What Telecom Minister Nicolas Sehnaoui achieved on Tuesday (August 23) is memorable and we thank him!

Lebanon needed this release of “broadband” DSL packages. Gone are the pathetic 128, 256 and 512 ones. We now welcome 1, 2, 4 and 6-8 Mbps packages with more Gbytes and lower prices!

Is this enough? Where does Lebanon go from here?

When Cedarcom CEO Imad Tarabay wrote the first article shocking the local industry on March 9, 2011, Lebanon ranked 186^th. Based on Net Index, the average download speed in Lebanon today is 530 Kbps. This ranks Lebanon 170^th.

Where does the increase in DSL packages put Lebanon now?

Considering the average new DSL packages most consumers can afford, we project that:

30% of the DSL subscribers will choose the 1 Mbps package;

35% the 2 Mbps package;

25% the 4 Mbps package; and

10% will opt for the fastest — and most expensive — package of 6-8 Mbps.

Based on the above, the average connection speed would become 2.7 Mbps — roughly five times the current connection speeds. And Lebanon moves up to 107^th position worldwide, right after Zimbabwe and Laos.

The old vs. the new Internet prices and speed

So is this enough? Do we lack initiative, investments, intelligence, or willingness to rank among the top 10 fastest countries like Lithuania (31 Mbps), South Korea (30 Mbps), Sweden (23.9 Mbps), Romania (23.8 Mbps), the Netherlands (23.7 Mbps), Latvia (23.7 Mbps), Switzerland (20.4 Mbps), Bulgaria (19.4 Mbps), Andorra (19 Mbps), or Singapore (18.5 Mbps)?

Can Lebanon reach an average connection speed of 20 Mbps or more?

Yes! We proudly say that we can. How?

The first requisite of any Internet connection is the international feed. Even at $420, the E1 (2 Mbps) line remains exorbitant.

Internet prices in Lebanon are decreed by the Council of Ministers. International practice, however, is to let supply and demand determine the price of E1. In Europe, for example, it doesn’t cost more than 3 Euros/month.

According to Telecom Ministry sources, the cost price to the ministry does not exceed $30/month. So either price the E1 at $30 or break up the monopoly and allow serious investments in alternative cables by private operators. Price fluctuation would then be determined by the old, yet valid, “supply and demand” practice.

If prices dropped further, DSL connection speeds could be beefed up to 20 Mbps like in Europe or South Korea where the 100 Mbps home connection costs $30.5/month (See Executive Insight).

Secondly, there needs to be incentives to invest in new networks, technologies and services. In the current circumstances and heavy unfair competition between state-owned and private data operators and Internet providers, inequality in taxation, etc. (see our post “Fair competition key to Internet success”) the private sector is not willing or financially incapable of making large investments in advanced networks, infrastructure, and services.

What do investors need? If we examine any of the top 10 fastest countries, operators there have 20- to 25-year licenses and regulators have enforced fair competition in these markets.

It is in the hands of the telecom minister to further reduce international bandwidth prices or open up the competition on international fiber-optic lines.

It is in the hands of the telecom minister to enforce fair competition among all operators. This can be implemented at a day’s notice.

It is further in the hands of the telecom minister to grant long term licenses to current operators and then open up the market to new entrants.

Former Telecom Minister Gebran Bassil drew the roadmap for Lebanon to become an information-based society. We constantly hear Minister Sehnaoui declaring the importance of the private sector in the telecom industry. It is now in the hands of Minister Sehnaoui to make it happen.

In less than a year, Lebanon can be among the top 10 fastest Internet countries in the world.

A belated first meeting was held on Friday (August 19) between Telecom Minister Nicolas Sehnaoui and Lebanese Telecom Association (LTA) members Cedarcom-Mobi, Broadband Plus, CableOne, TerraNet, Cyberia, Pesco, Wise, IDM, and GDS.

In addition to Sehnaoui’s advisors, also present were Sodetel and Telecommunications Regulatory Authority (TRA) interim Chairman Dr. Imad Hoballah.

Sehnaoui announced he has forwarded the draft bill to reduce fees for Internet services — E1s and DSL packages — to the Cabinet for consideration.

While details of the bill were neither revealed nor shared to the disappointment of the private sector, the fact it was sent was seen as an “excellent move” by the telecom minister. To what extent the TRA was involved in drafting the new bill was also not revealed.

Among the issues raised by the LTA members with Sehnaoui and his advisors were concerns about the obstacles they are facing in E1 provisioning, DSL expansion, creation of a one-stop-shop office for ISPs/DSPs, long term licenses, and fair competition.

The LTA members handed the minister an open letter outlining their vision of telecom sector reform – how it will become competitive and spiced with innovations and a competitive customer centric environment (we will post on this soon).

Some LTA members were pleased the TRA’s interim chairman attended the meeting. Sehnaoui confirmed all conflicts between the Telecom Ministry and the TRA are being ironed out in a win-win scenario where each will preserve its rights, powers, and authority.

Cedarcom-Mobi CEO Imad Tarabay said he was happy to hear Sehnaoui championing the implementation of transparent regulations, fair competition, equal taxation, and a healthy private telecom sector.

He added it was a very positive meeting and a portent of excellent news for the telecom industry.

Tarabay is also hoping the positive momentum of the meeting will lead to the release of private sector equipment held up at the airport — since January 2011 in Cedarcom-Mobi’s case — and leading to shortages on the market (see our blog post, Apologies for Mobi modem shortages).

The private sector operators were heartened to hear Sehnaoui believes in “fair competition” among all operators. This is something the private sector hasn’t heard since Minister Gebran Bassil’s departure from the Telecom Ministry.

Several LTA members left the meeting believing Sehnaoui will follow Bassil’s route. Bassil presented a cure for the ailing Internet sector in his 2009 General Rules. It upholds the creation in Lebanon of a “people-centered information society” based on a “vision of growth, investor confidence, public-private partnership, fair competition and transparent regulations.”

Some members promised to send the minister their suggestions for updates to the General Rules.

Tarabay said it was also a positive sign that Sehnaoui is a keen adaptor of technology and supports innovation. The minister, he noticed, carries his iPhone full of apps, including the Dermandar, the mobile application that creates panoramic photos stitching and sharing. It was developed by a new technology startup founded by Elie-Gregoire Khoury with Lebanon’s Berytech and has already had over one million downloads. The minister even took pictures of the meeting and all those present, Tarabay said.

It was certainly a good note to end the week and we hope to bring you more good news soon.

Like most industries, telecommunications is driven by competition – a mixture of factors based on price, quality, and service.

Telecommunications is what weaves together telephones, mobile phones, computers, and what links us to the Internet — the global village we all congregate to. Telecom operating companies make all this happen, together with Data Service Providers (DSPs) and Internet Service Providers (ISPs).

Globally, the telecom industry is becoming more and more deregulated to create competition and innovation by reducing or limiting government power over the sector to a “regulatory role” — unlike in Lebanon where the government polices and plays the role of regulator, supplier, and competitor.

Government monopolies – where a single company or group controls all or nearly all of the market for a given type of product or service – are characterized by the lack of competition. This often results in high prices and low quality products, as with mobile services in Lebanon.

Although the traditional telephone is not dead to the industry, telecom is now more about text, images, videos, mobile applications, social gaming… For this, high-speed Internet access is needed.

Liberalizing the telecom sector — internationally and in Lebanon — is key to the growth and competitiveness of the economy. Indeed, liberalization has proven at the international level to attract investments, lead to the development of high-tech services, and create high value added jobs.

In a fair competition market, the same rules and conditions are applied to all participants, and the competitive action of some does not harm the ability of others to compete.

We keep calling for “fair competition” in Lebanon because it doesn’t exist. There is no fair competition between government-owned (Ogero/Alfa/MTC) and private operators.

Fair competition means all operators are given an equal opportunity to compete and offer services or solutions to the consumer. It means all operators are liable to pay identical taxes, are properly licensed and subject to identical rules and regulations.

With fair competition, the Lebanese consumer would have a wider choice of services from different operators, more data plans, more packages, and more competitive prices.

Let’s take the Lebanese example and the current discrepancy between mobile GSM operators and private DSPs and ISPs.

Mobile operators are dedicated to selling GSM services while the DSPs and ISPs sell Data and Internet services. It is unfair competition when mobile operators decide to compete with data operators and offer 3G services – without proper licensing (from the Council of Ministers or licensed frequencies from the Telecommunications Regulatory Authority), and without fiscal obligations. Mobile operators highly cross-subsidize 3G services with Voice profits while data operators are highly taxed, pay for E1s, etc.

The following charts illustrate the extent of unfair competition between the two camps:

Enforcing fair competition on state-owned operators and private sector DSPs and ISPs requires only a few days’ work. We hope the Telecom Ministry and the Regulator insist on fair play before it is too late.

Given unfair competition between government and private operators, when both compete and offer a similar service (WiMAX or Mobi vs. 3G for instance), the cost on the mobile operator is much lower (see graph below).

It is unfair competition because costs to the mobile operator are much lower. Its antenna site rentals are fully subsidized; incremental site electricity overheads are minimal; staff expenses are subsidized at large; bandwidth cost is negligible — compared to $2700/E1 on ISPs; licenses and other taxes don’t exist. Consequently, the private operator is unable to compete and would eventually be forced to exit the market.

Telecom Law 431/2002 in Lebanon and international practice prohibits cross-subsidy of one service by the revenues of another. The regulator — the Telecommunications Regulatory Authority in Lebanon — would put very strict rules to prohibit mobile operators from exploiting their advantage.

In a fair competition environment, the regulator would impose cost accounting per service on Significant Market Power operators (SMPs) — like Ogero, Alfa, MTC — so as not to subsidize the 3G service’s staff and site rental costs. The regulator would also impose equal taxes – in Lebanon it is currently 59% on private DSPs while zero on mobile operators.

To illustrate the gravity of unfair competition even more, we can highlight the following example: Assuming the data operator offers WiMAX 2.0 which brings faster and superior service than the mobile operator’s 3G service, given the fiscal, cross-subsidies and cost advantages, mobile operators can introduce their service at half the cost. DSPs and ISPs would go bankrupt and exit the market, leaving the consumer with only one choice: the mobile operator!

The first reaction from a consumer’s perspective would mainly be positive and welcoming. However, it is the total opposite as this removes the consumer’s basic right to choose. We believe that only through “fair competition” that we can safeguard the consumer’s right to choose the best service at the best price.

A happy consumer is what keeps operators and the telecom sector going. Consumers should have a variety of options provided by multiple mobile operators, DSPs, and ISPs from which to choose. Choice gives the consumer value added services, alternative data plans, package variety, quality of services and most importantly, competitive prices.

Multiple operators = choices = a happy customer

Under a de-facto monopoly, however, government-owned operators have control over basic services, data plans, quality, and price. They determine the terms of access to the consumer. In our previous blog post, Waiting for Lebanon’s Internet Godot, we explained why the current subscription costs are so expensive in Lebanon. It is because of the high cost of the international Internet feed, which comes from only one source: the monopoly.

Fiscal and cross-subsidy advantages let SMP operators control the sector and establish a monopoly. Monopolies typically produce fewer goods and services that are sold at higher prices than under fair competition to maximize their profit at the expense of consumer satisfaction.

One mobile operator = no choice = an unhappy customer

Fair competition in the telecom sector in Lebanon is crucial for the economy, innovations, and consumer satisfaction. We again urge Minister Sehnaoui to break the mould and shape the way for the future and implement fair competition. It wouldn’t take the minister long to enforce fair competition and we hope he will turn his attention to this crucial problem for the sector.

Former Minister Gebran Bassil’s focused on that in his May 2009 General Rules and we will continue to strive for fair competition in the telecom sector. It is the only way for Lebanon to take its due place among the top Internet countries. In the fast-moving world of telecommunications technology, we cannot afford to hold back.

All fingers are crossed and waiting for the draft bill Minister Sehnaoui said he was presenting to the Cabinet in the coming weeks to reduce the price of Internet services.

Can anyone remember the world before the network of networks? And how is it that a “cloud” has come to dominate our lives on a personal level and economic growth on a national one?

The attraction is still there after more than 25 years. It continues to grow thanks to the speed of innovations, the evolving uses of the Internet, and the creation of Smartphones and mobile devices.

Sadly, Lebanon’s low speed Broadband connectivity woes have been negatively affecting the flow of investments to the country. Moreover, lack of adequate Internet connectivity and the high cost of Internet services are also hampering individual and corporate production capacity.

Since 2009, the cure to the ailing Internet has been a Telecom policy authored by then Telecom Minister Gebran Bassil. It called for the creation in Lebanon of a “people-centered information society” based on a “vision of growth, investor confidence, public-private partnership, fair competition and transparent regulations.” [See “Telecom road sign points to Bassil‘s general rules,” 10 Jun 2011]

For companies and individuals to make use of the enormous wealth of facilities the Internet offers, Internet Service Providers (ISPs) need to easily buy international bandwidth to pass on fast, affordable, connections to the consumer.

How does this work in Lebanon? Where does the country get its Internet bandwidth and how is it passed on to the consumer?

These questions were addressed in an in-depth look at the Telecom sector in Lebanon and the problems it is facing on Sabine Oueiss’ TV program “Kalam bel Arkam” on June 12. The show’s host was joined by Cedarcom-Mobi Group CEO Imad Tarabay and Dr. Riad Bahsoun, an international telecoms expert. [See Cedarcom’s YouTube channel]

In his opening comments, Tarabay presents two options, illustrated with graphs – the “Internet in Lebanon Today” and the “Competitive Internet Tomorrow.” He explains how he sees the future of the industry and the Internet, how Lebanon gets its international bandwidth, and how the Internet is priced.

International bandwidth is the connection that links Lebanon’s ISPs to the cloud. The ISPs, through Data Operators’ wire-line (like DSL) or wireless (like Mobi) service, connect the end user to the cloud.

The best and cheapest way to connect a country to the cloud is via submarine fiber-optic cables. There are satellite connections, but these are still very expensive and not of the best quality.

Internet sources

Submarine international cables connect Lebanon directly to Cyprus, Egypt, and Syria. Official figures on their exact capacity are not available. The figures stated are as close a range as possible from various telecom sources, including the Telecom Ministry website.

Cadmos, a 230-km fiber-optic submarine telecom cable system in the Mediterranean, links Beirut to Cyprus. It started in 1995 with a design transmission capacity of 622 Mbps. In September 2010, the Telecom Ministry signed an agreement with Cyprus to increase Lebanon’s share. According to some sources, after its recent upgrade Cadmos now has 40 Gbps. Lebanon gets 38% of the bandwidth; Cyprus, Syria and other countries 62%.

Tartous in Syria receives two fiber-optic cables: Ugarit from Cyprus (622 Mbps) and the 787-km Aletar from Egypt (5 Gbps) which in turn is connected to Beirut via Berytar’s 134-km cable (5 Gbps). (See graph below)

Figure 1 – Submarine cables connect Lebanon directly to Cyprus, Egypt, and Syria, but official figures on their exact capacity are not available.

Berytar is co-owned by Lebanon’s Telecom Ministry and Syrian Telecom Est., with 6.25 percent for ARENTO, the Arab Republic of Egypt National Telecommunications Organization.

According to informed Telecom sources, by way of international fiber-optic cables, Lebanon receives the E1 (2 Mbps) that goes to the Telecom Ministry which in turn distributes it through local fiber-optic cables to ISPs at 100 times more than its original price. For example, they say, an E1 costs the Ministry $30; it sells it to ISPs at $3,000. The ISP then distributes the bandwidth to the consumer.

How do ISPs get the E1s in Lebanon? They go through a very tedious process. An application is submitted to the Telecom Ministry that goes through the lengthy process of paperwork and studies before a written decision is issued and a copy delivered to the ISP. ISPs then have to submit a bank guarantee and make a one-month upfront payment. Sometimes, after making this payment, the E1 lines take up to 12 months or more to be activated!

The supply of bandwidth — and therefore Internet connection, speed and price — is channeled and controlled by the Telecom Ministry.

How do ISPs get the E1s in Saudi Arabia, for example? It’s simple. ISPs contact their account manager at STC, request capacity and it is activated. It is called “Bandwidth on Demand.”

We are hoping that with the IMEWE cable now operational and the upgrade of Cadmos, the Telecom Ministry will enforce a mechanism that simplifies and quickens the process — Bandwidth on Demand!

Today and tomorrow

On “Kalam bel Arkam” Cedarcom’s Tarabay explained how Lebanon’s international bandwidth is received and distributed in Lebanon and how it could be in a competitive market via two charts.

The “Internet in Lebanon Today” shows the current status for an ISP. “Competitive Internet Tomorrow,” illustrates how it could be, if there were competition on international fiber-optic submarine cables, and the benefits that could be passed on to end users.

Graph one, above, takes the example of an ISP. In this case LYNX is connected to Cedarcom’s wireless network and sells the MOBI service.

The Telecom Ministry is the only operator with submarine cables connecting to the cloud. LYNX gets 2 Mbps at $3,000 a month from the Telecom Ministry which it passes to the user. Dividing that cost on a scale of 30 users, the cost of bandwidth will be $3,000/30, or $100 per month.

The cost is high because there is only one source of Internet bandwidth. In the case of such a monopoly, prices are fixed and may change – or not. In Lebanon, the last time the E1 prices were dropped was in 2006!

In a competitive Internet scenario (graph below), the Telecom Ministry would have competition and various carriers would bring in submarine cables landing in Lebanon. Each sets its wholesale price to ISPs. This creates competition on international connectivity and ISPs can select their carrier of choice.

So, in essence, two carriers invest tens of millions of dollars and build submarine cables connecting Lebanon to the cloud, giving the country the redundancy needed in severe cases. Depending on the cable’s capacity, length, landing points, etc., each carrier has its respective cost per E1.

In this scenario, Carrier One passes on the 2 Mbps to ISPs for $120; the Telecom Ministry passes on the 2 Mbps to ISPs for $100; and Carrier Three passes on at $70. This gives LYNX and all other ISPs in Lebanon three choices.

From a cost perspective, the ISP can choose to buy all the capacity from Carrier Three, but it risks interruption in case this cable is disrupted for any reason. A smarter choice would be to combine capacity from two sources and have redundancy – half the capacity from Carrier Three and half from the Telecom Ministry.

Comparing the “competitive landscape” to the current situation, the consumer could save up to $97 thanks to lower international E1 prices.

Waiting for the IMEWE Godot

Lebanon has an additional option: The IMEWE cable.

The IMEWE (India-Middle East-Western Europe) cable project — for India, Pakistan, UAE, Saudi Arabia, Egypt, Lebanon, Italy and France – was signed by Lebanon in 2006. The cable was completed and switched on in December 2010 – but not in Lebanon! That is until July 4, 2011 when the Telecom Ministry allocated a small quantity of E1s to local ISPs.

IMEWE is a 13,000-kilometer submarine communications cable system between India and France. With a 3.84 Terabits per second capacity, ISPs and network operators hope to utilize the additional bandwidth to support high-bandwidth peer-to-peer IP-based broadband services such as multimedia streaming, broadband Internet, and voice/video telephony.

All Internet hopes in Lebanon are pinned on IMEWE. Said to have cost the Lebanese government $45 million, with 30 Gbps broadband capacity, it will greatly improve the speed and quality of Internet services in Lebanon. Again, there is no official confirmation of IMEWE’s capacity. Official sources have said in the press it could be updated to 1.4 Terabits.

The excellent news is that Minister Sehnaoui recently stated plans to slash the E1 prices and everyone is now waiting for the draft bill he is due to present to the Cabinet to reduce the price of Internet services.

However, Lebanon needs competition at the international fiber-optic level. Competition brings redundancy and reduces prices (or stops price-fixing). Redundancy is very important to keep Lebanon’s Internet connections “ON” in case IMEWE or any other cable is interrupted. Prices would go down like in any competitive market, especially in Lebanon where prices are fixed by the Cabinet. In Europe, the wholesale price of E1 is… 2 Euros per month!

Activating the IMEWE cable is a step in the right direction. We also hope the “important developments” promised by Minister Sehnaoui will translate into lower prices to pass on to the Lebanese consumers.

Our orders have been held up at Rafik Hariri International Airport since January 2011, mainly due to red tape and the tedious procedure we face when importing our products.

Like any other Data Operator, Cedarcom places its orders via a global vendor who ships by air or by sea. On arrival in Beirut, and prior to its release, the equipment has to be cleared by the Telecom Ministry and Lebanese Customs. The major hurdle that holds up Cedarcom and all Data Operators’ equipment is the ministry’s bureaucracy.

You may have heard our cry for “fair competition.” This is an excellent example to justify it. Several Data Operators’ equipment has been languishing at the airport for over six months. How can the telecom sector function, and how can operators compete, when we are unable to supply our customers with basic equipment such as modems and spare parts?

A six-month shortage for any company, especially during spring and summer, and during Ramadan and Eid, is infuriating.

As a client-centric company and despite the obstacles, we are facing up to the current situation by continuing to provide our clients with the best products and services. This is why we launched two very interesting “promos” for those already connected earlier this summer.

We offered savings of up to 40 percent – or $91 on a six-month recharge and $182 on a 10-month recharge. This reduced the one-month cost from $45 to $32. We also offered 3 GB/month instead of 2.5 GB, free night quotas, and up to 512 Kbps.

This exceptional promo ended on July 26.

Again, we apologize for any inconvenience. We will let you know as soon as the Mobi equipment is released. You can reserve a modem by emailing us at hog@cedarcom.net with your name and number.

In the meantime, we hope you enjoyed and benefited from our promotion. Keep surfing the Net with Mobi!

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.

Figures

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.

Problem solved?

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:

Internet Providers and Data Operators should be granted 20-year licenses to give them the security and incentive to invest in the country’s telecom infrastructure and networks and offer the consumer a variety of very fast Internet and Data services at competitive prices.

DSL needs to be revamped with higher speed subscription.

DSPs should be allowed to sell DSL through all 171 central offices (today, the Telecom Ministry/Ogero sell in the 171 while DSPs sell in only 35).

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.

The document was developed and authored in 2009 by then Telecom Minister Gebran Bassil after intense consultations, and as per Telecom Law 431/200 granting the minister the power to set the general rules for regulating the sector in Lebanon.

It is still being hailed for setting down a credible roadmap for the creation in Lebanon of “a people-centered information society supported by a new, effective, and modern telecom landscape.” The document is based on vision of growth, investor confidence, public-private partnership, fair competition and transparent regulations.

Private telecom operators sing its praises because, among other things, it:

Acknowledges Lebanon’s ailing telecom sector;

Recognizes this sector as a key driver of economic growth;

Grants the Telecommunications Regulatory Authority (TRA) full “financial and administrative independence”;

Directs the TRA to grant incumbent telecom operators (Cable One, Cedarcom, GDS, Pesco Telecom, and Sodetel) new long-term licenses of between 15 and 20 years “with adequate spectrum assignment”;

Calls for licensing new operators;

Calls for fair competition in all Internet and Data eco-systems, such as international fiber-optic systems, in-country fiber-optic backbone, wireless access levels, etc.;

Calls for international E1 prices reduced to the neighborhood of $200; and

Calls for opening up the shareholding base of all operators via public listing on the Beirut Stock Exchange.

However, to the great disappointment of stakeholders in the industry, neither the Telecom Ministry nor the TRA have tried to implement this policy. Former Telecom Minister Charbel Nahhas, who succeeded Bassil, shelved the 2009 policy and removed it altogether from the ministry’s website.

Two years later, it is still ink on paper. This leaves Lebanon with highly taxed Internet services, unfair competition, insignificant securities for investments by private operators, interim-transitory short term licenses, and monopolistic tendencies.

There are conflicting reports on whether Telecom Law 431 is enacted. We believe it is — based on TRA decisions and published regulations — after the Shura Council’s review.

Now, with a new government in Lebanon, all industry stakeholders urge Telecom Minister Nicolas Sehnaoui to reinstate Bassil’s General Rules, with updates if needed. This will go a long way in paving the road ahead for telecom operators, investors, and consumers.

For the government to assure the telecom sector it does not intend to create a new telecom monopoly, it needs to formulate a clear policy that will enforce fair competition among government and private operators, grant long term licenses to all incumbent operators, and implement transparent regulations.

Bassil’s May 2009 General Rules puts forward “A Change-Reform-Repair Plan of Action.” It delineates a roadmap for the telecom sector’s future development to help Lebanon regain its top position among regional telecom leaders.

Bassil diagnosed the tribulations of the telecom sector that led to delays in services, a blow to the interests of the private sector, and a knock to the image and role of the public sector.

The vision

His vision was for an “Information Society” with the telecom ministry leading “the national global effort needed to build a people-centered, inclusive and development-oriented Information Society in Lebanon.”

It was based on the 2003 Geneva World Summit on the Information Society motto, where “everyone can create, access, utilize, and share information and knowledge.”

Bassil perceived a “society for Lebanon where all global public-private or local-foreign partnerships for development would be systematically encouraged with clear and strong incentives; a society using Information and Communication Technologies (ICTs) as tools for economic, social and human development, in a secure manner fully protecting national security interests, individual freedom, data home and business privacy.”

In the Information Society, “education, knowledge, information and communication are at the core of human progress, endeavor and well-being,” and have an immense impact on virtually all aspects of our lives.

“Extremely rapidly progressing telecom technologies should be regarded as the most powerful tools and instruments for economic and social development, to increase economic and industrial productivity, to generate revenues that may help reduce or reimburse our National Public Debt, to create jobs for our youth and young graduates, to bring back our brains who have fled the country during the past three decades, to reduce all traditional obstacles, especially those of time and distance, thus facilitating social integration and harmony,” in the Information Society.

The General Rules provided for the integration of women, the elderly, the disabled, the poor and those living in remote, rural, and marginalized urban areas, as well as refugees, the unemployed, and underprivileged who should all be granted access to communication services and the means to use ICTs to better themselves.

The Principles and Objectives

Continuing his roadmap, Bassil set out principles and objectives to reform the telecom sector “using all powers granted by the Constitution and by Lebanese Law, in particular by [Law] 431.

”He detailed the powers, responsibilities, duties, and mission of the TRA to achieve the most-effective regulation of all telecom services in Lebanon. “Such regulation is based on the implementation of a Licensing framework, being the only tool able to have all telecom operations conducted throughout Lebanon in a licit manner, protecting the consumers, preserving the financial interests of national treasury and favoring the introduction of advanced services at affordable cost within a transparent and competitive environment.

”The TRA has exclusive power to assign and manage the Radio Frequency Spectrum and make sure licensed operators are following the guidance included in the General Rules and serving the best interests of telecom sector in Lebanon.

To encourage fair competition, the General Rules suggested that incumbent operators be granted licenses to allow them to compete in the Lebanese market and offer high quality, advanced, and competitive broadband services. “Consequently, the minister defines as a rule for regulation that the TRA grants incumbent operators new long term licenses (15- to 20-year licenses) with adequate spectrum assignment.”

According to the 2009 General Rules, foreign firms are to be considered, but priority should be given to Lebanese companies and competition is to be promoted through the implementation of an equal treatment framework between all licensees — incumbents, re-instated, LT, and newcomers.

Also among the principles and objectives of the General Rules is granting the two 100% state-owned companies — MIC1 (currently Alfa managed by Orascom) and MIC2 (currently MTC managed by Zain) 20-year licenses each, giving them the right to operate the existing 2-2.5G network infrastructure and build and operate a new 3G network infrastructure using spectrum assigned by the TRA in frequency ranges allocated by the minister.

Whereas Broadband Internet and data services are currently provided by one public entity – the ministry with OGERO as a sub-contractor –; Sodetel, 50% owned by the Telecom Ministry; and the four incumbent broadband wireless operators (Cable One, Cedarcom, GDS and Pesco), the General Rules sets out the features for a new landscape by introducing Liban Telecom and later a second PSTN operator; the five incumbent operators (including Sodetel), two reinstated operators and eventually two newcomers; and local area new generation network operators.

Bassil’s vision saw Lebanon as the ideal country to situate and operate call-center services. Creating around 9,000 sustainable jobs, this would greatly contribute to Lebanon’s economic development policy.

Competition is encouraged via “equal and non-discriminatory” access to infrastructure while information and communication technologies, seen as an extension of the telecom sector, are to be promoted and revived as a fuel to economic growth.”

Cedarcom, the private sector’s flag-bearer in the push for fair competition and consumers’ rights in Lebanon’s telecom sector, and the largest wireless broadband operator in the country, is already challenging the drive by the government to monopolize the Internet sector through unfair competition.

Cedarcom firmly supports introducing and implementing the latest technologies in Lebanon. But it is equally insistent on transparent regulations and fair competition as stated in Telecom Law 431/2002, issued to provide a framework for governing the telecom sector and set the rules for its transfer to the private sector. The TRA was mandated by Law 431 to license, regulate and monitor the telecom sector in lieu of the Telecom Ministry.

We also firmly believe in protecting the consumer’s right to choose the best service, at the best price. This right can only be protected if the telecom market is competitive and liberal. It is only through fair competition that Lebanon can strive to become one of the fastest Internet-connected countries in the world.

Whereas the Internet and mobile technologies are widely used in Lebanon, the telecom sector faces a monopoly threat as well as lack of investment confidence and transparent regulations:

Monopoly: Due to the government’s monopoly over international fiber-optic lines, Internet providers pay a high $3000/2 Mbps compared to a government cost of less than $30 on some cables. The DSL market is heavily gripped by the incumbent national operator that controls over 80% of the DSL market. [See Insight in “Executive” magazine, 10 March 2011]. We believe prices should be driven by the basic economics of supply and demand rather than by price-fixing.

Investment confidence: The more than 23 data operators and internet providers in Lebanon are only granted yearly interim-transitory basis licenses by the government, thus undermining confidence to invest in infrastructure technologies. How, for example, can a private operator raise $30-40 million in capital needed to build new networks on a one-year license?

Transparent regulations: These should be imposed on government-owned and private operators to secure fair competition and private sector investment. That private operators are highly taxed — at up to 59% — while state-owned operators are not, will also ultimately lead to a telecom monopoly. [See Insight in “Executive” magazine, 4 May 2011]

If these problems are not addressed by the government, this will impact negatively on the country’s economic growth, on Internet speed, the quality, availability and tariffs of telecom services, investor confidence, innovation and inevitably lead to a monopoly in the sector.

According to the International Telecommunication Union (ITU), there are now over two billion Internet users worldwide. The active users of social networking platform Facebook grew from 150 million to 600 million between 2009 and 2011.

Hence the May 2011 report by the UN Special Rapporteur on the Promotion and Protection of the Right to Freedom of Opinion and Expression. It asserts, “The Internet is one of the most powerful instruments of the 21st century for increasing transparency in the conduct of the powerful, access to information, and for facilitating active citizen participation in building democratic societies.”

“Indeed, the Internet has become a key means by which individuals can exercise their right to freedom of opinion and expression, as guaranteed by Article 19 of the Universal Declaration of Human Rights and the International Covenant on Civil and Political Rights,” the report adds.

But it cautions, “The Internet, as a medium by which the right to freedom of expression can be exercised, can only serve its purpose if States assume their commitment to develop effective policies to attain universal access to the Internet. Without concrete policies and plans of action, the Internet will become a technological tool that is accessible only to certain elite while perpetrating the ‘digital divide’.”

The UN Special Rapporteur concludes: “Unlike any other medium, the Internet enables individuals to seek, receive and impart information and ideas of all kinds instantaneously and inexpensively across national borders. By vastly expanding the capacity of individuals to enjoy their right to freedom of opinion and expression, which is an ‘enabler’ of other human rights, the Internet boosts economic, social and political development, and contributes to the progress of humankind as a whole.”

The UN report says ensuring universal access to the Internet should be a priority for all States. “Each State should thus develop a concrete and effective policy, in consultation with individuals from all sections of society, including the private sector and relevant Government ministries, to make the Internet widely available, accessible and affordable to all segments of population.”

Cedarcom has long embraced the call for Internet access as a human right. The Lebanese Telecom Association (LTA), of which Cedarcom is a founder and member, in an open letter to former Telecom Minister Charbel Nahhas in June 2010 on its vision for a reformed telecom sector, wrote that Broadband services must be a human right for every Lebanese by 2016.

The letter said “this goal can be achieved by setting the right policies and taking the appropriate decisions to build the Broadband infrastructure through a partnership between state operators and licensed private operators, [and] enforcing fair competition in a transparent manner.”

In Lebanon, there were one million Internet users out of a population of 4,125,247 in June 2010 and 222,000 Broadband Internet connections (according to the ITU).

The local market and the inflow of foreign investments are suffering from a lack of clarity and certainty about telecom policy management in Lebanon. This, together with low Internet bandwidth and excessive connectivity prices, has stopped Lebanon becoming a regional business and telecom hub.

Broadband access is no more a luxury. Like liberty, it has become an inalienable right for citizens and businesses everywhere.

Through this blog, we at Cedarcom hope to open a dialogue with customers and readers on telecom issues in Lebanon as we continue to defend the rights and interests of both end-users and private operators in Lebanon.

We will update you on developments in the telecom sector and our push for proper legislation and free market competition.

While we stand ready to answer your questions, we look forward to your support of our campaign to make Broadband access a Lebanese human right.