This year’s Broadband World Forum (BWF) MEA was in stark contrast with the one held 12 months ago. The theme last year went down the path of fixed broadband, specifically fiber access and the UAE’s pioneering approach to connect every house to fiber. However, discussion on fixed broadband was pretty much subdued by a network that, while many industry insiders consider it to be complementary to FBB, some experts treat it as a threat and competitor – [namely] LTE.
In my estimation, LTE has the potential to be a threat to fixed broadband – even FTTH – in certain segments of the market. This will increasingly become the case as the technology is rolled out further and grows in maturity. Yet it would be premature to consider LTE as such in the context of [the] region, given the spectral problems issues it is facing. It is precisely because of these issues that, unlike FTTH, I believe that discussion on the technology will not have disappeared by the time next year’s BWF MEA approaches.
As a case study, Etisalat’s CEO Matthew Willsher in his keynote speech mentioned that over 700 LTE base stations have been installed. Etisalat’s LTE customers who roam outside the LTE coverage area can fall back onto its HSPA network. In comparison with voice, Willsher’s five-year forecast was that Etisalat’s data revenue will increase from 20% to 40% in mobile, and from 50% to 75% in fixed. He added that Etisalat ramped up data allowances last year, from 100-MB for 99 Emirati Dirhams (€20.33) in 2Q11 to 1-GB for the same price by the end of 2011.
Willsher said that the challenge of increasing consumption of bandwidth should be welcomed with open arms rather than treated as a threat; even if it is a threat, he argued that he would rather be in the telecoms industry than any other, due to the rapid advancements in technological innovation it is experiencing. The main challenge he believes an incumbent like Etisalat faces is the segmentation of its target audience and how to deliver tailored services to each of these segments. This is an indication of a problem that the rollout of advanced technologies themselves cannot solve – getting the service to end users and getting the money out of them.
The conference was laden with proposals, launch announcements, timeframes and roadmaps. However, the influx of speedy next-generation networks should not be reason to forget what these deployments actually work best for: services. I note there is a disproportionate emphasis on the quality of the networks being deployed, in comparison to the discussion on how they can actually be monetized. The regional apps and content market is far from mature and – away from the glitz of the large regional incumbents’ physical networks – there is a danger of a large number of operators becoming dumb pipes; fattening these pipes up with FTTH and LTE will not guarantee any significant increase in return on investment.
Though calls for an urgent reality check are being drummed up, there has been relatively little action to this effect. Then again, perhaps some of the operators can (literally) afford to roll out without worrying too much about the lack of the services these networks are capable of, and are supposed to, deliver.
I submit that the Middle Eastern operators have the precious gift of hindsight on their side. Traditional telecoms revenues in North America and Western Europe are drying up, and are being substituted and/or cannibalized by the digital sector – the likes of content, apps, etc. The diversity of these Western markets is what puts technologies and services through the mill, and it is the stories of success and failure that are the real golden lessons for governments and operators in the Middle East’s less mature markets.
This is not to suggest that success and failure of specific models would definitely be replicated in the Middle East; rather it is the guidance that will be welcomed by the Middle East’s industry decision makers. Perhaps that is precisely what may work best for regional operators – to strategically remain a step behind their Western counterparts, rather than break into unchartered territory on their own initiative.
Ismail Patel is a research analyst with Informa Telecoms & Media’s MEA team