We have four words to say to Telecom Minister Nicolas Sehnaoui: Congratulations and thank you!
Congratulations to your Telecom Ministry.
Thank you for believing in implementing Telecom Law 431.
Thank you for believing in Lebanon’s youth and trying to limit their migration from the country.
Thank you for supporting fair competition in the telecom sector.
Thank you for believing in the strength and value of the private sector’s Data Operators and Internet Providers.
Thank you for declaring a plan to lower Internet feed costs.
We have learned that the cost of international E1 (2 Mbps) will drop from today’s exorbitant $3,000/month to $300/month.
What can we expect after this price reduction? How will it affect our lives? Put very simply: Internet subscription prices will drop while the capacity in Gigabytes and speed in Mbps will increase.
ISP business model
To better illustrate this, let’s have a look at the Internet Service Provider (ISP) business model.
An ISP buys its international Internet feed from the Telecom Ministry on a wholesale basis. This capacity is sometimes referred to as E1s. The ISP then divides this capacity among its subscribers — based on their subscription plan and speed. However, the division is not made on a 1:1 dedicated basis, rather on a shared basis or “oversubscription” of 30 to 1.
In fact, not all subscribers are constantly connected to the Internet, nor are they downloading/uploading at the same time. Also, it is impossible to dedicate capacity to a single user. This would be very expensive, technically almost impossible, and there would be lots of wastage.
That’s why capacity is oversubscribed by ISPs. This doesn’t only happen in Lebanon, oversubscription takes place all over the world. In countries with poor Internet, oversubscription rates reach 50:1, while in advanced countries it is 30:1. The lower the oversubscription, the better the quality of the connection is.
What does this mean in figures?
Subscription fees are not all related to the international Internet feed. ISPs and DSPs incur “other costs,” (including human resources, customer care, office rent, site rent, electricity, advertising and marketing, distribution, depreciation, taxes, etc.).
For example, for a 2Mbps international Internet feed at $3,000 per month with an ISP oversubscribed at 30:1, the price of the international Internet feed is $100 ($3,000/30 users). When the cost of the International Internet feed drops to $300, the 2 Mbps international Internet feed charge deflates to $10 ($300/30 users). Clearly, the subscription total price will be a bit higher given the “other costs” mentioned above.
According to informed sources, the Telecom Ministry’s cost of the 2 Mbps international Internet feed via IMEWE is less than $30. That is why we believe there is still room for improvement, and hope the E1 price drops to $100 or less. In this scenario, the raw Internet cost per 2 Mbps subscription would be reduced to $3.3 per month and most certainly make the consumer happier!
Now the fact that a South Korean Internet aficionado buys a 100 Mbps home connection for $30 a month makes more sense.
Does this drop in the price of the international Internet feed solve Lebanon’s Internet problems?
Not totally, but it’s an excellent move in the right direction.
There’s still a long way to go and a lot to be done to implement Minister Sehnaoui’s commitment to Telecom Law 431 and fair competition.
But there are some steps that could have an immediate impact on Internet quality, speed, variety of services, and price:
Additionally, Cedarcom should be treated fairly, given equal rights and allowed to operate its DSL network — installed in October 2007 — just as other Data Operators do.
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