TBY talks to Imad Tarabay, Chairman & CEO of Cedarcom Group, on the future direction of Lebanon’s internet and data market, and the need for more reforms to liberalize the sector.
TBY What services does Cedarcom Group provide to the Lebanese IT market?
IMAD TARABAY We operate the largest wireless broadband operator in Lebanon. We cater for three sectors of the market. The first is the multi-branch-office market, where we securely interconnect the branches of banks and other businesses. The other sector that we cater to is the residential market, where we offer mobile broadband wireless services via USB dongles, Wi-Fi routers, or similar means, and third we serve the enterprise sector’s high-end internet needs. Basically, we cater for the whole data and internet eco-chain in Lebanon.
How do you see the potential for progress in the Lebanese telecommunications sector?
The potential is huge and leapfrogging from the slowest broadband country (current in 186th position) to a top-10 country can happen in less than a year. What Lebanon needs is to enforce fair competition among operators and give security to investors. With the current anti-competitive practices by state-owned operators and one-year renewable licenses to private operators, Lebanon is unlikely to see any serious investments or innovations led by the private sector. The Lebanese people have the financials, the knowledge, and the will. What is needed is a proper regulatory framework that implements fair competition between state and private operators.
How does your wireless network compare to that of your competitors?
We’ve outgrown all our competitors. When we came to the market in 2004, our competitors controlled the market; prices were high and the service quality was barely acceptable. The largest operator controlled over 50% of the market, but today we’re proudly the largest. Our strategy was eight times the speed at 80% of the price. We shook pricing and service quality and forced our competitors to re-invest in their outdated infrastructure. We had a very clear-cut strategy, and we executed it with passion and excellence. We invested in the right technology at the right time.
What developments are underway as far as updating your network?
We’re currently planning to invest $15 million in a new network build out, yet some shareholders are very cautious and are concerned to take this step. Though it is the right step to take, it might not be welcomed by the Ministry because we will compete with the state-owned operators.
What are the biggest issues you face in establishing a better level of competition and higher service standards in Lebanon?
The government imposes direct and indirect taxes on private operators like us of up to 59%, while state-owned operators are exempt from paying such taxes. State operators are classified as Significant Market Powers (SMPs), and they have the tendency to subsidize the cost of broadband services through the profits generated by voice services. These factors make competition impossible. Even if we offer a faster, superior service vis-à-vis the state operators, the fact is that the state operators have high fiscal advantages and subsidies, and they are able to sell a service at a lower rate than our own. In this respect, how can we compete? The telecoms regulators impose restrictions on SMP operators in order to prohibit any fiscal imbalance, while subsidies led to the creation of “monopolies” in telecoms, and as we all know monopolies are a consumer’s worst enemy. Unfortunately, the regulator in Lebanon is not playing its role to the fullest and the unfair competition is strengthening day by day.
Why isn’t the government imposing a more level playing field for all operators, whether public or private?
The previous Minister of Telecommunications, Gibran Bassil, was savvy and aware of the threat of creating additional monopolies. He published the famous General Rules for Regulating Telecommunication Services in May 2009, which were totally oriented with the clear-cut objective of converting Lebanon into an information-based society. He advocated fairness in competition, proper licensing, and listing the state operators’ shares on the Beirut Stock Exchange, among other things. Unfortunately, until now, these General Rules have not been implemented.
What impact do you see 3G having on the country?
The way things are going today, 3G will be a reason for joy amongst consumers in the short term, but will turn out to be a nightmare over the long term since the government will monopolize the telecoms sector leading to the exodus of the private sector. When this happens there will be no incentive for the monopoly to invest in a cash-cow business, as we saw in the past. Lebanon was once the innovator in adopting GSM services, but 15 years later we can barely make a call without the line dropping. Accordingly, services will deteriorate in no time, and the first to suffer will be the consumer with less than satisfactory and expensive services, whereas on a larger scale the economy will miss out on huge investment opportunities. Forcing the private sector out would mean the closure of 23 companies that employ over 1,000 people. This will have a big impact on the economy of a small country like Lebanon. There is no question that introducing 3G is a necessity for Lebanon; however, it should be accompanied by the appropriate licensing in line with Telecoms Law No. 431 and with the right set of regulations that encourage the private sector to invest on the grounds of fair competition. If this is accomplished, then all stakeholders, whether users, operators, or the government, will come out as winners ready to make e-Lebanon a reality.
What is your hope for the future of broadband in Lebanon?
We are calling for broadband to be a “human right” in Lebanon. We communicated that to the Prime Minister, to the Minister of Telecommunications and to the Telecoms Regulatory Authority. In countries such as Finland, Greece, and Spain, broadband has already been made a human right, and this is what we want for Lebanon. We live in a small country and giving access to a 20 Mbps connection within Lebanon is not farfetched.
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