Poor Telecom Services hold back UAE Vision 2021
Stifling VoIP services hurts a fledgling startup industry that could one day potentially enable larger, booming industries.
Welcome to the United Arab Emirates. A country that excels in almost every possible field be it sports, logistics, transport, finance, tourism, culture, art and education. In almost every field that is, except telecommunications. When it comes to ICT and telecom services this great country is being shortchanged. This inefficiency is a major problem because ICT is no longer a vertical of the UAE economy, it’s become a horizontal enabler of every part of it — from education to healthcare and more.
Don’t take my word for it. The World Economic Forum’s 2015 Networked Readiness Index study ranks the UAE 23rd in terms of telecom services (Singapore topped the list). Even more appalling, the International Telecommunications Union 2015 ICT Development Index ranked the UAE 32nd worldwide. Consider this: Would Dubai be content with Emirates being ranked as the number 32 best airline in the world? Will Abu Dhabi accept Etihad Airways as the number 23 global airline?
Probably not. So why is the UAE’s telecom industry allowed to lag to such an atrocious level?
To understand the reason it is important to consider the history of the sector. In 1974 the UAE Federal Government established the precursor to etisalat, then known as Emirtel to offer telecom services to the fledgling federation. Emirtel was a joint venture between British firm International Aeradio Limited and the UAE government. Emirtel, which was nationalised in 1981, was off to a great start laying fiber optic cables across the federation in one of the most ambitious infrastructure projects ever undertaken, launching the Middle East’s first mobile network in 1982 before changing its name to Etisalat in 1984. The story of etisalat is the story of the UAE, until the turn of the 21st century where the ambitions of both diverged. While the UAE is seeking to be a global force for the 21st century, etisalat, and now du, are content to play in the minor league using rigid, outdated, and monopolistic telecom regulations to their advantage.
The reason why the UAE government accepts this poor service is perhaps due to the taxes collected from this sector or royalty fees as they are officially called. The royalty fees levied on etisalat and du have been a major boon to the federal budget. By 2009 etisalat alone had paid AED 52 Billion (around US$14 Billion) to the UAE federal government coffers. This year, for the first time, both telecom firms will be paying the same royalty fee of 15 percent of revenues and 30 percent of profits. However, Reuters has reported that both firm’s profits are in decline this year with etisalat registering an 8 per cent fall in first-quarter net profit and du’s profits falling for six successive quarters year-on-year despite the growing population size of the country. Another reason for the government’s protectionist attitude towards etisalat is also due to its hiring of a significant number of UAE nationals (now around 2,500) although this process seems to have plateaued since the turn of the century.
The likelihood is that the historic increase in profits and subscriber numbers that these telecom duopolies enjoyed was to a large extent because of the fast paced development of every other industry in the UAE — except the telecom industry. In other words this growth in subscriber base and profits is not because of their service but is in spite of their service. Instead of adding value to the economy, etisalat and du are merely benefiting from the growth of other industries in the UAE. The more employees Emirates, Dubai Holding and Mubadala hire, the more subscribers etisalat and du sign up.
The mystery here is why these two firms get a free pass. After all, this is the country that prides itself on being a leader in every field. Dubai International Airport dislodged London Heathrow as the busiest in 2014 while Emirates and Etihad Airways are both winning top industry prizes for their services. The latter two companies now fly to every corner of the world carrying new residents, businesspersons and tourists to and from the UAE. And yet one cannot make a simple phone call while driving between Emirates Towers and the Dubai International Financial Centre by the Empower district cooling edifice (a few hundred yards) without the risk of encountering a black spot or drive between Sharjah and Dubai without the call disconnecting. While Dubai’s Open Skies Policy, in place since July 22, 1937, turned Dubai into the world’s aviation hub, the Telecom Regulatory Authority’s outdated and duopolistic rules have resulted in abysmal services not worthy of the UAE’s global ambitions.
The result of over-protecting legacy telecom operators is manifested in cost and technical deficiencies. An analyst from telecom research firm International Data Corporation told Gulf News in 2014 that data prices in the UAE are still the “highest in the Middle East and Africa” while a report by the International Telecommunication Union on domestic broadband internet in the UAE found that it lags behind Qatar, Oman, Bahrain and Kuwait. Moreover, while on etisalat in many areas, one simply cannot make a phone call and and simultaneously browse 4G data. This means that if you are on a 4G network phone call and receive a photo or an email you cannot open it until you end the conversation.
Furthermore, for some unknown reason, the UAE is reluctant to sanction Voice Over Internet Protocol calls to be conducted or received on 4G including calls on Apple FaceTime, Facebook Messenger, Skype, Tango, Viber, WhatsApp and Snapchat calls and Google Hangouts. In what appears to be a Catch-22 situation a public statement by the TRA asserts that is has “granted licensed operators the eligibility to provide (VoIP) services across their networks”. However a senior official from etisalat, the dominant telecom firm laid the blame for the ban on the regulator saying that “We work with the laws [set] by TRA.” Additionally using VPN is also outright illegal and can be punishable under UAE law as it is seen as “tampering” with the country’s Internet network. Rather than block a website, the UAE telecom duopoly are believed to be lowering the bandwidth to an extent that renders any Internet call unviable according to one telecom public policy expert I spoke to. The TRA’s erratic policy of blocking Internet websites and services was likely a factor behind the UAE’s fall to the lowest category of Internet friendliness as per the classification of Paris-based Reporters Sans Frontières.
Officials in the country seem to be taking note of the situation. The youngest member of the UAE Federal National Council, Saeed Al Remeithi, had according to Federal Minister Noura Al Kaabi “won his seat by embracing innovative channels — his campaign run entirely on Snapchat and social media, not a billboard in sight”. Following the Snapchat calls ban Al Remaithi lashed out at the country’s telecom and Internet restrictions calling them ‘an international embarrassment’ during a questioning session in the FNC with Hamad Al Mansouri, the TRA Director General. Mr Al Mansouri retorted that these restrictions were due “to concerns over state security and cyber-terrorism”. While these may be valid reasons few other countries have resorted to such drastic measures. Banning Skype calls due to potential misuse is akin to banning cars due to potential reckless driving.
UAE officials such as the country’s popular Foreign Minister have more than once voiced their displeasure with telecom services in the country. Moreover, telecom expert Raf Fatani suggests that rather than banning services etisalat and du should study how operators overseas have adapted to the 21st century telecom landscape, where digitisation is transforming the way people communicate. One solution is, rather than stifling Internet calling, the TRA or telecom duopoly could introduce a flat monthly rate for people who need to use VoIP as is the case with some broadband VoIP providers in Canada and the US. Raising this matter online, a young Emirati student in Washington DC shared with me his feelings of “shame” and “embarrassment” that such services are blocked in the UAE “in the 21st century.” While The National reported that hacktivist group Anonymous justified its 2012 targeting of the UAE because of the country’s telecoms carriers “unfairly penalising low-income workers” with their pricing.
However, it’s not just vexed Emirati students, government officials or low-income labourers who suffer from the abysmal telecom services in the UAE. Today, the startup ecosystem is one of the fastest growing industries in the world, not least in the Middle East where youth between the ages of 15 and 29 constitute close to a third of the population. According to the Wall Street Journal the number of startups, mostly launched by young Americans, that were worth more than a billion US dollars has tripled to 147 in the past two years. Between Silicon Valley, London and India youth connect and deliberate on how to collaborate, cut costs, outsource and synergise, with Dubai seeking to become their Arab world connection hub. I say seeking because guess how these young people communicate? They use Skype, Hangouts, and FaceTime, services that are banned or throttled in the UAE. The bottom line is the policy of stifling VoIP services is hurting a fledgling startup industry that could one day potentially enable larger, booming industries than the ailing telecoms. It also does little to reinforce the theme of the World Expo 2020: ‘Connecting Minds, Creating the Future’.
“A story of our time is near universal access to smart devices,” says Christopher Schroeder, a U.S. based venture investor and author of StartUp Rising, the first look at regional tech entrepreneurship. “It means unprecedented, bottom up communication, collaboration, access to information allowing millions to solve problems and innovate. The UAE generally and Dubai are a regional, even global, hubs of talent because they understand this and what it means to be globally competitive. I suspect it is only a matter of time before easier access becomes the norm.” I hope Christopher is right, although there seems to be hardline resistance to opening up the sector. While Dubai has launched a Museum of the Future housed in the world’s first functioning 3D printed office and is launching a probe to Mars in 2020 the federal authorities still ban basic Internet calling services. The message such a puzzling conundrum sends about the UAE is that it is selectively embracing the future including the industries revolving around the Internet of Things. Furthermore, unfettered access to Internet services also gives regional technology hubs such as Amman, where no such restrictions exist, an advantage over Dubai.
In 2014 I was invited to attend a closed seminar in Dubai conducted by futurists, social scientists who predict future trends. Each stood up and commended much of the UAE’s developments in various fields, except that of, you guessed it, the telecom industry. In fact one of the futurists flatly identified the poor telecom services as a “threat” to the development of the UAE. Back in 2002 Britain’s Federation of Small Businesses complained that poor telecom services in some parts of England were stunting growth and called upon the government to intervene by taking over the service loop, upgrading it and renting it back to the telecom firms. In the early 2000s the UAE was coming under pressure to liberalise its telecom sector following its accession into the World Trade Organisation in 1996. Rather than allow international competition or overhaul the sector, the UAE opted for more of the same: It introduced another etisalat and called it du.
Will the future also be more of the same? Vision 2021, which “aims to make the UAE among the best countries in the world by the Golden Jubilee of the Union”, includes the realisation of a Competitive Knowledge Economy as one of its five pillars of success. So far it’s a mixed bag at best with the country ranking a disappointing 47th place in the du telecom-sponsored Global Innovation Index 2015 where ICT Infrastructure is a key component. The UAE has less than five years to go for it to attain its ambition of being “among the top 10 countries” in that specific category as Vision 2021 stipulates. While the latest World Economic Forum’s Global Information Technology Report, which measures the economic impact of ICT, saw the UAE’s ranking fall three places to 26th (again Singapore topped the list).
World class ICT infrastructure and services are no longer a luxury, they are crucial prerequisites in the development of any nation. Ultimately, the UAE government should ask itself this: Would we be happy if Emirates was the world’s 32nd best airline? If the answer is no, it’s high time to do something about the UAE’s telecom services.