Playing Catch-Up

Lebanon has the capability to develop high-speed internet with its location, human resources, logistics, and underwater fiber-optic cables, but the speed and cost of connectivity still does not meet international requirements and hampers the Lebanese economy.

According to Internet World Stats, there were 4,545,007 internet users in June 2016, representing 75.9% of the population. The price per unit of speed for the consumer, that is the rate of internet access divided by the rate of speed, is estimated at USD9 per megabyte per second, while in Malaysia it is USD3, Estonia USD0.7, and the UK USD0.6.

The cost of internet in Lebanon remains one of the highest in the world for its connection speed of 1.9MB per second, placing Lebanon 14th out of 16 Arab countries—ahead of only Syria and Yemen—and 200th globally. Depending on proximity to call centers and increased internet traffic at peak times, this bandwidth speed can fall to less than one megabyte per second. In comparison to Malaysia, which falls within the same economic classification as Lebanon, the rate of internet speed is four times faster in Malaysia than in Lebanon.
A study done by Ericsson and Arthur D. Little shows that doubling broadband speeds for an economy can add 0.3% to GDP growth. In such an equation, if Lebanon develops its internet to be on par with Estonia, its domestic output will increase by more than USD1 billion a year for the next five years, for a total estimated increase of USD5-7 million. By 2032, this figure would be USD62 billion. A large number of positive effects come from higher broadband speeds, such as increase in productivity, better access to services such education, health, job creation, and others.

Over the years, the Ministry of Telecommunications and OGERO, the main provider of internet infrastructure, have been working on initiatives to boost the sector. But the targets that Lebanon is expected to reach in 2020 should have been achieved in 2013, and this delay is costing the Lebanese economy. One of the main challenges stopping the development of the sector is the presence of illegal companies providing internet service. These companies are widespread, and there are no official controls around them by the relevant ministries.
The existing monopoly and the heavy reliance on the sector’s revenues to support the state treasury make it difficult to invest heavily and reduce prices for fear of reducing treasury revenues. Furthermore, revenues from the telecommunications sector are shrinking.

Following the example of other countries, the state could liberate the sector, thus contributing to economic growth and creating of jobs while maintaining revenues through direct and indirect taxes. One such example of this in Lebanon is the installation of fiber optics as part of the 2020 strategy. The Ministry of Telecommunications ultimately decided to license out the project to private companies such as Cedarcom.
Though costly, one of the most important benefits of installing fiber optic cables is incentivizing people to utilize legal internet providers. With more than half of the internet serviced by illegal providers, it is not feasible to outright shut down these providers. Rather, if the government can offer a superior product at a good value, economic forces should weed out the illegal providers, directly boosting government revenues and indirectly stimulating the broader economy.

Connectivity’s role in the ecosystem should not be understated. Imad Kreidieh, President and General Director of Lebanon’s major telecommunications infrastructure provider Ogero, explained Ogero’s transformative role in the Lebanese economy. He asserts, “Many entrepreneurs are moving out of the country due to the lack of proper infrastructure. Connectivity has become essential for every start-up and every business that seeks growth. Our objective is to cater such services for all stakeholders to grow within their homeland and benefit its economy.“