Broadband in MENA: what will it take to expand internet access?


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This blog was edited by its author subsequent to publication to clarify that the EUR 20 to 25 billion for broadband infrastructure represents the majority of all investments needed.

 what will it take to expand internet access?The issue of affordable connectivity gained prominence last week when photographer John Stanmeyer won World Press Photo of the Year for his eloquent picture of people standing on a beach at night in Djibouti, trying to access cheaper wireless service from neighboring Somalia. In a new study “Broadband Networks in the Middle East and North Africa: Accelerating High –Speed Internet Access (launched February 6 in Abu Dhabi) my colleagues Carlo Maria Rossotto, Michel Rogy and I looked at prices and other market structures in places like Djibouti when we set out to understand what it will take to expand broadband internet in the Middle East North Africa (MENA) from its current low base.

Analysis of 19 national broadband markets in the region gave us a number of insights. Our findings confirm that price is a key determinant in broadband penetration (and Djibouti on this count fares the worst).  Countries in the region would benefit from the same proven policy approach built around market competition which allowed more developed economies to pursue broadband Internet expansion. At the same time, we found that, unlike other regions, MENA has a unique and historic opportunity to leverage dynamic demographics, widespread underused fiber optic networks owned by utility companies, and inter-regional connectivity. I’ll expand briefly on these three opportunities which, combined with policy and regulatory reform, could set the region on a faster and more affordable course toward internet expansion.

First, demographics. The urbanization level in MENA is quite high at roughly 63 percent of the population (urbanization in the Maghreb and Iran is similar to the regional average, whereas in most other countries of the region the urbanization rate is 80 percent or higher) and its population is primarily young (about 50 percent of the population is under 24 and only 6 to 7 percent are above 65 years old). So far, the demand for internet access generated by young urbanites has been mostly addressed through the use of xDSL in the limited footprint of the traditional copper telephony network and through fragmented 3G coverage, particularly in North Africa (about 96 percent of all fixed broadband connections were xDSL as of December 2012).  Fiber optic and 4G penetration (if present at all) is marginal in most of the countries: Fiber to the Home / Building is widespread only in the Kingdom of Bahrain and in the United Arab Emirates.

According to our rough estimates (based on 10 Mbps for 100% of population and 30 Mbps for 50% of population, using a combination of FTTC and LTE technologies), it will take from EUR 20 to 25 billion for MENA to take a giant leap toward widespread high speed broadband Internet access infrastructure. (This amount represents the majority of all the investments needed to complete the needed backbones, backhaul and international connectivity.) Much of this investment can be coupled with real estate development, and demand for better homes. Indeed, real-estate developers and telecommunications operators can share different elements of the active and passive infrastructure, network operations, and services and thus expand the frontiers of commercial viability of the fiber optic infrastructure. This innovative public-private partnership approach could work particularly well in a region where dynamic demographics (e.g. very young population, its high growth rates, declining household size, etc.) are contributing to rapidly growing housing needs over the next 25 years.

A coordinated approach to civil works could also bring better broadband connectivity in the region, and result in major business opportunities, capable of creating jobs in infrastructure while enabling growth and employment in value-added, knowledge-intensive activities. MENA is a booming region in terms of the scope of construction works both in terms of the real estate discussed above and deployment (modernization) of the utility infrastructure throughout the region. Nonetheless, when it  comes to construction, there is only one country (Kingdom of Bahrain) out of 19 which has put in place a certain framework on how to systematically coordinate civil works, which, in itself, are quite an expensive endeavor (civil works represents about 80 percent of broadband network deployment costs).  Although partnerships between utility companies and telecommunications operators could save substantial amounts of time and money, these partnerships are rare in MENA. We advocate for a review of the construction processes to save time and financial resources whenever infrastructure deployment involves a significant amount of civil works.

Underused fiber optic networks are another major opportunity highlighted by the study, which includes original research on the fiber infrastructure deployed by utility companies in charge of electricity, railway, and oil. While much can be achieved by commercializing the excess fiber capacity of these utility companies, our finding is that those opportunities have not yet been fully leveraged to extend national broadband Internet coverage and improve cross-border interconnectivity. A workable policy and regulatory framework that opens up this infrastructure for telecom operators (local, but also regional and international) is a prerequisite for this opportunity to materialize. The figure below provides as an example the existing fiber optic infrastructure in Tunisia which is both widespread and underutilized. At the moment of writing the report, out of three utility companies owning fiber optic and duct infrastructure across the country, one was not leasing excess capacity to telecom operators, one was open to the national incumbent operator only, and only one was open to all the players of telecom domain.

Lastly, there remains much that can be done to enhance cross-border connectivity. In terms of internet capacity coming to the borders and shores of each country, there is a significant gap of about 40-50 Terra-bits per second (Tbps) between the regional leaders, Saudi Arabia and Qatar, and the rest of the region. To reduce this gap, inter-regional connectivity will be critical to ensure further connectivity to international networks with ample capacity (i.e. submarine cables connecting Asia to Europe). Policy measures for open access to this cross-border connectivity will also help in speeding up network expansion and reducing the price of service. Currently, there are significant gaps in North Africa where there is no infrastructure that connects it to the Mashreq region. New networks through the Sahel – through Libya, Chad and Sudan – could increase connectivity to the submarine cables running along the East African coast.

What do you think of these opportunities? Hopefully our report will stimulate a discussion around innovative approaches to accelerate the roll out of high speed internet in MENA. The findings will be presented on February 26 to an influential audience of telecommunications professionals and policymakers at the GSMA Mobile World Congress in Barcelona. Please read the report and give us your ideas and comments!
Click to enlarge maps

Widespread but underutilized: Fiber optic cable over railroad network (left), road network (right) and electricity and gas network (bottom) in Tunisia;
Source: World Bank


Natalija Gelvanovska-Garcia

Senior ICT Policy Specialist, World Bank

February 28, 2014

Nice summary of the report I guess, but where are the numbers that would make the case for all this? OK so EUR 25 billion represents "only a fraction of all the investments needed to complete the needed backbones, backhaul and international connectivity" and presumably get us to some acceptable level of connectivity.Even here we lack numbers from the team, so given the tough economic choices ahead for many countries in the region why should anyone prioritize this versus basic needs? The region needs jobs, better schools, inclusionary politics and yes, better connecitivity can help all this but where are the compelling arguments on all this? We look at these blogs to provide us with short concise arguments, in this case for the "why" we would invest billions in this area. The "what to do" is undoubtedly well covered in the report as must be some of the "how to" questions. First though, tell us why we should prioritize this over other investments at a time of unprecedented turmoil and transition in the region?

Gelvanovska, Natalija
February 28, 2014

Dear Benim, thanks for your insightful observation. Regarding 'why to invest in connectivity?' undoubtedly because of the reasons you cite; with growth in GDP and jobs At the front of the line. We see connectivity as a catalyst for economic growth and most countries in MENA have already identified broadband as a critical input to broader efforts in nation building and the transition to a knowledge-based economy. There is growing consensus that broadband Internet is a prerequisite for a modern economy and to foster sustainable economic development and job creation. Furthermore, it is strategic to the goals of enhancing job opportunities and reducing poverty in the region. The most recent studies are consistent with those conclusions. For instance, the most recent report conducted for Facebook and about the value of connectivity, argues that by expanding internet access in developing countries to levels seen today in developed economies, we could increase productivity by as much as 25 percent, generating $2.2 trillion in GDP and more than 140 million new jobs, lifting 160 million people out of poverty. The report also mentions affordability as the primary barrier to accelerated internet take-up.
Our study builds on this broad consensus. The objective of our work was to assess the status of development of broadband in MENA, to identify key bottlenecks to broadband expansion, and to offer suggestions on how to accelerate investment and the diffusion of broadband connectivity through supply-side measures. The focus of this study is therefore on infrastructure-related actions - and measures to stimulate the demand for broadband are therefore only touched upon.
Coming back to the EUR 25 Billion figure, up to 85% of those investments will come from the private sector; only the remaining 25% from the public sector. Public sector investment has a huge catalytic effect on the private sector, in pushing broadband outside of the more commercial areas and towards rural areas, and towards low income families. The telecom sector in MENA already has most of the resources needed in universal access funds that are currently not well utilized across the region: as a consequence, the commitment of true public sector money would be a small part of the EUR 25 Billion. Against this commitment you get all of the benefits mentioned above, i.e. giving schools access to knowledge, creating jobs, bringing connecting rural communities, etc.

March 01, 2014

Many thanks for your prompt and informative reply. Just a couple of questions:
The EUR25 billion refers not to the totality of investments needed but just a fraction of the actual investments needed as per your blog. Indeed if only it were EUR25 billion, that would have been quite managable across the region. Do we have some rough approximations for the actual full amount?
The global figures you quote on why we should invest in broadband are very useful but as yoou and the team talk to government officials in the MENA region are there region or country specific numbers/projections, etc. you are using to priotritize these investments versus others?
Once again many thanks and looking forward to more useful work on MENA from you and the team.

Gelvanovska, Natalija
March 06, 2014

Thanks for your reply. Indeed the EUR25 billion represents just the component to strengthen access and the infrastructure needed to achieve this. Increases in capacity and/or coverage which are needed in other segments of the infrastructure, such as international connectivity or networks are not part of that estimate.
We did not estimate that remaining portion. Emphasis on the access component of the broadband network is important for us, because it is where the public funds appear and the governments play a key role in investing those public funds. Thus it should be well justified and provide a return, not only financial, but also social.
I also consider it important to point out that nearly all investments needed to strengthen backbones and international connectivity are expected to come from the private sector. We see a huge opportunity there to attract foreign investments, in particular inter-regional investments, for example investments to North Africa from the Gulf. The book specifically looks into the matter of creating a more favorable environment for those kinds of investments.
Regarding the estimate of region/country numbers/projections, we do not have all the specific numbers in advance, but we assist individual countries to come up with specific estimates (e.g. in terms of job creation, etc.) as, for instance, part of the development of their national broadband plans.

March 09, 2014

"The book specifically looks into the matter of creating a more favorable environment for those kinds of investments."
Why? as opposed to international investments, from Europe for example?
"part of the development of their national broadband plans."
I don't know if this was something you were concerned with, along with the team, or this is more of a general task picked-up by the World Bank. However, I wish there were efforts in that direction here in my home country, Libya; where the telecommunication sector is getting itself ready to "boom"; and where the question of broadband connectivity is becoming a very pressing issue affecting small business and the ability of international companies to localize. Now I don't know if this something you've already started, the public didn't hear about this as you can tell, but It would be really useful to actually list what it takes to initiate such a discussion with the authorities here. Taking into account what has been outlined in the annex section of the report about Libya.

March 13, 2014

Dear Waddah, thanks a lot for your comment! In our view, inter-regional investments show great promise when taking into account the common language and culture shared by countries in the region. Nonetheless, from our perspective inter-regional and international investments are equally important. As huge growth opportunities lie ahead for the region, MENA will need lots of capital to build on this potential. Definitely, countries in the region should take advantage of all opportunities.
Regarding the second issue you raise, we see the report as a tool for launching a dialogue with each and every country in the region, including Libya. The inclusion of a chapter on Libya in the report is really the best proof of that. At the moment, we support the Libyan Ministry of Communications and Informatics (MCIT) and Libya International Telecom Company (LPTIC) with two technical assistance programs financed by trust funds: The Frequency Management and Digital Switchover/Digital Dividend program and pre-investment detailed technical assistance for a national cluster as part of the regional interconnection initiative between Libya, Sudan and Chad. The World bank is also exploring opportunities to support the Libyan government with the development of an ICT strategy and we remain open to assist with any other related efforts.