Connections Transport & ICT 96248 Key Pathways to High-Speed Internet in the Middle East and North Africa Spurring Competition and Building New Networks Natalija Gelvanovska, Michel Rogy, and Carlo Maria Rossotto Most countries of the Middle East and North The average share Africa (MENA) region are falling behind in their of disposable quest to develop high-speed Internet for rapid 1/3 income required by socioeconomic development. Despite young Morocco’s poorest adults’ rising use of social networking tools 40% to obtain and solid progress in a few countries, most mobile Internet of the region’s Internet remains hobbled by monopolized, inadequate infrastructure; weak investment incentives; and high costs. High-speed (broadband) Internet can drive economic and social transformations. To realize that potential, a recent World Bank study finds that MENA countries must pursue a three-pronged approach: (1) Reduce costs by fully liberalizing access to the existing Internet infrastructure. (2) Support the resulting competition with independent national regulators working within a harmonized regional framework of regulation. (3) Promote investments in new fiber-optic networks and other ultrafast broadband infrastructure (including Long-Term Evolution or LTE) alongside existing technologies.1 With these measures, plus aggressive strategies for sharing public works infrastructure and subsidies for rural access, MENA can leapfrog its current information and communication bottlenecks. Bottled-Up Broadband Three sets of factors are blocking the development Competition to build networks (facilities-based of broadband service in the MENA region: (1) a lack competition) has been the decisive force in coun- of competition, (2) a fragmented regional market, tries with advanced telecommunications markets. and (3) a lack of incentives to both fully employ ex- Thus, developing economies with competition in isting networks and build new ones that allow faster mobile Internet facilities and service have quickly service. The consequence is generally slow Internet reached usage levels similar to those of the ad- service with patchy coverage, high prices, and con- vanced economies. Besides triggering private sequently low penetration of usage. investment, competition boosts quality and low- ers prices. Indeed, the most competitive mobile broadband markets in the MENA region have the The region encompasses 19 countries: Algeria, Bahrain, 1 lowest prices. Nonetheless, in most MENA coun- Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Libya, tries, one-half or less of the population uses mobile Morocco, Oman, Palestine (West Bank and Gaza Strip), broadband, and less than one-fourth uses wired Qatar, Saudi Arabia, Syria, Tunisia, United Arab Emirates, and Yemen. The World Bank is conducting similar reviews (fixed) broadband. for two other regions in the world (South Asia, and Central and Eastern Europe). MARCH 2015 NOTE 07 Competing in a Unified Market Bringing in Fiber The region overall has lagged in opening up its In many instances, fiber-optic technology will be telecommunications markets. In contrast, the Euro- indispensable to widening high-speed Internet ac- pean Union accomplished that in 1998, and newer cess, as it is most effective for aggregating increas- members of the EU have had to comply. Lithuania, ing data traffic and thereby reducing average costs. for example, now has more than 100 facilities-based Without it, broadband services are unlikely to be Internet service providers (ISPs). In contrast, in the viable outside of major cities. MENA region, only Bahrain and Jordan have imple- mented full liberalization, and most countries do Broadband plans in MENA countries generally do not allow their ISPs to be facilities-based (to reach not take a systematic approach to reducing the the final client with their own infrastructure). Other costs of infrastructure deployment. Deployment reforms must accompany the removal of barriers to strategies involving utilities, railways, and public entry: Independent national regulatory authorities works projects—for example, laying fiber cables must be strengthened, or established where they do alongside oil pipelines and railways, on power lines, not exist; and countries should collaborate on creat- and while digging new roads—can significantly ing a harmonized regulatory framework that would reduce costs and accelerate rollout, as can work in allow investors to consider the MENA region as a conjunction with real estate development. These options introduce a much-needed alternative or single market. complement to the infrastructure provided by in- cumbent telecom operators. Leapfrogging Existing Networks These regulatory reforms are critical for a well- Mixing Fixed and Mobile Connections functioning telecommunications market. But in the Markets for mobile broadband are much more MENA countries in the emerging and developing competitive than those for fixed broadband. Hence, phase of broadband development, regulatory liber- mobile phone users constitute the majority of alization will support a second core objective—pro- broadband customers in the MENA region, and mo- moting investment in new infrastructure. bile access is generally considered to promise the These countries have a great opportunity to quickly quickest expansion of service. Nonetheless, even by deploy new broadband Internet networks, leapfrog- 2017, data traffic generated from mobile networks is ging their legacy infrastructure with fiber-optic and expected to represent only about one-fourth of the other high-speed technologies. Romania, Latvia, traffic from fixed broadband connections. and Lithuania are examples of this breakthrough A significant increase in rural access can be expect- phenomenon. They inherited decrepit, obsolete ed by simply letting market forces develop, albeit networks from the Soviet era. But in just a few years with coverage obligations for operators and subsi- under market liberalization, they have surpassed the dies for broadband development and use. western European countries in some performance indicators, including deployment of high-speed With the liberalization of competition and innova- broadband Internet. Today, for example, the ultra- tive strategies for adding infrastructure, fixed and fast “fiber to the home” technology reaches more mobile broadband technologies will ultimately households in Lithuania than in Germany. complement each other, with the latter more domi- nant in rural areas. For more information on this topic: http://hdl.handle.net/10986/16680 Connections is a weekly series of knowledge notes from the World Bank Group’s Transport & Information and Communication Technology (ICT) Global Practice. Covering projects, experiences, and front-line developments, the series is produced by Nancy Vandycke, Shokraneh Minovi, and Adam Diehl and edited by Gregg Forte. The notes are available at http://www.worldbank.org/transport/connections MARCH 2015 NOTE 07