FNC telecom survey makes case for change

The UAE Telecom Regulatory Authority is doing its best to break the stranglehold of monopoly, said a top official from the TRA, responding to a study that found prices of telecommunication services in the country, especially for international calls and broadband internet, are higher than those in several Arab and European nations.

The Federal National Council study is the first detailed survey of its kind in the country and it was compiled by a special committee chaired by FNC member Hamad Harith Al Midfaa.

The study findings refute the common perception that telecom charges in the UAE are low compared with several other countries, especially those of the Gulf Cooperation Council (GCC) and the Organisation of Economic Co-operation and Development (OECD), a bloc of 30 countries.

The issue of high telecom tariff had also been raised in a recent FNC session, and when Emirates Business contacted the TRA, Director-General Mohammed Nasser Al Ghanim reiterated what he had told the council then: "The authority is working to break the monopoly, but it is not an easy thing to do."

As an example of its efforts in this direction, the senior official cited how the TRA helped telecom giant etisalat's rival company du obtain sea cables to boost its international activities and to expand its network. Du now covers 95 per cent of populated areas of the UAE, said Al Ghanim.

However, even with the increased competition, more evidently needs to be done. The survey committee found big gaps in the tariff structure, especially when it comes to international calls (residence) and broadband internet (residence and business). In Saudi Arabia, prices are 41.9 per cent lower; in Qatar 11 per cent; and in Bahrain 3 per cent.

In Germany, it is lower by 94 per cent; Canada 93 per cent; Norway 89 per cent; Japan 19 per cent; and Korea 7 per cent. On an average, prices in OECD countries are 66 per cent lower.

The FNC committee said although UAE's broadband internet services of less than 1 MB are the cheapest in the Gulf, they are high in comparison with the average OECD prices. In Turkey it is lower by 72 per cent; Sweden 65 per cent; and Denmark 63 per cent. On an average, OECD charges are 56 per cent lower.

The prices of the broadband services between 1-4 MB (residence) are high in comparison with OECD countries and some GCC member states. In Qatar it is 18.5 per cent lower; in Oman 9.5 per cent; in Turkey 85 per cent; in Ireland 85.5 per cent; and in Slovakia 83.1 per cent. On an average, OECD prices are 74 per cent lower.

Broadband internet prices for companies (1-4 MB) are high compared to many countries of the world. In Morocco it is lower by 91.1 per cent; in Egypt 77.7 per cent; in Oman 51.2 per cent; in Australia 63 per cent; and in Ireland 83.1 per cent. On an average, prices in Europe for this broadband service are 95.1 per cent lower.

Wanted: more competition

The committee concluded that there is not enough competition among the current service providers in the UAE, and in the past three years, there has been no benefit from competition for consumers.

It said the Law on the Organisation of Telecommunications Sector stipulates in Article 14 of Chapter 4 that the Telecommunication Regulation Authority (TRA) shall bring about competition in the telecom sector in keeping with legal provisions. Guaranteeing competition among the service providers licensed by the TRA is supposed to be the strategic target, but there has not been sufficient enforcement of this in the market, said the panel.

The TRA's focus on keeping competition within the current framework has hindered the authority's strategic aim of protecting the interests of subscribers, said the committee in its findings.

It said that Article 13 of the Law on the Organisation of Telecommunications Sector No 3 of 2003 specifies that the TRA's aim would be to primarily serve the interests of subscribers rather than that of the providers. Item 1 of Article 13 speaks of upgrading the level of service provided by the telecom sector to serve subscribers' interest. Item 2 provides for the extension of services all across the country for those who need the services and want to benefit from them.

However, this is not quite the ground situation, the committee has found. It has seen that the telecom companies have exclusive control in certain areas at the expense of the consumer's right to select the best service. In other words, the telecom firms have a monopoly in those areas, and consumers are forced to put up with whatever service is offered to them and pay whatever fees are charged from them for lack of options.

Al Ghanim pointed out that the TRA is working to increase competition not only in basic telecom services but also in sea cables, ground stations, roaming international agreements, data management exchanges, internet, land for setting up reinforcement towers and underground cable services all over the country.

This summer, he said, will witness a big expansion of telecom services – etisalat will have an opportunity to offer services in areas largely controlled by du, and vice-versa. The TRA, he added, has recently set up an organisational framework that will allow it to "lift its hand" from pre-approvals of price offerings, and this will boost competition between the two companies.

The director-general said the authority, over the past few years, has managed to establish strong competition between the two main providers, especially in terms of mobile phone penetration.

Worldwide position

The committee found that the TRA's "failure" to play its role right has denied the UAE the chance to be the best in Asia when it comes to telecom service. What is more, as other countries have surged ahead in the past few years, the UAE now has 27th position worldwide, a few notches down from 23th in 2004. In Asia, Singapore is now in the lead, and it is the fourth worldwide, after Denmark, Sweden and the United States.

The committee also noticed insufficient communication and co-ordination between the UAE telecom companies to reach an agreement on building infrastructure such as transmission and reception towers.

Al Ghanim argued that the UAE has not lost its advantageous position, adding that certain institutions have issued reports confirming that the UAE is in the lead. The Emirates Competitiveness Council is currently co-ordinating with international bodies to supply them with indicators that the UAE is leading, he said. The TRA, he added, has significantly contributed to the UAE's economic development through the growth of the telecom sector.

The panel said the Federal Law No 5 of 2008, which amended provisions of the Decreed Law No 3 of 2003 on the regulation of the telecommunications sector, has not covered a number of basic issues for regulating the telecom sector and upgrading the services. These issues include the right of service providers to object to TRA resolutions; laying down the rights and commitments of providers once the telecom sector is freed up, eg the enforcement of comprehensive service principles, ensuring excellent service and extension of services to urban and rural areas; and the right of some community establishments such as hospitals, schools, universities and libraries to get the most competitive rates from the service providers.

Closer monitoring required

The committee said it has found that the TRA's role is weak in checking whether a telecom firm's offers match the actual potential of the company. It found that service providers lure the consumer with offers, but there are quality problems afterwards. Also, it found that to monitor the quality of service, the TRA relies on customer complaints rather than on its own mechanism.

According to statistics on customer satisfaction, the committee found that 50 per cent of some 13,258 complaints about etisalat's mobile phone service were related to the quality. For Du, 61 per cent of 93,545 complaints were quality-related.

To this, Al Ghanim replied that customer satisfaction with TRA services reached 89 per cent in 2009, compared with 68 per cent in 2007. In the first half of 2008, 71 per cent of TRA's strategic and operation plans was achieved, and in the same period in 2009, 95 per cent was achieved, he said.

Varying privileges

The committee noticed that the offers and privileges provided by etisalat within the UAE are different from those outside the country. For instance, a UAE user gets Dh25 credit as bonus once he clocks 2,500 points; in Saudi Arabia, the user starts to receive a variety of services once he clocks 750 points, including 110 free messages, 50 international, 5 MB free internet and 60 minutes of free calls. The bonus goes up whenever the number of points increases.

The committee said that although the TRA set a general policy to regulate marketing and telecom practices to protect subscribers against fraud or improper marketing practices, some offers and services are still being launched without enough preparedness on the provider's part.

Referring to Law No 3 of 2003, the committee noticed the absence of penalties against service providers violating the TRA policy. Also, the mechanism enabling the TRA to verify a company's commitment is not very clear, it said.

It noticed that du coverage range is weak, though three years have passed since the launch of its service, a period deemed sufficient by the committee for full preparedness.

The study also tackled responses by representatives of service providers. Du representatives said that any drop in charges below current levels would affect the economic position of the Federal Government. Etisalat representatives said the company's prices are the cheapest at the regional level.

As for coverage, du said it uses the wireless signal system, whose functioning is affected by rain, humidity and dust, unlike the rival company's fibre optics.

The committee also found that the TRA's monitoring is inadequate when it comes to negative social phenomena such as the use of programmes that break the providers' wall of protection and downloading of materials banned in the UAE.

The committee stressed that the service providers and the TRA should monitor BlackBerry use, as there is nothing to prevent users from entering banned websites.

Recommendations

Real competition would encourage companies to offer their best in terms of quality and charges, said the committee in its report.

The recommendations reiterated the importance of Law No 3 of 2003 and its amendments to the regulation of the telecom sector.

The committee demanded a department within the TRA specialising in research, saying the absence of such a body affects the authority's ability to have a clear picture of the telecom sector now and in the future.

The recommendations stressed the need for all bodies connected with the telecom and infotech sector to draw up joint plans to protect telecom and IT services in the UAE in times of crises.

Telecom figures

At a recent Federal National Council meeting in Abu Dhabi, concern was raised that customers in the UAE were not being served well enough by the country's two main telecom operators. Countering this, Mohamed Nasser Al Ghanim, Director-General of the Telecommunication Regulatory Authority (TRA), pointed out certain facts related to the TRA's accomplishments. These are: rates of international calls have dropped by 20-75 per cent; the internet permeability rate has reached 67.3 per cent, with a total of 1.4 million subscribers and 109 per cent growth rate of broadband services; for businesses, internet charges have dropped by 31-35 per cent; and for residents, the charges are down by 22-46 per cent.

At the same meeting, responding to a member's concern over low rates of emiratisation in the telecom sector, Al Ghanim said 34 per cent is the current rate, as over the past few years, a significant numbers of nationals have left telecom to work in more rewarding sectors such as real estate. "However, of late, many of these skilled workers have been coming back," he said. "We are working on a law for an emiratisation quota in telecom firms."

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