Lebanese Ministry of Information
DSL internet service providers (ISPs) and mobile internet service providers welcomed a decree passed by the Cabinet earlier this month that significantly reduces internet tariffs. If the terms so far informally set by Ogero are respected, ISPs will soon be able to provide faster connections and consequently a wide range of new digital TV services.
“The whole landscape [of telecommunications] will be changing in Lebanon over the next 12 months,” Habib Torbey, president of Global Data Services, told The Daily Star. “[The new decree] will allow us to offer a wide range of services adapted to the needs that we perceive in the market and that we were not able to [fulfill] before.” Among the services Torbey expects to soon be offering are the streaming of HD movies, video on demand and multiple streaming.
Ogero and the Telecommunications Ministry succeeded in June in lowering the government-regulated internet tariffs. As soon as the decree is published in the Official Gazette, Ogero’s head Imad Kreidieh pledged to remove the bandwidth shaping in its central offices – thus giving users access to the maximum speed their telecom infrastructure can support.
“Now that the new decree has raised the capacity in gigabytes and has removed the constraint on the line speed, we are able to offer plans that we call ‘open line speed.’ That means some users may well experience speed up to 20 megabit per second on the DSL line, which is a substantial increase,” Torbey – who is also the executive director of IDM – told The Daily Star.
End users located within a one kilometer radius of an Ogero central office will experience the greatest boost – while others will progressively lose speed as the signal travels through the outdated copper wires that constitute the Lebanese telecommunications network.
Plans to develop a fiber-optic network have been recently revived to solve this problem. The Telecommunications Ministry is expected to launch a tender next month for the development of a “fiber to the cabinet” (FTTC) network that aims to replace the existing copper wire network from the central offices to the street cabinets.
While similar plans have in the past resulted in few benefits for the Lebanese users, Torbey is confident that the present administration will not only keep its word, but take it a step further. “I am sure the ministry will also do fiber-to-the-home as the tariff has already been included in the decree,” he said. If Torbey’s predictions were to become reality, this would mean that also the last stretch of copper wires from the street cabinet to the home – referred to in technical terms as “the last mile” – would run on fiber, granting users the maximum speed possible.
While Torbey does “not foresee any problems in this project” following informal talks with Ogero, internet experts said its success will depend on the company’s fair play. “We have only one network [Ogero] and all the other ISPs are subscribed to it,” Jad El Cham, an independent engineer and telecom consultant, told The Daily Star. “It is still not clear how everything will be divided and how the ISPs will connect to Ogero.” As Cham explained, ISPs are dependent on Ogero – which is both the gatekeeper and a service provider itself – to acquire sufficient broadband to serve its customers.
According to estimates, about half of the total internet users are subscribing to illegal internet providers who provide satellite connections. Improving the legal services will bring back many of those customers into the ranks of legal ISPs, thus increasing their client base. If ISPs are not granted the necessary bandwidth by Ogero – who is also a competitor on the market – these companies risk letting down their clients who will then turn to Ogero for better service.
However Kreidieh, the chief executive of Ogero, told The Daily Star in previous interviews that the new Ogero administration had so far always granted bandwidth to ISPs who required it, which was confirmed by Torbey.
While DSL connections seem on track toward significant improvements, mobile internet bundles are likely to remain among the most expensive in the world. Internet bundles for 20 GB in Lebanon cost $59 with both Alfa and touch, which is more than double compared to some other countries in the region and in Europe.
Given the relative decrease in price for the number of megabits per second that customers are soon going to be able to access via DSL, mobile consumption would also be expected to shrink and trigger a reduction in prices.
This scenario however remains unlikely, according to Marwan Hayek, chairman and CEO of Alfa. “Any reduction [you implement] today will automatically impact the total revenues we collect on an yearly basis, so the ministry and the government will have to decide: Can we live without this component of revenues we are getting from the mobile internet?” Hayek told The Daily Star.
Telecom revenues are the second largest source of income to the government after the value-added tax. Revenues from telecoms, both landline and cellular, total more than $1.5 billion a year.
The two operating GSM networks – Alfa and MTC touch – are both government-owned, which means that revenues from mobile internet flow to the Finance Ministry, as Hayek confirmed. “The expenses we have are similar to the rest of the world in terms of cost per megabyte. [But] there is a dependency on these source of revenue [for the government to] pay salaries at the end of the month,” Hayek said.
While the competition is likely to increase due to the decree, from the technical perspective the new tariffs would not justify a price reduction. “On the mobile side, the only component that has an impact is the cost of the E1 lines,” Hayek said, referring to the single digital links that together constitute the bandwidth and that mobile providers also buy from Ogero.
While the new decree dropped the prices of E1 lines by more than half, this will not have significant repercussions on the total costs for mobile providers. “Our spending on E1 is around $10 million a year, so if you reduce it by half – make it $5 million – this will not change the cost of the operations because the bulk is on the network, [on which we spend] around $250 a year,” Hayek said.
“There is always a difference in price between the fixed and the mobile internet because the fixed cost structure is totally different, so I cannot go below a certain price,” he added. However, according to Hayek mobile internet providers can “do better in terms of pricing,” but this will depend on the new market dynamics and whether these will put enough pressure for the government to give up a part of its revenues.
