The second fixed-line operator was the topic of discussion on the first day of Cairo ICT ’08. But the jury is not out yet if it’s a good idea.

The ICT sector in Egypt and the Middle East has developed rapidly in the last few years. Egypt, a country with a population of 80 million, needs a large and developed ICT sector if the country will continue on its rapid pace of growth.

"If we are successful this year it is attributed to the Minister of CIT Tarek Kamel," said Ossama Kamal, the managing director of TradeFairs International, the organizer of Cairo ICT.

"Many initiatives have been introduced at Cairo ICT over the years, such as the initiative to provide a computer for every citizen at an affordable price," said Kamal. "This year we will discuss the second fixed computer operator."

Minister Tarek Kamel noted that the ICT sector is growing by 20% annually in Egypt. This is not only in terms of internal growth, but also exporting to other countries.

"The telecom sector is growing by 20% annually. It is also growing in terms of exporting services to neighboring countries.

"The journey of 2007 reflects your commitment as an industry to invest in Egypt and grow your investment and creating a regional role for Egypt,” the minister said. “This has been only happening with investors' support and partnership. With your support today we're announcing a new project which is Egypt's second fixed operator. We long awaited this project, and it's not an easy one. It requires a lot of effort. It shows how committed we are about competition in Egypt and providing better services. This reflects the real implementation of attracting investment, deregulation and privatization. With the support of the whole industry we'll be able to produce better services in a growing market.”

Paavo Vayrynen, the Finnish Minister of Trade and Development agreed that ICT is important for the growth of a country, but he was skeptical that a second fixed line was a good idea.
"ICT is synonymous to 'economic growth in any society," said the Finnish minister.
"Technologies are improving fast and becoming less expensive. Broadband will outrun fixed lines, especially in large countries with long distances."

Minister Kamel noted that the fixed line license is part of the country’s growth and modernization process. Although Egypt brought in a third mobile operator in 2007, this experience with the fixe line will not be the same.

"We need to be realistic,” he said. “This is not like the 3rd mobile-operator launch. Mid-term to long-term investment is expected due to the high cost of launch. Modernization is happening all over the sector. A new building will be built for Telecom Egypt and the post authority and other various institutions at the Smart Village.”
Kamel expressed his appreciation to the community for in investing in call centers. Egypt is being put on the international agenda. Customers and investments are confirming this fact.  He also showed appreciation to Ossama Kamal and Amany Ghanem for organizing Cairo ICT 2008.

An Outside Perspective

Osman Sultan, the CEO of DU, the second mobile operator had some thoughts of his own on the topics of modernization and the importance of fixed lines. He noted that the experience in the UAE with mobile operators has been a challenge and an opportunity at the same time because competition is high, but mobile usage has exploded and mobile broadband video has been a popular service.

"Conversion is used as a buzz word to designate different things. Is it the Pandora box — once we open we can't close it — or is it the holy grail?” Osman wondered. “Consumers and enterprises long to do more and more. New players are trying to draw new boundaries. Explosion of it everywhere is making the internet change the mobile world.”

Sultan talked about discussions at the GSM Global Congress in Barcelona surrounded promoting an environment of embracing new technology and solutions because the demand is there from consumers. Many people in the business world want to carry their work and leisure with them wherever they go. He believes that our world today is not so far from the past, when people formed on rivers and oceans to connect with other people, just as people consume technology to communicate with their peers.

"Mobiles are promoted with cameras and music or even laptop capabilities, the telephone part is becoming less and less significant and taken for granted, people are asking for more.  Throughout the 100 years of telecommunications, it was known what had to be done, now there are a lot of question marks. Today these players have to share more and more the bad news that they have to share more and more uncertainties."

Sultan asked, however, if a second fixed operator was a viable option. The internet is relying more and more on heavy media transfer, blending fixed, mobile and broadcasting. This has been apparent throughout the world. He said that it’s an exciting time, one that we have to carefully consider our choices.

"Wired infrastructure or wireless WiMAX, 3G — it all depends on the content and the framework that the regulators want to put in place. Voice data video that goes through this infrastructure. We are talking about application of tracking. These were basically the three dimensions that I wanted to touch upon. We are players in this transformation. We should feel privileged because what we're doing now is contributing fundamental changes, on the way our societies and communities are evolving.”

The Debate
After opening comments from the two ministers and Sultan, the discussion moved directly to a discussion about the fixed line. Amr Badawi, Executive President of National Telecom Regulatory Authority (NTRA) said that a new fixed operator will give new services to Egyptian customers and improve competitiveness, and it will make TE better and perform in a better environment.  He said that the ministry and the NTRA are keen on facilitating the entry process.

Ossama Kamal asked Akil Beshir, CEO of TE, if he thought TE could improve without competition.
“This is normal and happens everywhere and competition is good for customers at the end,” Beshir said. “We don't need a second operator to improve. We always improve and if you visit the exhibition you'll see how Telecom Egypt is providing cutting-edge technology.

We welcome the other company and it doesn't scare us. It will have to use our infrastructure just like mobile companies and that would increase the revenues. We want to benefit from the second operator.”
Kamal then asked why a second operator should exist if it will only use existing infrastructure. Badawi responded that the second operator will use existing infrastructure, but the NTRA will put some obligations on it to invest in infrastructure. The second operator won't use 100% of TE’s and it will to invest to assist in areas like national roaming for mobiles.

Alex Shalaby, CEO of Mobinil, gave his opinion on the matter from the point of view of a mobile operator. He said that competition benefits customers and there is a difference between mobile and fixed, but it's a complex issue. The fixed operator will depend on Telecom Egypt's service.        
“Infrastructure is supposed to be independent,” he said. “If we're allowed to compete, I'd love Mobinil to compete.”

Badawi said that there will be requirements for whoever bids, but there is nothing specific to prevent mobile operators from bidding.

Sultan spoke about the situation in UAE. After only ten months Du was able to capture 20% of the market. This happened through a strategy of providing video services, he said, and this wouldn’t have been possible without fiber optic cables.

“[The second fixed operator] should buy a certain capacity,” he said. “Infrastructure costs billions of pounds. Every company that opens can't have its infrastructure because it's impractical.”

“We want to use the already existing infrastructure,” Badawi responded. “Digging is possible in new cities, but in Downtown it will be hard. In rural areas we can use WiMAX. We'll provide a range of services that the operator can use in whatever manner it suits their needs.”

But Beshir was skeptical about the proposition. He said that every operator should have the same opportunity to provide the same services. It’s an issue of fairness to be able to provide the same service for the same price.

“I believe that competition means that the customer should have all the services available to them,” Beshir said. “In some markets some privileges are given to new entrants. This is a decision to be made depending on the situation of the market if there should be differences in privileges.”
“The second operator wouldn't provide any service that Telecom Egypt will not provide, any service we would be able to do. So if customers are rich they can still stay with Telecom Egypt. [The second operator] will be obligated to provide the poor and the rich in the rural and urban areas.  They will provide basic services and specialized services.

Whoever becomes the second operator, Shalaby noted, will have to invest in the long term. It simply cannot be a short term investment because the capital expenditure will be too high. It will be beneficial for consumer to have many options. This was highlighted during the crisis in the end of January when the underwater fiber optic cables were cut.

“New services, like online stock trading have been recently introduced,” Kamal said. “This could've never been possible without a strong infrastructure.”