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Lebanon 2014 | TELECOMS & IT | REVIEW: TELECOMS & IT

Lebanon's telecommunications sector is in need of a major overhaul. With a new minister appointed, the sector can expect to see some significant changes in the short term.

In June 2014, a television commercial was launched by the Ministry of Telecommunications showing a group of astronauts descending to the moon, then they bounce around and plant a Lebanese flag before the message is broadcast across the screen, “Of course we didn't arrive on the moon—but the internet has become faster, cheaper, and better." The commercial adequately reflects the pain of a disgruntled population and the need for progress in the Lebanese telecommunications sector. The telecommunications industry has frequently been eclipsed by political disputes and vested interests, and has been to the brink of privatization and back over the last decade.

The 12-year pending Telecommunications Law No. 431 was adopted by Parliament in July 2002, the idea being to organize and regulate the telecommunications sector and allow the formation of a joint-stock company, Liban Telecom, to which the fixed-line operations and assets of the Ministry of Telecommunications would be transferred and granted a 20-year license for the provision of telecom services. A decree for the formation of Liban Telecom was adopted by the Council of Ministers in December 2004. Law No. 431 provides for the sale of up to 40% of Liban Telecom's shares to a strategic partner within two years of the establishment of the company; however, the company has not yet been established.

The government-owned Ogero Telecom still maintains the fixed network in Lebanon and the state owns the two mobile operators, Touch and Alfa, which Zain and Egypt's OTMT manage, respectively. Zain took control of Touch in 2004 and OTMT of Alfa in 2009, and their management contracts have repeatedly been renewed since then, usually on an annual basis. Both companies' contracts were renewed in June 2014.

A Business Monitor International estimate put Touch and Alfa's combined revenues in 2011, and therein treasury revenues, at $1.6 billion, of which $1.4 billion went to the government, making telecoms the second-largest contributor to state coffers after taxes on goods and services. Lebanon is estimated to have more than 4 million cellular subscribers at present. According to Zain Group's report published in June 2014, their Lebanese subsidiary Touch's subscriber base increased by 4% to reach 2.1 million, up 4% YoY, while Alfa is reported to have 1.8 million—both numbers have grown significantly with the influx of over a million Syrian refugees in the last two and half years. Touch is the market leader, with a 53% share of Lebanon's mobile phone subscribers. According to a Ministry of Telecommunications report in 2012, the mobile phone penetration rate in Lebanon was 91% and fixed telephone at 21%—the highest in the region for the latter compared to a regional average of 9.6%. In more recent 2013 ITU report, taking account of the influx of over 1 million Syrians by that period, Lebanon's penetration rate for data subscription is 50%, putting the country on a par with most European countries. However, according to the 2014 international Household Download Index by US broadband tester Ookla, Lebanon's average internet speed currently stands at 2.2 Mbps, which ranks the country 181st out of 192 countries globally.

Such ineptitude has been part and parcel of not having elected officials to the Telecommunications Regulatory Authority (TRA). “They did not nominate anyone in the regulatory body, meaning we don't have a regulatory body now and we don't have a Lebanese telecommunications company," said Telecommunications Minister Boutros Harb during an exclusive interview with TBY. “The companies currently running the sector have reduced their attention, which is why I told them I could not accept their quality and they had to improve or I would break the agreement," Harb continued. It may be true that both Alfa and Touch had succumbed to the lack of productivity incentives offered by the Lebanese government. Affirmative action by the Ministry meant in 2014 the Council of Ministers agreed to the formation of a steering committee to control the quality of service, and accelerate the handover to the regulatory body. “In the future, we will have a regulatory body; however, it does takes some time to nominate the right people," said Harb.

The Head of the Higher Council for Privatization, Ziad Alexandre Hayek, also laments on the Ministry's apparent 180-degree turn and the consequent delays to the creation of Liban Telecom and its privatization. “Throughout this process we can be opening up more to competition. For fixed line, we had a plan that was stopped by the Minister of Energy at the time… to create a parallel fixed-line network that could be deployed for reading electricity and water meters," Hayek said. “Once you have that network you can use it also for telecoms. Therefore, it automatically competes with Liban Telecom."

Upon taking control in March 2014, the Telecommunications Minister passed three new decrees by the Council of Ministers, not only to significantly slash phone rates, but also announce Lebanon's first unlimited broadband plan and increased speeds for existing DSL services in the country. These plans and prices went into effect on July 1, 2014. The Ministry decided to award post-paid mobile line holders with an additional 60 minutes of free calls in exchange for the current $15 monthly subscription fee, while the rate of calls on pre-paid mobile lines were reduced by around 30% from $0.36 to $0.25 per minute. The registration of a new landline was introduced at no cost, as opposed to a previous $33 onetime fee, while the monthly subscription fee was reduced from $8 to $6.

Harb went a step further in May 2014 with the controversial introduction of unlimited broadband, and was met with delight by Lebanon's start-up and ICT companies that rely on the heavy usage of the services to optimize their productivity and generate investment. It is in this sector where the most significant injections could be made in the long term. These will include significant reductions on DSL packages—an average of 80%—as well as important reductions on mobile calls and 3G services.

With the new DSL package for $50, subscribers will get the 2 Mbps and an unlimited download plan compared to a previous cap of 20 gigabytes. The 4 Mbps plan will see its price drop to $33, from $50, and have its usage increased to 50 gigabytes, from 25 gigabytes. The service providers may well have been saved by their last-minute pledges to make the necessary upgrades to their infrastructure required, enabling them to boost the speed and quota for their existing customers as per the new data plans set out by the Telecoms Ministry.

Lebanon has in total 45 internet service providers and data operators. However, the cumulative revenues generated by these 45 generate revenues of not more than $200 million, versus Alfa, Touch, and the Ministry of Telecommunications that does $2 billion.

Companies such as Cedarcom and IDM, the latter holding approximately 60% of the ISP corporate segment and more than 50% of private sector, have invested significantly in the upgrading of switch nodes; yet, the implementation of these higher quality services is still dependent on Ogero completing its own upgrading of switch nodes at services points. Ogero technically has the capacity for ISPs without buying additional capacity on two submarine telecommunication cables, such as the IMEWE line.

Lebanon's current link between households and service points, which is largely still reliant on copper cabling, can handle speeds of up to 8 Mbps, which under current data plans is sufficient. However, any increase above that speed would require the completion of the fiber-to-the-x (FTTX) project, including fiber-to-the-home and fiber-to-the-office components. Only a few large firms, universities, and hospitals are currently linked to the internet through a fiber-optic network.

Time will tell whether the need and demand for higher capacity requires further investment in international infrastructure. All indicators would point to this becoming inevitable in the coming years. Fortunately, the Ministry of Telecommunications is looking at forming partnerships with neighboring countries, at the same time as incentivizing domestic companies. “Turkey has a major interest in connecting with Lebanon because it will be connected through this channel to India and the Far East. I think this is the kind of project that we can do besides inviting the Lebanese corporations to start creating new projects themselves," explained Minister Harb.