Broadband in the MENA region: Trends, Opportunities, and Challenges for Operators (page 1 of 3)

With market liberalization, increased competition, and new network technologies, consumer demand for broadband access is rapidly increasing.

The study found that most MENA countries experienced double or triple-digit growth rates in broadband subscribers in 2006, resulting in significant opportunities for telecommunications operators. At the same time, however, operators face difficult marketing, technical, and operational decisions.

"The broadband environment is changing, and operators will face challenges in finding the right answers to complex service differentiation questions - in selecting the most favorable network technology options, and in building the optimal customer service model going forward," commented Ghassan Hasbani, a Vice Principal with Booz Allen Hamilton.

Good News for Regional Broadband Players

Telecom operators in the MENA region have had unprecedented growth since 2005 with broadband penetration estimated at 1% of the total population in 2005. Broadband potential in the region is hampered by late market liberalization, poor infrastructure, and high prices.

"Despite these factors, the region's number of broadband subscribers is expected to more than double over the next three years, largely because of the increasing availability of broadband access channels, reductions in cost, and the enormous demand for broadband content. In 2006, the number of broadband subscribers in the region experienced double- and triple-digit growth rates," said Hilal Halaoui, a Principal with Booz Allen Hamilton.

Telecom operators are positioned to take advantage of this shift. Although broadband access could be provided via different technologies, the vast majority of broadband access in the MENA region is expected to be delivered through DSL—that is, through the wires of local telephone networks—providing a semi monopolistic opportunity for regional telecom operators.

Solid Growth Drivers for Broadband

Five key factors are driving increased demand in the MENA region for broadband:

1. Greater Availability of and Demand for Digital Content
Over the past decade, satellite TV services have proliferated in the region, as opposed to traditional state-run television, causing a surge in the creation and distribution of various types of content including entertainment, educational programming, news, and sports.

2. Burgeoning Youth Market
In the MENA region, the population is young, with 33% under 12 years old who are generally technologically savvy. Most have grown up with the Internet; and expect to receive high-quality digital pictures on satellite television and high-quality sound from their MP3 players. These are the consumers driving the adoption of broadband in the region.

3. Increasing Regional Prosperity
The region is an emerging market, with many countries liberalizing what were traditionally government-controlled sectors of the economy.

"Rising oil prices, an abundance of natural resources, and an upsurge in investment have raised the living standards for many. For the wealthy, services once considered luxuries like broadband, are quickly becoming "necessities." Those on the lower economic tiers represent potential customers for broadband providers," commented Hajj, an Associate with Booz Allen Hamilton.

4. Competition and its Effect on Broadband Penetration
The liberalization of the telecommunications market is facilitating the use of broadband.