UAE Telecom Market: Telecommunication Regulatory Authority

H.E. Mohamed Al Ghanim, Board Member & Director General of Telecommunication Regulatory Authority First of all, there is the investment side of the telecom infrastructure. Right now, we have a lot of areas in which companies need to go and invest in order to lay down the telecom infrastructure. We believe that the best way forward for competition should be on a service level rather than on a facility level.

You have mentioned that the competition between Du and Etisalat has helped the end customer in terms of better services and lower cost. At the same time, the companies continued to grow and developed the best practices, which have helped Etisalat in international expansion. In your opinion how do you assess the current regulatory environment in the UAE? What are the specifics of this market?

Initially, when we licensed Du, we put a regulatory framework that enables competition in the UAE. We introduced interconnection instructions that allow both companies to interconnect together with their network. This is one of the primary regulating instruments that any regulator will do. At the same time, we immediately put in a state-of-the-art regulatory procedure where, if there is a dispute between the two operators, then the TRA will take due process to resolve any disputes that happen between the two operators. These instruments were introduced in a transparent way where both companies know what their mandates are; what they should do and what they shouldn’t do. Before competition started, we put in place a price control policy where we made sure that the incumbent operator does not enter into anti-competitive practices before competition starts to protect competition. The second operator came into the market when there was a monopoly and a high penetration of mobile services in the country. Also, the penetration rate for fixed services was high as well as internet or dialup. We wanted to make sure that the competition that was going to happen was healthy, the UAE is one of the leading countries in the Middle East and continues to grow at a fast pace. We also wanted to make sure that the telecom sector moves with the country’s vision to become the top in the region. 15 months after the operation of Du, the current mobile service market has grown by 38%. This shows you that, even with the excessive 100% penetration rate when Du started, the market is still healthy, it has grown by a big chunk and Du has obtained around 22% market share in three years, and they said they would obtain 30%. This is a healthy indication. At the same time, Etisalat became more successful and more efficient. Their profit margin has increased by far more than in previous years and they are still continuing to grow inside and outside the country. As for the consumers and how competition has benefited the consumers, we have made analyses lately and we saw that, in general, all the telecom services in the UAE, in terms of retail prices, have reduced by 15%. If we put all this in one basket, telecom prices have decreased by 15%. At the same time, if you take individual services, you will find that international calls, for example, have dropped by up to 81%, broadband prices have dropped by more than 25%, and local mobile services have dropped by 15% although the call rates were low when competition started. We have processed more than 2,000 packages for Etisalat and Du in 15 months so you can see how aggressive both operators are in terms of trying to bring the best products to the end consumers and I think the regulatory framework that we implemented three years ago has proven that it is strong, sustainable and has sustained competition.

In your opinion, what is the industry’s five year outlook? Is there still considerable space for growth?

I think there is still considerable space for growth. We are in a country where the growth rate is high, we have booms in different sectors of the economy such as the real estate sector in various emirates of the country; this sector will require telecommunication services and there is a lot of room for companies to grow in this area. At the same time, the population is increasing and there are other sectors, such as the financial sector, education sector and tourism and all sectors of the economy, that are also growing and expanding.

You made an important announcement today concerning mobile TV. Could you tell us more about that?

Today, on the second day of the MECOM exhibition, we announced that the UAE Telecommunications Regulatory Authority will start the bidding process for licensing a broadcast mobile TV company. We are going to start this process with a one month consultation period. We will consult with the industry to see what our process will be; how we are going to go about the billing process. So, within a month we will be hearing from the industry with their opinion and then immediately we will formulate the request for a proposal and then we will start the contest for the bidding of broadcast mobile TV in the UAE. The company that wins the contest will provide a wholesale offer to both companies – Etisalat and Du – to provide their services to the end customer and it will deliver high quality TV broadcast services to the end consumer based on a technology known as HDVB or Media FLO. So, we will see the benefits for the competitors and which technology they prefer to use. We will also look into the best technology to adopt for the UAE, we will consider which option enhances availability, enhances price, the best offer given to the customer, the relationship with the media company, the content providers, advertising and so on. All this will be integrated in the model.

Where do you see the main challenges TRA will face adopting mobile TV?

The challenge is that this is a new technology internationally. We are only seeing the success of mobile TV in few countries because this technology has just been launched in a few countries. Lately, Austria and Switzerland have also completed the process in preparation for Euro 2008. We see also other countries like Germany and Italy. I think Italy is the only country that has the service live. So, the challenge that we are facing is that we need to learn from all of those countries about the pros and cons of these services. However, during the bidding process we are going to look into the entire value chain to make sure that the entire value chain is available for the customers to be able to see and receive a lucrative and state-of-the-art service with a competitive price.

Some of the venturing concepts at yesterday’s panel discussion about future convergence stipulated the need for common infrastructure to reduce costs and to better compete at the service level. How will you tackle the regulatory aspect the convergence?

There are two elements to tackle this issue. First of all, there is the investment side of the telecom infrastructure. Right now, we have a lot of areas in which companies need to go and invest in order to lay down the telecom infrastructure. We believe that the best way forward for competition should be on a service level rather than on a facility level. We have agreed with the industry that there should be common investment in the infrastructure for new projects and new cities that are being built right now in the country and, moving forward, this common infrastructure is going to provide services to those companies. The companies should compete on the service level and this will also give consumers the choice as to which operator they should take the service from. The trend right now in the world is that there is consolidation in terms of infrastructure and there’s more competition on the service level so the facet infrastructure is common around the world and the active components are on the service level there is competition.

One of the major challenges is to stay ahead of the operators and the industry, which is constantly changing. How are you staying ahead in constantly changing environment?

Right now, we are trying to implement a state-of-the-art framework and update our regulatory instruments, and we are doing this on a continuous basis. Whether we do it on a case by case basis with the policies, procedures and guidelines or we create a new framework. On the licensing side, by the middle of this year, we are going to adopt a new licensing framework that will last for the next five years. This will help us implement and license new companies and we will have consistency in terms of mandates and the role and responsibilities of each licensed company. So, we do update our policies, procedures and regulatory instruments. We look into the future. We have, for example, next generation networks, which will come with a lot of challenges and we need to upgrade our policies in order to make new procedure and guidelines or other regulatory instruments to make sure that they cope with new technologies.

How do you assess the level of cooperation with the major international players in terms of expertise?

We do cooperate with all the regulators around the world. Last year, we headed the World Regulations Forum where we put in place the roadmap for the next generation. We do have good contacts with all the regulators around the world, we coordinate with big regulators around the world seeing their experience in certain areas and they see our experience in some areas. Lately, we’ve been working with Singapore, the US, the UK, Austria, Switzerland; you name it we’ve been working with it. Also, regionally, we’ve been working very closely with the gulf countries surrounding the UAE, such as Oman, Bahrain, Qatar and Saudi Arabia to see how we can harmonise what we do together.

Your Excellency mentioned that the new generation facilities will bring new challenges, such as security IP and privacy of customer data. How are you going to craft the regulatory framework to better protect the customer?

Now, the migration from the classical server switch-type networks to soft switch networks will bring its own challenges. Everything is going to connect to the IP so you will have streaming coming to your home, whether it’s TV or data or internet or voice-over-IP. There are aspects of network security for this; the aspect of customer choice, you have to provide the customer a choice at the end of the day. As I said, there are certain challenges in terms of deploying the next generation networks. Every country defines next generation the way they see it and right now, we don’t have a clear definition of what next generation networks are but we believe that next generation networks are going to come. Right now, Etisalat is deploying next generation network facilities to homes and Du is also deploying internet connection to the homes and businesses. So, there are different challenges. It’s not the classical type of communication that happens. In terms of connection between the two operators there are also some challenges because it’s a new technology that needs to be adapted and we also need to upgrade our instruments to be able to cater for it.

The question now is: is the market ready for a third operator?

It’s premature to speak about it right now because Du has just started operation and competition just picked up. Competition has become aggressive and that’s healthy and it’s going to end up giving better service and choice to the customers. However, today, it is premature to speak of a third operator to compete in the UAE market.

Since your inception in 2003, what effects has the TRA had on the UAE. In what way has it helped to build its image?

Four years ago, we came and looked into the future and we made, at the initial stage, a two-year plan. The first two years were very difficult for us because we had to lay down everything from scratch. We had to develop the national telecom policy, the national numbering plan, the type of licensing regime, the licensing framework, the internet connection, the customer complaints, the directory inquiries and so on and so forth. There were so many regulatory instruments that we had to develop in a short period of time. Then, we had to license a second operator and we did that. Immediately after that, we went from a pre-operation of the competition into, now, we have a second operator and it is alive and discussing interconnection with Etisalat. We’ve moved from one stage to another, and during the past two years, we have been working closely with the two operators in order to resolve all issues dealing with site sharing, interconnection, network deployment and all related issues. We need to facilitate the work for both operators so that they can compete in a healthy environment. Four years after competition started and we saw the results – what you see and what I told you just now – we are preparing the market for the next phase, where we have to come up with innovative technologies, we have to come up with new licensing regime, we need to upgrade the legal instruments and we have to focus on the consumer; we have to make sure that both companies focus on consumers. Lately, we have mandated both companies to issue a consumer code of practice. Both companies have produced a document that will give the customers full details of their rights, how they can find things within their organisations, how to complain if they want to complain, how they can apply for new services, how they can upgrade their services. We also implemented a complaint system for customers to complain about quality of service, coverage, support and so on. That is now in place and we get monthly reports from them and we make sure that they deal with these complaints. So, this is the pre-operation side that we started four years ago. Now, we are getting into the actual feedback coming from the customers and looking into all the issues.

What is your long-term vision for the UAE and your ambition?

The ambition for the leadership of the UAE is for the country to have state-of-the-art technology and we have to do it, there is no choice and we have to be in the top ten countries worldwide. The regulations that we have to put in place are supposed to be state-of-the-art, we have to encourage new technologies in the country and investment in the telecom sector and we need to make sure that competition is growing and that the sector is growing. There are different dimensions that we need to tackle with regard to the telecom sector, which is the convergence issue that is happening right now between IT and media. We need to make sure that there are enough resources coming to the sector to support the growth of this sector and we need to make sure that the sector supports the other sectors that support the entire economy like the financial sector, the education sector, the real estate sector and so on. So, we have to make sure that the telecom sector is an enabler and that it supports all the other sectors that support the economy of the UAE.

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