Enabling Environment

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Home	>	Egypt's Information Society	>	Enabling Environment

Enabling Environment

- Deregulation
- e-Signature Law
- Media Convergence

‘The Enabling Environment should maximise the social, economic, and environmental benefits of the Information Society. Governments need to create a trustworthy, transparent, and non discriminatory legal, regulatory and policy environment.’

WSIS Plan of Action, December 2003

A primary concern for information society builders in Egypt was to secure the creation of a liberal and dynamic economic and legal environment that enhances productivity and competitiveness, and positions Egypt to benefit from the information revolution. The government introduced in the mid 1990s liberalisation packages, which accelerated the privatisation process, as it was becoming clear that this was the best way to attract foreign direct investments. The benefit of such investment would not be limited to the inflow of finances, but would reach much further to the transfer of knowledge, opening of global markets, introducing best practices, increasing job opportunities, adding efficiency, and last but not least, establishing quality procedures and processes.

Egypt has made significant changes in its government structure and economy to manage its progress to an Information Society. Continuing implementation of deregulation policies and effective and succinct new laws is needed to allow ICT developments and free markets to develop. Egypt’s deregulation in the telecommunications sector has been effective, but it is realised that as markets flourish, policies need to be quickly adaptable and fluid in their influence. Regulatory issues also need to be addressed with regard to privacy, security, and intellectual property.

Despite several successive crises within the Middle East, and their inevitable adverse effect on all developing countries and economies in transition, including Egypt, the Egyptian economy still maintains reasonable levels of GDP growth. The budget deficit remains at an acceptable level, and the foreign debt was reduced by 50 percent, reaching a manageable level. A decade of economic reforms is now bearing fruits, and the prospects of the Egyptian economy are quite promising. With a goal of raising sectorial exports to US$ 500 million, MCIT has developed an integrated plan for the development of the IT industry, including export promotion, growing the local market, partnering with multinationals and building the capacity of Egyptian companies.

In the past years steps have been taken to encourage a free market and a more stable and encouraging environment for business to thrive. The main items of related policy are listed below.

Deregulation

Deregulation in the various sectors is a major part of the government’s overall strategy. In 1998, a new regulatory framework was created to create a more encouraging environment for participation from the private sector in ICT. Law No 19 and Presidential Decree No 101 of 1998 were issued to separate telecommunications services provision from other regulatory functions. The new Telecom Act No 10 of 2003 was a major landmark in the telecom sector, with aims for liberalising and regulating the market, and the e-Signature Law addressed four main areas, namely information disclosure, free competition, provision of universal services, and user protection, as detailed below.

The National Telecommunication Regulatory Authority (NTRA), which was formed in 1998 and now fully active since the Telecom Act in 2003, is concerned with all telecom policy and deregulation aspects such as consumer rights, competition, and quality of service.

As part of the deregulation process, the Egyptian government will be awarding licenses for operating international telecommunications services starting from 2006. Licensed operators will have flexibility for using appropriate technologies for relay of transient voice and data traffic and interconnection with licensed operators in Egypt and abroad. In preparation for implementation of Egypt’s commitments under WTO-BTA towards full liberalisation of the communications services within 2006, NTRA has established a fair and transparent competitive framework that enables competition and promotes innovation. The government’s deregulatory incentive seeks to achieve the following goals:
- Stimulating traffic termination in Egypt and eliminating by pass of licensed
    gateways.
- Development of transient services and Internet exchanges in Egypt positioning
    Egypt as a telecommunications hub for the region.
- Improvement of quality and choice of services offered to licensed operators.
- Creating new employment opportunities in ICT sector.
- Attracting new foreign investment opportunities to Egypt and revitalisation of
    the capital market.

Telecom Egypt will undergo a partial privatisation and will take its first steps in giving up its monopoly of the telecommunications industry, with international investment bankers being called upon to draw a detailed prospectus of the company for its flotation. The privatisation of Telecom Egypt will allow a new competition and innovation to thrive, and for the industry to follow a course similar to that successfully set by EU and other countries. It is intended that all basic voice services undergo complete deregulation by the end of 2005, and regulations are currently being formulated for the licensing of Voice over Internet Protocol (VoIP) service providers.

The main other items of related policy are as follows:
Investment Incentives Law, 2001
Intellectual Property Law No 82, 2002
Governance of the Communications Industry Law No 10, 2003
e-Signature Law No. 15, 2004 (also establishment of IT Development Agency)
Tax Reform Law, 2005

The National Telecommunication Regulatory Authority
NTRA works closely with consumers and the telecommunications industry to develop transparent environment that supports a more liberal market and provide services at affordable prices to all citizens. NTRA also established licensing terms and conditions for telecommunication services to promote healthy competition and encourage investment.

NTRA awarded twenty licenses to operators offering telecommunications services within the Egyptian market, such as mobile services to the Internet, VSAT, and public payphones. Also there are steps being taken to open up competition over pre-paid calling cards for the benefit of the customer. NTRA is also managing the first phases of a project to develop an advanced radio management and monitoring system, and has proceeded successfully with the rationalisation of the frequency spectrum to introduce new services.

NTRA will also this year coordinate the terms and conditions of acquisition of a third mobile network in Egypt. At less than 12 percent of capacity, the market remains fertile ground for potential investors and the expected growth of mobile penetration in Egypt is expected to reach 20 percent by 2008/2009. Investment in the mobile telephone market has been substantial in the last six years at US$ 4 billion, and a third entrant into the market is expected to achieve a market share of 20 percent within four to five years.

In May 2005, the government announced that it had successfully concluded a plan for the availability of some mobile spectrum with the intention of auctioning a license for operation of a Third Generation Mobile Technology (3G) mobile network. It is intended for the licensee to have freedom of choice in the deployment method of G3 technology. Either CDMA or Universal Mobile Telecommunications System (UMTS) will be used, with the ability to gain access to G2 and G2.5 spectrum to compliment the coverage of the new network. The process is expected to take between and around eighteen months. NTRA has now published exact terms and conditions of the new license, and interested parties are expected to submit their bids by the end of 2005. Selection of the licensee will be made in mid 2006, with a commercial launch of services in the first half of 2007.

World Trade Organisation
MCIT started the accession process in summer 2001 for joining the Fourth Protocol of the General Agreement for Trade in Services (GATS), generally known as the Basic Telecommunications Agreement (BTA), and became a member of BTA in June 2002. The main objectives of the agreement were as follows:
- Instant deregulation of the markets of data, Internet, and value-added
    services.
- Deregulation of the mobile services market after the four year exclusivity period     granted to the mobile operators in 1998.
- Grace period for the deregulation of the international voice market till the end
    of 2005 to allow for tariff balancing.
- Technology neutral approach to licensing of telecommunications services to
    allow for innovation.
- Participation of the licensed companies in transfer-of-technology and
    development of local industry.
- No limitations on foreign capital participation in telecommunications companies.

In early 2004 Egypt began implementing its commitments under the World Trade Organisation (WTO) and the Information Technology Agreement (ITA). The main itinerary for deregulatory reform was set out as follows:
- Establishment of cost based interconnection between public operators and role
    of NTRA to facilitate and ensure such interconnection.
- Sharing of bottle neck resources to facilitate the introduction of competition
    through loop-unbundling and conduits sharing.
- Competitive safeguards to be set and administered by the NTRA to assure level     playing field for telecom operators.
- Transparent licensing process through publicly available criteria for effective
    deregulation.
- Competition neutral Universal Service mechanism through a Universal Service
    Fund to be established under the NTRA.
- Fair allocation of finite resources especially frequency spectrum and numbering.
- Reduction of customs taxation for related ICT products.

A noticeable reduction in the cost of ICT was seen as tariffs decreased from a base rate 15.6 to 8.8 percent on completion of the GATS agreement in 2004, and a further reduction in September 2004 was made to 2.0 percent. In 2005, tariffs were again reduced to 1.9 percent, and it is planned to abolish ICT import tax completely by 2007. The process of trade in ICT has been significantly simplified, along with much of the ambiguity in taxation. The launch of the e-Content initiative, the boom in Internet access, and the growth in telecommunication use are fuelling the evolution of international services. Elimination of customs on ICT related products in compliance with Egypt’s commitments under the ITA agreement is lowering costs of new networks, and assisting in the success of these initiatives. The reduction in import taxes comes also hand in hand with automation and e-portal development of the Customs Authority to more effectively apply its new working parameters.

Further deregulatory issues have also been put in place relating to foreign companies establishing interests and investing in Egypt. There is now no limitation on the number foreign nationals in a company for the first four years of operation, and in addition to that there are also now no restrictions on foreign ownership. Cross border supply chains are also now actively being encouraged.

e-Signature Law

The e-Signature Law No 15 was approved by Parliament in April 2004. Its implementation is among the strongest mandates of the newly established Information Technology Industry Development Agency (ITIDA). This move will help improve the efficiency of government services while putting Egypt on an equal footing with global competitors in a world where e-signatures are becoming the norm.

The Law regulates and formalises the use of electronic transactions, guaranteeing that they are accorded the same legal merit as paper transactions. For further information on the recent application of the e-Signature Law refer to Sections 8.1 ITIDA and 9.1 e-Government.

Media Convergence

Over the course of the last five years, Egypt has started to experience a phenomenon where the classical boundaries between information technology and communications disappeared and the two domains became more integrated. The boom in the utilisation of the Internet is a classical example of where such Media Convergence between communications and IT domain could lead to in terms of usage, as well as applications. Egypt lagged a couple of years in realising the full potential of this convergence phenomenon due to the technological and regulatory gaps that were present in the ICT sector during the 1990s. It has since made efforts to level itself with the international trends due to effective reforms and massive investments in the telecommunications and IT sectors in accordance with the National CIT Plan. Such convergence has proven to be instrumental in stimulating demand for communications, as well as IT services and products at much higher rates than what could have been without this convergence.

Egypt is currently considering a second phase of Media Convergence by making use of the communications and IT infrastructure. This is particularly applicable to the potential that broadband connectivity currently presents to deliver media content that was classically delivered through terrestrial and satellite broadcasting. Such a strategy is seen as being instrumental in bringing the benefits of the information age to the reach of the majority of the population. This is due to the availability of content in Arabic language, as well as the convenience and ease of use of the communications networks. The delivery of the content over electronic networks could be the catalyst needed for stimulating demand for communications as well as media services.

With a historical leadership in the area of content production and distribution in addition to highly competitive ICT markets, Egypt is well placed to be leading the region in this area. MCIT and the Ministry of Information started a strategic dialogue with leading international players to realise convergence potential in Egypt. The ministries are analysing the various technological and regulatory issues related to such phenomena in order to develop an action plan to promote converged services in Egypt and the region.