Monday, 29 March 2010

FNC Committee Slams TRA, Telcos Bigtime

Old telephone exchangeImage by bbcworldservice via Flickr

We pay 85% more than Turkey, 85.5% more than Ireland and 83.1% more than Sweden for our broadband. This should come as no surprise (consider that the Japanese pay $0.27 per megabit per month for broadband and these other figures look positively benign). What is, perhaps, a surprise is that the news comes to us via Emirates Business 24x7.

A special committee reporting to the UAE Federal National Council has found that prices of telecommunications services are higher than those in several Arab and European nations refuting, according to Emirates Business 24x7, “The common perception that telecom charges in the UAE are low...”

Refuting a common perception among the mentally deranged, perhaps chaps, but I think you’ll find that the rest of us know perfectly well that we’re being gouged on an intergalactic scale by a cosy duopoly buoyed by a compliant regulator.

The EmBiz story reports that telecom prices across the OECD are, on average, 66% lower than in the UAE. The picture’s even more depressing when you look at the prices business users are paying for broadband – 91.1% more than Morocco, 83% more than Ireland and so on. In fact, prices in Europe are, on average, 95.1% lower for broadband connectivity.

The committee has concluded, in telling words, that “ the past three years there has been no benefit from competition for consumers.”

In fact, the report hands out a pretty comprehensive drubbing to the TRA, pointing to the effective monopolies that the two telcos have established over certain areas, the lack of subscriber focus in regulation and generally accused the TRA of “failure”.

It’s a no-brainer that low-cost, high speed, highly available broadband is a critical element in supporting economic development in the Internet age. Jordan reacted to that need, expressed at the Dead Sea Forum in 1999 with the privatisation of Jordan Telecom, a move that started the country’s march towards being the region’s most competitive telecom market and where significant economic value is being generated by a dynamic and burgeoning Web-based technology industry. Egypt has seen blisteringly fast adoption of broadband and, once again, is seeing significant and growing economic value being generated through its online capabilities.

The UAE, once the leading telecom market in the Arab World (and actually pretty far ahead of the rest of the world at one stage – the UAE was 100% fibre-optic before the UK, for instance) is fast dropping behind. We’re paying too much for broadband at both the domestic and business level and it’s hampering adoption and innovation. We’re seeing an increasing number of Internet-based innovations (including, but by no means limited to, VoIP) being used as a business advantage elsewhere while our operators continue to cling to circuit-switched pricing models at the expense of their customers' business competitiveness.

Low-cost, high speed Internet access could, and should, be a major advantage being offered to businesses wishing to set up in the UAE to serve regional markets. And it's not - it's actually a major disadvantage. A trading economy, the UAE’s businesspeople can’t even use mobile data services when they’re travelling overseas because roaming data tariffs are insanely high. And those mobile services are going to become increasingly key to us all.

It’s good that the FNC committee has highlighted the massive discrepancies in value, despite the operators’ claims that they’re price competitive and great that its work has resulted in a resounding wake-up call for the regulator to be more subscriber focused.

Will anything change as a result? I remain, as always, optimistic...

(Interestingly, the committee found that 6,629 complaints had been logged about Etisalat’s mobile service quality, against a whopping 57,062 complaints about Du’s mobile service quality – a number made even more impressive by Du’s lower subscriber base.)
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Seabee said...

Speed, or lack of it, too Alex.

These problems are a departure from what's underpinned Dubai's economic success in the past - the best communications infrastructure available at the time for businesses.

It's what gave a huge boost to the place back in the early seventies, when ME offices of international companies moved out of Beirut. In those days it was Telex and landlines, but it was still infrastructure way ahead of the rest of the area and it attracted them.

It's gone backwards to an average service at very high cost.

measured PR said...

I don't think your comparative figures reflect how much much much worse things are. When you compare with the basic packages, you come up with the figures you quoted perhaps.. but once you get into bigger needs (e.g. static ip's, higher bandwidth) for businesses, the numbers jump exponentially (literally). an 8Mbps up/down link with a static IP at 23k dhs.

Everytime I think about it, I want to scream. The guys sending the invoices nod and shrug :)

samuraisam said...

I think the important thing to remember is that the UAE is in the middle east, it isn't located near Europe or anywhere else. The only way to get internet here is via undersea cables which are expensive.

I don't think it is fair to compare the price of broadband here to Europe; the only comparable country is probably Austalia, where broadband prices are high/higher than here and just as bad.

On top of all the pricing shenanigans, the government does take a 40% royalty fee from Etisalat and Du.

Speed isn't everything on a connection; the more Etisalat and Du keep on pushing out higher internet packages the more and more demand will be put on the infrastructure. I haven't really looked into it much recently, but I somehow doubt we'll be seeing 100mb internet anytime soon.

We'll probably end up getting 3000 mbps internet packages with 3.5kb monthly download allowance.

The push for higher speeds is unreasonable and unrealistic--I'm sorry, but no home user really needs more than 2mb/s. 2mb/s is enough to stream 720p video content; in 12 months time I would put the requirement at 4-6 mb/s which would be enough to stream 1080p content. Giving people 30 mbps pipes into their houses - although nice - serves no realistic purpose. It doesn't make webpages load faster. However, upstream speeds could do with an increase.

Of course, business users are definitely a different issue (both in terms of price/speed)

In my opinion the main issues with internet reliability in the UAE come from the proxy and from Etisalat giving people shitty chinese routers.

measured PR said...

samuraisam, not having invested in undersea cables to deal with growth is no excuse to the current situation. Australia is geographically isolated (relative to the Middle East). So, I find your argument to be flawed.

It is understandable that the current prices are set to pay for the investments made (and planned to be made).. but it isn't clear where we're headed. Compared to the GCC, Internet in the UAE is more expensive.

On another note, I strongly disagree with your outlook on broadband home usage, unless you are counting 2mbps per individual user and not home account. A household of 4 users has very different demands than one with a single user.

Also, back to Australia.. it's just about the worst country from the 'developed' world when it comes to Internet (prices, censorship, etc. -- just horrid!). They set the bar so low, the Middle East might trip walking over it!

alexander... said...

Sam, I'd tend to agree with the MeasuredPR approach on this - the Gulf is NOT an expensive place to lay cable, there's a shitload of the stuff out there and Etisalat has had a cableship of its own for over two decades now.

It's not a cable issue - it's a mindset issue. If you're charging $2 a minute for yoghurt pot to yoghurt pot connections, you're hardly going to change to a more challenging business model unless someone really destroys you. Du couldn't destroy its way out of a wet paper bag because the TRA is sitting on its ass in the interest of the 'shareholders' who really don't want you and I paying 1c a minute rather than $2.

And so, because of short term, unenlightened self interest, the whole nation gets dragged backwards into global uncompetitiveness, dropping down the global telecom table until we're down there with Angola and Paraguy...

samuraisam said...

MeasuredPR, Alexander: Take a look at this map; you'll notice that the UAE and Australia are both far from any mass of undersea cables.

Places like Ireland, Japan, Morocco are all relatively nearby to large quantities of undersea cables.

Places on the same part of the SEAWEME as the UAE (Kuwait, Oman, Saudi) have similarly high prices (usually more than 150 AED+ for 2mb/s, sometimes lower with harsh bandwidth limits)
Another place with a similar internet situation (undersea cables) would be Israel where internet prices are slightly high (lower than the UAE, but still higher than other places)

I don't doubt that the price of the internet in the UAE could do with coming down a little bit (25% or so), but I'm guessing that this lays with the UAE govt's 40% royalty fee. Even if Etisalat brings down their prices a fair amount I doubt that they will ever reach pricing found in the UK/US etc that everyone seems to be hoping for.

The UAE can't just wake up tomorrow and build an undersea cable from here to New York, they're all planned in conjunction with other countries. To give an idea of the cost-- the SEAMEWE 4 cable cost an estimated 500 million USD and was split between a bunch of countries.

Also, there isn't really that much undersea cable here, which is why the whole internet here gets FUBAR'd anytime theres a cable cut. I read last year about some more undersea cables being installed but I haven't been keeping up to date with it recently.

samuraisam said...

Side note: If you can suffer through the atrocious EMIX website there's some info about the UAE's internet capacity (37 STM-1 links = 5754 megabits of bandwidth)

Not sure how up to date that is.

Doug said...

Leaving aside the arguments about cables etc...the point is that the prices for BB in the UAE are completely unchanged since at least 2007.

Surely as the subscriber base grows, there is the opportunity to reduce the overall cost to the consumer as the initial costs are being covered by a greater number of people?

The fact is that the UAE already has the infrastructure in place to offer high speed connections at low prices. It doesn't actually cost Du or Etisalat to increase my line speed from 1Mbps to 10Mbps if the line is already installed. The pricing structure is simply there to reflect the value given to me by the faster connection.

The only excuse that really exists in the UAE for broadband prices is, as has been pointed out, a complete lack of competition. Du and Etisalat are essentially the same company. Then there's the issue that you can't have a line which can be leased to either telco.

There is no valid economic reason why phone charges are so high in the UAE, other than the fact we are 'used' to the charges which enables the telcos to have larger profits without consumers suffering any further financially than they are used to.

samuraisam said...

"It doesn't actually cost Du or Etisalat to increase my line speed from 1Mbps to 10Mbps if the line is already installed."

That's totally incorrect; perhaps the local infrastructure allows higher speeds but the limiting factor is always going to be the undersea cables unless you plan on just loading local content (where such a diverse selection is available).

They can't just upgrade every single person in the UAE to 100mbps 'next Thursday' because they wouldn't have enough bandwidth; that is why the higher speeds are priced so high.

The more people keep on pushing for higher speeds, the more they will have to limit the connections in other ways (monthly bandwidth caps).

If you're used to monthly bandwidth caps, then paying 100 USD per month for an unmetered 2mbps line is a good deal. But no one here sounds as if they are used to that.

Simply put, I'd prefer paying 100 USD for a unmetered 2mbps connection than paying 100USD for a 16mbps connection that I can only use to download 20GB each month on.

And we ARE reaching that point; the lowest package on that page has a bandwidth allowance which would only allow you to use the connection for 2 hours until you have exhausted the allocated bandwidth.

Anonymous said...

There's really two things going on: 1) The total lack of competition and the resulting lack of investment in infrastructure. If you don't have to do it, why do it?

But 2) is IMHO the much bigger problem, and that is that any government owned company, itisalot included, has to find something to do for all the emiratis working for them, making insane amounts of money and also a way to pay for it. There's a reason how they can afford all these people sitting in the business center, wearing rolexes and driving Cayennes while doing something that some else not sporting a UAE passport is getting paid pittances for.

The current approach to emiratisation is the single biggest obstacle for the UAE to achieve anything close to resembling world class.

As long as they can charge us aed400 for a 4Mb line that actually get's 2Mb bandwidth past the proxy nothing's gonna change.

Emaar, Nakheel, Emirates and all the other government owned companies are facing the same problems...

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