidth had improved and that it now takes one month for international bandwidth applications to be approved, a length of time he described as "fast." Some sector players don't share Youssef's estimation or agree that one month is a fair time to wait. Chammas pointed to Jordan, where it takes 24 hours, and Saudi Arabia, where it is approved overnight. "Today as an ISP if we want to get international bandwidth, if we go and submit an application to the ministry, the average time it takes is three months. The best we saw ... was one month and that was exceptional but usually it's between three and six months," said Chammas. He attributes the delays to the lack of bandwidth and an "extremely heavy" procedure that requires paperwork to pass between four or five different departments at the ministry before being signed by the general director.
Patrick Farajian, chairman and CEO of Sodetel, which is 50 percent state-owned, refused to be drawn on the quickest period that it had taken to get new international bandwidth approved but agreed that it varies and that the longest had been a "a few months."
But amid a climate where the ministry retains, at least for the time being, a monopoly on the sale of international bandwidth, sector players remain unsure as to the extent of improvements that can be expected. "We're living in a kind of funny situation between a state monopoly and a fully deregulated market but there are still no laws yet for deregulation, so for all practical purposes it's still a state monopoly," said Kaddoum. "Even if you have four different data service providers (DSPs) and ISPs, if we all are buying the commodities from the government and reselling [them], we could end up being resellers for the local ministry and that would be worse than a clearly stated monopoly as that would be a disguised monopoly. And until the Telecommunications Regulator Authority (TRA) becomes really effective, the minister and the director general of the ministry should be really keen and conscious and aware so that this doesn't happen."
While the ISPs have been getting by despite the limitations imposed by a state monopoly on bandwidth, the knock-on effects for users have resulted in complaints that mainly revolve around connection speeds and quality, as well as poor service from ISPs.
"The real speed is very, very bad and it stops frequently," said Zuhair Berro, president of Consumers Lebanon. "ISPs have all kinds of problems because they oversubscribe their numbers. At certain times of the day you can't work with it."
"We commit to what we advertise so when we say we offer a company a one megabit per second connection, we truly offer that," said Farajian, but he added that some his company's competitors do indeed oversubscribe.
ISPs often bear the brunt of customer dissatisfaction since they are the end-users' first and only point of contact. What end-users should know, though, is that although the ISP is the one selling them their connection, there are multiple actors that collectively determine whether a connection is up to standard.
"We cannot disassociate ourselves from the current economic costs and technical issues that exist in Lebanon," said Chammas. "If the international exchange of the Telecommunications Ministry goes down, we go down and there's nothing we can do." He added that in a developed market, quality of service exists but that the concept of standards is not defined yet in Lebanon.
And it's not just the ministry and ISPs that play a role in quality. ISPs work with DSPs, which provide the technical side of the service. Kaddoum gave the example of a residential user who pays $50 a month to an ISP for Internet service. That ISP's back office will then call a DSP to connect them and pay the DSP their cut of the $50. "The end-user is buying two things," said Kaddoum. "He is buying the communications plus Internet so the ISP is packaging the service made up of the communication plus Internet access. In other countries the ISP does it all." Kaddoum explained that the DSPs operate on frequencies that have been allocated by the ministry. While the number of ISPs has fluctuated in tune with market dynamics, the number of DSPs has remained limited. "It is much easier to acquire an ISP license today than a DSP license," said Kaddoum. "Because if you are a DSP you need to acquire spectra [channels] from the government, and this is a very scarce resource."
Off the record, some industry players raise questions over the extent to which DSPs are backed by political interests in limiting the carving up of the financial bounty of such resources. Kamal Shehadi, chairman of the TRA, was quick to discount the accusation from one industry source who suggested that existing DSPs had been handed their frequencies free of charge. "They have to pay 20 percent revenue sharing to the Telecommunications Ministry. They also paid a fee of LL100 million for the frequencies," he said. Although Shehadi would not speculate on the value that any new frequencies might fetch when auctioned in the future, others have suggested that it could be in the region of several hundred million dollars - a sharp contrast with the LL100 million the government pocketed from DSPs in the past.
Auctioning off frequencies is just one of the many tasks that now reside under the aegis of the TRA. Chammas sees the work of the authority as very challenging but like others in the sector looks forward to the improvement in quality of service and speed that will follow as a result of deregulation.
"There is no room for cynicism," is Shehadi's straightforward response to suggestions that some skepticism may linger over whether the TRA can put the sector in order. "Are you asking me if I am absolutely confident that my colleagues and I on the board will do our job? Of course," he said. "Why else would we have accepted? Politics will not interfere in our work. Not with the recruitment, not with the decisions on licensing - politics cannot interfere at all."
But while the government has made it clear that it wants to privatize its state-owned entities in the telecoms market, Shehadi warned that the TRA's ability to bring the benefits of competition to the end-user would depend on how soon that privatization takes place. Unfortunately, tangible progress on that front is yet another waiting game the public has grown only too familiar with. Shehadi believes that the only thing that will convince the most hardened of cynics is results. The latter is something that Lebanon eagerly awaits.
