Lebanon ICT Market Status and Real Potential

1. Lebanon ICT Market Status and Real Potential Lelia EL KHAZEN Market Analysis Manager Market and Competition Unit Telecommunications Regulatory Authority – Lebanon ITU workshop Sharm el Sheikh June 8, 2012

2. Outline • Status of the Telecommunications sector • Potential to Go: Broadband as a booster for the National Economy • Regulatory and policy tools www.tra.gov.lb

3. Status of the Telecommunications Sector www.tra.gov.lb

4. The enactment of Law 431 in 2002 and the establishment of the TRA in 2007 paved the way for telecom sector reform Before Law 431 After Law 431 MoT Ministry of Telecommunications: policymaker, regulator and service provider CoM: Arbitrary regulatory role (e.g. issuing all licenses) No formal regulatory regime TRA: regulator Drafts and implements regulations Awards licenses Ensures competition Prevents anti-competitive behavior Manages radio frequency on behalf of GoL • MoT: Policymaker • Sets general guidelines of the telecom policy • Decides on international representations • Approves: • TRA recommendations on individual licenses • Frequency pricing • TRA annual budget policymaker regulator operator Operators (Incumbents and New Entrants) Provides telecom services to the public Installs, owns & manages telecom networks & facilities Abides by TRA rules, regulations and license terms www.tra.gov.lb

5. Although reform has started, Mobile & Fixed telecom operators in Lebanon are state-owned and the market requires “competition” www.tra.gov.lb

6. The mobile sector is comprised of 2 state-owned networks operated under private management agreements;Astructure with no true competition stifles innovation Mobile Penetration Evolution • Major milestones: • Consecutive decreases in prices since March 2009 for postpaid, prepaid and VAS • New prepaid offers introduced in June 2011 • 3G services launched in October 2011 • Achievements: • Penetration rate increased by 50 percentage points since 2008 • Mobile broadband penetration reached 13% in 5 months only • ARPU decreased by 45% since 2008 to reach an average of USD 39 in 2011 • Bottlenecks: • Despite the decrease in ARPU it is still considered high compared to the regional average of USD 15 • Quality of Service is not up to international standards • Introduction of advanced and competitive services and offers is slow due to the structure of the sector Mobile Subscribers Evolution (in thousands) Blended ARPU Evolution www.tra.gov.lb

7. With the expansion of DSL services, there has been an increase in demand for new “fixed lines”, Consumers await the introduction of bundled & IN-based services • Some Indicators: • Total number of PSTN subscribers as of March 2012: 855,000 • Fixed line residential household penetration is ~64%, increasing by 2 percentage points since 2010. • The penetration rate of fixed services in Lebanon is higher than other countries with comparable GDP per Capita (for example Jordan’s Penetration rate per population is 8% while for Lebanon the fixed penetration per population is 21%) • Major Milestones: • Decrease in fixed line installation rates in 2009 • Continuous Growth in DSL subscribers: major growth since the introduction of high speed packages in Oct 2011) • Geographical expansion of DSL in 170 Central Offices • Bottlenecks: • Current service offering lacks bundled services, self -selection schemes, NGN services and Intelligent Network (IN) Services • Illegal VoIP services are widespread despite large international call tariffs cuts by MOT • High Cost related to management and maintenance of current outdated PSTN network www.tra.gov.lb

8. Required speeds for triple or quadruple play services are still much higher & prices much lower than the ones currently available Good efforts are underway to correct the situation • Lebanon DSL services were previously priced well above the regional prices; however with the decrease in DSL prices in October 2011, Lebanon is now very well positioned when compared to Arab countries • With decree 6297 (Sept 2011), an entry package of 1Mbps speed is now offered at a price 70% lower than the previous 1Mbps offer and a usage that can go up to twice the previous one. Service Packages available in Lebanon (Since Oct 2011) Typical Triple Play Service Packages • Residential • For around $46/month individual subscription to: • $16 for the basic entry plan of 1Mbps downlink with a cap of 4 GB (most used DSL plan) • $15 for very poor quality cable TV subscriptions • $15 for very low usage of Fixed Voice services Residential • For around $40/month : • On average 8 Mbps downlink and 4 Mbps uplink with virtually no cap on usage • High speed Internet Access + 100 video Channels (including 1 HD) + unlimited VoIP calls Business • For around US$ 4000/month: • Business • For around US$ 500/month: • Up to 10Mbps for business located in remote areas • High speed Internet Access viable for video conference, e-commerce, etc…+ 100 video Channels (including HD) + unlimited VoIP calls • 2 Mbps download and 1 Mbps upstream Internet access • With Service Level Agreement www.tra.gov.lb

9. Since the launch of DSL in June 2007, this market faced a lot of bottlenecks hindering the wide adoption of true broadband services • Anticompetitive behavior from the incumbent • Incomplete Reference Access Offers • Unfair access to Central Offices • No switchover procedures • DSPs not connected to all ISPs • Unavailability of a true high speed and a high capacity National NGN Backbone Network • Limited fiber optic coverage • Current expansion and modernization of PSTN national transmission network to lay-down a fully meshed fiber optic network of 4,400 km of backbone is underway • Saturated transmission network despite the latest upgrades • DSPs and ISPs are still connected by a maximum of 100 Mbps network ; there are no wholesale backhaul bundled offers • Lack of International Capacity • Despite the latest increases in international capacity and the major decrease in prices, the distribution of international capacity to the private service providers requires more transparency and fairness Only 20% Line Sharing www.tra.gov.lb

10. Potential to Go Broadband as a booster for the National Economy www.tra.gov.lb

11. Next Generation applications and advanced e-services enrich consumer lifestyle, improve business performance and deliver value for stakeholders Virtual Reality Tele-presence Interactive signboards Virtual sports Tele-medicine Interactivity Level Social Networking Quality Video Streaming Rich media Tele-learning VoIP Interactive IP-TV Next Generation TV Browsing Video Conference Email 64-256 Kbps 20 Mbps – 1 Gbps 512 Kbps - 2 Mbps Higher Speed / More Bandwidth Actual Generation of Broadband Narrowband Next Generation of Broadband PSTN, GSM, GPRS/EDGE DSL, WCDMA, HSPA+, WiMax 802.16e, etc. FTTx, LTE Advanced, Wimax 802.16m, GPON, etc.. 1st June 2012 www.tra.gov.lb

12. Broadband is uniquely positioned to stimulate economic growth, business development and social welfare GDP GROWTH: 1.38% increase per year for every 10% point increase of Broadband Penetration • Job Growth: • 0.25% increase in jobs for every 1 point increase in Broadband penetration • Social Inclusion: • Boost human capital • Improve healthcare • Create new income opportunities in the poor and remote areas Broadbandan Economic Booster Business Productivity: Lebanese SMEs waste thousands of hours a year due to poor connection – to illustrate: 5000 hours a year represent a loss of US$ 250,000-US$ 500,000 Fiscal Returns: 90 million USD per year for every 10% point increase of Broadband Penetration Brain Drain: less youth migrate overseas with Lebanon as a hub for communication • Government Revenues: new sources of revenues to the GoL will be generated (auction proceeds, RTU fees, RoW fees, revenue sharing …) Sources: Economic & Fiscal Impact of Introducing Broadband Networks and Services in Lebanon – World Bank 2009 www.tra.gov.lb

13. The digital divide between Lebanon and the MENA region is particularly deep in terms of environment, infrastructure and government usage MENA Lebanon Adv. Economies Sources: World Economic Forum 2012 www.tra.gov.lb

14. Lebanon still suffers from important weaknesses in terms of ICT development that hinder its capacity to take full advantage of the benefits accruing from the deployment and use of advanced technologies Sources: World Economic Forum 2012 www.tra.gov.lb

15. Regulatory and Policy Tools www.tra.gov.lb

16. Aspirations towards a knowledge-based economy should focus on two main ICT policy areas: liberalization of the telecom market and an ICT development strategy National ICT Strategy and Policy • Economic Diversification and Growth • Innovation and Productivity • Access to Education and Healthcare • Government Modernization • Social Equity • Environment Safeguard • National Competitiveness • Sustainable development Telecom Policies ICT Industry Development Liberalization Sector Governance & Regulation National coordination Cross Sectorial vision Corporatization of LT and Mobile networks SMP, Cyber security, Net Neutrality, etc. Promote digital Literacy, develop on-line content, e-commerce E-education, E-health, Smart grid, E-gov, transportation LARGE TALENT POTENTIAL Availability of a large, young population Develop strong local talent pools Increased enrollment into high education and focus on training www.tra.gov.lb

17. The development of the ICT sector in Lebanon is hindered by a slow decision making process and a lack of consensus on the current policies and laws as well as future directions Barriers to the ICT Sector development Availability Affordability • Lack of political consensus regarding the Telecom Law 431 • Very low government engagement in the enactment of modern laws and policies • Absence of a overarching economic vision • ICT-focused activities within the government institutions are not integrated in a way to fully harness ICT potential in Lebanon services Users Usage Reliable & Advanced TELECOM infrastructure Applications & CONTENT ICT MAIN ENABLER www.tra.gov.lb

18. The liberalization of the telecom sector requires the elimination of existing bottlenecks and the development of competition within an enabling regulatory framework Main driver for infrastructure based competition Main driver for infrastructure based competition Infrastructure based competition • Abundant national and international capacity • High grade of services • Competitive prices Ensure service based competition • LT • NGN networks • Mobile Licensees • Long term licenses to ISPs and DSPs • MVNO Enforce Regulation on Service Providers with SMP • Open access regime on essential facilities owned by dominant players (local loop, backbone, etc…) • Access to Public Property & Rights of Way (duct sharing reduces around 70% of the cost of laying fiber) • structural separation between wholesale and retail segment of vertically integrated players HEALTHY AND FAIR COMPETITION Ensure infrastructure based competition • Create a healthy corporate structure (in terms of human and financial resources) • Reinforce position on the market • Increase value on the market • Pave the way for a healthy retail versus wholesale corporate identity Complete the corporatization & subsequent licensing of Liban Telecom Healthy and fair competition Healthy and fair competition www.tra.gov.lb

19. Since its establishment, TRA has been working extensively on setting a regulatory framework that would ensure successful telecom sector development Drafting Stage Draft Ready Stage Awaiting Board approval Sent to MoT – Need to transfer to State Council Final Review after consultation Issued Access to the Local Loop Regulation VOIP Policy Statement Spectrum Refarming and Packaging Plan Access to Information Regulation Licensing Regulation SMP Regulation Spectrum Management & Licensing Regulation • Decisions: • VSAT, • Trial IPTV • Spectrum trial Allocation for MoT • Interim licenses for ISP and DSPs (+ extension) • Licenses for Trisat, LCNC and MADA National Roaming New building Requirements for BB delivery services Liberalization Roadmap Accounting Separation Regulation Broadband Licensing Plan Consumer Affairs Regulation Digital Migration Strategy for TV Broadcasting Plan Universal Service Technical requirements for NBCLs Class and Frequency License fees regulation CS / CPS Improving FM Broadcasting Pricing Regulation Interconnection Regulation National Numbering Plan Interconnection Interim Pricing Decision Sent to MoT- Need CoM decree Type Approval Regulation Numbering Regulation Study on the Use of Public Property Emergency Communication Plan Quality of Service Regulation Code of Practice for VAS Draft RTU Fees & SAC decree Decision for establishment of call centers EMF Regulation Rights of Way Draft Decree Lebanese National Frequency Table www.tra.gov.lb

20. Sustainable policy and empowerment of the TRA are essential to ensure successful telecom/ICT sector development and highest benefits to all stakeholders Investors Investment opportunities Lower risks Regulated environment Empowerment of TRA1-Full transfer of regulatory functions • 2- Staffing and organization • 3- Nomination of Board Members • 4- Financing Broader range of services Lower prices Better quality of service Telecom Operators Fair treatment Fair competition Consumers New and recurrent revenue streams Economic boost Government of Lebanon www.tra.gov.lb

21. Some demand-side promotion policies should be encouraged and adopted by the Government to stimulate growth of e-services • Raising public awareness on benefits of e-services and promote their use • Governments providing training on the use of PCs and Internet • Digital literacy program integrating both demand and supply sides (i.e. financial support to schools for network construction and broadband use) • Promote digital literacy • Subsidize low-cost user devices • Policies aiming at making user devices more affordable • Wide range of policies to be adopted for subsidizing CPE: from complete government subsidization to private initiatives. • Have government serve as an anchor tenant • Computerizing public information and providing e-government services • E-government also encourages citizens to subscribe to broadband services and provides businesses with more information • Develop online content and media • Governments should support content and media development in local languages, with locally relevant content. • Encourage businesses to use e-services • SMEs, representing most of the private sector, often lack understanding of broadband impact or cannot afford it • Special policy measures for SMEs: free/low-cost applications, tax breaks for investments in ICT and Web-based services, tax cuts to ICT related businesses 30 October 2019 www.tra.gov.lb

22. THANK YOU