Sami al-Basheer al-Morshid is the current director of the Telecommunication Development Bureau at the International Telecommunications Union (ITU), the United Nations agency that works with governments and the private sector to advance information and communications technology (ICT) worldwide. With more than 23 years experience in the regional and global telecommunications industry, al-Morshid has held several high-level posts within governments and the private sector, including the position of chief of the regional office for Arab states at the ITU. In August he sat down with Executive to offer his insights on the regional ICT sector and how countries in the region should reform the sector in order to meet global standards.

E Liberalization in regional markets has been slow to come about. Many governments in the region still view their existing telecommunications operators as cash-cows and this has resulted in prohibitive pricing and bad planning models. Do you see this changing, taking into account that the financial crisis is making governments more conservative in general? 

This is what we are trying to do at the ITU by organizing the global symposium for regulators, which will be held in Lebanon. Regulators from all over the world [will] come [together] in one place and exchange ideas, adopt best practices [and talk about] where it worked and where it didn’t, how much regulation is needed and how much involvement from the government is enough. It’s funny that we are talking about this at a time when we have a financial crisis, where even the most open market countries like the US and the UK are coming back and erecting [trade] barriers and adopting protectionism. We hope this will not happen in telecom, because we feel, and we have studies to prove it, that the ICT sector is the least affected by the financial crisis. It is going to be affected but it is the least affected. Some experts go even further and think this is the sector that is going to solve the problem of the whole world, even the financial problem. In short, yes, we feel there are steps being taken by governments themselves and through regional and multilateral forums like the ITU. We are trying to find the right balance in terms of a regulatory framework where you don’t have it completely free, but at the same time you have a balance [between government and regulator].

E When you start talking to governments about independent regulators, do alarm bells start going off as governments fear they will lose a major source of income?

That has been true until recent years. Many developing countries, including the Arab countries, thought [infrastructure and telecommunications were] a goldmine for the government’s budget. The good news is that when these governments realized this [the advantages of liberalization] and partially opened their markets, they had better services, more affordable prices and more output even in terms of government budgets. Because most developing countries, including Arabic countries, own the infrastructure, when you talk about the regulatory framework in Saudi Arabia or the United Arab Emirates, you find that 70 to 80 percent of the shares of these incumbent companies are still owned by the government.

But the good thing is they are working on a commercial basis. With only 30 percent of the shares of, for example, Etisalat or Saudi Telecom created, all of this improvement is in services. Can you imagine how it would be if you increase this [private] share of the market? I promote a gradual approach in this aspect. There is no single government in the world that opens up directly. Even the UK and France took a long time to do that. We try to talk a lot about the global village and open competition.

E In light of what you just said, how do Arab countries measure up to other developing nations?

The Arab countries are doing much better than a lot of developing countries. If we are talking about the Gulf countries, penetration rates for mobile [service] are over 100 percent. You have middle income countries like Egypt, Syria, Lebanon and others and you have the least developed counties, such as Yemen and Djibouti, where we have the biggest problem.

E So there really is an oil divide and that line is clearly drawn. Wouldn’t this logically mean that the middle to lower income economies would want to embrace liberalization faster, for commercial means at least? But this is not happening. Is it just because of the politics of poorer countries or are there other reasons?

In my personal opinion this is a misperception. The least developed counties in the region have financial problems and they are struggling. Although it is logical that they should open up, at the same time, it is a matter of administration and management, where they are so preoccupied with food, agriculture and security which is [the] number one [priority]. Iraq is a good example of a rich country where unfortunately the services are terrible, especially in fixed and broadband. It’s simply because they have other priorities. Security and stability are number one, [because] you don’t only attract direct investment but you also have the security to really have the confidence to open up the system. If you are hungry you don’t have time for luxury, although [ICT] is not a luxury anymore — it’s a basic need.

E What is the biggest concern for governments when they look at the private sector?

There are many things they look at. In some countries it’s for security reasons, and in others its competition for business. Who gets the largest piece of the cake? Is it my internal and domestic investors [and] how much I can guarantee them this? It’s about how the government can make sure that the whole population gets the benefits of this privatization and not only a rich businessman or individual who can take over the whole thing. That’s why you see that when most government offer their tenders after they open up, they have a consortium where they say, for instance, 30 percent [ownership] has to be from within and this has to be comprised of five or six unions from within the country. This is to avoid having one person or company control the sector. This is wise and has been done beautifully in some countries. Some countries are still reluctant to open up. We are working closely with them to encourage them to do so by giving them advice and training some of their people. The good news is that this is high on the agenda. In Syria we are expecting this to happen anytime.

E How about Lebanon’s regulator? There have been suggestions that the regulator is not independent of the government.

Lebanon has a regulator. I don’t know how independent the regulator is now but from what I see from the Lebanese government, they are heading toward that. Lebanon has a special situation. You remember that Lebanon was the first country to introduce mobile [and it had] the highest penetration in the Arab region. Security and regional conflicts affected the sector and this is understandable. This is a rich sector if you have the right transparent, independent rules and regulations — [then] the money is no problem, the money is there. But you have to make sure that it is transparent, it’s open and it’s fair competition, and those countries which have succeeded to do that have taken off in the right direction.

The long hours Lebanon’s Internet users spend sitting in front of their computers waiting for content to download is not the fault of some computer conspiracy. The decrepit state of the Internet is the result of poor governance, suffocating bureaucracy, illegal internet providers and sectarian politics. 

Illegal Internet networks made headlines last month when a microwave transmission connection installed on top of the Barouk Mountain in the Chouf region of Lebanon was alleged to have been taking bandwidth from Israel.

The incident set off a wave of accusations from Member of Parliament Ahmad Houry, part of the March 14 parliamentary bloc that won last June’s elections, against the present care-taker telecom Minister Gebran Bassil, who is part of the Free Patriotic Movement (FPM) opposition party. Houry claimed Minister Bassil was somehow involved in facilitating the illegal connection.  Hezbollah, allies of the FPM, said that the connection was discovered in April but “a large political party” had prevented the station from being raided earlier. The minister, who did not respond to requests for an interview, has denied the allegations. The station was installed in 2006, however, when Marwan Hamade — a March 14 ally — was telecommunications minister.

Sources in the telecommunications industry, who asked not to be identified in order to speak freely, told Executive that the station owner has not been arrested, which is “very weird,” said Habib Torbey, head of the Lebanese Telecommunications Association (LTA).

Mohamad Safa, an adviser to Bassil — who stressed that he speaks for himself and not the minister — said there were “many partners involved” in the Barouk business, which he claims is now being made an issue in order to maintain the “oligopoly” of Lebanon’s legal Internet providers, who are losing market share to unlicensed providers.

“Some of them [the partners] have been arrested and some have not, but there are no real details because these are security-related matters,” he added. “No one will be able to tell you who the ‘godfather’ is, and if they do they are lying.”

Ironically, the Barouk incident has also cast light upon how technically uncomplicated it would be to increase bandwidth in the country.

“The official sector has [a bandwidth of] only 1 gigabit per second (Gbps). The Israeli antenna of Barouk alone had 10 Gbps,” said Riad Bahsoun, telecom expert at the International Telecommunications Union (ITU), a UN agency for information and communications technology; Bahsoun also advises the Lebanese government on telecom issues. Telecom Minister Bassil recently contradicted this statement though, saying the station was only transmitting 300 megabits per second (Mbps). 

Does Lebanon have broadband?

Illegal Internet providers in Lebanon service more than half the market, and for good reason —  Lebanon’s legal internet is slow.  Even with these illegal suppliers, however, Lebanon’s market is grossly undersupplied.

Many Internet service providers, like Cyberia and IDM, as well as state provider Ogero, claim they provide broadband internet service.  That assertion is debatable. 

“Nothing [in the market] is really broadband,” said the LTA’s Torbey when asked why his company, GlobalCom Data Services, which owns Inconet Data Management (IDM), one of Lebanon’s largest Internet Service Providers, advertises their Internet service as broadband.

The definition of broadband is foggy. The International Telecommunication Union (ITU) defines broadband as a transmission capacity that is 1.5 to 2 megabits per second (Mbps). In the United States, the Federal Communication Commission is currently seeking public comment on what should constitute broadband, with the goal being to help consumers. The current minimum bandwidth to qualify as broadband in the US is 0.75 Mbps. The Organization for Economic Co-operation and Development defines broadband as 0.25 Mbps in at least one direction. This rate is the most common baseline that is marketed as “broadband” around the world. 

Salam Yamout, co-founding member of the Lebanese Broadband Stakeholders Group, a local lobby group that pushes for broadband in Lebanon, defines broadband as 100 Mbps “at the access point for businesses and people who require it.”

The Internet speeds available to the Lebanese public today vary from 0.125 Mbps to 2.3 Mbps.  Lebanon’s Internet download speed averages 0.59 Mbps, according to Ookla Net Metrics, an Internet diagnostic company. Ookla says the world average is about 10 times that, at 5.5 Mbps.

It’s astonishing to think that these speeds represent major  progress since Digital Subscriber Line (DSL) technology became available in the summer of 2007. 

“The introduction of DSL was a very good step although it was long, long, long overdue,” said Leila Serhan, country director at Microsoft Lebanon. “It is still a very shy step and [the slow speed] is definitely hindering the introduction of a lot of the services you can get on the Internet.”

That hindrance has led to a low penetration rate for Internet service, resulting in a vast untapped market for broadband Internet. With ADSL penetration, a precursor to broadband Internet, at less than 10 percent of the population and consumers willing to adopt new technologies, there is ample room for the market to grow, yet it has not.

“There is no network and there is no infrastructure,” said a multinational telecommunications executive who asked to remain anonymous in order to speak freely.

The lack of decent Internet has also hindered Lebanon’s business world. Khalil Letayf, deputy general manager of Société Générale de Banque au Liban and a member of the Lebanese Broadband Stakeholders Group, explained that because of the lack of broadband, his bank has to incur extra costs to make physical backups instead of transferring data over the Internet, due to of the lack of reliable infrastructure. He said that, as a result of operating in such an environment, the risk factors associated with all the banks have increased.

Why so slow?

Lebanon’s Internet market does not run on a network made for data, but rather one made for voice. The current network was built by Siemens, Ericsson and Nokia in the early 1990s with $1.3 billion of funding from the World Bank. There has been no comprehensive plan for improving the infrastructure since then.

“What Lebanon has done since 1994 is build [its telecom infrastructure] in blocks,” said the ITU’s Bahsoun. Bahsoun explains that in the 1990s telecom operations like Internet and mobile were separate, and “back then they didn’t know that all these [Internet and communications technology] services, were going to converge.”

Since then, there has been little restructuring and Lebanon’s telecom ministry today is a fragmented body with two general directorates, a separate office that deals with mobile communications and miles of red tape holding it all together.

Meanwhile, regional telecoms have stayed on the cutting edge of Internet technology and service. Telecom services have been combined and broadband with hassle-free, high-speed upload and download is a reality across the region — but not in Lebanon. Transfering data is a costly and cumbersome process that involves the converting the data into a format suitable for transmission over Lebanon’s archaic network. The result for consumers is low quality and speed in tandem with high costs. The economy surely suffers, as broadband penetration has become a key economic indicator. The World Bank estimates that every 10 percent increase in broadband penetration accelerates economic growth by 1.3 percent.

Lebanon’s telecommunications market indicators as of December 2008

Where’s the problem?

Because the government only allows Internet service providers (ISPs) a miniscule amount of bandwidth — the measure of available data communication resources — there is no variety in the market. The packages offered by the county’s ISPs are identical in terms of speed, meaning all the options available are relatively similar. What makes matters worse is that the ISPs impose download ceilings or charge for additional downloads above a certain level. This has resulted in a situation where the typical Internet user in Lebanon pays eight times more than a typical user in similar countries like Jordan and Egypt.

Unlike the rest of the telecom sector in Lebanon, which is owned by the government, the retail Internet market does operate under conditions of limited competition. That fact has spurred the growth of several ISPs and Data Service Providers (DSPs). Both are licensed by the Telecom Regulatory Authority (TRA), Lebanon’s telecom regulator — the only difference being that DSPs are assigned a certain frequency they can use to provide services. At present, there are around 20 ISPs and 6 DSPs and many are owned by the same people who typically have connections to politicians. One example is the CableOne DSP, which also owns the Lynx ISP, and is partly owned by Karim Hamade, the son of Lebanon’s previous telecom minister Marwan Hamade. One of the largest DSPs, Sodetel, is half owned by the Ministry of Telecommunications itself and Solidere, the large real estate developer which was founded by the late Prime Minister Rafiq Hariri.  The Hariri family also hold a major stake in the Cyberia ISP.

No matter how many connections exist or how much competition there is, without adequate infrastructure and capacity the market cannot grow. The problem is rooted in the amount of available bandwidth in the country and who controls it. Officially, the total amount of bandwidth in the country last january did not exceed 260 Mbps, according to the Telecom Regulatory Authority (TRA), but most observers put the figure today at around one Gbps. This, however, does not take into account the illegal market which controls “40 to 60 percent of the market,” according to Torbey. The Ministry of Telecommunications distributes all the bandwidth in the country and does not release detailed information, even to the TRA.

Monthly charge for 30 gigabytes of download using 1Mbps residential DSL

How to make it better?

In order to legally increase the level of bandwidth however, sizeable investments have to be made to create a “national backbone” in Lebanon. The national backbone will be like an information superhighway that connects the major cities of Lebanon.

“Instead of a superhighway, what you have are small, small roads,” said Kamal Shehadi, chairman of the TRA. “The connectivity between these places is not what it should be.”

Bassil has announced several projects in order to upgrade the current infrastructure, including an upgrade of the existing system like the backbone project.

One development expected to take place is a pilot project in the Hamra and Ashrafieh districts of Beirut that will, in theory, lay down fiber cables. The $14 million project aims to supply better connectivity to residents as well as provide a reference for a previously announced project to build a national backbone that the ministry estimates will cost around $64 million. But even the pilot project has yet to commence and the budget has not been approved by the Council of Ministers.

“They need decisions and they have not got all the decisions,” said the ITU’s Bahsoun.

The decisions in question must be made by the telecom ministry. The telecom ministry today consists of two general directorates, the Directorate of Operations and Maintenance and the Directorate of Construction and Equipment. Moreover, the Directorate of Operations and Maintenance, headed by Abdulmenaim Youssef, also controls the government-owned company that runs the current Internet infrastructure holder, Ogero.

List of offers and prices in Lebanon as appearing on operators’ websites ($/month)

A mess of a ministry

“It is one of the most embarrassing aspects [of Lebanese telecoms] that the person implementing and supervising [the implementation] is the same person,” said Safa, the telecom minister’s advisor.

Youssef did not respond to repeated requests for comment. He was appointed to both posts by Lebanon’s former telecom minister Marwan Hamade in 2005. Beyond being a gross contravention of efficient corporate governance, the position that Youssef maintains has made it almost impossible to ascertain who is in charge of what at the ministry. When Executive called Naji Andraous, the director general of construction and maintenance, to acquire information about the status of the pilot project’s progress, Andaous’ office said that Youssef was in charge.

“Abdulmenaim Youssef is reluctant to progress in Lebanon [sic],” claimed Bahsoun.

Youssef held the position of general director of the Directorate of Operations and Maintenance from 1995 to 1999, when he was imprisoned and later released in an extremely politicized struggle for control over the telecom industry. He is widely seen as the representative of current caretaker Prime Minister Fouad Siniora and his political coalition’s interests.

“[Youssef’s] appointments were made at the behest of the previous governments and Prime Minister [Siniora],” says Safa.

It is worth noting that Safa is an advisor to telecom minister Bassil, who is part of the opposition to Siniora’s ruling March 14 coalition. The minister has become the focal point of Lebanon’s most recent political debacle between Michel Aoun, Bassil’s father in-law, and Saad Hariri, the prime minister-designate. Aoun is insisting that Bassil maintain his position at the helm of the telecom ministry.

But the fight over control of the sector seems to run much deeper than the ordinary squabbling between Lebanon’s politicians. Lebanon’s telecom law, Law 431, outlines the legal procedures that should be followed in order to reform the sector. The trouble is that the law has been implemented in pieces, and as such, its interpretation has been a contested topic between the TRA, the telecom ministry and all the political and commercial interests pegged to both bodies.

“If you implement [the law] in parts, especially when politics are involved, you take the parts that you like and the spirit of the law is lost,” said Safa.

The law calls for the creation of a joint stock company called Liban Telecom that will be granted a license to operate for 20 years and provide all other telephony services to the public. Liban Telecom will also acquire the assets of the current operator, Ogero, which includes the current Internet and phone network and any upgrades made to it.

The latest point of contention between the ministry and the TRA is how to increase the bandwidth in the country. Having already announced the expansion projects, the ministry’s current direction is to start by increasing the bandwidth themselves. Critics say the process is hampered by the inner workings of the ministry, especially Youssef’s offices.

Internet speed test from Executive’s offices in Beirut on a typical Monday afternoon in August

Evasive and unaccountable

“The minister asked in a letter about how the E1s are being distributed and the Abdulmenaim Youssef says ‘don’t respond,’” said Bahsoun. (An E1 is a measure of bandwidth equal to 2 Mbps). “When the minister calls [to follow up], he says ‘I don’t know, the letter went missing.’”

Even the Telecom Regulatory Authority’s annual report criticizes the telecom ministry because it will “only release limited information” about the current DSL market, “and as a result, it has been difficult to analyze the root causes of this slow development.” The report goes on to state that “it can be concluded that while some of the problems stem from anti-competitive behavior, others relate to the lack of appropriate investments.”

Factor in the political rivalries in Lebanon and the prospect of broadband becomes even less probable.

“If your objective is to make the minister fail then, you move like a tortoise and tell people that the minister does not act,” said Safa. [As stated above, calls to Youssef’s office to respond to these, and other statements, were not returned]. 

The other option on the table would be to allow the private sector to install, operate and provision broadband services. However, this too has become a point of contention between Lebanon’s ministry and its regulator.

The TRA wants to offer three “National Broadband Carrier Licenses” to the private sector which would allow them to install the fiber optic cables needed to facilitate broadband Internet and sell the services to end users. One of these licenses would legally have to go to Liban Telecom and other two would be offered in an open international auction. The proposal has been opposed by the minister who has issued his own policy paper stating that he would offer the already existing DSPs (data service providers) one of the two remaining licenses.

Proposed Telecom Regulatory Authority liberalization scheme

TRA vs the telecom minister

The ministry’s position has in part been facilitated by the fact that the law has not been fully implemented and Liban Telecom, the body that the TRA is mandated to regulate, does not exist.

“The [ministry’s policy paper] has a schizophrenic nature,” said Shehadi. “On the one hand it said the TRA is not respecting the law and it is being autonomous. On the other hand it said clearly ‘I want to change the law to make the TRA depend on and report to the minister.’”

Law 431 does say the minister is granted the authority to “establish the general rules for the regulation of telecommunications services in Lebanon” but it also says the TRA has the authority to “organize the bidding process, and issue, execute, oversee, amend, enforce, suspend and revoke licenses.” The minister’s policy paper also criticizes the TRA for not issuing licenses.

“That is bull,” said Shehadi angrily. “The TRA prepared the tender for the mobile licenses and this process was suspended by political decision, not by the TRA. The TRA has [also] issued licenses to about 6 DSPs and about 20 ISPs.”

Shehadi also criticized the minister for not forwarding the TRA’s draft licensing regulation to the Shura council, Lebanon’s highest court, in order to begin the bidding process. Safa defended the minister’s right to amend the legislation if he sees fit.

As far as the DSPs are concerned, they are happy to go along with the minister’s policy because it serves their purposes by protecting them from large international players.

Shehadi, on the other hand, says this policy and the position of the DSPs are putting Lebanon’s economic future at risk by erecting barriers to trade and going against the government’s stated liberalization policy.

“The four wireless service providers who claim, pretend or call for protection from foreign investors are jeopardizing Lebanon’s accession to the World Trade Organization, and Lebanon’s trade commitments to the European Union and to all of our trading partners, for very specific, vary narrow private interests,” Shehadi said, adding that any international player in his right mind “will ally with one of the incumbents,” so they should not fear international entrants.

“We are not trying to recreate a new monopoly or oligopoly,” protests the LTA’s Torbey. “We do believe in competition and free markets. He said that the TRA “cannot start with a clean slate as if nothing has happened in the past,” referring to their presence in the market and the preferential treatment they seek to gain.

Law 431, however, does state that “no discrimination or restrictions shall be imposed on providing the services, as no such restrictions shall be imposed on owning or operating the necessary infrastructure to provide these services.”

But it seems politics have once again stunted the implementation of the law. “In principle the TRA is right, but the minister is the political representative and implements the politics of the government,” said Safa.

Each delay makes the situation in the telecom industry worse and facilitates the wrangling for power over the sector

Liban Telecom and sectarian politics

When it comes to political appointments in Lebanon, horse trading is commonplace and as such the country’s politicians have yet to come to a consensus over the chairman and board of directors of Liban Telecom. Each delay makes the situation in the telecom industry worse and facilitates the wrangling for power over the sector. So why hasn’t Lebanon Telecom been established?

If it is ever created, Liban Telecom will be regulated by the TRA, thus releasing the control the ministry currently wields over the network as well as dissolving the current operator of the network, Ogero. This will mean that Youssef and the interests that he represents will also have less control over the sector.

Law 431 also states that the government “may, within a period of two years of the establishment of the company [Liban Telecom], sell a portion not exceeding 40 percent” to a strategic partner. That strategic partner could be anyone from the operators who are present on the market, such as Zain and Orascom, or those allied with political parties in Lebanon that have a stake in the telecom industry.

Whether or not there is a setup in the works may be one thing, but the creation of Liban Telecom also seems to hinge upon another of Lebanon’s more unpleasant sectarian realities.

“The [future] board of Liban Telecom will need to split according to the confessions of the members and a lot of power has been given to the chairman. The chairman will have to be decided on the basis of confession,” said Safa.

Here again there seems to be some horse trading at play because to appoint a member of one confession to a major post means there has to be a balance somewhere else. Sometimes that balance is not maintained and institutions function (or malfunction) without the presence of supervisors, or the intended accountability structures. The Lebanese government to date has failed to even appoint all of its mayors — the very officials who are responsible for providing basic services to the country’s population — let alone appointing the board of a nonexistent entity like Liban Telecom.

“You are in a country where there are sectarian issues,” said the ITU’s Bahsoun. “You have ministers who don’t know why they are ministers; it’s a system.”

Supposing Lebanon’s bickering politicians do eventually work out their differences over the telecom ministry, Liban Telecom, privatization, the national licenses, international commercial interests and the implementation of Law 431, serious work will have to be done to implement a national backbone. This would seem to be a tall order for Lebanon’s politicians who still cannot agree over the formation of a cabinet, let alone implement a progressive economic policy. One can’t forget that the same politicians who are hampering the advancement of an essential economic development tool were also elected last June by the people who still pay exorbitant fees for archaic Internet access.

But, as the ITU’s Bahsoun said: “If the people are happy, what can you do?”

In the midst of the global economic downturn, governments and private companies have cut costs and slashed budgets. But one look at regional information and communication technology (ICT) investment shows that that the situation is better than it seems. 

In terms of ICT infrastructure, countries in the Middle East and North Africa have lagged behind developed countries for decades. Nonetheless, governments have been willing to pump millions of dollars of investment into building the appropriate infrastructure. Before the onset of the global economic downturn in the region, Gulf Cooperation Council governments alone were expected to allocate around 25 percent of their infrastructure development funds to expanding ICT frameworks. Accordingly, the market was expected to generate $70 billion in annual sales revenue by 2015. Today that figure is markedly lower and will depend on how the region weathers the global downturn.

“There hasn’t been huge growth this year because of a slowdown on the consumer side,” says Leo Psara, chairman of Minerva, the largest regional distributor for Motorola wireless broadband in the region.

Even so, governments have not backtracked on their commitment to ICT infrastructure investment, but rather have only given up on “like-to-have” projects, according to one regional ICT executive.

“I have seen some [infrastructure] projects go on a short-term hold, but on the whole business is still strong,” says Psara.

That said, regional governments still remain relatively reluctant to fully liberalize their markets and open up the ICT infrastructure sector to provide a competitive framework that translates into accessible technology for citizens.

Sami al-Morshid, director of the Telecommunications Development Bureau at the International Telecommunications Union (ITU), the United Nations agency for ICT that works with governments and the private sector to promote best practices in the market, says that there are multiple reasons for this. “In some countries it’s for security reasons and in others its competition for business,” he says. “Who gets the largest piece of the cake? Is it my internal and domestic investors [and] how much I can guarantee them this?”

The technology race

Liberalized or not, many countries in the region, especially in the GCC, have been keen to invest in and improve ICT services. In the Gulf, governments account for 20 percent of all spending on ICT services. The United Arab Emirates has been increasing their ICT spending to facilitate the expansion of services for years. In 2008, the Emirates registered a total ICT budget of $3.1 billion, a budget that is expected to reach $4.7 billion per year by 2013, according to Business Monitor International. 

Much of this spending has been focused on digitalizing government functions to create a more efficient ‘e-government’ that boosts economic activity by facilitating automated, online procurement for government suppliers. “Across the government entity and the government businesses there has been a massive drive towards doing e-business, both with their customers and internally,” says Psara. 

Given that the government is usually the largest consumer in a country, the advantages of an efficient e-government cannot be understated. “E-procurement of the government, which is the biggest purchaser of goods and services, fosters the whole ecosystem for ICT development [in a country],” says Raymond Khoury, a principal at Booz and Company who consults on Internet technology strategy in the public sector.

But no matter how much emphasis is placed on e-government, there is still much to be done to provide essential technologies to populations.

“One of the main bottlenecks in the region is affordable and accessible infrastructure,” says Khoury. “There is still much more work to be done in terms of reducing the costs of broadband, which today is becoming a key performance indicator for any measurement of any country.”

That affordability has been constrained by the fact that government ownership of service provision has stunted competition in the region and kept prices at levels that separate the haves from the have-nots. 

“This is often something that most of these developing economies do not look at,” says Lelia Serhan, country manager at Microsoft Lebanon. “They just go and build this infrastructure, pricing it in a way that probably furthers the digital divide inside these countries.”

Selected ICT indicators for MENA countries, 2008

The MENA region overall lags behind global standards for e-government readiness

Arab World countries versus global e-governement readiness

E-government readiness in MENA countries steadily improving

Online expense

The issue of prohibitive pricing is not a new one. For decades the region has been plagued by business models that are a direct result of inadequate planning by incumbent operators, typically owned by the government and regarded as cash cows.

“This whole notion… where we don’t want to hear the word privatization is also a political phrase without any beef,” says Khoury. “There has to be… a study that will easily prove whether it is monopolies or liberalized markets that introduce broadband at affordable prices [and subsequently] increase uptake and volume of resources.”

Indeed, some regional governments have been willing to adopt a ‘big picture’ perspective and allow companies to compete for licenses to develop infrastructure and provision services to the population.

“We are trying to find the right balance in terms of a regulatory framework where you have… a balance [between government and regulator],” says Morshid.

Spurring on that realization is the connection drawn by many economists between broadband penetration and increased gross domestic product of a country.  “The big potential going forward is broadband,” says Andreas Hessler, vice president of networks at Ericsson Middle East. “Broadband is a very poorly penetrated market in the region because you have low bit rates and unreasonably high pricing still.”

Every 10 percent increase in broadband penetration within a population translates into a 1.3 percent jump in total GDP, according to the World Bank. With such encouraging statistics, it is little wonder why governments are now changing tact.

“Until recent years, many developing countries, including the Arab countries, thought this [infrastructure and telecommunications] was a goldmine for the government budget,” says Morshid. “The good news is that when these governments realized [the advantage of liberalization] and partially opened their markets, they had better services, more affordable prices and more output even in terms of government budgets.”

Still, governments own around 70 to 80 percent of incumbent companies in the region, according to Morshid.

Broadband access today is heterogeneous around the region, with service providers in Saudi Arabia offering download speeds of up to 29.04 megabits per second (Mbps) to Lebanon where the speeds average around 0.5 Mbps.

ICT spending in GCC markets, actual and projected, in $millions

As a direct result of public ownership, the ability of each individual country in the region to improve its infrastructure, facilitate affordable services and encourage ICT use by its population depends on how much money is present in government coffers. This reality has created another digital divide within the region between richer oil producing countries and poorer non-oil producing countries.

“Countries in the GCC have piled up sufficient revenue and sovereign fund cash that allows them to be more generous in their spending on ICT in general, and on infrastructure in particular,” says Khoury. “Those without oil need to be selective. They are selective in their projects and the priority is on reductions in cost.”

Due to regional conflicts and socio-economic realities, many countries in the region are forced to focus their strategies on issues like security, food and agriculture, which Morshid says often preempt ambitions for the ICT sector. He gives the example of Iraq as a country where there is enormous potential, yet the lack of stability has led to a lack of the needed “confidence to open up the system.”

A real regulator

Reluctance to open up regional ICT markets is exemplified by governments’ reluctance to establish strong, independent regulators to keep their markets competitive, and to ensure access to essential technologies like broadband for both urban and rural populations.

Unless regional governments are willing to change, it seems the population of the region will have to settle for infrastructure that is out of step with global standards and practices. According to the ITU, a total of seven countries in the Middle East do not have an independent regulator, which is seen as a precursor to development of ICT.

“This is a rich sector if you have the right transparent independent rules and regulations. [Then] the money is no problem, the money is there,” says Morshid. “But [first] you have to make sure that it is transparent, it’s open and it’s fair competition.”

Every 10% increase in broadband penetration within a population translates to a 1.3% rise in total G.D.P.