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Since the late 1990s, the GoE has made deregulation and development of the telecommunications sector a priority. MCIT’s sector development policy was translated into a comprehensive unified law, the Telecommunication Act, which was ratified by the Egyptian parliament in 2003. MCIT policy targeted establishing a sound institutional framework with an independent regulatory function and increasing the competitiveness of the Egyptian telecommunications market. MCIT aims to further empower the telecommunications sector through continued deregulation, ensuring that all stakeholders – citizens, government, operators and vendors – benefit throughout the process.
Since MCIT announced the first national ICT plan in 1999, it has recognized the importance of creating an environment conducive to the development of the ICT sector. MCIT has worked on creating an enabling framework over the last six years through a series of laws and regulations covering areas including telecommunications, e-signature and industry development. Yet, as ICT-empowered products and services quickly develop, this framework needs to be adjusted to turn these developments into feasible business opportunities that benefit all stakeholders. Among the most important of these developments is the convergence between information, media and telecommunications. MCIT aims to promote Egypt as an internationally recognized ICT hub for the Middle East and Africa, providing state-of-the-art converged services to its citizens and businesses and exporting convergence-enabled services to neighboring countries
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International experience has shown that state-of-the-art telecommunications infrastructure is crucial to the development of various economic activities in modern societies. Competition ensures the sustainability of infrastructure and the continuous enhancement of services to serve the needs of individuals and businesses. Looking forward, MCIT will continue to focus on promoting new and cutting-edge technologies that will assist overall socioeconomic development.
Objectives:
MCIT will work with the NTRA, to set up a transparent and competitive framework to license new cable systems linking Egypt to strategic markets in the region and across the Mediterranean. The new framework will support the establishment of a secure, competitive and sustainable international bandwidth market in Egypt. It will also resolve the issue of bottlenecks in the submarine cable systems across the Mediterranean, thereby empowering the development of broadband services in the Middle East and Africa.
B. National Connectivity and Infrastructure Program
While satellite networks played a leading role in the development of Internet services in Egypt in the mid-1990s as the upstream backbone connection, their role has subsided since the turn of the century due to the increasing demand for bandwidth that can only be provided through fiber optics. Successive reductions in the cost of bandwidth delivered through fiber optics provided a much more attractive solution for establishing backbones and delivery of services throughout Egypt.
However, the need to take ICT services to rural areas where fiber-optic networks are impractical due to limited demand and rough terrain requires new solutions. Recent developments in satellite technology that have resulted in lower costs and higher throughputs now make it a more viable means to connect rural areas. Satellite systems can also increase the safety of air and maritime navigation by providing real-time digital channels connecting aircraft and ships with land-based monitoring stations.
MCIT will cooperate with the NTRA in setting up an enabling framework for the provision of satellite services and clearing the spectrum needed for such services. MCIT will also cooperate with relevant stakeholders to promote investment for setting up and operating new satellite systems to provide rural connectivity and digital communications between aircraft, ships and land stations.
Penetration of broadband services, as required for the delivery of government, social and educational services, has become a differentiating factor in assessing countries’ ICT infrastructure development and overall attractiveness.
MCIT therefore aims to set up a new policy framework for the provision of broadband services making use of the developments in wireless communications, especially in the domain of High Speed Packet Access (HSPA) and WiMax technologies. The ministry will cooperate in this regard with the NTRA and relevant stakeholders to clear the spectrum needed for the provision of services and upgrade the licenses of existing operators, issuing new licenses if needed, to facilitate the provision of broadband technologies. In 2007, MCIT will fully implement its commitments under the WTO to abolish customs on ICT products, thereby reducing the capital costs of rolling out new wireless infrastructure by almost 30% compared to 2004 costs.
B. To Promote Converged Services
Convergence between media and ICT is becoming a global market trend driven by technological developments and consumer preferences. Development in digital technologies, especially those related to the web (Internet protocol communications, streaming and casting services, peer-to-peer applications, etc.), is creating de facto standards for both the media and telecommunications sectors. Providers in various countries have found that integrated packages of Internet, telephony, media and entertainment services best suit customer preferences. Moreover, provision of such integrated services over a single high-speed platform significantly reduces provision costs and allows for more efficient utilization of infrastructure. Such economies of scale reflect in better returns on investment in infrastructure projects and hence provide an incentive for wide-scale deployment of broadband infrastructure. MCIT will be working with Ministry of Mass Media and all relevant stakeholders to create an enabling environment for converged services. Building on its experience in creating enabling frameworks that foster cooperation between various stakeholders (government, consumers, operators and service providers), MCIT will promote converged services by:
Egypt is in a position to become a regional leader and offer all forms of converged services such as:
A. Fixed and Mobile Operators Licensing Program
3G Licenses for Mobile and Fixed Users
In Q2 2006, the NTRA granted the first license to provide 3G services and the third mobile license in Egypt to a consortium led by Etisalat of the UAE for US$ 3 billion. In Q1 2007, the NTRA granted a similar 3G license to the second mobile operator, led by Vodafone of the UK, for US$ 560 million. These sums reflect the interest of international operators in the Egyptian 3G market and the potential of broadband development through 3G services.
By Q2 2007, the majority of mobile users in Egypt will be enjoying 3.5G services based on HSPA technology offering speeds surpassing that of conventional ADSL services through mobile operators with 3G licenses. Additionally, Telecom Egypt will be offering CDMA 1X EVDO to customers of CDMA services in rural areas with speeds comparable to those of ADSL services.
It is expected that by the end of 2010 high-speed Internet access will be available across the entire country.
WiMax Services
Egypt is following closely the efforts to standardize WiMax technologies as they permit simpler and faster access to Internet services, especially as WiMax receivers are integrated into PC processors. Field trials have been set up in Cairo, Giza, Luxor and Aswan by leading international vendors and Egyptian operators on a non-commercial basis to assess the suitability of these technologies for Egypt’s environmental and topographical conditions.
With WiMax standardization expected to be complete by 2007-08, MCIT will cooperate with the NTRA and current WiMax users to clear the spectrum as necessary. The ministry will also hold discussions with relevant stakeholders to determine the best policy framework for introducing WiMax into the market through existing or new operators.
Licensing of a Second National Operator for Voice and Transport Services
Following completion of the tariff rebalancing process, Egypt’s fixed-line telecommunications market will be ready for the introduction of alternative carriers. MCIT is planning to start the process for licensing a second national operator for voice and transport services by 2008-09, with a view to this company starting operations in 2009. MCIT will make sure that the new operator contributes positively to the overall growth of the telecommunications sector by offering world-class services to other carriers as an alternative core network, as well as to business and residential users.
Framework for Cooperation in the Rollout of Alternative Network Infrastructure
As the framework for converged services outlined below becomes a reality, alternative networks may be required. The ownership structure of such networks, their coverage, technologies and the services they will deliver thus need to be discussed by various stakeholders.
Among the networks likely to be used are the fiber-optic networks owned by gas and electricity companies, while there is also the possibility of making use of the right-of-way of railroads to roll out new national cable infrastructure. These networks might be complemented by hybrid networks of power-line communications, co-axial cables or wireless solutions to reach end-users. Using high-speed packet technologies, the new network infrastructure could be utilized for the delivery of a wide array of Internet, telephony and entertainment services.
MCIT and the NTRA will be leading a national dialogue among all stakeholders about the various options for fostering the development of such alternative networks in a competitive and transparent manner that would benefit all market participants.
As Egypt develops its connectivity within the region and through submarine cables to Europe and Asia, it will be increasingly well suited to function as an exchange point for international traffic flowing between these highly active regions. Also, through its growing customer care and content industries, it will be in a position to provide attractive offerings to international carriers. MCIT intends to establish an industry for value-added services for transit traffic by setting up a telecommunications free zone where transit telecommunication services are provided to serve international markets.
MCIT will be cooperating with the ministries of finance and investment and other relevant organizations to promote the establishment of this free zone by offering an attractive package of incentives for international and local carriers to serve regional markets.
A. International transient voice relay
As Egyptian operators are successfully establishing operations throughout the Middle East, Africa and southern Mediterranean region, and as Middle Eastern operators move in the Egyptian market, the need arises for a flexible framework for exchange of regional traffic (especially that not originating or terminating in Egypt) making use of the excellent connectivity that links Egypt to almost all Middle Eastern and African countries. Companies located in Egypt’s telecommunications free zone would be in an ideal position to aggregate traffic and thus run the most efficient routes to various countries in the region and beyond.
B. Establishment of regional Internet exchanges
The Middle East and Africa region has one of the world’s highest growth rates in Internet penetration. Deregulation in major Middle Eastern markets is making broadband communications more affordable and is creating more demand for Internet bandwidth. At the same time, the direction of traffic is shifting; while the majority of traffic previously came from Europe and the US to regional markets, it is now becoming more balanced as intra-regional traffic grows with the use of peer-to-peer applications. However, due to the nature of connectivity between Middle Eastern and African markets and European and American hubs, traffic needs to be exchanged in Europe and the US, consuming international bandwidth.
As Egypt promotes converged services by offering Arabic content online, it would be well positioned to offer Arabic content to other countries in the region, especially as it increases its direct links to Arab markets. This would allow for the establishment of regional exchanges serving Arab carriers and data centers, thus creating a critical mass that would attract foreign carriers to exchange their traffic with regional carriers. This would bring down the costs of international bandwidth for Egyptian carriers and eventually for Egyptian consumers, and also promote value-added and content services in Egypt. |
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The international postal sector has changed more in the last 20 years than in the previous century and a half, leading many governments in developed and developing countries to recognize the need for effective and sustainable postal reform. Significant forces have driven this transformation: changes in postal market demand and supply, globalization, market liberalization, regulatory progress and technological advances in all communications media. Among these changes, the most important is the increasing role of the private sector in the provision of postal services. Previously, public operators were chosen to meet this obligation and were provided with monopolies, not only to preserve the integrity of the mail, but also as an economic incentive to serve unprofitable areas of the mail market. Today, the level of private sector participation in the supply of postal services is significant and growing, resulting in a more competitive postal market and an increased need for effective regulation.
The GoE recognizes that a strong universal postal service operating within a competitive postal market can serve as a valuable tool in achieving national development objectives. Efficient postal services can reduce the cost of financial and other business transactions and thereby increase national competitiveness. Nationwide postal networks can also serve as effective agents in increasing public participation in civil and economic life, reducing rural isolation and marginalization, and in distributing government benefits and services more equitably. When these networks also incorporate comprehensive financial services, they can stimulate national capital accumulation, include wider segments of society in formal financial channels and serve as a catalyst for the growth of SMEs.
However, recent analysis has shown that the postal market in Egypt is performing below potential and not fully meeting the needs of individual and business mailers. This is demonstrated by the low per capita level of mail in Egypt (3.2 pieces per person annually) in comparison with countries immediately above (5.8 pieces) and immediately below Egypt (5.0 pieces) in terms of GDP per inhabitant (PPP method). MCIT is therefore determined to undertake a program of postal reform and modernization to define and realize its future vision of the postal sector in Egypt by 2010.
Objectives:
To develop a world-class postal service in terms of quality, innovation and accessibility
A. Development of a State-of-the-Art Postal Network
A comprehensive postal network can serve as an effective agent to increase access to information that is the key to strengthening levels of participation in civil and economic life. This is particularly true in rural and isolated areas that have little access to other government or private services. Postal retail outlets can serve as “portals” to government services – including registration, licenses, tax documents, etc. Postal networks are also positioned at the center of three critical business flows: information, goods and cash. In many countries, this unique positioning has been used to move towards a “business communications center” concept for post offices that adds value to the postal network and reduces the cost of maintaining a universal service network.
The communications center concept has also been used to develop “hybrid mail” and other innovative mail products that synergize digital and physical communications media.
B. Development of a State-of-the-Art Postal Network
While the evolution of the postal sector in industrialized countries was characterized by liberalization, best practices show that liberalization needs to be accompanied by enhancement of public operators’ efficiency and effectiveness. This can be achieved by extending the reach and portfolio of services offered by public operators to reflect industry changes and economic development. Extensive integration of ICT in the operations of national operators and the services they provide has a positive effect on restructuring.
MCIT views the modernization of Egypt Post as a fundamental component of its strategy to develop the sector since it will continue playing the role of universal service provider until such time as alternatives emerge. Making use of Egypt Post’s wide outreach, extensive network and the public confidence it has built over the years, its service offerings can be further extended to include governmental, societal and financial services in addition to traditional postal services.
MCIT will facilitate collaboration between Egypt Post and relevant governmental and business institutions to develop postal services, products and systems that support e-government and e-commerce as well as new and innovative products that combine digital/physical communications systems.
MCIT will also continue to encourage Egypt Post to form partnerships to further empower its human and capital infrastructure and enable it to offer new products and services making use of and serving the ICT industry. This will result in the development of systems for sorting, tracing, addressing and customer care – all crucial components of any modern postal infrastructure. Use of postal networks to manage global supply chains and enhance delivery of e-commerce is another area that could be beneficial to the development of the ICT sector in Egypt.
Utilization of the private sector as a catalyst for development has been a cornerstone of the strategies of MCIT since 1999. Currently, the private sector accounts for a significant portion of the supply of postal services in Egypt, even though much of this activity is unlicensed. ENPO has also utilized private sector individuals and businesses to extend its universal service network and in partnerships for high-value products. Through arrangements in areas such as courier services and transportation, ENPO has also demonstrated the potential of public-private sector partnerships. With proper regulation and market definition, and resulting market growth, private sector participation could be increased significantly.
Furthermore, as the Egyptian economy grows and as mail-heavy industries such as financial services and utilities expand, there will be an increasing need for an efficient postal network to handle advertising, bill delivery and payment, and goods and cash transfers. There are demonstrated cases where effective postal sector policies and reform have led to significant increases in the level of such partnerships and in the level of private sector investment in public postal services (financial services, FDI in equity, management contracts).
MCIT recognizes the need to stimulate innovation in the postal market to respond to the unmet and emerging needs of customers for new and innovative postal products. Hence, MCIT will be working on a set of incentives to encourage the participation of the private sector in projects that could stimulate further progress in various areas. At the same time, an independent regulatory mechanism will be in place to monitor ongoing growth and innovation in the Egyptian postal market and benchmark this progress against international standards.
A. Establishment of a Neutral Regulatory Mechanism
The Egyptian postal market has a high level of competition with 12 operators providing various forms of postal services. However, it does not have effective regulatory oversight, as the Egyptian National Postal Organization (ENPO), the entity entitled by law to issue licenses to postal operators, is itself in the market competing with other operators directly or indirectly (through subsidiaries or joint ventures). Moreover, some of these operators offer services beyond the scope of their licenses while others function without licenses.
A recent study by the Universal Postal Union (UPU) argues that this market structure has resulted in fragmentation of postal networks and mail flows that reduces potential economies of scale and limits service quality and innovation. The UPU study concludes that the postal market in Egypt is performing below capacity and that there is room for expansion and additional private sector investment However, the significant lack of transparency concerning the separation between the regulatory and operator functions of ENPO has affected the predictability of the sector and thus the level of private sector investment. Moreover, there are no regulations concerning fulfillment of universal service obligations or an effective licensing regime to legitimize competition in the market.
MCIT will thus be working with ENPO, postal operators and other stakeholders over 2007-08 to:
B. Adapting to New International Postal Regulations
Globalization of national economies and liberalization of marketplaces have influenced the supply side of postal markets more significantly than the demand side by allowing both official and private postal operators to expand their operations across national boundaries into regional and global markets. International regulatory advances (e.g. the WTO’s General Agreement for Trade in Services – GATS) are rapidly reducing or eliminating trade and competitive barriers, creating new opportunities for market entry.
The UPU is moving towards a quality- and cost-based terminal dues system. As ENPO’s inbound and outbound international letter mail flows are more or less equal to its domestic flows, this market segment and the economic viability of both public and private operators might be significantly impacted by such changes. As part of the reviewed proposal under the GATS Doha round presented in 2006, Egypt proposed liberalization of courier services starting from 2009. Thus, postal laws in Egypt need to be developed to allow for liberalization of services and to comply with international trade regimes. Regulatory reforms will need to be introduced to prepare the postal sector for future changes in international postal regulatory regimes required by GATS and the UPU.
As the size of regional trade increases, primarily due to e-commerce, there will be an increasing need for hubs that manage supply chains on a regional level. Such hubs will be characterized by intermediate geographic position, efficient operations supported by strong ICT infrastructure as well as a flexible and enabling framework. Postal services in high-growth countries demonstrate the value of postal networks in strengthening import and export channels. Through a unique arrangement with customs counterparts, postal operators have been able to increase import and export flows and provide support for the growth of SMEs and other businesses.
B. Cooperating with International Operators through a Postal Free Zone
MCIT will be facilitating cooperation between governmental agencies responsible for transport and trade (aviation, transport, finance and investment), the Customs Authority, Egypt Post, private operators and other stakeholders to create the first postal free zone in the region. It is expected that this move will entail the development of the current regulatory frameworks governing establishment and operations of free zones to match those of prominent regional and international free zones. It will also involve the establishment of new infrastructure and supply systems connected to global and regional markets and the re-engineering and rationalization of relevant processes and inspection mechanisms to facilitate transactions and promote business.
This strategy to build an export-oriented industry, improve the competitiveness of the Egyptian economy and generate employment will be facilitated through the cooperation of active regional and international operators. MCIT will therefore cooperate with the General Authority for Investment and Free Zones (GAFI) and other relevant agencies to promote Egypt’s postal free zone to international postal and supply-chain operators as a regional hub and logistics center, building on its successful experience with multinational telecom and IT companies.
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Egypt recognizes the importance of integration within the international ICT framework as a means to achieve its goals for the Egyptian ICT sector. Thus, while Egypt was developing its original framework governing the ICT sector in 1999, active participation in international ICT forums and adoption of relevant agreements were priorities. Egypt has maintained this strategy throughout its various phases of ICT development and will continue to do so during the next phase.
Another focus of Egypt’s ICT sector development plans is the need to ensure continuous, affordable and secure delivery of ICT services to all members of society. This need is in fact growing due to the increase in use of ICT in mission-critical applications by all sectors of society.
Objectives:
To integrate Egypt within international frameworks governing trade in ICT
A. Active Integration into the Global ICT Market
Globalization holds benefits for economies that manage to create the right framework to make use of its merits while avoiding its shortcomings. Egypt has chosen to undertake this challenge as a means to promoting exports and attracting investment and has demonstrated this commitment through a number of international and regional trade agreements. These commitments are meant to ensure predictability in governing the sector and assure local and foreign investors of the intention of Egypt to integrate into the world trading system.
B. Trade Agreements
During the development of the original Telecommunications Act in 2000, MCIT focused on the principles of independence, transparency, non-differentiation between companies based on the nationality of their founders and fair competition as bases for governing sector performance. Egypt joined the WTO agreement governing trade in telecommunications services (Basic Telecommunications Agreement) in June 2002.
Looking ahead, and in order to promote competition in other sectors of the ICT industry, MCIT has proposed commitments under the current round of negotiations in services regarding trade in computer-related services (CRS) and courier services.
There is considerable potential for Egyptian operators in regional markets in the areas of call centers, content and value-added services. MCIT will therefore cooperate with the Ministries of Trade and Industry as well as Foreign Affairs in the ongoing process of developing the GAFTA agreement on services to ensure that it reflects the expectations of operators.
A universal services fund (USF) was established by the NTRA in 2003 to support provision of access to basic telecommunications services throughout Egypt. The fund received LE 50 million from the surplus of the NTRA’s 2005 budget to support emergency and rural communications in five governorates. Expanding effective use of the fund will be the focus of the coming phase.
The Egyptian government, in cooperation with the private sector, has initiated actions to prevent, detect and respond to cyber-crime and misuse of ICTs. These measures include developing legislation regarding investigation and prosecution for misuse; promoting effective mutual assistance efforts; strengthening institutional support at the international level for preventing, detecting and recovering from such incidents; and encouraging education and raising awareness. In addition, the government has begun to raise awareness among users, both corporate users and individuals, about the appropriate use of ICTs and the penalties for violations.
Maximizing Economic Gains from the Liberalization Process
development of telecommunications on GDP growth. The Egyptian experience with the process of deregulation shows that through careful planning and with a transparent licensing framework, all stakeholders can benefit from the deregulation process. Moreover, the telecommunications sector has proven itself to be a primary driver of the Egyptian stock market, expanding the pool of beneficiaries of the telecommunication sector even further. MCIT’s strategy is to work on maximizing the positive contribution of the ICT sector to the overall economy. This can be achieved through increased revenues from licensing proceeds and taxes from the ICT sector to the benefit of the national treasury whether as considerable one-time or sustainable annual fees.
In addition attracting new long-term national and foreign direct investment in large ICT projects and promoting the expansion of Egyptian operators into high-potential and strategic markets will significantly contribute to growth. |
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