With countries throughout the MEA region being at widely varying stages of broadband deployment, the Broadband World Forum MEA, held in Dubai last month, made for an eclectic event that reflected the diversity of challenges faced by operators, vendors and regulators in the region.
Indeed, it was clear from the various conferences and discussions at the event that while there is a huge gap between the average broadband penetration in the Gulf countries and many other countries in the region, one factor is consistent across the MEA region. And that is the huge potential of broadband, whether fixed or mobile.
Indeed, even in Gulf countries including the UAE, Bahrain and Saudi Arabia, broadband penetration remains relatively low compared with markets in Europe. For example, the broadband penetration rate in Saudi Arabia is estimated to be about 12%, compared to an average of over 50% in Europe and the US.
But with big differences in regulation, competition and the type of technologies deployed to offer broadband in countries in the MEA region, operators and vendors face diverse challenges as they seek to deploy and operate broadband networks.
The case for fixed
While Gulf operators including Etisalat and Qtel have been busy deploying nationwide FTTH networks with an eye on offering services such as IPTV and video-on-demand, operators in many other countries have to be more conscious of cost, and more discerning in the way they deploy fixed-line network infrastructure.
This was a key theme for Richard Jones, founding partner of Ventura Team, a consulting and investment firm that has earned its stripes by deploying its own FTTH network in Sweden.
Jones, who chaired a number of conference sessions at Broadband World Forum MEA, pointed out that operators must look carefully at the costs and the business case of deploying fibre, and tailor each deployment to the individual market.
“The first thing if you are an incumbent trying to balance those things out is that you have to get the right business model at a very detailed level,” Jones says.
“You have to try to balance out what to do for fibre. FTTH will cost you about five times the capex of fibre-to-the-cabinet. Then when you have a certain amount of fibre-to-the-cabinet, what do you do beyond that?” he asks.
“Maybe you can use some ADSL, which in the region is often low-quality copper, for the distances from the exchanges to the cabinets. But where there is no DSL, what do you do? You have got the un-served and the underserved, and in those areas you might have to use satellite, perhaps some 3G, or perhaps some WiMAX, to fill-in.”
This approach, of tweaking a fibre network with other technologies, can mean the difference between a network making a sound business case or not.
“What we have seen is that changing by 5% to 10% the balance between FTTH and fibre-to-the-cabinet, adding some LTE, taking in some HSPA, can lead to swings of a few percent in the internal rate of return measure for the project and essentially you can go from having a project that is unattractive to something that is viable and attractive,” Jones says.
“It is not a slam-dunk like the UAE where you can just do fibre everywhere, or just do fibre-to-the-cabinet everywhere as can occur in other countries,” Jones says. “That balance is hard to strike and you have to look at the local geography and get the right business case.”
Amir Ghoddoussi, BBA sales development manager for Ericsson Middle East, agrees that it is important to tailor fibre deployments. For example, he says that copper networks within buildings can often be retained, reducing the cost of a deployment significantly.
“The fact is that some buildings have copper in them and the business case doesn’t make sense to replace all the copper with fibre within the building. So in some cases they want to utilise the existing copper. But in new buildings the business case makes sense for all fibre access,” he says.
But in order to decide how to go about deploying a fibre network, operators also need to make a realistic appraisal of the subscriber take-up they can achieve in the market, according to Jones.
“Key to it all is getting absolutely the right business case, the right financial model that stacks up and makes sense, and then the component parts of that to ensure realistic subscriber take-up and revenues.”
Jones adds that operators should question how much customers will pay for additional bandwidth. For example, if an area is already well served with a 2Mbps, how much extra will the average customer be prepared to pay for a 20Mbps connection?
Jones also insists that, as a general rule, an operator should be the first to launch fibre in a given area in order to be successful.
“Always be the first to offer a service in an area or don’t go there with fibre, because if 50% of an area has taken fibre service or FTTC service the other 50% is telling you something,” he says. “They have been offered it but have already said no, so you are trying to preach to the unconverted or penetrate against people who have already got the service, and what are you going to offer – half the price?”
Operators that have not yet deployed FTTH networks also need to consider how the next generation of access is going to evolve, according to Ericsson’s Amir Ghoddoussi.
“The evolution needs to be smooth, it needs to re-use the current infrastructure for fibre and that is what we are planning and that is what we are presenting to the customers,” he says.
“The current infrastructure is copper-based so there is some opportunity to use existing copper to support the bandwidth requirements of today, and the vision is to evolve towards fibre as we migrate away from copper.
“This region, specifically the Gulf, is leading the way towards this evolution. We are also seeing growth elsewhere in the Middle East, in Turkey, Egypt, Saudi Arabia, so we are very positive.”
But aside from the technology, Ghoddoussi adds that operators also face a challenge in terms of developing a sound business case for their evolving broadband networks, and particularly fibre.
“The main challenge is business case, the services they have to offer to actually get the revenues they need to pay for the new infrastructure. Turkey is a good example, where the revenue per user is relatively low but when you take into account triple play services, the demand for bandwidth and the cost of electronics and cost of deployment coming down, the business case works favourably for FTTH.
“There is almost always a need for triple play and the services such as HD-TV and video-on-demand to provide the subscriber with more services for more revenue potential.”
With many different types of access technology often required to make a network successful, including a combination of fixed and wireless technology, licencing issues also came to the fore at the event.
Noel Kirkaldy, director of solutions marketing, at telecoms vendor Motorola, said that while many operators in the region, particularly some of the incumbent operators, have benefited from universal licences, some operators that have only a mobile licence could fall behind amid competition from players that use a combination of fixed and mobile technology.
“As an industry I think we should be looking at the best utilisation of a technology,” Kirkaldy says. “Three to five years ago GSM was the only team in town. When we first launched with UMTS many years ago it was a solution without a requirement because there weren’t the social networks, the video, the Youtubes.
“Now the requirements are ahead of the solutions, so we have an issue. It is absolutely clear that if you put a high video data usage on to existing technologies in the mobile space, they are going to struggle, so we have to be able to co-locate and work between the different mediums,” he says.
Kirkaldy adds that this is less of a problem where the same operators have fixed and mobile licences, as oppose to the situation in numerous European countries where operators have either fixed or mobile licences.
Eric Festraets, director, broadband marketing and consulting, EMEA, Alcatel-Lucent, also spoke about the importance of being able to converge fixed and mobile technologies.
“Alcatel is very active in two domains – broadband technology, copper and fibre, and we are trying to take a leap and be at the forefront of mobile broadband technology as well. Secondly, we try to work on the convergence of all these technologies on the end-to-end architecture,” he says.
To show how the convergence of the various access technologies works, Alcatel-Lucent has specific broadband projects involving fibre in the Middle East region. These include projects with Etisalat, STC and Vodafone Qatar. “We need to understand what people want to experience in terms of services and applications on the internet or in a specific organised environment,” says Festraets.
“If we define service scenarios and understand how operators can play into bringing these scenarios into mobile, then it can be immediately linked to the network evolution that is needed to do it.”
Festraets adds that Alcatel-Lucent views entertainment services and healthcare as areas that hold particular potential for broadband growth. “In European countries, 10% of the GDP goes into healthcare, which means there is a lot of money. A typical example will be serving the ageing population through fast and reliable communication services. Here, the health sector is willing to invest on these technologies which call for more bandwidth. This is one of the areas where broadband can play an important role,” he adds.
While there was a strong focus on network infrastructure for broadband at Broadband World Forum MEA, a few companies also sought to highlight the importance of the services that use those networks.
As mobile markets in the Middle East mature and become more competitive, there is a growing pressure on operators to improve customer retention and acquisition by identifying new growth opportunities through differentiated service offerings, according to Sherif Hamoudah, SVP & GM for Middle East, Africa and Pakistan, at mobile data specialist, Acision.
“Operators are also looking for the ways to better monetise services in line with the data growth through real-time charging solutions and segmented bundled offerings which offer a personalised user experience to the consumer,” Hamoudah said.
At the event, Acision, which works with telcos including MTN Group and Zain Group, focused on issues including mobile broadband quality of experience, fairness policies, content optimisation, video quality and consumer’s willingness to pay for VAS.