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WORKSHOP ON LICENSING AMMAN SEPTEMBER 2– 4, 2003

WORKSHOP ON LICENSING AMMAN SEPTEMBER 2– 4, 2003. LIBERALIZING OF FIXED SERVICES IN MENA REGION : THE MOROCCAN CASE. OUTLINE. Why are competitive fixed-services important in MENA region? Regional telecom specificities The Moroccan case

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WORKSHOP ON LICENSING AMMAN SEPTEMBER 2– 4, 2003

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  1. WORKSHOP ON LICENSINGAMMAN SEPTEMBER 2– 4, 2003 LIBERALIZING OF FIXED SERVICES IN MENA REGION : THE MOROCCAN CASE

  2. OUTLINE • Why are competitive fixed-services important in MENA region? • Regional telecom specificities • The Moroccan case • Options for improving fixed-services and corporate network provision

  3. 4000 3000 2000 1000 Portugal Greece Jordan Egypt UAE Morocco Algeria 0 20 000 40 000 60 000 80 000 International Internet bandwidth (Mbit/s) International trade (USD millions) International trade is not supported by sufficient Internet connectivity Countries under study are underserved in the area of international connectivity Source: Telegeography, Packet Geography 2002, Analysys

  4. 70% Norway 2 y = 0.7x + 0.2x 60% Japan 2 R = 0.8 USA 50% UK 40% Portugal Internet penetration UAE Germany 30% Italy Egypt 20% Algeria Morocco Jordan Greece 10% 0% 0% 20% 40% 60% 80% Fixed line penetration Fixed Penetration is a Key Driver of Internet Usage Source: ITU, Analysys

  5. Main lines Cellular Internet per 100 Subscribers Users per inhabitants per 100 10000 2000 inhabitants inhabitants Sub Saharan Africa 1.4 1.7 3 East Asia & Pacific 10.1 7 4 Latin America & 14.8 12.3 30 Caribbean Middle East & North 9.2 3 1 Africa 1995 Sub Saharan Africa 1.1 0.1 1 East Asia & Pacific 4.1 0.5 0 Latin America & 9.1 0.8 1 Caribbean Middle East & North 5.8 0.1 0 Africa Key Telecom Indicators

  6. Number of Fixed Lines / Pop (source ITU)

  7. Number of Mobile Lines / Pop (source ITU)

  8. Mobile Overtaking Fixed Penetration 80% 60% 40% 20% 0% Algeria Egypt Jordan Morocco UAE Fixed penetration Mobile penetration Source: ATRN Database, ITU

  9. Strictly monopolistic markets are holding back development of the leased line market 60 50 Algeria 40 Egypt Jordan 30 Morocco 20 Spain Portugal 10 0 1995 1996 1997 1998 1999 2000 2001 Number of leased lines per 10 000 inhabitants (source: Analysys)

  10. Companies interviewed (Analysys 2002) revealed service can be improved • Poor service quality: Lack of Service Level Agreements • Long lead times for corporate users • Companies (that can afford it) often prefer to use their own private links (low degree of infrastructure sharing) Source: Analysys Interviews

  11. Status of ISP market in different regions 100% 80% 60% 40% 20% 0% MENA Europe Americas Asia Pacific Rest of Africa Competition Monopoly MENA is lagging in the liberalization of ISP and leased lines markets Status of leased line market in different regions 100% 80% 60% 40% 20% 0% MENA Europe Americas Asia Pacific Rest of Africa Monopoly Competition Source: ITU World Telecommunication Regulatory Database 2000

  12. Data and leased lines delivery by alternative operators is constrained • Provision of data services on top of infrastructure (mainly leased lines) supplied by incumbent operators, e.g. IP VPN • ISPs in national markets. Note that the regulatory treatment for international service provisioning varies by country • Mobile operators have the right to operate their own international gateway Source: ATRN Database, ITU 2001 regulatory surveys

  13. Regional MENA Specificities • Fixed/mobile substitution for voice services • Mobile duopolies (more or less regulated) Low fixed penetration • Fixed monopolies • Untapped growth potential for data services and Internet • Challenge: approaches to foster a dynamic market for fixed services

  14. Fixed network telecommunications license : The Moroccan case • 12 applicants for the 2nd fixed license. • No offer. • Failure of the tender for the granting a license to a second fixed network telecommunication operator.

  15. Main reasons of the failure according to telecom specialists • Unfavourable international economic situation. • Specificities of the investment in the fixed network. • Constraining measurements in the tender document according to the majority of the participants.

  16. Unfavourable international economic situation • Major and persistent crisis which has affected the NTIs and involved operators of telephony. • The international economic situation would not allow operators to be engaged in a project which will require heavy investments in infrastructures and technical means.

  17. Unfavourable international economic situation • Analysts confirmed that two risks existed for the operators: • The banks would not have followed them in this type of financing; • The courses of their shares would have been depreciated in case of the acquisition of a telecom holding in a Maghreb country. This was going to be perceived like a large risk taking.

  18. Specificities of the investment in the fixed network. • Specificities of the investment in the fixed network where each line is connected permanently with the network. • Difficulty to attract customers because of the fixed telephony sibstitution by the mobile that offers attractive features.

  19. Specificities of the investment in the fixed network. • The fixed network is regarded as an activity segment having already reached its maturity; its growth potential is limited. • The necessary infrastructure for a fixed network is extremely capital intensive while taking time for the return on investment.

  20. Constraining measurements in the tender document According to telecom analysts: • To establish the connection of seven cities as of the 1st year and extend coverage to 16 cities at the end of 5 years is a dissuasive obligation. • To redeploy switches with a quality of service in conformity with the international standards requires for a new entrant an enormous investment.

  21. Constraining measurements in the tender document Telecom Analysts confirmed that : • The contributions to the general missions of the state for the fixed network are quite high for a new entrant.Those conditions should be relaxed according to analysts. • Potential operators should be allowed to use the infrastructures of the competitors without forcing them to invest too much.

  22. Licensing Approaches and Policy/Regulatory Tool-Box

  23. Fixed Licensing / Key lessons (1/2) • Strong and independent regulatory body; • Watch for the best circumstances to launch the tender; • Avoid complex entering conditions.

  24. Fixed Licensing / Key lessons (2/2) • Technological neutrality • Maximize regulatory readability • Avoid intractable regulatory complexity, allow a given degree of tariff rebalancing and control anticompetitive behavior (squeeze;…) • Best candidates are “local” candidates: • Know the market – Capacity to assess risk

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