30 June 2005
DUBAI -- While announcement of a second telecom operator in the local market by the UAE Telecom Regulatory Authority (TRA) in April as well as the earlier entry of Dubai Internet City and Sahm, the IT arm of Emaar, has added to the number of telecom players, there is a strong fear that customers will not be getting the benefit of competition.
Emirates Telecommunication Corporation (Etisalat), for long years a state telecom monopoly, will soon get a competitor. Although the new company will be another local entity like Etisalat, according to the TRA announcement, it would provide all kinds of services. And those might include the cheaper IP (Internet protocol) telephony, which Etisalat has so far refused to allow.
The biggest advantage of the IP telephony is that calls made through this Internet-based technology cost only a fraction of what they would be billed for by traditional telecommunication operators. A recent report by Gartner, the IT market research consultancy, states that the wider adoption of Internet phone would force traditional players, including mobile phone operators, to drastically reduce charges.
The new technology is beginning to eat into the existing players' telephone revenues, which still account for 60 to 80 per cent of their total revenues and most of their profits. And this is precisely the reason why monopoly telecom companies are resisting the IP telephony.
The UAE telecom operator Etisalat is no more a monopoly as the statutory provision that provided that status to the company expired last year. But the new regulations to govern the country's telecom sector have not come into force as the TRA is yet to become fully functional. In the absence of new norms, the monopoly situation is by and large continuing unchanged.
The lack of clarity has helped Etisalat to act decisively to prevent IP telephony services being accessed by households and businesses. Customers are complaining about arbitrary action by the telecom company and questioning Etisalat's rights to block sites offering cheap telephone calls using IP telephony.
Etisalat on its part insists that IP telephony is illegal as there is no law permitting it. But it is an arguable point whether there is a law prohibiting it in the new context of deregulation.
In fact, Mohammad Al Ganem, director-general of TRA, in one of the recent interviews made it clear that VoIP (voice over Internet protocol) is not allowed. He said TRA has instructed Etisalat to block websites that allow the Internet telephony.
Etisalat officials, however admit in private that IP telephony is a technology whose time has come and it will no longer be possible to deny access to the technology even if that means substantial loss of revenue for the telecom giant. They also indicate the possibility of Etisalat itself entering the fray with IP telephony solutions.
But industry experts say that the telecom company's stand that IP telephony is illegal in the UAE cannot stand scrutiny because IP-based solutions are already offered in selected places of Dubai. If it is illegal, how can it be offered anywhere in the country?
The telecommunication system in DIC, Dubai Media City and Knowledge Village, for instance, is based on IP technology and the costs are about 30 per cent cheaper compared to Etisalat's rates.
DIC was one of the first entities to adopt the technology, with the help of Cisco,
a major player in global IP telephony sector, even before it became popular in other parts of the world. The DIC is equipped with one of the world's most sophisticated communications infrastructures built on Cisco technology, which forms the spine of DIC's communications and networking systems, including the largest installation of IP telephony in a single site in the Europe, Middle East and Africa region.
DIC, using IP and Ethernet, can provide data, voice and video to its commercial tenants and residents over the same infrastructure in a way that is familiar and requires no conversion at the interface.
DIC also provided the telecommunication infrastructure for the Global Village in its new location in the mega Dubailand project, which provides a pointer to the future direction as far as IP telephony is concerned. The new technology also got a major boost with all Emaar projects in New Dubai, including Dubai Marina, the Greens, Emirates Hills and other, getting serviced by IP telephony.
Significantly, Etisalat is not offering any of its services in these areas. All the telecom services in those areas are offered through Sahm technology, a wholly-owned subsidiary of Emaar, which has acquired the necessary technology from DIC.
So, does it mean that competition is already there? Not really. Competition is deemed to be there when customers have the option of going to the service provider of their choice. But that is not the case even in the New Dubai areas. Rather it is monopoly divided. Sahm technology has a monopoly in its designated area just as Etisalat is the only player offering the services outside that area.
With Sahm being a new player, it may be quite a while before it can reach the levels of Etisalat. This has kept price competition out of the arena, thus denying customers a major advantage of the new technology. There may be some price difference in terms of telephone bills, but this is offset by increase in other costs.
Although telephone bills in New Dubai are less than in the city, subscribing to pay channel is working out more expensive than in Old Dubai. For example, pay TV package subscriptions have to be paid for every room the service is made available, meaning the customer will have to pay three times over for the same service in one home.
Although Etisalat is said to offer the cheapest mobile rates among 18 Arab countries, UAE tariffs are still higher than in some other countries. As, a mobile call in the UAE currently costs Dh0.24 during peak hours, while in India it costs Dh0.17. An international call to the US costs Dh2.12 during peak hours and Dh1.18.
Revenue from mobile phone services currently contributes the bulk - 55.2 per cent of Etisalat's income, while fixed-line services fetch 26 per cent, data - 8.2 per cent and Internet 5.8 per cent.
VoIP (voice over Internet protocol) services providing Internet telephony can save money because it uses the Internet connection to carry voice calls rather than the regular public switched telephone network. This means that a VoIP service does not incur the same costs as a conventional telephone link because it does not involve buying satellite time or undersea link bandwidth for long distance calls.
Most of the VoIP works quite well, but sometimes calls stutter and digital garbage occurs for a couple of seconds. There could also be occasional lag or echo, but new technological advances are increasingly taking care of these issues.
VoIP allows the user to call telephones or mobiles at decent quality. Some services also allow receiving of calls from regular telephones at no extra cost through direct inward dialing (DID). With DID, for example, the user could sigh up to a VoIP service provider based in the country of a friend or relative and have them call from a regular telephone at local call rates.
But access to the service provider can be controlled by the local Internet service provider. And this is what Etisalat has been doing.BY JAMILA QADIR
© Khaleej Times 2005