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Egypt investing in broadband infrastructure.

Summary: Egypt recently allocated $1 billion to invest in broadband internet infrastructure, with the goal of boosting internet subscribers by 4 million come 2014, according to a Euromonitor International report issued in July.

Egypt recently allocated $1 billion to invest in broadband internet infrastructure, with the goal of boosting internet subscribers by 4 million come 2014, according to a Euromonitor International report issued in July.

The report, "Egypt broadband investment to fuel internet usage," explains that "improved access to computers, especially amongst higher earners, has caused the number of broadband subscribers to increase more than tenfold from 2004 to 2009, rising from 141,100 to 1.5 million."

Moreover, the report states, "Egypt's international internet bandwidth capacity has more than doubled over 2009-2010 from 48,073 MBps (megabytes per second) in February 2009 to 99,487 MBps as of January 2010."

Yet opinions differ as to whether the government broadband infrastructure policy will have the desired effect.

"Broadband infrastructure needs to be upgraded, and the government's plan will have a major impact," Ahmed Ossama, managing director of internet service provider TE Data, told Daily News Egypt in a telephone interview.

Expanding broadband infrastructure, Ossama said, will inevitably increase the number of subscribers.

"Already at the end of 2009, there were 1.025 million broadband subscribers, and now there are 1.3-1.5 million, which represents a 40 percent growth rate," he added.

Still, hindrances toward augmenting broadband uptake loom within the Egyptian market. "Household ownership of broadband computers remains amongst the lowest in the region and is hindered by low incomes and illegal sharing of internet," the report notes.

Noran Abdel Rahman Ali, who previously worked for the Ministry of Communications and Information Technology and currently works as a telecommunications analyst at CI Capital, a Cairo-based investment firm, echoed the reports concerns regarding income and illegal sharing.

To address the latter, both Ali and Ossama pointed out, the government has implemented specific tools: The government as well as a few major corporations, such as Microsoft, have undertaken a series of awareness campaigns that explain the security dangers to which users are exposed by engaging in illegal connection sharing.

The campaign strategy, according to Ali, "has been ineffective in halting illegal connection sharing."

Ossama, however, felt that while some impact had been achieved, the number and frequency of the campaigns needs to grow along with the market. Not only are individual consumers to blame for connection piracy, but, he said, many companies offering broadband connections facilitate and promote sharing between neighbors.

"It is not uncommon for internet companies to offer connections to several householders under one connection to entice consumers to make a purchase," Ossama stated. Egypt is not unique in facing this problem, he added, "This practice is ubiquitous in countries such as India and in the Far East."

Internet companies, such as TE Data, work with the telecommunications regulator to create a system of penalization for companies found guilty of selling one connection to several households at a time.

A further action taken by the government to stem piracy: reducing broadband tariffs, because in Ali's view, the government has recognized that the high rate of piracy is strongly correlated with the low-income levels.


Triple-play licenses are another tool at the government's disposal, she explained.

News last year that Egypt would issue triple-play licenses -- for companies to offer the voice, data and video service -- excited analysts and firms, but their limited scope and reliance on Telecom Egypt infrastructure later muted interest.

While common in the UAE and other Gulf countries, as well as the US and Europe, triple-play is yet to be offered in Egypt. Via triple play licenses, the government is hedging its bet that broadband penetration will increase "exponentially," Ali said, as consumers will be forced into buying a broadband connection when seeking to purchase a telephone line or TV connection; but it is a bet, however, that the telecommunications analyst sees as dubious over the long-term.

In her estimation, the salient issue is not whether broadband uptake will increase by obliging consumers to purchase it through a bundle package, but rather, the heart of the matter must remain focused on the low levels of income coupled with high rates of illiteracy.

"In Egypt, broadband remains expensive, and Egyptians' incomes as well as literacy rates remain low, which are all obstacles to expanding the number of broadband subscribers," Ali explained.

"The government's plan only targets high income earning Egyptians," she added.

Indeed, the report cites income as a predicament in this matter, noting that Egypt, with a population of 78.2 million as of January 2010, has an average annual disposable income of LE 12,429 ($2,240) per capita in 2009, thus remaining "very low."

Given such daunting figures, Ali believes that the government's policy instruments and the $1 billion figure allocated to infrastructure reflect a failure to apprehend the core issue at play.

She mentioned that the Minister of Telecommunications and Information Technology Tarek Kamel, in a recent speech bemoaned the number of broadband subscribers in Egypt -- hovering around 1 million subscribers, which she says, further illustrates the inadequacy of the government's efforts.

In the end, she said, "Egypt is facing a socio-economic dilemma," and so the lack of broadband penetration will not be reversed by the government's current policies because the problem is wider in scope.

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Publication:UMCI News (Potomac Falls, VA)
Date:Aug 20, 2010
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