Broadband operators are at risk of becoming dumb–pipe providers

Dr. Imad Hoballah, Acting Chairman and CEO of Lebanon’s Telecommunications Regulatory Authority, talks about major developments in the broadband industry in the MEA region over the past 12 months.

LTE is rapidly gaining momentum in the Middle Eastern region. With new LTE deployments and commercial network launches that took place in Saudi Arabia from Zain Saudi, STC, Mobily, and the UAE from Etisalat, LTE subscriptions will grow at an average annual growth rate of 200 per cent. Global LTE subscriptions are racing ahead of initial expectations. They have already passed 3.7 million in the third quarter of 2011, spanning over 36 worldwide networks.

The deployment of FTTH services has been steadily growing and boasting speeds of up to 1Gbps, as in the case of the incumbent operator STC in Saudi Arabia. Also, the take-up of IPTV services is noticeable, with the focus of operators such as the Saudi incumbent on international expansion.

Faster speeds and increasingly affordable broadband access has fostered development of a digital economy, encompassing government services (e-government), e-health, e-education and e-commerce. In Qatar, for instance, strategies and specific initiatives have been launched in the areas of e-commerce, e-government, e-health and e-education.

The regulator has also unveiled plans to develop Qatar as a digital media hub, recognising the current underrepresentation of Arabic content on the Internet and hence the potential for growth. Kuwait has also taken steps to develop a digital economy; national level policies for e-health and e-government have been developed, with a number of services available online.

For countries that have been lagging behind in the rollout of broadband services like Lebanon, the market is set to enter a new growth phase centred on mobile data services after the two mobile network operators launched the overdue 3G services in 2011, deploying HSPA+ network infrastructure. DSL speeds have also been increased to a minimum of 1Mbps.

Are broadband networks finally catching up with the technological aspirations of consumers, businesses and public bodies?

Reliable and fast broadband networks are paving the road for a new breed of technological solutions based on the so-called Cloud Computing offers demanded by consumers, businesses and public bodies. Cloud Computing technology is being widely adopted worldwide due to its low cost, scalability, security, etc.

Cloud Computing solutions rely on fast broadband access between the end-user and the cloud in order to provide full functionality and features, in addition to remote management. It is noted that in developed countries, cloud computing is growing fast due to the availability of high-speed and robust broadband connections.

In developing countries, cloud computing is a great tool for development in multiple sectors such as education, industrial, financial and telecommunication; however, these goals cannot be achieved where broadband is not fast, reliable and secure. Yet, we note the landing of several broadband submarine fibre-optic cables in MEA and Africa (e.g. IMEWE, WACS, ACE, etc) promises to bring increased connectivity to the region

Will consumers ever fill their super-fast broadband pipes?

Consumers tend to demand more capacity for cheaper prices. Trends show that they are willing to accept offers for new and innovative services. On the operators’ side, as owners of the super-fast broadband pipes, the challenge is to find those services and market them to the “right” customers.

Network providers and operators have an abundance of customer data that enables them to collect a variety of information on user behaviour. Such information could be utilised in building commercial offers, leading to the marketing of the right products to the right customers and eventually raising the demand for and the consumption of broadband pipes.

Service providers are beginning, rightfully, to shift their focus from being mere voice and Internet-pipe providers to working on the right partnerships with application/content providers, in an attempt to tap the potential revenue associated with new, Internet-based services. This is becoming a necessity for them in order to compete in the market and continue to afford the CAPEX and OPEX expenditures required to keep up with increased demand for network upgrades and faster broadband pipes.
What do you think will prove to be the killer application that creates demand for super-fast broadband?

The definition of ‘super-fast broadband’ varies from one country to the other. In some countries such as the UK, super-fast broadband services should be able to deliver more than is currently possible over existing copper telephone lines (i.e. faster than ADSL2+, which tops out at 24Mbps), whereas in other countries, such as South Korea, the speed is 100Mbps.

I am not sure as to what will be considered the killer application. To some, Internet Protocol Television (IPTV) is gaining momentum as an important application for the next-generation Internet and will provide exciting new revenue opportunities for service providers. Internet Protocol television (IPTV) provides digital television services over Internet Protocol (IP) for residential and business users at a lower cost.

These IPTV services include commercial grade multicasting TV, video on demand (VoD), triple play, voice over IP (VoIP), and Web/email access, well beyond traditional cable television services. IPTV is a convergence of communication, computing, and content, as well as an integration of broadcasting and telecommunication.

To others, over-the-top (OTT) video services such as YouTube and Facebook  are more popular. These services refer to video, television and other services provided over the Internet rather than via a service provider’s own dedicated, managed IPTV network. OTT is delivered directly from provider to viewer using an open internet/broadband connection, independently of the viewer’s ISP, without the need for carriage negotiations and without any infrastructure investment on the part of the provider.

What technical challenges lie ahead for the broadband industry?

In developing countries including Lebanon, the main technical challenge for the broadband industry is to cater for advanced backbone and access infrastructures in order to cope with the increasing demand for higher broadband capacities.

Building a robust national and access infrastructure including FTTx requires significant public and private investments. Often public funding and/or subsidies are needed to maintain acceptable Return On Investment (ROI) for the private sector.

Moreover, serving rural areas continues to be a challenge. New solutions are being adopted such as public access femtocells, which are cost effective and easy to integrate, especially for remote areas where the backhaul connection could be provided via DMW or satellite.

As mentioned earlier, service providers and operators should tap the application/content business through partnerships and/or acquisitions of existing application/content providers. while benefiting from the operators’ visibility on customer behaviour to create innovative products and services.

How big a challenge does over-the-top video pose to broadband operators and networks?

Broadband service providers and operators are at risk of becoming dumb–pipe providers utilised by so-called over-the-top (OTT) application/content providers such as YouTube, Google, Facebook, etc.

Even though revenues from OTT are small in comparison to those from new IPTV service offerings, they still represent a missed opportunity for service providers.

Some suggest that the best approach for operators is to negotiate partnerships with OTT providers. One way to do that would be to charge for content delivery and guarantee quality of service for certain types of OTT traffic.

This could be paid for by either the content provider or by the end-user. However, it remains questionable whether giant OTT providers are willing to enter into such agreements with much smaller service providers.

How can network operator’s best monetise their investments in super-fast broadband networks?

Again, with the rise of application/content providers, network operators may become mere data “pipe” providers, selling only the broadband capacity with no significant ROI. Network operators have many options to avoid such a situation. The first option is to avoid competition with those providers by delivering an extra layer of value that only they can provide. This layer is based on using data analysis, such as Deep Packet Inspection (DPI), which leads to “customer experience visibility”, resulting in huge opportunities in the advertising world such as targeted ads.

The second option is to leverage the network policy capabilities the network operators have, to deliver an enhanced video streaming service for partners that want to guarantee a certain QoS for their customers. A revenue sharing model might be used in this case.

The last option is to benefit from the synergy created by the partnership with (or the acquisition of) existing application/service providers, allowing the creation of dynamic providers that possess customer visibility and application/content exposure.

How can telecoms regulators further support the MEA region’s burgeoning broadband business?

Governments and telecom operators should promote policies that encourage partnerships, especially in the rollout of services like FTTH. Also, because of the huge cost in the rollout of fibre infrastructure, some governments subsidise investments in fibre infrastructure in the same way they do for other utilities like roads and highways, as is the case in Australia and USA. In addition, regulators and policy makers may consider transforming existing universal service programs into programs for digital inclusion that support broadband services for all citizens.

Policy makers and regulators have several options to provide incentives for the private sector to invest in broadband, such as by adopting enabling policies, simplifying licensing regimes (licensing regulation can be simplified and a unified licensing framework can be introduced with all services unified under a single license or concession), making available more spectrum, reducing regulatory obligations and barriers to broadband build-out and access to broadband networks (e.g. by adopting rules or promoting policies and incentives that encourage infrastructure sharing, particularly involving passive sharing of towers, ducts and other support facilities), and offering tax incentives (reduce taxes on services, devices and equipment which will in turn increase penetration levels and pave the way for increased demand of broadband services).

Policy makers and regulators should also stimulate innovation and the development of applications and services by nurturing the creation and adoption of applications, services and digital content (for instance, the wide diffusion of e-government and e-finance applications and services will considerably raise consumer demand for broadband).

Moreover, private investment in research and development (R&D) should be encouraged by all possible means.  It is also essential to protect intellectual property, as this empowers researchers and inventors to lead the way to a smart and innovative digital economy. Innovation can be encouraged through intellectual property regimes that balance monopoly use of inventions with building a rich public domain of intellectual materials.

Regulators and policy makers have a role to play in promoting a first-class training system in all countries to provide creative human resources. It is crucial to facilitate investment in all forms of education, notably in the area of R&D, ICT knowledge transfer and the development of digital applications and content (in particular those related to the local culture). Sufficient and sustainable funding should be provided to universities, computer labs and other public research institutions, leveraging international partnerships when possible and advantageous.

Dr. Hoballah will be speaking at the Broadband World Forum MEA 2012 event, taking place in Dubai in March 2012.