|Africa and the Middle East 2006
|Bridging new digital divides
Jean-Hervé Jenn is the President, International, of Convergys Corporation. He is responsible for the company in Europe, the Middle East, Africa (EMEA), Asia Pacific and South America. Before the expansion of his role, Mr Jenn served as the President, EMEA, for Convergys’ Information Management Group (IMG). Prior to joining Convergys, Mr Jenn led a team at Goldman-Sachs responsible for all of the firm’s strategic dialogues with large corporate, institutional and government clients. Jean-Hervé Jenn served previously as head of the European Information, Telecommunication and Entertainment practice for KPMG and was a co-founder of KPMG Ventures. He is a member of the Institute of Chartered Accountants of England and a trade representative to the Financial Services Authority. Jean-Hervé Jenn earned master’s degrees in science from Ecole Spéciale des Travaux Publics, Paris, and in management, from the University of California, Los Angeles. He also completed the Executive Management Program at INSEAD, France.
The world increasingly relies upon broadband for the voice data and video services that sustain the economy and drive growth. Without broadband, countries are doomed to play a secondary role in the emerging information society and global economy. Although, in recent years, great strides have been made liberalising the communications infrastructure and providing modern, competitive communications services in African and Middle Eastern countries, the penetration of these services there is still quite low compared to the world’s more developed regions.
The Internet’s promise of being the great economic equalizer has never been so near at hand. Nevertheless, it remains out of reach for the majority of developing countries. The world’s leading economies now rely heavily on broadband technologies to underpin cheaper and faster Internet connections and offer a growing range of communications services that enable e-commerce, e-government and e-education. Commercial imperatives now drive the development of a new generation of converged services, combining media content and communications services, and ensure the widespread availability of broadband connections. Those economies that fail to adequately harness such commercial forces risk being left behind. The term ‘digital divide’, coined more than ten years ago, refers to the gap between those communities, populations and countries with access to technology and those without. The benchmarking standards used to monitor the technological progress of nations and regions with reference to the digital divide included access to telephone services, to personal computers and to Internet access relative to total populations. Despite great strides forward made by public and commercial initiatives to make these technologies more widely available, and thereby reduce the gap, the prospect of a widening digital divide remains a very real one. As leading economies seek to capitalise on the latest wave of digital opportunities, new benchmarks that track progress in areas like broadband penetration, VoIP traffic and the availability of ‘multiplay’ – triple play and quadruple play – services are becoming increasingly significant. Triple play includes voice, video and data services; quadruple play adds mobile access to the package. Traditionally, the comparison between the ‘haves’ and the ‘have-nots’ was between unconnected areas with limited telephony and no Internet access, versus communities that had ubiquitous telephony and high levels of Internet access. However, today, even some of the most remote areas in the world can boast some level of connectivity – even if only found in community access centres or as dedicated Internet access provided for medical or educational use. Egypt’s free Internet initiative has helped increase its Internet usage from just 600,000 people in 2001 to more than 5 million people in 2005. While this makes Egypt the largest Internet market in Africa, it only represents a seven per cent penetration rate in a population of 71 million. This said, Egypt’s Technology Access Community Centre program, TACCs, established in 1999 and jointly funded by the United Nations Development Program, UNDP, has enabled community Internet access in hundreds of towns, villages and rural areas throughout the country. This means that actual access rates are higher than the subscriber statistics reflect. Despite the progress in both overall subscriber numbers and rural Internet access, broadband access, with only about 100,000 subscribers, remains low. Now let us compare the Egyptian situation with that in Europe. Forrester Research predicts that 41 per cent of all Internet-connected households in Western Europe will have broadband access by 2010. According to the OECD, the pace of broadband access is increasing amongst member countries such as The Netherlands, Denmark, Korea and Iceland, all of which now have more than 25 broadband lines per 100 people (OECD Statistics, December 2005). Forrester expects that in the Netherlands this figure will rise to 54 per cent by 2010, and that there will be 71 million European broadband users by the same date. For today’s economists and statisticians one of the challenges will be how best to compare communities with access to converged multiplay service offerings such as broadband, IP telephony and interactive digital television, to regions that only have traditional telephony and Internet services – or just basic voice services. Like it or not, just as many countries reach, or even exceed, their targets for Internet access and telephone services, economists will begin measuring their e-competitiveness based on broadband penetration and the ability to offer fully converged services. Unfortunately, the global model for telecom privatisation has tended to divide national communications assets by technology and geography, via licensing for specific communications services. Following the lead of the USA and Europe, emerging markets have by and large privatised mobile services, Internet services, satellite services and wireline services in separate processes, sell-offs and competitive bids. In the Eighties and Nineties, this strategy had the desired effect in many Western markets of rapidly promoting growth in cellular and Internet subscribers – a trend mirrored during the past ten years in the Middle East. Today, the lines between different services and technologies are increasingly blurred. Many international communications service providers have already embarked upon ambitious strategies to integrate services such as broadband, cellular and fixed-line telephony services to create new multiplay offerings. In Europe, this has already led to numerous new business partnerships, mergers and acquisitions by communication service providers that are strong in one or more service area, but recognise the need for additional capacity to offer subscribers fully converged multiplay services. In the UK, NTL is set to acquire Virgin Mobile in order to offer integrated TV, broadband, telephony and mobile services under the same umbrella. NTL saw an opportunity to create a large integrated communications company able to compete with both pay TV and telecom operators. Meanwhile, British Telecom – still the UK’s largest telephony provider – is investing billions in upgrading its national network to provide triple-play services, including digital TV. The company has already signed deals with several global media companies to provide content for television services it will launch later this year. Some countries in the Middle East and Africa are now in danger of bogging down in the middle ground. Having privatised systematically – and some would say wisely, given the circumstances – often beginning with mobile and Internet services before deregulating the wireline sector, some economies have effectively created fast-growing islands of communications services. Operators are empowered to drive their category, so long as the core benefit sought by their subscribers is a standalone communications service. Many operators are currently limited in their ability to provide multiplay services by their respective regulatory environments. If these markets are to continue to close the gap between themselves and the global digital leaders, this must change soon. Jordan is perhaps the furthest along the road to deregulation in the Arab world. Jordan is well positioned to reap the benefits of a competitive environment, which can drive the adoption of broadband and converged communications services. Based in firm economic principles, Jordan has liberalised incrementally. One of the most significant steps in the liberalisation process, though, occurred in 2005 when the Kingdom’s fixed-line services were opened to competition. This paved the way for the other 26 telecom operators to offer a rich variety of multiplay services in Jordan, and the opportunity to create what could be the most competitive communications market in the Middle East. The incumbent operator, Jordan Telecom, as a result, has already embarked on an ambitious strategy to integrate its offerings and provide a broad range of multiplay services. In what seems to be a diametrically opposite approach, the State of Qatar maintains a monopoly in the telecommunications sector, but Qatar’s national operator, Qtel, has pressed forward with its own business strategy to develop a sophisticated suite of converged services. Although broadband penetration is still relatively low at about 30,000 lines or 3.7 per 100 people, Qtel has invested heavily in much of the underlying technology required to provide new multiplay services throughout the country. These include wireless local loop services using broadband point-to-multipoint technology to provide telephone and broadband Internet services to areas outside Qtel’s wired network. Qtel will introduce 3G and video streaming technologies later this year. Qtel was also one of the first operators in the world to implement a converged billing system for quad-play services, allowing it to unify billing for mobile, telephone, Internet and digital TV services, and easily integrate multi-service offerings. South Africa already boasts the African continent’s most advanced network services, but the country had to wait until last year for the first major steps towards full liberalisation, creating new licence categories, allowing the use of VoIP and permitting fixed line competition for the first time. Competition has already had an impact in the broadband services market; broadband subscriber numbers grew from 50,000 in February 2005 to about 200,000 currently. The country is now mulling a Convergence Bill to provide a regulatory framework for the telecommunications, broadcast and IT markets to compete openly in a fully converged services market. Many Middle Eastern and African countries have invested heavily in e-government and e-education systems to ensure future economic competitiveness and are turning increasingly towards e-commerce. The greatest limiting factor to their e-competitiveness has been the number of citizens able to access the Internet. In the Economist Intelligence Unit’s 2006 e-readiness rankings, the Middle East and Africa’s state of e-readiness ranks below that of North America, Western Europe, Asia Pacific, Central and Eastern Europe and Latin America. In a world where broadband access, increasingly driven by multiplay services, is becoming a core requirement for e-competitiveness, emerging markets must either put themselves on the fast track to full liberalisation of their markets, or significantly change the agendas of the incumbent operators. Where regulatory environments foster and promote converged services markets, market forces will prove to be powerful allies in driving e-competitiveness goals.