Archive for November, 2009

Telecoms: priority for Sri Lanka

Monday, November 30th, 2009

A modern progressive telecommunications sector is certainly high on the list of priorities for Sri Lanka. There is considerable determination within the country to work at strengthening the economy and general well-being of the country. A good start has been made on expansion and provision of infrastructure that is capable of providing a sophisticated level of telecommunications service to the population throughout the country.

Nevertheless, much still needs to be done to complete the build-out of the necessary national infrastructure. Extending infrastructure into the North and Eastern provinces, those parts of the country most affected by the long-running civil war that ended in May 2009, has been of high priority. It is well recognised that the growth and development of the telecom sector is necessary to provide, among other things, an impetus for national economic activity. Sri Lanka is characterised by high levels of literacy (93%), life expectancy (74 years) and infant mortality that are comparable to those of developed countries. The country needs the ready availability of Internet, email, e-finance, e-commerce and other services that play an important role in global commercial activity.

At the end of 2008 fixed-line teledensity reached 3.5 million (17%). The boost to the numbers was aided by the widespread application of the Wireless Local Loop platform to support the fixed-line roll-out. The fixed voice penetration levels remained relatively low however, especially when it is recognised that there is a large concentration of these services in the capital Colombo with a penetration of 35%. The low penetration levels have continued to be more a result of acute supply constraints rather than a lack of demand for services.

In the meantime, the country’s mobile telephone services have been booming. By offering an effective and efficient alternative to the fixed-line networks, with their chronic problems in meeting the general demand for telephone services, the mobile phone has become an essential service and is no longer considered a substitute for a fixed-line service. By early 2009, the Sri Lankan mobile market was still growing at an annual rate of almost 40% as it passed the 60% penetration mark. The strong growth looked likely to continue as the country’s four competing mobile operators – Mobitel, Tigo (Celltel Lanka), Hutchison Lanka and Dialog Telekom (MTN) – battled for market share and position. These four had been joined by a fifth operator in January 2009, when Bharti Airtel Lanka launched its GSM service.

The development of the Internet remains of particular concern for Sri Lanka. In a country whose population is increasingly Internet savvy, the estimated user penetration stood at around 5% in early 2009. Despite signs of an enthusiastic user market, however, coverage and accessibility remained limited and the sophistication of the available services generally remained low. By end-2008, it was estimated that there were only around 100,000 broadband Internet subscribers in this country of 20 million people.

Key highlights new BuddeComm report on Sri Lanka:

  • Sri Lanka’s mobile market had reached 12 million subscribers by March 2009, for a mobile penetration of just over 60%.
  • In other words, coming into 2009, the number of mobile subscriber had increased tenfold in just over five years.
  • With three mobile operators having launched their 3G services, there were around 400,000 3G subscribers in Sri Lanka by early 2009.
  • A fifth mobile operator, Bharti Airtel Lanka, launched its network/service in January 2009, further increasing the level of competition in the market.
  • The country’s fixed-line market had been undergoing a period of healthy growth, reaching a subscriber penetration of 17% in 2008.
  • Fixed-line expansion had been boosted by the extensive application of CDMA-based WLL technology; WLL services comprised 70% of the total fixed line subscriber base by end-2008.
  • After a number of years of solid expansion, there were signs that the fixed line growth was slowing in early 2009.
  • The country’s Internet sector remained underdeveloped, with the take up rate of broadband services being especially low; there were however signs that this was changing.

For more information on new BuddeComm report see: Sri Lanka – Telecoms, Mobile, Broadband and Forecasts

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Poland rising telco star in middle Europe

Monday, November 30th, 2009

One of the larger Eastern European nations, Poland is defined by as an upper middle-income country by the World Bank. Since its transition to a market economy Poland has experienced sustained economic growth, assisted by its accession to the European Union which is now its main trading partner. Like many of its neighbours, Poland was affected by the recent global financial turmoil through declining demand for its exports, a slowdown of credit activity, and lower foreign direct investment (FDI) inflows. However the country is expected to fare well given its relative strength in terms of unemployment, inflation, current account, external debt as well as relatively sound and well-capitalised financial system. The IMF expects Poland’s GDP to contract slightly during 2009 before recovering in 2010.

Poland’s telecoms market underwent reform to align telecommunications policy with that of the EU. Competition has been introduced but incumbent operator Telekomunikacja Polska SA (TPSA) retains a major share of the overall telecoms market. Ongoing action by an active regulator has improved market conditions, particularly in the network access sector.

Despite relatively low penetration, Poland’s fixed broadband market is one of the largest in Eastern Europe. Broadband represents the majority of Internet connections; ADSL is the most popular fixed broadband access platform followed by cable due to Poland’s well-established cable TV operators. Fixed broadband access is also available via FTTx and wireless. An emerging Internet society is taking shape, encompassing commerce, health and government services.

Poland’s broadcasting market is transforming under the weight of competition and technological convergence; Broadcasting network operators and telecom service providers have launched competing triple play offerings. Digital TV is widely available via cable, satellite, broadband TV (IPTV) and terrestrial TV; with a number of new market entrants leading to increased competition.

Poland possesses a well developed mobile market with high mobile ownership levels although penetration levels suggest multiple SIM card ownership. Four mobile network operators offer services along with a number of mobile virtual network operators. Average Revenue per User levels have stabilised after falling in recent years due to retail tariff competition and the take up of mobile services by lower spending consumer segments of the market. Also placing pressure on ARPU levels are regulatory-enforced cuts in mobile termination rates for all three SMP mobile network operators. All four mobile network operators offer 3G services, with mobile broadband and content the new growth market given low penetration of existing mobile data services.

Key highlights of the new BuddeComm report on Poland:

  • The incumbent continues to struggle in the face of competition, characterised by stagnant growth in both top line revenue and bottom line profit. Resistance to developing the wholesale market led the regulator to commence functional separation proceedings in early 2009.
  • Broadband represents the majority of Internet connections. The incumbent dominates the broadband market through its ADSL offering. Competition in the ADSL market based on wholesale offerings is poor, characterised by almost non-existent take up of unbundled local loops and shared access lines.
  • More success is visible in the bitstream access market due to the regulator’s imposition of a retail-minus price methodology, guaranteeing a certain level of profit margin for alternative operators relative to the incumbent’s retail ADSL offering.
  • Infrastructure based competition is strongest from Poland’s well-established cable TV operators, which have upped the ante by launching DOCSIS 3.0-based broadband offerings with speeds of up to 120Mb/s. A number of FTTx networks have been deployed although take up to date has been minor.
  • Digital TV is widely available via cable, satellite, IPTV and DTTV, with healthy competition in the cable and satellite markets. Cable operators offer triple play services and a once cosy duopoly in the satellite pay TV market has been shaken up with five operators now in operation, leading to the rollout of new products and services. DTTV broadcasts officially commenced in September 2009 on the first multiplex, with a total of three to be deployed.
  • Poland’s mobile market is served by three well established mobile network operators and a relatively new market entrant. A number of MVNOs have also entered the market; despite their numbers their impact on the overall market in terms of revenue and subscribers is minimal. The regulator has worked to improve competitiveness in the mobile market by setting asymmetric mobile termination rates favouring the new market entrant.

For more information on this new BuddeComm report see: Poland – Telecoms, Mobile, Broadband and Forecasts

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The Middle East in numbers

Monday, November 30th, 2009

Fixed-line operations

As in the rest of the world, fixed-line voice revenues are in decline, partly as a result of substitution by mobiles, and telcos are turning to broadband services to improve profits.

At first glance fixed-line teledensity in the Arab Middle East would appear very low, even in the wealthier countries, compared with teledensity rates of around 60% in the USA for example. However, notice must be taken of the larger household sizes compared with Europe or the USA. Even in Saudi Arabia, which has teledensity at only 16%, around 75% of homes have fixed-line telephones.

Fixed-line operators

Other than in Israel, each country has a national fixed-line operator but no other large players in the fixed-line sector. Even in the more liberalised markets of the Middle East there are no real competitors to the incumbents other than in the area of international calling cards and VoIP-based services. A number of licences have been awarded in both Bahrain and Jordan for fixed-line domestic and international services but none of the alternative operators individually have yet made much impact.

The majority of national fixed-line operators have now been partly privatised. In most cases this has been by means of share sales, usually restricted to the nationals of the home country. Only Jordan and Turkey have sold significant shares to a foreign investor. Together with Israel, they are also the only countries not to have retained majority government ownership.

Infrastructure

Telecom infrastructure in the Middle East varies from rudimentary to highly advanced. Infrastructure in almost all cases is the sole responsibility of the incumbent fixed-line operator. There is very little alternative infrastructure in the region. This situation is not helped by the region’s lack of cable TV, which could have potentially formed the basis of an alternative infrastructure.

Israel is an exception and does have a very extensive and developed digital cable TV infrastructure, which is used by HOT Cable Systems Media to compete with incumbent Bezeq. In addition, mobile operators Cellcom and Partner own extensive networks. The UAE and Saudi Arabia also have alternative operators with lesser amounts of infrastructure.

While the Middle East is served by extensive and modern submarine cable networks and has benefited from its position between Europe, India and China, with its exploding need for greater capacity, increasing demand means more are needed. Numerous new cables are planned or under construction.

The Middle East suffers from a satellite capacity shortage, mostly due to the huge regional DTH satellite TV industry. Steps are underway to remedy this and it has been suggested that there are so many planned new satellites that there could be over-capacity by 2011 if all are launched. At present the main satellites serving the region are those of Saudi-Arabia based Arabsat and Egypt-based Nilesat.

NGNs

In Israel, Bezeq has been working on the development of a Next Generation Network (NGN) since late 2004 and in April 2006 was set to complete the testing of the network. This was delayed but, by 2009, Bezeq is again moving forward with the NGN.

The Gulf countries also have sophisticated infrastructure. Bahrain’s Batelco completed the migration of all services from its original network to an NGN in January 2009. Kuwait began FttH network developments back in 2005 and further contracts have been awarded since. In the UAE, Etisalat’s FttH project is being completed in phases, with the first being completed in January 2008. UAE alternative operator du serves all residential units within its ‘footprint’ via FttH. In Saudi Arabia, Mobily, ITC and Bayanat Al-Oula reached agreement in 2006 to build and operate a fibre optic backbone network covering most of the country. The first stage of the 12,600km network was completed by early 2007 and the entire network was completed in May 2009.

Internet, broadband

Internet and broadband penetration rates remain low in many countries of the Middle East, access speeds are often relatively slow and tariffs are relatively high compared with other regions in the world but the region is making a strong push towards higher broadband penetration. The young population will be a driver for growth as they grow up with Internet use as the norm. In addition liberalisation and increased competition are producing a greater variety of services and mediums.

Broadband prices in the Arab countries are generally high compared with costs in the USA or Europe. While broadband growth has taken off in the small, oil-rich and developed countries of the Gulf, wide income disparities across the Arab Middle East region as a whole are echoed by wide disparities in Internet and broadband penetration rates. Computer penetration levels are generally low. Qatar, Bahrain and UAE all have high household broadband penetration, particularly among nationals. The largest country in the region, Saudi Arabia, has low broadband penetration but it is rising quickly.

ADSL is the prevailing broadband Internet technology in the region. Only in Israel does cable have a significant market share. Services are provided by HOT Cable Systems Media, which is subject to the same broadband universal service obligations as is DSL network operator Bezeq. This has resulted in broadband being available to 99% of all households. Much is being promised by WiMAX across the Middle East region but projects have still to come to fruition.

All the GCC and Israeli operators, with the exception of recently launched Vodafone Qatar, offer HSPA mobile broadband services. Mobile broadband prices in most countries remain relatively high but the introduction of some affordable, flat-rate pricing plans has encouraged higher take-up rates. Saudi Arabia’s second mobile operator, Mobily, said it could not cope with the level of demand when it introduced flat-rate price plans. It claimed to have 600,000 subscribers in June 2009. This subscriber number is very high when compared with a total of just over 1 million Saudi ADSL subscribers at end-2008.

One of the reasons for slow Internet and broadband subscriber growth in Arab Middle East countries has been a lack of sufficient content in Arabic for users to need a high-speed broadband connection in their daily lives. There has been too much emphasis on hardware and the latest must-have gizmo and not enough on creativity. This is beginning to change with the increasing digital content produced by the flourishing Direct-to-Home satellite TV sector, including entertainment, educational programming, news and sports. At least 60-70% of homes across the Middle East have access to multi-channel TV, much of it Free-to-Air DTH satellite. Around 70% of the 400+ channels are privately owned.

Digital media

While DTH satellite TV booms, other digital media have been slow to develop in the Arab Middle East, but this is beginning to change as broadband penetration increases. The population of the Arab Middle East is young and growing fast, many of them with high incomes. In the GCC countries, 65% of the population is under 30. Young consumers tend to be enthusiastic consumers of all types of digital media and users between the ages of 15 and 29 are said to form nearly 70% of all Internet traffic in the GCC countries. A survey in early 2009 found that young people in Saudi Arabia spent more time interacting with Internet media such as Facebook and YouTube than watching TV.

Mobile operations

Across most countries of the Middle East, including even some of the most highly penetrated, growth rates are surprisingly high. This is often due to an increase in competition – a second or third operator has entered the market or a new investor has bought a share of an existing operator – causing a subsequent drop in tariffs or improvement in services. Highest growth rates are in the relatively undeveloped markets of Egypt, Iran and Yemen. The large number of expatriates in many countries is also a factor in encouraging competition, and thus growth and penetration rates – with a fluid population new operators stand a better chance of gaining market share.

In recent years the region has become home to some large international players. Etisalat of the UAE and Zain of Kuwait have been particularly aggressive buyers of both new licences and existing operators in Africa, the Middle East and Asia. Qtel of Qatar, STC of Saudi Arabia and Batelco of Bahrain have also taken this route for growth.

HSPA services are now offered throughout the Gulf region and in Israel. Speeds are increasing, with HSDPA USB modem broadband packages commonly up to 7.2Mb/s. There are several regional factors that favour mobile broadband. The populations are very young and there are very large numbers of expatriates. Fixed-line penetration levels are generally low. In addition there are several dynamic regional mobile operators whereas fixed-line operators are generally state-owned incumbents accustomed to little competition.

For more info on this new BuddeComm report (tables only) see:

Middle East – Telecoms, Internet, Broadband and Mobile Statistics – tables only

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Finland moves closer to LTE

Monday, November 30th, 2009

Finland has a long history of innovation in the mobile market. It was the first country in Europe to issue 3G licences, and when it awarded four national licences on 20-year terms in March 1999 it did so free of charge and without launch deadlines ’ the only cost was the €1,000/25KHz administration fee.

These arrangements contrasted with those in most other European countries, where massive fees were charged for acquiring 3G spectrum, and deadlines were imposed, subject to penalty, for rolling out infrastructure and starting commercial services. Across Europe, a number of network operators soon went to the wall, while most others have been saddled with servicing the extraordinary debt obligations for at eight years or more.

Times have changed and now lower (and more advantageous) frequencies are being made available at a fraction of the price of the 2GHz and 2.1GHz bands initially set aside for 3G. Finland also pioneered the use of 900MHz spectrum for 3G, which can provide area coverage between two and four-times larger than 2.1GHz, thus significantly reducing network deployment costs in rural areas. Elisa, TeliaSonera and DNA all have extensive 3G network coverage using 900MHz spectrum.

Higher frequency spectrum, in the 2.5-2.69GHz band, has also been utilised: the recent auction for 20-year licences –which raised €3.8 million – saw Elisa allocated 50MHz of spectrum, TeliaSonera five blocks of 2x5MHz spectrum and DNA 40MHz of spectrum. DNA planned to place customers on its extensive HSPA+ network using the new frequency, providing up to 21Mb/s, before migrating to LTE during 2010, when data rates of up to 100Mb/s should be available. TeliaSonera is in a position to migrate to LTE sooner (by early 2010), though as ever network roll-out will depend on customer demand and the availability of compatible equipment.

For more information, see:

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EU telecom overhaul one step closer

Thursday, November 26th, 2009

Europe’s electronic communications sector is currently governed by directives adopted in 2002. These stipulated that the directives and regulatory framework should be reviewed, a processed initialised in November 2007. Both the European Council and the European Parliament need to adopt the proposed changes, and none of the initial consultations conducted by the EC indicated that a major overhaul was on the cards, or even required. Yet this is what has transpired.

After two years of wrangling the European Parliament has finally approved the telecoms reform package (championed from the outset by the EU Telecoms Commissioner Viviane Reding) which promises to deliver a range of fundamental changes. Many of these changes will be appreciated by privacy- and cost-conscious consumers, while for a number of operators they will spell lower revenue in coming years. Operators, particularly in the mobile market, have had to bear a host similar measures in recent years, including tariff controls on mobile termination rates (MTRs), and voice and data roaming. The new measures go far beyond tariff controls.

The package includes an extensive overhaul of European telecoms legislation, including the creation of a new European body of telecom regulators (BEREC – the Body of European Regulators for Electronic Communications) charged with bringing down prices for consumers and penalising anti-competitive behaviour. It also provides the right of individual national regulators (NRAs) to impose functional separation on those incumbent operators which are deemed (by their market size as well as behaviour) to restrict competition.

The telecoms reform enters into force next month and grants Member States until May 2011 to incorporate regulations into their national telecoms laws.

In many respects the package is geared towards consumer rights, particularly its focus on reducing the time taken for operators to port mobile phone numbers, its measures to respect consumer privacy, and the principal that consumers cannot have their Internet connection cut off for downloading files illegally without a full hearing (the basis for this -considerations of terrorism or other major concerns aside – is that consumer rights to the Internet are widely considered a given, whereas the qualms of movie studios and record executives can be appeased through other processes). Several EU States (Finland and Spain in particular) have already or are in the process of legislating broadband as a Universal Service, so cutting off access would be as profound as terminating connections to the telephone or electricity grid.

Some measures did not pass muster: the proposed creation of a European Electronic Communications Market Authority EECMA (which would have absorbed the ENISA) was amended in September 2008 and finally dropped, in favour of BEREC, while issues relating to spectrum management and additional harmonisation powers for the EC were watered down. Nevertheless, harmonised radio spectrum management across the EU, especially considering the switchover from analogue to digital TV by 2012, is a fundamental policy of the reform package.

For more information on Europe’s regulatory regime and related matters, see:

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