Smiles returned to the Lebanese communications sector in 2004. The question is whether they were forced. Two existential dramas in the communications arena last year were carried over from 2003 and the years before: the quest to make the mobile and landline sectors more productive and create a stable environment for modern data communications. A third troubling communications issue, the management of postal services, was solved and the new operators of LibanPost were able to present themselves in 2004 as a smooth running entity. Concerning the issue of increasing productivity in mobile and fixed line telecommunications, 2004 inherited a dispute in which the very definition of productivity was already a bone of contention. One philosophy that has emerged in the last five years was to regard productivity under a formula of control and profits. What operational recipe would generate the highest revenue? Who would control the networks? How could the fiscal share in this revenue be maximized? This position was juxtaposed with another that placed the central value on productivity as consumers would experience it, emphasizing the deployment of technological upgrades and making services affordable and accessible to the largest possible number of people. The origins of the debate go back to the first half of the 1990s, when the need for a functioning communications infrastructure was overwhelming. The Lebanese government back then awarded private sector firms with contracts under which they would build and operate two mobile telecommunications networks and transfer ownership back to the state at the end of a ten to twelve year period. These BOT contracts proved very lucrative for operators LibanCell and FTML, as demand for mobile communications in Lebanon outstripped all expectations and consumers within three years raced to the top of global statistics for the minutes of mobile phone usage.
But in this mobile revolution, potential conflicts of interests between the political responsibilities and private interests of persons involved in the network operations were ignored. Moreover, the operator contracts had been awarded in a time when fiscal projections assumed unlimited growth of the economy and fast development had precedent over careful profit-sharing calculations. Sure enough, worsening economic conditions made mobile sector revenue look extremely enticing for alleviating the state’s financial pressures. Telecommunications became entangled in a debate placing revenue maximization and improvements for consumers at opposing sides of the table.
Arguments reflecting both positions have been employed in acrimonious debates since 1999, involving political decision makers, network operators, telecommunications experts and consumer advocates. One massive debate took place in the public and the other in the political arena. The latter was the decisive one but it seemed that arguments used in defending and promoting the two positions in either arena did not necessarily reveal the objectives of those involved in the debate. The dispute was by no means truly resolved in 2004, but decisions were made, which resulted in a new course for the cellular sector. After a final attempt to auction-off mobile telecommunications licenses was declared a failure at the beginning of the year, the concentration shifted from the search for private sector bidders looking to buy an operator license to a search for companies that would manage the networks on fee basis. Following this decision, the exhausting debates and repeated prolongation of uneasy, temporary operator arrangements with the former BOT partners quickly came to an end. Within a few weeks, bids for management contracts were collected and the operators with the best offers on the table were awarded three-year contracts.
Thus, by spring 2004, the discussion over privatization of the telecommunications network faded from the public discourse and at the beginning of the second half of the year, the two new operators – the Kuwait-based MTC and German-Saudi joint venture Fal Dete Telecommunications – took over the operations of the LibanCell and Cellis networks. By December 2004, the Lebanese ministry of telecommunications acting as network owners and the management firms had phased out the old network names and launched new brands, MTC Touch and Alfa. In the realm of private sector data networks, 2004 was the year when broadband internet was promised but not quite fulfilled yet. In early October, service providers and the ministry of telecommunications invited the media to a hastily assembled press conference announcing the deployment of wireless broadband internet access, with immediate effect. The service was explicitly targeted at private residential users and by local standards competitively priced. But by early December, industry insiders said that in most cases, consumers applying for a broadband connection would only be linked up to the wireless service if several parties in the same building signed up at the same time.
The growing pains of the wireless broadband service illustrate that this solution, while feasible for some clients, is in itself, not enough to establish a national broadband environment. So at the end of 2004, the vision of a digital society and e-Lebanon remains at least to a substantial part, a fancy.
In its confines, the story of the Lebanese internet service sector was not quite as dramatic as the high-stakes fight over the mobile telecommunications sector, but in its persistent failure to keep the country abreast of the technological evolution, it was just as indicative of the need to develop a strategy of public sector priorities and enforcement capabilities.
When local entrepreneurs set out to establish Internet Service Providers in the first half of the 90s, they had great initial success. Connections over the landline phone network were cumbersome and the noise of repetitive dial attempts and incomplete ‘handshakes’ between simple modems and overworked servers become the daily music in many Beirut offices. But compared to no internet, it was progress.
Then, however, followed years of public sector procrastination in rolling out new services, the deployment of which would have posed no technical problem. Introduction of ISDN was postponed under various excuses month after month, while the technology became already obsolete in other countries. Manufacturers of telephone equipment came to a Beirut telecommunications show and left again in frustration, until at one point the expo also relocated to elsewhere in the Arab region. So feasible an exercise as establishing a network of public phone booths was announced time and again but not implemented until 2003.
Without improvements in the telecommunications infrastructure, high telephone charges kept customers away from ISPs. Progress in the telecommunications industry was confined to basic communication: the delivery of speeches by vocal chords and amplification through microphone at conferences discussing the country’s regulatory and telecommunications needs. In real life, Lebanon could only watch as Jordan inaugurated its ADSL broadband network in February 2001. There was no real argument over the need to liberalize the telecommunications sector and establish an independent supervisor. But while the discussions carried on endlessly, the monopoly structures at the state-owned telecommunications network remained in place and costs of their bandwidth connecting them to the internet backbone remained exorbitant for ISPs and their customers. What the lament over high electricity costs was for industrialists thus became the moan over the impossibly high communications charges at the Lebanon branch offices of international companies. The only enterprises to benefit from the absence of an affordable regular data line infrastructure for internet service were operators of homespun cable networks that wired whole neighborhoods on the cheap and competed illegally with the ISPs. On another track of the communications industry, operators of regional satellite television networks could only shrug their shoulders as the failure to pass a law regulating the transmission of cable and satellite TV put the entire country at the disposal of unlicensed distributors who could with impunity re-sell the program packages owned by the region’s handful of providers. Lebanon became a nation of illegal cable hookups sold at dumping prices by gray providers unaccountable for any technical problems, service quality, or any regulation of content.
Heavy telecom users and content developers have drawn the conclusion from such circumstances that Lebanon is not the place where communications and media enterprises in the Middle East find the best soil for nurturing their business, and the latest open-end delays in a series of failures to create a dedicated technology park (BETZ) might have been the straw that broke the willingness of some companies to look at Beirut for locating offices here. Although the expansion of data networks, the implementation of new mobile phone services and the privatization of the landline network are somewhere on the horizon, the mistrust borne out of years of inactivity by apparently unconcerned authorities was not erased in 2004. As things stand, at the end of 2004 and beginning of 2005, the prospect of the long-awaited Telecommunications Regulatory Authority is viewed with suspicion by analysts, who wonder whether such an institution could truly be independent. International consultants agree that the telecommunications infrastructure is vital for growth of the Lebanese economy. They sense a contradiction between the nation’s high level of technical skills and the backwardness of the operating environment. This could cost the country billions already in 2005.
