Media convergence issues in EGYPT and the region and prospects for the future

1. Media convergence issues in EGYPT and the region and prospects for the future

2. Introduction • Egypt possesses a number of comparative advantages which positively positions it as a promising market for ICT and Media convergence: • infrastructure • talented ICT professionals • efficient service providers • empowering regulatory framework. • Content is a key word in the convergence game. • Egypt has always been, and continues to be, the leading source of culture and entertainment in the Arab world. • Egypt could become an exporter of content to the Arab world; consequently economies of scale could be achieved.

3. Characteristics of 21st Century Economies • Driven by the services sectors • Founded on information/communication networks – next generation Internet • Dependent on effective reforms in the telecom sector – information infrastructure • Strengthening links among local, national, regional, internatonal networks and markets

4. Stages of Telecom/Information Sector Reform • Telecom Liberalization (Participation, Univ. Access) • Expanding Network Capacity (Broadband) • Preparing the Network Foundation for New Services • Developing New Services - “killer applications!” • Applying Services Productively in Different Sectors • Telecom Reform & Regulation – Key Driver for Implementing Policy Reforms for the e-economy

5. Technologies Markets Applications Services Regulations Policies Criteria for Economic Growth Policy & Regulation: Catalyst for, or Constraint upon Growth?

6. A Review of Technological Change • Transmission, Switching and Memory: laser and spectrum, microprocessor, digital storage • Impacts on network architectures: less switching, more transport, caching nearer the user • Impacts on Functionality: portability, functional integration, communicability • Erosion of natural monopoly • End user empowerment • Erosion of Intellectual Property Protection

7. Change in Technology brings change in Economics • Falling cost levels • Changes in Relative Costs: Switching, Transmission, Storage • Spectrum Abundance replaces Spectrum Scarcity • Signal transport is free at the margin • Content becomes relatively scarce; network capacity becomes relatively abundant • Intellectual Property protection eroded • Mass markets become fragmented • Competition replaces monopoly

8. Change in Economics brings change in Markets • Sole providers yield to competition • Mass markets yield to segmentation • Features and functions more important than price • Cost of churn increases focus on retention • Customer service becomes competitive differentiator

9. Markets Technology Law Applications The Dimension of Convergence

10. Convergence at a Glance • So what is convergence? • In a nutshell, it is the ability to provide a range of services (voice, data, and broadcasting) over a single network (‘triple play’). • Examples: • Voice over IP, which makes very low and flat rate calling plans possible. • Television over IP, which provides much more flexible access • Radio over IP, which enable users to listen in real time or on demand • Convergence is being applied to many fields; commerce, education, health, publishing, and manufacturing, etc.

11. Convergence at a Glance (cont.) • It has changed many aspects of our everyday life: the way we communicate, the way we access content and entertainment, the way we make our purchases, even our own mobility. • A phone is no longer used for merely exchanging conversations, but also for watching movies, listening to MP3s or even watching and listening to the finals of the World Cup, live. • The NTRA has been active in convergence: • Cooperation between MCIT and RTU (Radio and Television Union) • VoIP • BGAN

12. Finance/ Banking Regional Development Disaster Management Media & Cultural Sectors Manufacturing Travel & Tourism Health/Medical Education/Training Government Services Applications Content Broadcast Media Film Libraries Software etc Interactivity (Instant & Delayed) Voice Data Sound Graphics Video Electronic Services (Pay TV, VAS, Internet) Multimedia, etc. (Public, User group, Private) Telecommunication Facilities Network (Information Superhighway) Computing / Information Technology Telecommunication Equipment Manufacturing INFORMATION INFRASTRUCTURE

13. Steps Toward ICT Convergence • Digitalization of the network • Mobility • Next Generation Internet (Broadband) • Media integration (Internet Protocol) • E-commerce (QoS) • Restructuring of industries • Reshaping Policy and Regulation

14. The ‘Converged’ Telecom Scene • Since its introduction, convergence has had a profound impact on the telecommuncation field and media sector, dramatically changing its infrastructure, services and overall environment. • Infrastructure: - digitalized • Competition: • diversity of service providers and offers • low and affordable prices • wide range of complementary services • Innovation: • new services • new business models • new devices • content creation industry to support demand • local loop unbundling

15. The ‘Converged’ Telecom Scene (cont.) • Examples: • Gradual shift to VoIP and VOB (Voice over Broadband); now almost 15% of voice traffic is through VoIP. • CATV (cable TV) systems are now offering video on demand, broadband access and voice telephony. Consequently, CATV operators are now competing with telecom operators. • The current trend in several parts of the world is for service providers to offer triple play service bundles in inclusive packages (ex. monthly) • There is a steady growth in 3G networks and wireless broadband services

16. Regulatory convergence ? • Signatories of the GATS Agreement and the Reference Paper have agreed to a more-or-less common policy of liberalization of traditional wireline and wireless telecom. • The GATS agreement has no recognition of convergence. • Most countries have separate regulators for telecommunications, broadcasting and cable TV, financial services, software and applications

17. The Impact of Convergence on Regulation • Convergence is reshaping regulation and policy and raising several implications: • Convergence is leading to a rise in the number of wireless services, which in turn raises the need for spectrum management reform. • Convergence entails revisiting current licensing regimes and favors regimes that are technologically neutral. • Convergence might lead to the broadening of certain market definitions, with the result that several narrowly defined markets are replaced by a single more broadly defined market. • Convergence may pose a threat on the industry if it induces mergers of large scale operators and drives out small local operators.

18. The Impact of Convergence on Regulation (cont.) • Access to communication channels and access to content • New issues of competition and monopoly • Privacy, security, IPR • A transition from monopoly/oligopoly direction to maximizing participation via open access • Target is not technological neutrality, but maximum development of all technology & services advantages • Maximum opportunities for competing firms to achieve public interest goals • Maximum stimulation to market development through both private and public participation

19. “Convergence” is really about “Competition” • Voice over IP: bypassing the PSTN undermines tariffs, international settlements structures; cross-subsidies. • Mobile networks are competing with fixed networks especially in developing countries. • Cable-HFC and Satellite are displacing Broadcast networks. • Competing technologies (Fixed lines, Wireless, Cable, Broadcast) offer overlaping, competing services.

20. Unresolved Network Market Issues • Public Resource Infrastructures for Telecom Networks - Rights of Way, Spectrum, Numbers, Names • Interconnection • Termination Number Monopolies • Access Limitations in the Face of Positive Externalities • Leverage Opportunities for Monopoly Nodes in the Network • Achieving Faster Infrastructure Network Development

21. Significance of Network Unbundling for Convergence • Industry Sectors - Equipment, Operator Networks, Services • Fixed and Mobile • Basic Network Layers • *Content *Communication Services *Network Protocols, OSS & Management *Equipment & Facility Capability

22. How Must Regulation Change? Investment, Investment, Investment • Regulation is too focused on short term abuse of dominance. More of a problem in developed markets, but stifles investment in developing markets. • In the long term, dominance will only be eliminated by the emergence of competing networks. • Competition requires investment. • Investment responds to Price, Cost and Profit expectations. • Price, Cost and Profit signals come from regulatory policy. • Incorrect signals encourage both overinvestment (i.e. long distance) and underinvestment (i.e. local networks). • Overinvestment causes lost capital (ask Global Crossing, Level 3); underinvestment causes lost opportunities (ask the 95% of the world who have no telephone.)

23. The Convergence Roadmap For any country to successfully integrate convergence into its communication and media sector, it must develop the following convergence pillars: • Technical: 1) Digitalized Infrastructure ( Broadband , Wireless and mobile technologies , High-speed backbone networks ) 2) Digitalized Media Content ( DRM , DAM ) • Regulatory: - Conducive Market Conditions (supply, demand, competition) - Technological Neutrality - Intellectual Property Rights and GATS agreement • Business: ( Encourage investment , More service providers , Diverse services; options , and Digital content creators )

24. Convergence Challenges • Political and Legal • Law restrictions • National security considerations • Politically acceptable • Business • Must find feasible business models: • Revenue: from customers and advertisers • Evidence of demand is still very unclear • Which firms have the expertise to make profits in these areas? (telecom co. vs. content providers) • Social • Socially acceptable content • Literacy (traditional and ICT literacy)

25. Convergence Challenges (cont.) • Economy • Income levels: low GDP per capita misdistributions of wealth within countries • Spending capacity: Are people willing to spend on entertainment? And if so, how much? • Infrastructure • which networks are best and cheapest? • availability of electricity • availability of computers • availability of telecommunications networks • availability of investment

26. Issues for Debate • Convergence is raising a wide array of regulatory and legislative issues that should be addressed by both policy makers and regulators • The need to : - encourage investment - lower market entry barriers • Policy should: • ensure competitive markets • encourage the provision of better and cheaper services - be responsive to market changes; updated upon need • Need to avoid regulatory arbitrage and gamesmanship • Reducing the digital divide: Universal Service

27. Issues for Debate (cont.) • Is the trend of institutional convergence (the example of Ofcom) really the best way to address Convergence? • Are current telecom or ICT regulators competent to regulate “content”? • Can content regulation be avoided? • What is the most effective role for national telecom regulators?

28. Thank You