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In an exclusive interview with BusinessToday, Ghazi Atallah takes a closer look at the progress of broadband in the region
Benoy George Thomas

Do you see a sudden spurt in the telecom sector in the region?
Currently, there is tremendous growth in the sector. Deregulation is happening in the region in a major way and new operators are coming in. There is also a change in the way that operators, even incumbent operators in the region, are doing their business. There is change that is driven by technology, change driven by regulation and also change that is driven by consumers themselves. Demand for communication has gone up. The mobile phone and the Internet are quickly becoming an integral part of our daily lives. So, most people want more options and they want it in a way that is much more personalised. This is driving even the incumbents to do things differently.

How well is the adoption of broadband going in the GCC region?
If you look at the GCC region, there are pockets with different levels of sophistication. There are countries with high levels of broadband penetration like the UAE and Qatar. On the other hand, there are also countries with much lesser penetration – like Saudi Arabia, which is also a big geographical entity. There are many challenges in taking broadband penetration levels higher in such countries. It would be a big challenge to take broadband levels in Saudi Arabia to the levels in the UAE, simply because of the vast geographical spread. A smaller country like Qatar or the UAE is usually more advantaged in such cases, since it’s easier to implement broadband quickly and to the nooks and corners of the country over a lesser area and smaller population. That is why you will find penetration levels of 32 per cent and more in some countries in the region, while in Saudi Arabia, broadband penetration is very low, still only about three or four per cent. The case with Oman is quite similar. It is a large country, while the population is not very high. The combination of vast geography and low population doesn't make it that attractive a business case for broadband initiatives. But despite these seeming disadvantages, there are still plenty of initiatives to take broadband to more homes and enterprises. Omantel is now getting ready to launch another 100,000 broadband lines.

Will residential users play a key role in increasing broadband penetration in Oman?
There is still scope for a lot of growth in the corporate segment. Right now, the corporate segment is still relying a lot on leased lines, which is not necessarily the most efficient and cost effective way of being connected. So broadband is actually a very important thing, especially for small and medium sized enterprises (SMEs). Having said that, it must also be understood that residential users too offer a large opportunity for growth.

When businesses switch from leased lines to broadband, won't operator revenues dip?
Leased lines do enable service providers to get a bit more profit from their customers. However, they also entail more operational costs for the service provider - to keep the
network up and running smoothly, 24x7. So, popularising broadband does make sense for the operator. You can expect to see more and more of broadband coming up in the enterprise space in the future. Yes, service providers will not be able to charge as much as in the case of leased lines, but new opportunities exist to help service providers gain more revenues. Let's look at a hypothetical situation where operators used to charge US$100 (about RO38) for a 128kbps leased line before. Today, it’s likely that they will be ready to provide a broadband connect of 1Mbps for much less.

Operators may not make as much money from a customer based on pure connectivity. What they need to do is to move up the value chain, by providing more and more services on top of that broadband connect. First, they can reduce their operational costs by setting up a next generation network (NGN) for broadband. On top of that link, they can deliver more value-added services (VAS) like security services, managed telephony services and call centre hosting services. This will enable service providers to go higher up the value chain, thereby gaining more revenues from the user by providing more attractive services on one hand and increasing the number of customers for their services by lowering the initial cost of the service on the other.

So, what will drive broadband in Oman?
First, service providers need to make it more available by putting more links in place. That is what Omantel is now doing – upgrading its capacity. Oman is a relatively vast country with population clusters spread out. The cost of delivering broadband links over vast distances jacks up the fixed and operational costs for service providers. Having said that I must add that the service provider needs to ensure that broadband is available for customers, in effect, overcome that geographical-cost challenge.

Second, the pricing is very important. Broadband needs to be reasonably priced and affordable for consumers. Third, it needs to be a simple thing to have. If you are a consumer who wants broadband at home, it should be set up quickly and with minimal effort from your side. It has to be self provisioning.

Is there sufficient content to help drive broadband in the region?
Though there is plenty of content online, not much of it is very relevant to the region. This insufficiency of region-specific content is indeed a major hurdle to popularising the Internet and broadband in the region.

If you look at the Internet traffic to this region, nearly 85 per cent of the content that is accessed by Internet subscribers in the region is hosted in the US. The rest of the content is primarily hosted in Europe, with very little intra-region traffic. This is a big problem that we need to tackle, not just for Oman, but at a wider regional level. We have to create more and more content that is appropriate and relevant for the region.

You also have to create more and more opportunities of interaction and e-commerce based out of the region where people could go rather than to Google or to eBay. Chances are that if were doing their online shopping and searches on a regional platform, it would help popularise Internet much more. It is going to take a little while to sort out before regional solutions do come up. But the good thing is that more people are looking at this now.

How much time approximately would this problem take to be addressed?
I don’t think we will begin to have solutions to this problem for at least another 18 months. There are some niche area players. For example, Tejari is present in e-commerce – in the business to business (B2B) space and there are some others who are in the business-to-consumer (B2C) space. This will indeed encourage more local content. But there needs to be many more such sites, doing much more.