More competition will lower prices

Household broadband customers in the UAE can expect lower prices as the penetration level has increased to 80 per cent, the highest in the Gulf, according to telecom analysts.

They could also be offered more sophisticated services by telecom operators.

"If competition is introduced with an already high penetration it will bring a downward pressure on the prices. Penetration will not go beyond 80 per cent and with a third operator stepping in the UAE telecom market it would also affect the prices," said Julian Herbert, Principal Analyst (Broadband) at telecom research firm Informa.

He said in the Middle East there is no competition for fixed broadband lines as there are incumbents in the market, with the exception of Bahrain and Saudi Arabia.

The penetration of fixed broadband services is more than 60 per cent in Bahrain, Qatar and Kuwait, with the UAE ranking the highest.

"Despite the fact that there is no competition in the fixed broadband market, in the UAE penetration has reached sky high. This is mainly because etisalat has created the need and brought it to the consumer. In spite of the prices being high consumers have accepted and purchased the service," said Herbert.

In Saudi Arabia the penetration of fixed broadband is at 25 per cent followed by Oman at 10 per cent. In the GCC the usage varies with the broader region having less than 10 per cent, which is mainly Egypt at three per cent and Syria at less than one per cent.

"If market penetration increases in non-GCC markets such as Algeria, Egypt, Iran, Morocco, Tunisia and Syria to 10 per cent the volume in broadband would increase from four million to 12 million people," said Herbert.

The UAE telecom operators also want to take the path of European operators. This is mainly because many work together unbundling networks and services.

"This can be done here as du can unbundle etisalat fixed network. Therefore they pay to take control of the line between the exchange and home. Building a network will be expensive for du, therefore, unbundling of etisalat network will help du to compete with etisalat in the retail space. Price regulation is also possible. Unbundling is happening to some extent in Kuwait and Egypt, and in Jordan this year," said Herbert.

On a worldwide level the prices of fixed broadband lines are also on a decline as fixed mobile broadband subscription increases. As prices rise on rental of fixed lines for internet and broadband, telecom operators are trying to fill this gap by offering services such as VoIP, IPTV and other services such as remote backup, monitoring and manage bandwidth.

"The incumbents have also realised that it is not possible to grow domestically and are looking at the wider region for growth in revenue. Etisalat has invested across the region, STC has a licence in Iran and Qtel in Qatar have kept their investments active internationally," he said.

IPTV is being provided by du over its fibre networks and fixed lines, which is still not cheap, and these services can be extended further. The recent Vodafone partnership with du can also be extended like in Oman with Nawras. The telecom operator can use Vodafone's network to extend services, which will not affect the fixed network.

Operators worldwide are also bundling voice and broadband to try to lock customers, which is mainly driven by high penetration.

"Fixed mobile broadband is not replacing fixed broadband lines like other developed countries in the Middle East. Fixed broadband is still superior to mobile. In Saudi Arabia and Egypt, where the fixed network is strong, it does not extend beyond metropolitan areas," he said.

As fixed broadband is replaced by mobile it creates opportunities for Wimax, which is beginning to find a niche and fix broadband where it is not adequate.

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