Speed kills (page 1 of 2)

Until recently, high-bandwidth connections to the Internet were available mainly to businesses and individuals willing and able to pay hundreds or even thousands of dollars a month for broadband Internet access. But with the development of cable modems, digital subscriber line (DSL) modems and satellite data services, the trend is set for access to high-speed, broadband data services.

In the Middle East, the spread of broadband has lagged because of slow deregulation of the state telecom systems, competing technologies and regional differences in infrastructure. "You have to bear in mind that it is a fragmented picture here," says Michel Kilsey, the general manager of Internet Facilities. "But it is fair to say that the Middle East is up to two years behind [the United States]."

One big reason for the gap is limited competition in the telecom markets. DSL runs over the same copper wire that carries voice calls from a central office into each home. But in most Arab countries, this infrastructure, known as the "local loop," is owned and controlled entirely by the monopoly phone companies, like Lebanon's Ministry of Post and Telecommunications (MPT) and the UAE's Etisalat.

Legislation that "unbundled" control and gave competing providers access to the local loop in the United States has not arrived across the Middle East. "The next phase is to look at the unbundling of the local loop," says Degaulle Azar, an Internet analyst with Bond Communications. "We need to produce recommendations to increase competition and reduce prices. But each country will have to apply those recommendations on its own."

As a result, telecoms across the Middle East are taking their time rolling out serious DSL services - or are setting high prices for them. The companies are not interested in undermining profits from metered local calls for dialup access, leased lines for businesses and ISDN service, an older technology that is similar to DSL but not as fast. "Many telephone companies in the region are quite carefully protecting their revenue stream of very profitable ISDN or leased-line services," says Kilsey. "Why should they kill the golden goose?"

ISDN may also be slowing the adoption of high-speed services. In the UAE, for example, 25 percent of households have ISDN lines. Analysts say the phone companies' lack of interest in shaking up the access business leaves an opening for cable. Cable does have the early lead across the Middle East, although it is not expected to last. According to some estimates, as much as 80 percent of broadband access connect to the Internet using cable modems. But strong regional differences mean that competition from cable companies will thrive in some places and languish in others.

Perhaps 65 percent of Lebanese households are passed by cable, meaning they could sign up for services if they chose to. But in the UAE and Bahrain, for example, more than 95 percent of households are passed by cable, while in Syria few are. For now, though, the phone companies' hold on the telephone infrastructure is good for cable. Unlike other ISPs, cable providers are not dependent on phone companies for access to consumers. And until the telecoms get serious about offering broadband service to residential customers, cable access providers will have the edge.

In the coming years, Arab businesses may be offered the luxury of using not just one broadband connection but three: a cable modem, a DSL modem and a satellite modem.