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Analysys Mason Research Report - FEMIP Broadband Potential 2010
Analysys Mason Research Report - FEMIP Broadband Potential 2010
FEMIP
Summary Report
Evaluation of the market, business and
financial aspects for the development of
broadband access for femip countries
Summary Report
The study/technical assistance operation is financed under the FEMIP Trust Fund. This Fund,
which was established in 2004 and has been financed – to date– by 16 EU Member States and the
European Commission, is intended to support the development of the private sector via the
financing or studies and technical assistance measures and the provision of private equity.
The authors take full responsibility for the contents of this report. The opinions expressed do not
necessarily reflect the view of the European Investment Bank (EIB).
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Contents
1 Introduction 1
5 Comparison and evaluation of the costs associated with the roll-out of different
broadband technologies 41
5.1 Scenario definition 41
5.2 Description of the methodology for terrestrial technologies 44
5.3 Assessment of commercially viable coverage by terrestrial broadband technology 47
5.4 Assessment of different cost types for a nationwide roll-out of terrestrial broadband
technologies 48
5.5 Assessment of coverage and costs for a satellite solution 55
5.6 Costs for different scenarios 56
7 Conclusion 68
7.1 Scenarios results 68
7.2 Barriers to, and opportunities for, broadband development 72
7.3 Investment opportunities 73
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Summary Report
Analysys Mason is an independent strategy consultancy in telecoms, media and technology. See
www.analysysmason.com for more information about our company and the services we provide.
Disclaimer
This document summarises the conclusions of work undertaken between April 2011 and
November 2011. This work was based on available quantitative data from the end of 2010 in
addition to information collected from stakeholders between May 2011 and July 2011.
Copyright
Copyright © 2011. Analysys Mason Limited has produced the information contained herein for the
European Investment Bank (EIB).
Analysys Mason
66 avenue des Champs Elysées
75008 Paris
France
Tel: +33 (0)1 72 71 96 96
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[email protected]
www.analysysmason.com
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1 Introduction
Analysys Mason has been commissioned by the European Investment Bank (‘EIB’) to undertake
the study Evaluation of the market, business and financial aspects for the development of
broadband access for FEMIP countries (Ref.: 2010/S 154-237201, TA2010014 R0 FTF).
The ultimate objective that the EIB would like to achieve is to identify ways to reduce the digital
divide for broadband services within each of the countries in the FEMIP (Facility for Euro-
Mediterranean Investment and Partnership) region and across the region. There are nine
beneficiary countries: Algeria, Egypt, Gaza/West Bank, Israel, Jordan, Lebanon, Morocco, Syria 1
and Tunisia. Therefore, the specific objectives of this study are to:
• analyse the current status of fixed and mobile broadband services in each FEMIP country,
including demand and supply
• assess the future needs of fixed and mobile broadband services in each FEMIP country,
including demand and supply
• estimate the future demand and related investment needs for the roll-out of an economic
mixture of broadband infrastructures in each FEMIP country under different scenarios.
The European Space Agency (ESA) is undertaking a complementary study of a possible satellite
solution for the entire region, including most other countries around the Mediterranean Sea. The
results of this study will feed into ESA’s study.
This document, or Summary Report, consolidates the results from each of the nine country
reports that we have developed throughout this project.
This Summary Report includes the following annexes containing supplementary material:
• Annex A provides some background on the socio-economic impact of broadband
• Annex B presents the list of stakeholders interviewed during the course of this project
• Annex C includes a glossary of terms used throughout this report.
1
The EIB has currently suspended technical assistance operations in Syria.
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This section provides an overview of the macro-economic situation in each of the nine FEMIP
countries. It is structured as follows:
Since December 2010 a series of demonstrations and protests demanding constitutional reforms
and more democracy (the ‘Arab Spring’) have been taking place throughout the Arab world,
including in most FEMIP countries. Tunisia, Egypt and Syria have been the countries most
affected by this wave of protests. Other countries such as Jordan, Lebanon, Morocco and Algeria
have been less impacted, and Gaza/West Bank and Israel have not been affected by the recent
political turmoil facing Arab nations. The situation in some of these countries, if it lasts long, may
lead to uncertainty about future roll-out plans for broadband infrastructures both for the private
and public sectors. The unstable political situation in the FEMIP region has meant that most
FEMIP countries have been able to attract only low levels of foreign direct investment (FDI) per
capita, as shown below in Figure 2.2.
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4,000
2,000
0
Jordan
Algeria
Israel
Morocco
Egypt
Tunisia
Syria
When taking into account a wide range of risks (security, political stability, government
effectiveness, legal and regulatory, macro-economic, foreign trade and payments, financial, tax
policy, labour market and infrastructure), the level of risk in most FEMIP countries is high, with
Israel and Jordan having the lowest rate among FEMIP countries (see Figure 2.3). The risk ratings
of 30–65 compare with an average level of risk of 26 for countries in the European Union.
Morocco
Israel
Egypt
Tunisia
Syria
Lebanon
As a result of the low level of FDI and the high level of risk in most FEMIP countries, the
development of a nationwide broadband infrastructure could be challenging in these countries.
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The population in FEMIP countries is estimated to total around 204 million in 2010 and is expected to
reach 235 million in 2020 (see Table 2.4). The population in FEMIP countries has been growing at an
average rate of 1.7% per annum in the last three years, and is expected to continue growing at an
average rate of 1.4% per annum in the period to 2020. Egypt’s population is the largest of FEMIP
countries with 80 million in 2010, accounting for 39% of the total population in FEMIP countries.
Algeria, Morocco and Syria have a relatively sizeable population between 20 million and 40 million
(2010), whereas Israel, Lebanon, Gaza/West Bank, Jordan and Tunisia are the least populated FEMIP
countries with a population of less than 10 million each in 2010.
The average number of persons per household is relatively high in all FEMIP countries, ranging
from 3.4 in Israel to 6.9 in Gaza/West Bank, as shown in Figure 2.5. Identifying the number of
households in each country is even more important than population as broadband is mainly a
household infrastructure to which access is shared between all members of the household.
household [Source:
5
Euromonitor, 2010]
4
0
Jordan
Gaza / West Bank
Algeria
Morocco
Israel
Egypt
Tunisia
Syria
Lebanon
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Population density varies significantly across FEMIP countries. It is extremely high in Gaza/West
Bank, Lebanon and Israel, with more than 300 inhabitants per square kilometre, whereas Algeria has
the lowest population density of all FEMIP countries with around 15 inhabitants per square kilometre.
It should be noted that the weighted average of FEMIP countries is lower than eight FEMIP countries
due to the significant land area of Algeria (2.4 million square kilometres, 2 which is around half the size
of all FEMIP countries). It should be noted that the results of our analysis in section 5 is not based on a
simple density average across the country but is rather based on a distribution population curve taking
into account the different levels of density on a regional basis within a country.
800
Figure 2.6: Population
700 density in FEMIP
600 countries [Source:
Inhab. per sq.km
Israel
Algeria
Egypt
Morocco
Tunisia
Lebanon
Syria
Using the maximum level of data available for each country, we extrapolated a curve for the
population distribution across the country, by dividing existing (real) divisions into (artificial) sub-
divisions and assuming that population in a given division was exponentially distributed across
sub-divisions. The results show that a large proportion of the population is concentrated in only a
small part of the total land area in most of these countries. For example, Figure 2.7 shows that 90%
of the total population live in less than 50% of the total land area in all FEMIP countries, except
for Lebanon where 90% of the population live in 52% of the total land area.
60% Figure 2.7: Proportion
50% of the total land area
that concentrates 90%
40% of the population
% of area
10%
0%
Jordan
Algeria
Israel
Tunisia
Syria
Lebanon
2
Source: CIA’s World Factbook.
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Summary Report | 6
2010]
15,000
5,000
0
Jordan
Algeria
Israel
Morocco
Egypt
Tunisia
Lebanon
Syria
When using the purchasing power parity (PPP) equivalence, all FEMIP countries have a higher
GDP per capita than in nominal terms, as shown in Figure 2.9. It is also worth noting that:
• Israel’s GDP per capita at PPP is at the lower end of the Western European countries in our
benchmark, alongside Spain, Italy or Greece, higher than neighbouring Cyprus, and significantly
higher than other countries in East Asia, Africa and Eastern Europe.
• Lebanon’s GDP per capita at PPP is in the upper range of international benchmarks at
EUR12 600, including Malaysia, African and East European countries.
• Algeria’s GDP per capita at PPP is higher than in the Eastern European countries in our
benchmark, such as Ukraine and Georgia.
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35,000
FEMIP countries Other countries
30,000
25,000
EUR at PPP
20,000
15,000
10,000
5,000
0
Jordan
Algeria
Botswana
Ukraine
Israel
France
Morocco
South Africa
Egypt
Germany
Thailand
Tunisia
United Kingdom
Spain
Italy
Cyprus
Georgia
Lebanon
Syria
Malaysia
Greece
Figure 2.9: GDP per capita at PPP in benchmarked countries [Source: Euromonitor, 2010]
Note: Information on Gaza/West Bank is not available and therefore is not included in the chart
The informal economy plays an important role in most FEMIP countries, contributing between
31% and 35% to the overall economy in Tunisia, Egypt, Morocco, Algeria and Lebanon, whereas
it represents between 17% and 21% of the overall economy in Jordan, Syria and Israel.
Note: Information on
20%
Gaza/West Bank is not
15% available and therefore
is not included in the
10%
chart
5%
0%
Jordan
Algeria
Morocco
Israel
Egypt
Tunisia
Lebanon
Syria
Inflation rates have remained relatively low (between 0% and 5%) in FEMIP countries between
2007 and 2010, with the exception of the year 2008 where the inflation increased significantly in
countries such as Egypt, Syria, Jordan and Lebanon. In addition, the inflation in Egypt was higher
than all other FEMIP countries reaching a maximum of 18% in 2008 before decreasing to 11% in
2010 due to the rising food and oil prices, and exacerbated by the depreciation of the Egyptian
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Pound as a result of the political crisis. Going forward, Euromonitor expects inflation to stabilise
in practically all FEMIP countries at around 2–3%, except for Syria and Egypt, where the inflation
rate is forecast to be 5% and 6%, respectively, in the long term.
20%
15%
Inflation rate (%)
10%
5%
0%
-5%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
The VAT rate in FEMIP countries ranges from 10% to 20%. Syria is the only FEMIP country
where VAT has not yet been introduced (see Figure 2.12).
[Source: Public
15%
sources]
10%
Note: VAT has not yet
been introduced in
5%
Syria, hence that it is
excluded from the chart
0%
Jordan
Algeria
Israel
Egypt
Tunisia
Lebanon
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The Human Development Index (HDI) is an indicator used by the World Bank which measures the
level of human development in terms of individual and collective welfare (e.g. life expectancy,
literacy, education and standards of living). With the exception of Israel, which has a rate
comparable to Western European countries, all other FEMIP countries are in the middle range of
the HDI rating as shown in Figure 2.13.
The GINI coefficient measures inequality of income or wealth between various segments of the
population. A GINI coefficient of 0 indicates perfect equality, while an index of 100 indicates
perfect inequality. The GINI coefficient for most FEMIP countries is between 35% and 40%, as
shown in Figure 2.14. The GINI average for the European Union (EU) is 33%.
0%
30% 35% 40% 45%
inequality index (GINI)
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Private consumption is very high in Jordan, Lebanon, Gaza/West Bank and Egypt) at approximately
75% of nominal GDP. Countries like Syria, Tunisia, Israel and Morocco have a private consumption as
a percentage of nominal GDP similar to the EU average, as shown in Figure 2.15. Private consumption
in Algeria is around 36% of nominal GDP, which is the lowest among FEMIP countries. This is
primarily due to Algeria being a major gas and oil exporter, which means that public expenditures
represent the stronger share of the country’s GDP (versus private consumption).
90% Figure 2.15: Private
80% consumption in FEMIP
70% countries [Source: EIU]
FEMIP average
60%
% of GDP
50%
40%
30%
20%
10%
0%
Jordan
Algeria
Israel
Morocco
Egypt
Tunisia
Lebanon
Syria
EU average
In terms of education levels, in all FEMIP countries except Morocco more than 74% of the population
aged above 15 is literate (Figure 2.17). The literacy rate is particularly high in Israel, Jordan and
Lebanon (97%, 96% and 91%, respectively), which is likely to lead to sustainable high levels of
demand and consumption of broadband services in these countries. On the other hand, Morocco has the
lowest literacy rate among FEMIP countries at 59%, which may hinder broadband take-up.
100% Figure 2.16: Adult
90% literacy rate in FEMIP
FEMIP average countries [Source:
80%
Euromonitor]
% of pop. aged 15+
70%
60% Note: Information on
50% Gaza/West Bank is
40% not available and
therefore is not included
30%
in the chart
20%
10%
0%
Jordan
Algeria
Israel
Morocco
Egypt
Tunisia
Lebanon
Syria
The electricity household access rate measures the share of households in a country that are
connected to the electric grid and that are able to use electric appliances. This rate is extremely
high and does not represent a major issue for broadband development in most of the FEMIP
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countries except Morocco, where the electricity household access rate stood at 82% of households
at the end of 2010. However, in some of these countries, such as Lebanon and Syria, the reliability
of the power supply is often also a major issue in certain areas, as electricity may be cut for several
hours a day during certain periods of the year.
100% Figure 2.17: Electricity
90% household access rate
80% in FEMIP countries
% of households
Algeria
Israel
Morocco
Egypt
Tunisia
Lebanon
Syria
This assessment shows that the most favourable macro-economic environment for broadband
development appears to be in countries like Israel and Lebanon. On the other hand, the least
favourable environment appears to be in countries like Algeria and Syria.
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This section provides an overview of the telecoms market in the FEMIP countries. It is structured
as follows:
• Section 3.1 highlights the importance of the telecoms sector in FEMIP countries
• Section 3.2 provides an overview of the regulatory framework and environment governing the
telecoms sector in FEMIP countries
• Section 3.3 describes the fixed and mobile markets
• Section 3.4 describes the broadband market.
Telecoms revenues in FEMIP countries account for 2.5–6.7% of GDP , which is higher than in
Europe where the figure is 1.5–4% in Western European (WE) countries and 3–5% in Eastern
European (EE) countries.
4%
Note: Data for Israel is
6.5% for 2008 and data for
3%
Lebanon is for 2007
4.9% 4.6%
2% 4.2% 4.0%
3.6% 3.5% Note: Information on
1% 2.2% Gaza/West Bank is not
available
0%
Jordan
Algeria
Morocco
Israel
WE
Egypt
Tunisia
EE
Lebanon
Syria
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Telecoms operators in FEMIP countries invest between 10% and 25% of their revenues in their
respective countries (Figure 3.2), which is similar to the level in the benchmarked Western and
Eastern European countries.
The share of employees working in the telecoms sector ranges from 0.25% to 1.25% of the total
workforce, as shown below in Figure 3.3. In European countries this figure ranges from 0.25% to
1.27% in 2009, and the majority of the countries lie between 0.35% and 0.69%.
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The share of international bandwidth used for Internet lies between 80% and 87% (Figure 3.4),
indicating that Internet is becoming an important means of communication even if the broadband
take-up is still relatively low in some of these countries. Furthermore, international bandwidth
usage in these countries has been increasing dramatically in recent years.
200 100%
87% 86% 87% 85% 85% 86%
180 81% 90%
80% 80%
160 80%
140 70%
184 120
120 60%
100 88 50%
80 69 40%
60 59
60 49 49 30%
40 20%
17
20 10%
0 0%
Morocco Egypt Tunisia Syria Israel Gaza / Jordan Algeria Lebanon
West
Bank
Figure 3.4: International bandwidth usage in FEMIP countries [Source: TeleGeography, 2010]
In Table 3.5 below we present an overview of telecoms regulation in each FEMIP country.
Countries with the most advanced national broadband strategies are listed first.
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In Table 3.6 below we present the status of the broadband market in each FEMIP country.
Countries with the most advanced national broadband strategies are listed first.
Ranking of most Existence of HSPA HSPA+ Existence Efficient Roll-out of Expected date for
advanced national 3G service service of LLU use of NGA award of spectrum for
broadband strategy operators availability availability LLU mobile broadband
Israel × × × 2.6GHz in
short term
Morocco × × Unknown
Algeria × × × × × In 2015 for 800MHz
deployment
Lebanon Launched × × × In progress 2015 for 800MHz
end 2011
Jordan × Expected × Limited to 2.6GHz available
in late school and 2015 for 800MHz
2012 universities
Tunisia × × × 2014 for 800MHz
Egypt Very limited Unknown
Gaza/West Bank × × × × × × Unknown
Syria × × × × 2014 at the earliest
Table 3.6: Status of the broadband market [Source: Analysys Mason, regulators]
Table 3.7 provides an overview of the regulatory framework and environment governing the
telecoms sector in FEMIP countries. 3
3
For more details please refer to the relevant country report.
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Lebanon The Telecommunications The market is not liberalised The Lebanese government
Regulatory Authority (TRA) has expressed its intention to
There are two state-owned 2G
was established in March privatise the incumbent
operators (Alfa and MTC
2007. However, in June 2011, wireline provider Ogero
Touch)that provide services
the Ministry of Telecom but this has not yet
on a build-transfer-operate
Telecommunications (MoT) materialised
(BTO) basis
announced that a government There are seven licenced data
legal authority had suspended 3G is expected to be launched service providers (DSPs)
the powers of the TRA, thus later this year owning fixed wireless
making the Ministry of infrastructure, of which only
Telecoms the sole body four have rolled out a network
authorised to set new rules and launched services
and guidelines for the sector
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Table 3.7: Overview of the regulatory situation in FEMIP countries [Source: Analysys Mason, regulators]
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Table 3.8 provides an overview of the most recent policies governing the telecoms sector in each
FEMIP country, as well as a summary of the plans and objectives set for national broadband.4
Country Main recent policies and plans National broadband strategy Universal service and access
published and objectives status
Algeria Strategic plan e-Algérie 2013, The plan is articulated around The law encompasses the
published in January 2009, 13 main streams including, notion of universal service
sets the vision, goals, strategic including: (which includes the provision
priorities and accompanying • accelerating the use of of 512kbit/s Internet since
measures with regards to the ICT in public 2009). However, it is only in
development of ICT in Algeria administrations and 2011 that the government has
private companies created a universal service
• improving the fund
development of high-
speed and very-high-
speed networks
• updating the ICT legal
and regulatory framework
Egypt The MCIT has recently In December 2009 it was Information not available
announced the government’s announced that Egypt was
strategy for the next six working on a national plan to
months (i.e. until January develop broadband services
2012) in urban and rural areas,
committing USD1 billion
[EUR700 million] of
government funds for the
infrastructure needed.
Although it was indicated at
the time that a national
broadband plan would be
published in the first quarter
of 2010, no plan has yet been
released by the government
Gaza/ A Statement of National The Statement of National A universal service/access
West Telecommunication Policy Telecommunication Policy scheme is included among
Bank roadmap was issued in 2010 identified a number of topics the main regulatory measures
with the main objectives of which require work in the next that need to be implemented
implementing a new regulatory two to three years, including: in the next two to three years
authority; creating a • LLU/bitstream services
comprehensive legal • national backbone policy
framework; introducing
• award of WIMAX licence
wholesale broadband services;
and establishing a sound • direct access to
interconnection and pricing international connectivity
regime • access to rights of way
and municipal consents
for operators
• licensing for the provision
of a broad range of
services, including
Internet and VoIP
4
For more details please refer to the relevant country report.
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Country Main recent policies and plans National broadband strategy Universal service and access
published and objectives status
Israel The Gronau Committee, one of Fibre and DOCSIS3 cable are The current universal service
the several expert committees being rolled out extensively in scheme imposes coverage
commissioned by the MoC to Israel without the need for obligations on Bezeq and
recommend policies and future government intervention HOT Telecom, but it is not
regulatory measures, is really enforced
arguably the one whose
recommendations have had
the strongest impact in the
Israel telecoms market:
• LLU and wholesale line
rental (WLR) should be
introduced in the fixed
(wireline) market
• new licences for WiMAX
and MVNOs in the wireless
market
The MoC is considering the
creation of a wholesale
market, which would allow
ISPs to package infrastructure
products with ISP products on
one single bill
Jordan In 2007, the MoICT published The National ICT Strategy The universal service is
the Statement of Government 2007-11 sets the following defined as including access to
Policy 2007, which defines main goals for Jordan by telephony and “data
guidelines for the regulatory 2011: communications sufficient for
developments and future • Internet usage penetration functional access to Internet
policies in the telecoms sector to reach 50% services [.., i.e. with a] data
Int@j, a voluntary non-profit, • ICT sector revenues to rate, reliability and continuity
private organisation reach USD3 billion of service [equivalent] to that
representing, promoting and used by a majority of
• ICT sector employment to
advancing the Jordanian subscribers taking account
reach 35 000 jobs
software and IT services technical factors that may limit
The Strategic plan through the performance of such
industry in the global market,
2012 sets the following technologies in certain
published its own view on the
objectives: geographic locations”.
development of ICT in Jordan in
a document National ICT • implementation of LLU However, the TRA finds that it
Strategy 2007-11, which has • stimulation of the is not necessary at this time to
been accepted by both the affordability and also include broadband
government and the private accessibility of broadband access in the definition of the
sector, which have been working services by setting universal service
towards achieving the targets performance indicators to
set out in this document monitor fixed wireless
The TRC published in late broadband providers’
2010 its own strategic plan performance
until 2012 TRC Strategic plan
through 2012, identifying a
number of tasks to achieve the
strategic objectives set out in
both the Statement of
Government Policy 2007 and
the National ICT Strategy
2007–2011
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Country Main recent policies and plans National broadband strategy Universal service and access
published and objectives status
Lebanon In November 2010 the TRA Main priorities and objectives: No universal service scheme
and the MoT gave a joint • expand and modernise the is currently in place in
presentation on broadband national fibre backbone Lebanon
objectives for Lebanon • connect 300 local
exchanges nationwide via
fibre-optic networks
• roll out FTTP/FTTB to
1000 corporate sites and
enable FTTC+VDSL to
350 street cabinets
• roll out mobile broadband
services based on HSPA+
in 2011
• ensure the timely
introduction of digital
terrestrial television (DTT)
before the deadline of
2015, in the process
freeing up digital dividend
spectrum to be reallocated
for mobile services
Morocco Maroc Numeric 2013 strategic Main targets set for 2013: In 2005, a new amendment to
plan for the Digital Economy, • 35% broadband the Telecoms Act broadened
published in mid-2008, household penetration the definition of universal
presents the vision, goals, • 100% of public schools service to cover value-added
strategic priorities and connected to broadband services, including Internet
accompanying measures with Internet services. This universal
regards to the development of service fund is used to finance
• 100% of Science students
ICT in Morocco two projects:
equipped with broadband
Policy paper, published at the Internet • the GENIE project
beginning of 2010, aims to (GENeralization of
achieve a social transformation, Information Technologies
develop more public services and Communication in
towards citizens, increase Education), which aims at
SMEs’ productivity, develop the installing computers in
ICT industry (including the schools in 2008–2013
telecoms industry), increase the • the PACTE programme
digital trust and improve the (Programme d’Accès aux
digital governance by 2013 Télécoms), aimed at
encouraging network
operators to roll out
infrastructure in rural
areas
Syria A new Telecommunications Law No formal broadband strategy No universal service scheme is
came into force in 2010 which has been identified currently in place
established the TRA as the
independent regulatory authority
in Syria. In 2004 the Syrian
government, in co-operation
with the United Nations
Development Programme
(UNDP), issued its National ICT
Strategy for Socio-Economic
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Summary Report | 21
Country Main recent policies and plans National broadband strategy Universal service and access
published and objectives status
5
Development in Syria. This is
still the reference document for
development of the country’s
telecoms sector even though it
is now significantly outdated
Tunisia In May 2011 Infocom released The draft action plan aims to: The draft action plan includes
for consultation its draft action • consolidate ICT aspects such as defining
plan Plan d’action pour infrastructures in regions schemes similar to the
6
l’Economie Numerique, which • strengthen access to the universal service to finance the
presents the government’s Internet and improve usage roll-out of mobile broadband in
vision, goals, strategic priorities of ICT rural areas
and accompanying measures • stimulate the development
with regards to the development of digital services and
of ICT in Tunisia digital contents that
generate local employment
Table 3.8: Overview of recent policies and broadband strategy and objectives in FEMIP countries
[Source: Analysys Mason, regulators]
Relevant and specific aspects to broadband regulation and national broadband strategy are
provided in Table 3.9. 7
5
Available at http://www.undp.org.sy/publications/national/E-Strategy/ICT_Strategy_en.pdf.
6
Available at http://www.mincom.tn/index.php?id=1600.
7
For more details please refer to the relevant country report.
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Below we provide an overview of the fixed and mobile market in the FEMIP countries.
Fixed-line penetration varies significantly across countries in the FEMIP region, as shown below
in Figure 3.10. It worth noting that:
• Fixed-line penetration as a share of households is higher than 100% in Israel, Syria and
Lebanon, which is comparable to, and even higher than, penetration in the Western European
countries in our benchmarks. Fixed line penetration of households in the EU was around 89%
in 2009.
• Fixed-line penetration in the other FEMIP countries ranges from 42% to 65% of households,
which is at the lower end of benchmarks but still higher than in countries such as Thailand,
South Africa and Botswana.
160%
FEMIP countries Other countries
% of households
120%
80%
40%
0%
Georgia
Botswana
MA (only fixed)
Spain
Greece
Germany
Ukraine
Syria
Tunisia
Cyprus
United Kingdom
France
Gaza / West Bank
Algeria
Jordan
Malaysia
Lebanon
Thailand
Israel
Egypt
Italy
South Africa
8
Figure 3.10: Benchmark of fixed-line penetration [Source: GlobalComms, Euromonitor, 2009]
8
In reality, 100% household penetration does not mean that each household will have access to a fixed line as the
number of lines includes business lines (penetration is calculated as total lines including fixed and business lines
divided by the total number of households).
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Mobile penetration has been growing rapidly in all FEMIP countries (see Figure 3.11):
• mobile penetration as a share of the population has exceeded 100% in Israel, Jordan and
Tunisia, and is approaching the 100% mark in Morocco and Algeria
• mobile penetration is lower in Lebanon, Gaza/West Bank and Syria at 66%, 64% and 48% of
the population, respectively.
160%
FEMIP countries Other countries
140%
120%
% of population
100%
80%
60%
40%
20%
0%
Jordan
Algeria
Israel
Botswana
Ukraine
Morocco
South Africa
France
Egypt
Germany
Tunisia
Cyprus
Italy
Thailand
Spain
United Kingdom
Georgia
Lebanon
Syria
Malaysia
Greece
Figure 3.11: Benchmarks of mobile penetration by population in 2010 [Source: Wireless Intelligence,
Euromonitor]
The mobile market is more than 80% prepaid in most FEMIP countries, except for Israel where prepaid
subscribers accounted for only 21% of the total mobile subscriber base in 2010 (Figure 3.12).
Israel
Egypt
Morocco
Tunisia
Syria
Lebanon
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Summary Report | 26
The number of 3G mobile subscribers is still very low in all FEMIP countries (accounting for less
than 10% of total mobile subscribers) except Israel, where 3G subscribers as a share of total
mobile subscribers grew steadily from 41% in 2007 to 55% in 2010. 3G is expected to be launched
in Algeria and Lebanon in 2012 and 2011, respectively, whereas there are no plans to launch 3G in
Gaza/West Bank (Figure 3.13).
20%
10%
0%
Jordan
Algeria
Israel
Egypt
Tunisia
Syria
Lebanon
In 2010, mobile average revenue per user (ARPU) was less than EUR12 per month in all FEMIP
countries except Lebanon and Israel, at EUR28 and EUR29 per month, respectively. The
comparatively higher ARPU in Lebanon and Israel is primarily due to their higher share of
postpaid subscribers. Mobile ARPU is extremely low in Algeria and Egypt at EUR6 per month.
Mobile ARPU in most Western European countries is above EUR30.
15
10
0
Jordan
Algeria
Israel
Morocco
Egypt
Tunisia
Lebanon
Syria
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Summary Report | 27
Below we describe the key features of the broadband market in FEMIP countries.
The broadband market is still in its early stages of development in all FEMIP countries except
Israel, where fixed broadband 9 penetration stood at 81% of households in 2010. Penetration in all
other countries except Jordan and Lebanon is still lower than 20% of households, as shown below
in Figure 3.15.
90%
FEMIP countries Other countries
80%
70%
% of households
60%
50%
40%
30%
20%
10%
0%
Jordan
Ukraine
Botswana
Israel
France
Morocco
South Africa
Egypt
Germany
Thailand
Tunisia
Cyprus
United Kingdom
Spain
Italy
Georgia
Lebanon
Syria
Malaysia
Greece
Figure 3.15: Fixed broadband penetration of households in benchmark countries in 2010 [Source:
TeleGeography, Euromonitor]
Penetration of mobile broadband 10 has been growing rapidly in recent years in most FEMIP countries,
reaching 36% and 17% of households in Israel and Jordan in 2010, respectively (Figure 3.16). Mobile
broadband penetration in Morocco, Egypt and Syria has exceeded the penetration of fixed broadband.
Mobile broadband has not yet been launched in Lebanon, Algeria and Gaza/West Bank.
9
Fixed broadband includes DSL, cable, fibre (FTTC, FTTH), fixed WiMAX and satellite technologies.
10
Mobile broadband includes HSPA, HSPA+ and LTE technologies.
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Summary Report | 28
Algeria
Israel
Egypt
Tunisia
Syria
Lebanon
The total number of fixed and mobile broadband subscribers in all FEMIP countries reached
approximately nine million in 2010, with Egypt and Israel respectively accounting for 31% and
28% of total broadband subscribers. Broadband penetration reached 117% of households in Israel
and 41% of households in Jordan in 2010, whereas it remains extremely low in Syria at 5% of
households (Figure 3.17).
3.0 120%
2.5 100%
Subscribers (million)
% of households
2.0 80%
1.5 60%
1.0 40%
0.5 20%
0.0 0%
Egypt Israel Morocco Algeria Tunisia Jordan Lebanon Syria Gaza /
West
Bank
Prices for a fixed broadband subscription of up to 1Mbit/s range from EUR9 per month in
Morocco to EUR63 per month in Lebanon (see Figure 3.18 below). Syria and Lebanon are at the
upper end of FEMIP countries in terms of fixed broadband prices, whereas Morocco, Egypt,
Tunisia and Gaza/West Bank have the lowest prices. Note that the broadband packages available
in Algeria, Israel, Morocco and Tunisia offer unlimited data usage, whereas the other FEMIP
countries have imposed usage caps on their broadband offers.
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Summary Report | 29
Figure 3.18 also illustrates the price for the cheapest mobile broadband packages available in each
FEMIP country, ranging from EUR3 per month in Egypt to EUR25 per month in Syria. Note that
mobile broadband is in direct competition with fixed broadband in most of the FEMIP countries,
and sometimes the prices for mobile broadband are cheaper than for fixed broadband such as in
Egypt, Jordan and Syria.
FEMIP countries
40
[Source: Operators]
30 Note: Prices include
VAT
20
Note: Mobile broadband
10 is not available in
Gaza/West Bank,
0 Lebanon and Algeria
Jordan
Jordan
Algeria
Israel
Israel
Morocco
Morocco
Egypt
Egypt
Tunisia
Tunisia
Lebanon
Syria
Syria
Computer penetration is low in all FEMIP countries except Israel and Lebanon, where computer
penetration as a share of households stood at respectively 119% and 78% in 2010, as shown in
Figure 3.19. Notwithstanding the low computer penetration in countries such as Syria, Jordan and
Tunisia compared to Western European countries, it is still higher than in other benchmarked
countries such as Thailand, South Africa, Georgia, Botswana, Ukraine and Greece.
250%
FEMIP countries Other countries
200%
% of households
150%
100%
50%
0%
Jordan
Algeria
Botswana
Ukraine
Israel
France
Morocco
South Africa
Egypt
Germany
Tunisia
Italy
Thailand
United Kingdom
Cyprus
Spain
Georgia
Lebanon
Syria
Malaysia
Greece
Figure 3.19: Computer penetration in FEMIP and other benchmark countries [Source: Euromonitor,
public sources]
Note: Information on Gaza/West Bank is not available and therefore is not included in the chart
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Summary Report | 30
Satellite broadband has not yet been launched in some FEMIP countries, or has managed to gain
only a very limited number of subscribers. However, satellite TV penetration is extremely high at
more than 60% of households in six countries, and it is closely reaching 90% of households in
Gaza/West Bank and Algeria (Figure 3.20).
100%
FEMIP countries Other countries
90%
80%
% of households
70%
60%
50%
40%
30%
20%
10%
0%
Jordan
Gaza / West Bank
Algeria
France
Ukraine
Morocco
Israel
South Africa
Egypt
Germany
Thailand
Tunisia
Italy
United Kingdom
Spain
Georgia
Lebanon
Malaysia
Greece
Figure 3.20: Penetration of satellite TV in benchmarked countries [Source: Euromonitor, Analysys
Mason] Note: Information on Syria is not available and therefore is not included in the chart
Table 3.21 summarises the characteristics and coverage of the existing broadband networks in
each of the FEMIP countries.
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Summary Report | 31
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This section provides an assessment of broadband market demand in FEMIP countries. It is laid out as
follows:
• Section 4.1 outlines the results of our assessment of the evolution of broadband take-up by
technology
• Section 4.2 outlines the results of our assessment of the evolution of broadband revenues.
• Morocco, Jordan and Lebanon are expected to have a penetration close to 95–100% of
households by 2020
• Algeria and Tunisia are forecast to have a penetration close to 75–80% of households by 2020
• Egypt, Syria and Gaza/West Bank are estimated to have a penetration close to 50–55% of
households by 2020.
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Summary Report | 33
160%
140%
120%
% of households
100%
80%
60%
40%
20%
0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
The forecast evolution of broadband penetration takes into account its historical evolution,
operators’ forecasts and plans, and a number of factors such as PC penetration, availability of
electricity, literacy rate and poverty levels. We have cross-checked our penetration forecasts with
coverage forecasts for each technology which were based on the results of our coverage-viability
analysis (detailed in Section 5), announcements made or inputs provided by operators, and our
understanding of the likely evolution of the market.
The number of broadband connections, including fixed and mobile broadband, is estimated to
increase from 9.3 million connections in 2010 to 38.8 million in 2020 based on the penetration
forecasts above. Egypt is expected to continue to be the country with the largest share of
broadband subscribers in the FEMIP region, increasing from 31% in 2010 to 32% in 2020 despite
a low penetration forecast. The number of broadband subscribers in Morocco and Algeria is
estimated to outperform the number of subscribers in Israel by 2013, reaching 8.1 million and
6.5 million in 2020, respectively (see Table 4.2).
Table 4.2: Broadband subscribers growth and share in FEMIP countries [Source: Analysys Mason]
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Summary Report | 34
Mobile broadband is forecast to account for approximately 71% of total broadband connections in 2020
in all FEMIP countries (up from 38% in 2010), as shown in Figure 4.3. We expect the increase in
penetration to come mainly from the mobile rather than the fixed market, for several reasons:
• fixed broadband penetration has stagnated in countries such as Morocco, or has reached
saturation as in Israel
• the footprint of the existing copper network in some countries is low (e.g. 30% of households
in Morocco), and we do not foresee that the existing copper networks will be expanded further
• mobile broadband penetration has experienced strong growth in recent years in most FEMIP
countries, outperforming fixed broadband in Egypt, Morocco and Syria
• mobile broadband offers are cheaper than fixed broadband packages in most of the FEMIP
countries such as Egypt, leading to lower mobile broadband ARPUs.
Morocco, Algeria, Egypt and Syria are the countries where mobile broadband is expected to
represent the highest share of the total broadband market in the FEMIP countries, primarily due to
their relatively large size, thus making it easier and less costly to roll out wireless rather than wired
technologies. It should be noted that we expect mobile broadband to be launch in 2012 in Algeria
and 2014 in Gaza/West Bank. Our forecast for the evolution of mobile broadband subscribers as
share of broadband subscribers in FEMIP countries is shown in Figure 4.3.
100%
90%
80%
% of total subscribers
70%
60%
50%
40%
30%
20%
10%
0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Figure 4.3: Forecast evolution of mobile broadband subscribers as a share of broadband subscribers
in FEMIP countries [Source: Analysys Mason]
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Summary Report | 35
Some parameters which are not specifically taken into account in our model may have an impact
(positive or negative) on our forecasts:
• Political instability –Major protests calling for political reform and greater freedom have been
taking place across countries in the FEMIP region since December 2010. If the political instability
persists for a prolonged period, this may have a negative impact on our forecasts as it may hinder
the inflow of foreign investment to the country.
• Award of 3G (and LTE) licences – 3G licences have not yet been awarded in Algeria,
Gaza/West Bank and Lebanon. Our forecasts for the launch of 3G services in these countries
are based on our discussions with relevant stakeholders. However, any further delays on the
award of 3G licences in these countries will have a negative impact on our forecasts.
Uncertainty regarding the licencing of 4G spectrum in most of the FEMIP countries could also
have an impact on our forecast (positive or negative depending on situation).
• Additional costs that may pose a barrier to network roll-out – The fees that operators will
have to pay to purchase rights of way to lay down new fibre will be a key factor incentivising
(or dis-incentivising) current operators to roll out NGA networks. Municipalities might waive
operator fees for use of rights of way in ducts, and if operators were able to use the public
rights of way free of charge, this could provide a significant boost to NGA. Licence fees for
mobile licence renewal or LTE spectrum fees could also pose a barrier to the rapid roll-out of
LTE networks.
• Level of censorship – A potential increase in censorship levels may have a negative impact on
the population’s interest in taking up broadband services.
• International connectivity bandwidth – It needs to be increased to take into account the rise
in demand for broadband services.
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We forecast the increase in bandwidth demand based on benchmarks from other countries as
information was not publically available or provided to us by operators.
• the average download consumption per fixed-line subscriber will increase from 6.1GB per
month in 2010 to 12.6GB per month in 2020
• the average download consumption per mobile subscriber will increase from 2.8GB per month
in 2010 to 7.7GB per month in 2020.
FEMIP countries are expected to be in the lower range of benchmarked Western European countries in
2020 in terms of fixed broadband usage (currently at 10GB to 20GB per month in Western European
countries). The opposite trend is expected in the case of mobile broadband usage, which is estimated to
be higher than benchmarks (currently at 1GB and 3GB per month in Western European countries).
However, the proliferation of applications such as video streaming and catch-up TV in FEMIP
countries could lead to a much higher usage of fixed broadband than forecast.
mobile broadband
10
users [Source:
8 Analysys Mason
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Mobile broadband usage is used to drive the costs of network roll-out as it has a major impact on
the deployment of wireless networks given that capacity is the main driver of wireless networks
after a few years from launch.
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Summary Report | 37
Our starting point for forecasting the evolution of broadband ARPU is to estimate ARPU for the
different broadband technologies. Our ARPU forecasts are based on an affordability analysis
where the average revenue per broadband user (or per household) is calculated as a percentage of
GDP. As broadband penetration increases, ARPU as a percentage of GDP is expected to decrease
as the less-affluent segments of the population take-up broadband services (i.e. ARPU dilution).
ARPU for 2011 has been estimated based on public data regarding broadband offers available in
FEMIP countries, as well as input from operators.
Fixed broadband ARPU is forecast to continue its decreasing trend in most FEMIP countries in the
short term and to stabilise in the longer term (Figure 4.5):
• this forecast follows a similar trend to what has happened historically in FEMIP and European
countries
• ARPU for fixed broadband is expected to stabilise in countries such as Morocco where it has
already reached a very low figure
If we exclude Morocco, which has a very low ARPU at EUR13 per month in 2011, and Israel, which
has a very high ARPU at EUR37 per month in 2011, in all the other FEMIP countries fixed broadband
ARPU ranges from EUR19 per month to EUR31 per month in 2011. The difference between the
highest and lowest ARPU levels is expected to decrease during the forecast period, ranging from
EUR16 per month and EUR26 per month in 2020.
40
35
30
EUR per month
25
20
15
10
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Figure 4.5: Fixed broadband ARPU forecasts in the FEMIP countries [Source: Analysys Mason]
Overall, mobile broadband ARPU is also expected to decrease in the period to 2020 in most of the
FEMIP countries, as shown in Figure 4.6 below. Mobile broadband ARPU is very low in Morocco
and Egypt at EUR8 per month and EUR11 per month in 2011, respectively, whereas it is above
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Summary Report | 38
EUR21 per month in Syria and Israel. Mobile broadband ARPU is expected to decrease to
EUR14–24 per month in most of the FEMIP countries by 2020, except in Morocco and Egypt,
where it is estimated to be much lower at EUR6 per month and EUR9 per month, respectively.
Mobile broadband ARPUs are expected to be lower than fixed broadband ARPUs as the
competitive intensity is higher in the mobile markets in all FEMIP countries.
30
25
EUR per month
20
15
10
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Figure 4.6: Forecast evolution of mobile broadband ARPU in FEMIP countries [Source: Analysys Mason]
Details on fixed and mobile broadband ARPU growth are provided in Table 4.7.
Table 4.7: Fixed and mobile broadband ARPU forecasts in FEMIP countries [Source: Analysys Mason]
11
CAGR calculated between 2012 and 2020.
12
CAGR calculated between 2014 and 2020.
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Summary Report | 39
We have calculated broadband revenues based on the resulting ARPU and penetration forecasts.
Broadband revenues are expected to total EUR6.8 billion in 2020, up from EUR2.9 billion in
2011. The share of broadband revenues in Israel and Egypt is expected to decrease from 37% and
27%, respectively, in 2011 to 21% and 25% in 2020 (Figure 4.8). However, the share of broadband
revenues in Algeria is expected to increase from 11% in 2011 to 21% in 2020.
1,800
1,600
1,400
1,200
EUR (million)
1,000
800
600
400
200
0
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Figure 4.8: Forecast evolution of broadband revenues in FEMIP countries [Source: Analysys Mason]
Revenues from mobile broadband are forecast to account for 27% and 57% of total broadband
revenues in 2011 and 2020, respectively. Mobile broadband revenues as a share of total broadband
revenues are expected to be:
• extremely high in Morocco and Algeria (around 80% of total revenues in 2020)
• high in Syria and Egypt (around 60% of total revenues in 2020)
• significant in all other FEMIP countries (40–45% of total revenues in 2020)
• modest in Israel (around 35% of total revenues in 2020)
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Summary Report | 40
90%
80%
70%
% of total revenue
60%
50%
40%
30%
20%
10%
0%
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Details on revenues growth, share of mobile broadband revenues and split of total revenues
between FEMIP countries are provided in Table 4.10.
Table 4.10: Broadband revenues growth and share in FEMIP countries [Source: Analysys Mason]
Broadband revenues as a share of GDP are expected to increase from 0.4% in 2011 to 0.7% in 2020
(based on a simple average of the nine FEMIP countries). As a comparison, 2010 broadband revenues
as a share of GDP in most European countries are estimated to be between 0.3% and 0.8%.
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Summary Report | 41
► Scenarios
We have defined three illustrative scenarios consisting of a mix of technologies that will provide the
most economical access to broadband services. As a starting point, we should use scenarios based on
the political agenda, regulatory requirements and future plans if available in each FEMIP country.
However, this would result in country-specific targets which would not allow for an easy comparison
of the results among FEMIP countries. Therefore, the scenarios defined for our analysis are similar to
those included in the Digital Agenda for Europe (DAE), 13 but with lower absolute speed targets which
we believe are more realistic for all FEMIP countries except for Israel, where we use the same targets
as in the DAE as broadband infrastructure deployment in Israel is more advanced than other FEMIP
countries. These scenarios are presented below in Table 5.1 below.
Scenario 2015 target 2020 target
Coverage target Minimum real Coverage target Minimum real
(as % of download speed (as % of download speed
population) (Mbit/s) population) (Mbit/s)
Scenario 1 50% 1Mbit/s 100% 1Mbit/s
Scenario 2 50% 4Mbit/s 50% 10Mbit/s
100% 4Mbit/s
Scenario 3 50% 10Mbit/s 50% 30Mbit/s
100% 10Mbit/s
Scenario 1 for Israel 50% 4Mbit/s 100% 4Mbit/s
Scenario 2 for Israel 50% 10Mbit/s 100% 10Mbit/s
Scenario 3 for Israel 50% 30Mbit/s 100% 30Mbit/s
Table 5.1: Coverage scenarios used in the costs forecasts [Source: Analysys Mason]
Note: For scenario 2 and 3, both coverage/speed targets must be met in 2020
(e.g. 50% at 10 Mbit/s and 100% at 4Mbit/s for scenario 2).
13
The Digital Agenda is Europe’s strategy for a flourishing digital economy by 2020.
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For each scenario, we first assess which technology may achieve the speeds required and then we
determine which technology mix is the least costly.
Table 5.2 illustrates the headline and real download speeds for the different technologies we
consider in our assessment.
It should be noted that, for simplicity reasons, we use one average real download speed for each
technology (with the exception of DSL). However, the real speed available to end users for one
given technology depends on several factors – especially in the case of wireless technologies –
such as the network design, the network load, the time of the day and the location of the user
(outdoors, indoors, on the move, etc.).
The speed of DSL connections is mainly dictated by the copper line length, which is mainly
dictated by how far the user is from the local exchange: the closer the user is to the local exchange,
the higher the speeds they can achieve.
As the minimum download speed targets are lower than those in the DAE, the total costs of
achieving them will be lower than in European countries, and the contribution of wireless is likely
to be greater.
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► Cost types
We have defined several types of cost by technology which are used in our analysis. These cost
types are presented below in Table 5.3.
Cost type Description of cost type Why we are modelling this cost type
‘50% costs’: costs associated with Cost needed to cover 50% of the Needed as an input to reach
covering 50% of the population population irrespective of scenario targets in 2015
commercial viability
‘100% costs’: costs associated Costs needed to cover 100% of Needed as an input to reach
with covering 100% of the the population irrespective of scenario targets in 2020 if
population commercial viability terrestrial infrastructure is used to
cover 100% of the population
‘Adjusted costs’: adjusted costs Costs needed taking into account Needed as an input to reach the
associated with covering 100% of that the ‘very remote’, i.e. the final targets in each scenario in 2020
the population few percentages of the population using terrestrial infrastructure,
living in the most remote areas, which will be complemented by
are unlikely to be covered by satellite to reach the remaining
terrestrial technologies. (more population not covered by
details are provided below) terrestrial technologies
‘Viable costs’: costs associated Costs based on our model results, Needed to estimate the amount of
with achieving commercially which are likely to be close to a funding required for terrestrial
viable coverage maximum of what private technologies in commercially
operators may invest in the future viable areas
‘Unviable costs’: costs associated The difference between the costs Needed to estimate the amount of
with achieving commercially for achieving the population funding required for terrestrial
unviable coverage coverage target (i.e. 50%, 100%) technologies in commercially
and the commercially viable cost unviable areas
Table 5.3: Type of costs for each terrestrial broadband technology [Source: Analysys Mason]
After calculating the different cost types by technology, we use the most cost-effective
technologies to reach the scenario targets by looking at the existing coverage of each technology,
the cost for commercially viable coverage calculated in our model, and the costs to reach the
adjusted population covered by terrestrial technologies in 2020.
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Figure 5.4 below illustrates a simplified flow-chart of the approach used to build these two outputs.
ARPU
Figure 5.4: High-level methodology used in this section [Source: Analysys Mason]
The costs of deploying and operating a broadband network for each technology are a function of
population density in a given area. As a rule, the lower the population density, the higher the cost per
person or household. 14
The commercial viability of broadband coverage is defined as the maximum population coverage
that is likely to be commercially viable to achieve 15 for each broadband technology (i.e. excluding
public intervention or public funds) taking into account the demand assumptions (i.e. expected
revenues) described in the previous section, through the use of a revenue-density analysis. For
each level of population density, our revenue-density analysis takes into account the revenue
potential arising from serving these areas with broadband and the costs (upfront and ongoing)
required to deliver broadband to these areas. Finally, we assume that it is likely to be economically
14
This may not always be true. For instance, in the case of wireless technologies, in areas of very high population
density it is necessary to increase the capacity of the network to satisfy the increasing demand for bandwidth. Thus,
it may be more expensive to cover the higher-density areas than those areas with lower densities. However, outside
very densely populated areas, the rule applies.
15
We define an area to be commercially viable whenever the business case for covering this area provides an internal
rate of return (IRR) above 15%, as described later in this section.
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viable to deploy a particular broadband technology in a given area when the internal rate of return
(IRR) is at least 15% for ten years. 16
Figure 5.5 provides an example of the revenue-density approach. The chart shows that using a
threshold IRR of 15% the viability of FTTH and FTTC is lower than 5% of the population,
whereas the viability of DSL, 17 WiMAX, HSPA, HSPA+ and LTE is between 50% and 60% of the
population. The FTTH and FTTC results are driven primarily by the high costs of rollout and this
limits viability significantly. It should be noted that the IRR is very sensitive to revenues and costs
and these both vary significantly with population density, hence there is a compound effect which
drives the IRR down (i.e. in less populated areas revenues reduce and costs increase).
• ‘50% costs’ – The costs associated with covering 50% of the population, which is needed
to reach the scenario targets in 2015.
16
Typically, the weighted average cost of capital (WACC) for European operators is 10–12%.
17
The viability calculation for DSL and FTTC does not take into account the limited footprint of the existing copper network.
Therefore, this result is theoretical and assumes that the existing copper network covers 100% of the population.
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• ‘100% costs’ – The costs associated with covering 100% of the population, independently
of what is commercially viable. The population coverage would exceed the commercially
viable coverage (calculated on the basis of the revenue-density analysis described above).
• ‘Adjusted costs’ – The ‘adjusted’ costs of covering 100% of the population, taking into
account that the ‘very remote’, i.e. the final few percentages of the population living in the
most remote parts of the country, are unlikely to be covered by terrestrial technologies. In
these areas, satellite broadband tends to be the most cost-effective means to provide
broadband. We have made a simplifying assumption that where terrestrial infrastructure exists
then it could potentially be re-used to support terrestrial broadband rollout. The most extensive
terrestrial infrastructure in this market is 2G mobile base station sites, and we believe it is
reasonable to expect over the long term that these sites could be used to extend broadband
coverage, taking account of the potential for use of lower frequency (<1GHz) spectrum. The
implication of this is that satellite is used to cover those very remote areas beyond the 2G
network footprint. This simplifying assumption is reasonably consistent with what we have
seen in some developed markets where a combination of terrestrial wireless and satellite
technologies have been used to address rural broadband ‘not-spot’ areas, e.g. in Ireland. In the
case of Ireland the Government ran a competition to determine the most cost-effective way to
deliver rural broadband and our estimates suggest that satellite is being used to provide 3–5%
of the targeted premises, which equates to less than 1% of all premises in the country; this
compares with 2G population coverage in Ireland being around 99%.
• ‘Viable costs’ – The costs associated with achieving commercially viable coverage. These
costs are likely to be close to a maximum of what private operators may invest in the future.
The commercially viable coverage is derived from our revenue-density analysis and will result
in partial population coverage. However, operators may decide to fully invest in one
technology and not in another. It cannot be expected that private operators will invest in all
technologies.
• ’Unviable costs’ – The difference between the costs for achieving the population coverage
target (i.e. 50%, 100%) and the commercially viable cost. These costs are needed to cover
the commercially unviable areas and those areas may require public funding.
We also assume that operators will not expand their existing copper networks, as fibre is widely
accepted as the fixed technology for the future. Therefore, DSL and FTTC technologies cannot be
rolled out beyond the current reach of the existing copper network.
It should also be noted that the costs are calculated for the roll-out of a single network for any
given technology (i.e. we assume that several networks will not be rolled out at the same time).
This assumption is reasonable for fixed access networks. However, several mobile operators
provide services over their own infrastructure at least in the commercially viable areas.
After calculating the different cost types, we also carried out an assessment of the costs associated
with three different scenarios consisting of a mix of technologies that will provide the most
economical access to broadband services.
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The results of our revenue-density analysis and our penetration and revenue forecasts are shown in
Table 5.7. The result for each technology shows the maximum commercially viable population
coverage, subject to the operator obtaining an IRR of at least 15%. For example, it would be
commercially viable for an operator to deploy WiMAX in Morocco to up to 55% of the population.
Table 5.7: Commercially viable coverage by technology based on demand forecasts [Source:
Analysys Mason]
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It should be noted that this analysis is done per technology on a standalone basis and does not take
into account the existing coverage of each technology. The results of our analysis show that Israel
has the highest commercially viable coverage for all technologies. This is mainly due to the
following factors: very high density, small area, high current and forecasted penetration of mobile
and fixed broadband, and high fixed and mobile broadband ARPU. In contrast, Morocco has the
lowest commercially viable coverage for fixed technologies, and one of the lowest commercially
viable coverage for mobile technologies. This is mainly due to the following factors: very low
density, big area, low current and forecasted penetration of fixed broadband, and low fixed and
mobile broadband ARPU.
5.4 Assessment of different cost types for a nationwide roll-out of terrestrial broadband
technologies
Table 5.8 below illustrates the costs needed to roll out DSL and FTTC technologies to 50% of the
population and to reach coverage of the copper network footprint in all FEMIP countries, as we
assume that operators will not expand their existing copper networks. Therefore, DSL and FTTC
technologies cannot be rolled out beyond the current reach of the existing copper network.
Costs for rolling out DSL to the copper footprint are high in Syria and Algeria due to the limited
coverage of DSL and the topology of the country (i.e. large countries in terms of land area and low
population densities). Regarding FTTC, costs are higher in Algeria and Egypt as they are the
largest countries in terms of area and population. On the other hand, costs are lower in small and
very densely populated countries such as Lebanon, Gaza/West Bank and Morocco due to the
limited footprint of the copper network (i.e. 30% of households).
Country Copper DSL DSL costs to DSL costs to FTTC costs FTTC costs
coverage coverage 50% of copper to 50% of to copper
(as % of (as % of population coverage population coverage
households) households) (EUR mn) (EUR mn) (EUR mn) (EUR mn)
Algeria 85% 70% N/A* 208 1219 3143
Egypt 99% 99% N/A N/A 1493 6014
Gaza/
90% 72% N/A 10 52 140
West Bank
18
Israel 100% 99% N/A 12 N/A 733
Jordan 95% 70% N/A 61 157 523
Lebanon 90% 70% N/A 20 88 269
Morocco 30% 30% N/A N/A N/A 188
Syria 75% 40% 27 124 480 1002
Tunisia 99% 99% NA NA 432 1788
Table 5.8: Costs of rolling out DSL and FTTC technologies to 50% of the population and costs to
reach full coverage of the copper footprint [Source: Analysys Mason]
*N/A = Not applicable
18
FTTC covers 50% of population at the end of 2010 in Israel
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Summary Report | 49
Figure 5.9 to Figure 5.13 below illustrate the costs needed to roll out the different technologies
(WiMAX, HSPA, HSPA+, LTE and FTTP) to 50% of the population (i.e. costs for 50%), to 100%
of the population (i.e. costs for full coverage), and to the adjusted coverage of 100% of the
population (i.e. costs for ‘adjusted’ full coverage) in all FEMIP countries. Note that:
• the costs of rolling out the different technologies are the highest in those countries with a large
land area and low population density, such as Algeria, Morocco and Egypt
• the costs of rolling out the different technologies are the lowest in those countries with a small
land area and high population density, such as Gaza/West Bank, Lebanon and Israel
• the costs associated with rolling out the different technologies to reach full coverage represent
a large share of the total costs (between 20% and 75%) required to cover less than 3% of the
population in Algeria, Egypt and Morocco (the largest countries in terms of land area).
It should be noted that the results take into account the coverage of the existing technologies at the end
of 2010. For example, HSPA coverage in Morocco stood at 50% of the population in 2010. This means
that the costs required to achieve 50% population coverage are zero, whilst the costs required to
achieve 100% population coverage includes covering 50% of the population (from 50% to 100% of the
population and excluding the 50% of the population living in the most dense areas).
3000
2500
EUR (million)
2000
1500
1000
500
0
Jordan
Algeria
Morocco
Israel
Egypt
Tunisia
Syria
Lebanon
Gaza/West Bank
Costs for 50% Costs for 'adjusted' full coverage Costs for full coverage
Figure 5.9: Costs of rolling out WiMAX technology to 50% of the population, ‘adjusted’ full coverage and
full coverage [Source: Analysys Mason]
Note: As a reminder, the ‘adjusted full coverage’ corresponds to the 2G actual coverage in
each country (i.e. between 97% and 99.9%)
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Summary Report | 50
6000
4000
3000
2000
1000
Jordan
Algeria
Morocco
Israel
Egypt
Tunisia
Syria
Lebanon
Gaza/West Bank
Costs for 50% Costs for 'adjusted' full coverage Costs for full coverage
Figure 5.10: Costs of rolling out HSPA technology to 50% of the population, ‘adjusted’ full coverage and
full coverage [Source: Analysys Mason]
Note: As a reminder, the ‘adjusted full coverage’ corresponds to the 2G actual coverage in
each country (i.e. between 97% and 99.9%)
7000
6000
5000
EUR (million)
4000
3000
2000
1000
0
Jordan
Algeria
Morocco
Israel
Egypt
Tunisia
Syria
Lebanon
Gaza/West Bank
Costs for 50% Costs for 'adjusted' full coverage Costs for full coverage
Figure 5.11: Costs of rolling out HSPA+ technology to 50% of the population, ‘adjusted’ full coverage and full
coverage [Source: Analysys Mason]
Note: As a reminder, the ‘adjusted full coverage’ corresponds to the 2G actual coverage in each
country (i.e. between 97% and 99.9%)
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Summary Report | 51
9000
8000
7000
EUR (million)
6000
5000
4000
3000
2000
1000
0
Jordan
Algeria
Morocco
Israel
Egypt
Tunisia
Syria
Lebanon
Gaza/West Bank
Costs for 50% Costs for 'adjusted' full coverage Costs for full coverage
Figure 5.12: Costs of rolling out LTE technology to 50% of the population, ‘adjusted’ full coverage and
full coverage [Source: Analysys Mason]
Note: As a reminder, the ‘adjusted full coverage’ corresponds to the 2G actual coverage in
each country (i.e. between 97% and 99.9%)
16000
14000
12000
EUR (million)
10000
8000
6000
4000
2000
0
Jordan
Algeria
Morocco
Israel
Egypt
Tunisia
Syria
Lebanon
Gaza/West Bank
Costs for 50% Costs for 'adjusted' full coverage Costs for full coverage
Figure 5.13: Costs of rolling out FTTP technology to 50% of the population, ‘adjusted’ full coverage and
full coverage [Source: Analysys Mason]
Note: As a reminder, the ‘adjusted full coverage’ corresponds to the 2G actual coverage in
each country (i.e. between 97% and 99.9%)
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Summary Report | 52
Several public sources provide additional benchmarking points for the costs of rolling out FTTH,
as shown below in Table 5.14. The unit cost of rolling out FTTH varies significantly from
EUR850 to EUR2900 per household passed. This can be explained by the different population
densities and size of the country. We have also added the results of our analysis for the FEMIP
countries which provides a cost range per household between EUR500 and EUR1700.
Country Cost of rolling out FTTH Cost of rolling out FTTH Cost as % of telecoms
per household passed per population investment for 2009
19
USA 1750 665 431%
20
France 1000 435 460%
21
France 850 372 395%
22
Germany 2900 1419 1932%
23
UK 1000 441 477%
24
Netherlands 1900 840 n.a
25
Algeria 1697 343 2194%
26
Egypt 541 152 763%
Gaza/West Bank 503 82 n.a
Israel 911 271 n.a
Jordan 1000 193 853%
Lebanon 866 164 n.a
Morocco 843 186 1379%
Syria 920 154 2438%
Tunisia 1257 340 2060%
Table 5.14: Benchmark of costs associated with rolling out FTTH to 100% of the population [Source:
Public sources, Analysys Mason, ITU, Euromonitor]
It should be noted that these figures from public sources are estimates (generally provided by
regulators and public bodies to inform the industry of upcoming investment levels) as there are
few real-life examples of large-scale FTTH deployments.
In general, the cost per household for the FEMIP countries is lower than Western European
countries and USA mainly due to lower cost of labour. However, other factors would increase
these costs as some investments are needed to upgrade exchanges and the fixed network due to
lower quality compared to Western European fixed networks. However, we note the following:
19
Federal Communications Commission (2009)
20
Autorité de Régulation des Communications Electroniques et des Postes (2010)
21
Autorité de Régulation des Communications Electroniques et des Postes (2011)
22
WIK (2009)
23
Broadband Stakeholder Group (2008)
24
JP Morgan (2011)
25
Data for Algeria is for 2007
26
Data for Egypt is for 2008
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Summary Report | 53
• The costs per household for Morocco, Israel, Jordan, Lebanon, Syria and Tunisia are
comparable to the costs for France and UK.
• The costs per household for Egypt and Gaza/ West Bank are low compared to other FEMIP
countries as they have the lowest GDP per capita among these countries (lower labour costs
are lower). In addition, Gaza/West Bank is a very small country with a very high density (over
650 inhabitants per square kilometre), and the population in Egypt is highly concentrated next
to the Nile (90% of the population lives over less than 8% of the country’s area).
• The costs per household in Algeria are high compared to other FEMIP countries, and
comparable to the costs for the Netherlands and the USA. This is mainly due to the high costs
in getting to the large areas of low population density
Fibre roll-out in most of the FEMIP countries seems to be possible due mainly to the relative low
cost of labour, which gives a lower cost per home passed when compared to most European
countries. However, this is not always the case: Algeria is the largest country in Africa in terms of
land area and, away from the coast, it is very sparsely populated; this means that the costs of
covering the entire country with fibre will be very high. Also, the cost of labour in Israel is
comparable to European levels. The low GDP per capita in most of the FEMIP countries leads to
low broadband penetration and/or low ARPU, and this factor would likely limit the deployment of
fibre in most of these countries.
If we look at the costs of rolling out FTTH to 100% of households as a proportion of annual
telecoms sector investment in these countries, we find that in benchmark countries these costs are
around 4 to 5 times the annual investments (except for Germany where this factor is very much
higher). In contrast, for most FEMIP countries costs are around 10 to 20 times annual investments.
This could be explained by the lower level of investments in emerging economies as compared to
developed countries due to the lower level of competition and lower end user revenues.
Figure 5.15 and Figure 5.16 overleaf show the evolution of costs as coverage increases for LTE
and FTTP technologies in all FEMIP countries to reach 100% of the population. The level of costs
required to cover the last 5–10% of the population increases significantly. In addition, the
cumulative cost curve shows a steep increase when coverage reaches the last few percentages of
the population, which in our opinion would be the key market for satellite.
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1.0
0.9
0.8
0.7
EUR (billion)
0.6
0.5
0.4
0.3
0.2
0.1
0.0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Figure 5.15: Evolution of total coverage costs for LTE [Source: Analysys Mason]
6
EUR (billion)
0
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Figure 5.16: Evolution of total coverage costs for FTTP [Source: Analysys Mason]
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The FEMIP countries are currently covered by satellite using the Ku-band. In our assessment we
consider the provision of broadband services over satellite using the next generation Ka-band. The
Tooway offering over current generation Ka-band today provides a headline download speed of
10Mbit/s, and is capable technically of delivering higher speeds. In addition, in good weather
conditions (i.e. with no rain fade), satellite is technically capable of delivering the headline
download speed to end users. However, in reality, satellite operators may choose to offer lower
speeds as the economics may be more favourable given the essentially fixed cost base of satellite.
Regarding satellite technology, and based on the demand forecast for satellite broadband in the
FEMIP countries, we believe that one satellite in the Ka-band would be enough to serve all FEMIP
countries and to cope with the demand expected, which is forecast at around 234 000 subscribers
by 2020. The costs of this satellite are shared among all FEMIP countries on the basis of a simple
allocation of costs by country based on its land area and number of households (50% on each
parameter), as presented in Table 5.17 and in Figure 5.18.
Country Area (square Households in 2020 Contribution of Satellite costs allocated
km) (million) satellite costs (%) (EUR million)
Algeria 2 381 741 8 299 600 34% 121.4
Egypt 995 841 26 202 100 34% 124.0
Gaza/West Bank 6010 756 044 1% 2.7
Israel 22 070 2 574 200 3% 9.2
Jordan 88 794 1 493 600 2% 8.3
Lebanon 10 396 874 100 1% 3.2
Morocco 687 184 8 048 600 15% 53.2
Syria 185 180 4 498 000 6% 21.9
Tunisia 154 530 3 095 900 4% 16.1
FEMIP region 4 531 746 55 842 144 100% 360
Table 5.17: Allocation of satellite costs by FEMIP country [Source: Analysys Mason]
80
60 53
40
22
16
20 9 8
3 3
0
Jordan
Algeria
Gaza / West
Morocco
Israel
Egypt
Tunisia
Syria
Lebanon
Bank
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Summary Report | 56
Finally, we have analysed the most economically viable option to provide access to broadband
services in each FEMIP country across three different scenarios.
We have identified the technologies that could potentially achieve the coverage targets set for each
scenario.
Table 5.19: Coverage scenarios used in the cost forecasts [Source: Analysys Mason]
It should be noted that DSL technology does not allow all the objectives of scenarios 1 and 2
(i.e. 100% coverage with a minimum real download speed of 1, 4 and 10Mbit/s) to be achieved.
This is mainly due to the limitation of line lengths, and hence DSL subscribers will have access to
different speeds depending on their location (i.e. the further a subscriber is from the telephone
exchange, the lower the speed they can get). For example, it is assumed that a small share of
households (i.e. between 5% and 10%) will not be able to get a download speed of 1Mbit/s.
Therefore, DSL has been excluded from our scenario assessment as another technology would
need to be rolled out simultaneously to achieve 100% population coverage for any given download
speed that DSL can achieve.
For each of the three scenarios, we show the lowest cost required to achieve the targets set out for
each scenario. However, other technology combinations are possible, which, even though they
may be more capital intensive, operators may choose to implement them.
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We also assume that the threshold for terrestrial coverage is the coverage of 2G networks, and that
satellite broadband will be used to cover the remaining percentages of the population not covered
by 2G. 27
The cost forecast in 2020 for scenario 1 is summarised below in Figure 5.20. This corresponds to a
target of 1Mbit/s to 100% of the population for all FEMIP countries except Israel, which has a
target of 4Mbit/s for 100% of the population. HSPA and WiMAX are the most cost-effective
technologies capable of achieving these targets in all FEMIP countries except Israel, where
HSPA+ is used to achieve the targets.
1,400
1,200
1,000
EUR (million)
800
600
400
200
0 Jordan
Algeria
Morocco
Israel
Egypt
Tunisia
Syria
Lebanon
Figure 5.20: Costs forecast to reach 2020 targets for scenario 1 [Source: Analysys Mason]
Note: We have not made assumptions on what percentage of the costs required to deploy
satellite broadband would come from public funding
The cost forecast in 2020 for scenario 2 is summarised below in Figure 5.21 overleaf. This
corresponds to a target of 4Mbit/s to 100% of the population and 10Mbit/s to 50% of the
population in all FEMIP countries except Israel, where the target is set at 10Mbit/s for 100% of the
population. HSPA+ and LTE were the most cost-effective technologies capable of achieving these
targets.
27
It should be noted that if a satellite is launched, it is assumed that 100% of the population will be covered. Therefore,
potential satellite subscribers could also come from different areas covered by other technologies.
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1,400
1,200
1,000
EUR (million)
800
600
400
200
0
Jordan
Algeria
Morocco
Israel
Egypt
Tunisia
Syria
Lebanon
Gaza/West Bank
Viable (terrestrial) Unviable (terrestrial) Satellite
Figure 5.21: Costs forecast to reach 2020 targets for scenario 2 [Source: Analysys Mason]
Note: We have not made assumptions on what percentage of the costs required to deploy
satellite broadband would come from public funding
The cost forecast in 2020 for scenario 3 is summarised below in Figure 5.22. This corresponds to a
target of 10Mbit/s to 100% of the population and 30Mbit/s to 50% of the population in all FEMIP
countries except Israel, where the target is set at 30Mbit/s for 100% of the population. LTE and FTTC
were the most cost-effective technologies capable of achieving these targets.
4,000
3,500
3,000
EUR (million)
2,500
2,000
1,500
1,000
500
0
Jordan
Algeria
Morocco
Israel
Egypt
Tunisia
Syria
Lebanon
Gaza/West Bank
Figure 5.22: Costs forecast to reach 2020 targets for scenario 3 [Source: Analysys Mason]
Note: We have not made assumptions on what percentage of the costs required to deploy
satellite broadband would come from public funding
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The results by scenario for each FEMIP country for 2015 and 2020 are presented below in
Table 5.23 and Table 5.24, respectively:
The costs to achieve the targets in each scenario are not extremely high and therefore the different
scenario targets seem achievable in most of the countries. This is mainly due to the high reliance
on wireless technologies, coupled with the fact that the scenario targets are lower than the ones in
the DAE.
• The evolution of the political situation –The political instability facing most FEMIP
countries may hinder the inflow of foreign investment, including in the telecoms sector, which
may postpone or even put at risk any national government plans on broadband development.
• The evolution of the economic context and the reduction of poverty – The economic
development in FEMIP countries based on offshoring, petrol or tourism may reduce poverty,
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Summary Report | 60
increase access to electricity and ultimately contribute to increasing the addressable market for
broadband.
• The review of the regulatory and legal context – There are a number of issues surrounding
the current legal and regulatory context that hinder effective competition in most of the FEMIP
markets. Further liberalisation of the telecoms market in some FEMIP countries, coupled with
a well-developed national broadband plan and the introduction of full LLU may further
contribute to promote broadband growth and stimulate investment in broadband
infrastructures.
In any case, from a government’s point of view, subsidies for a large-scale roll-out of broadband
infrastructure needs to be assessed in view of the socio-economic benefits that broadband may
generate.
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Despite a large number of academics and others researching the socio-economic impact of
broadband services, there still does not appear to be a strong consensus on the quantification of the
benefits of broadband, although several suggest the impact on GDP to be of the order of 1% for a
ten percentage-point increase in broadband penetration of the population.
For the purposes of this work, we have assumed that broadband can have a maximum potential
impact of 1% of GDP for a ten percentage-point increase in broadband penetration of the
population.
From our economic viability analysis (see Section 5) we have calculated the size and cost of
deployment in these unviable areas. We then estimate the potential GDP impact in the unviable
area, adjusting for the fact that GDP per head in the unviable will be significantly lower than the
national average.
It is not possible to accurately correlate the unviable area with the geographical distribution of
GDP. Hence we have made an assumption that, firstly, GDP in the unviable area is the national
GDP scaled down by the number of households in the unviable area, and secondly, further scaled
down by a factor of 50% 28, reflecting the fact that some industry sectors contribute more to the
“rural” economy, e.g. agriculture and mining, than others, e.g. services.
We then calculate an economic ‘payback’ period, i.e. the number of years it takes for the
cumulative benefits to exceed the costs of deployment in the unviable areas.
The reminder of this section provides an analysis of the socio-economic impact of broadband services
in FEMIP countries. It is laid out as follows:
• Section 6.1 quantifies the direct economic benefits and associated costs in unviable areas in
FEMIP countries
• Section 6.2 summarises the indirect (non-monetary) benefits of broadband.
28
The factor of 50% is an assumption.
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6.1 Direct economic benefits and associated costs in unviable areas in FEMIP countries
Figure 6.1 shows the estimated direct economic benefits of broadband in FEMIP countries. The impact
is high in Israel, Algeria and Egypt at around EUR1028 million, EUR805 million and EUR791 million
per annum, respectively, whereas it is comparably modest in Gaza/West Bank, Jordan and Lebanon at
EUR12 million, EUR118 million and EUR176 million per annum, respectively.
600
400
200
Jordan
Algeria
Egypt
Morocco
Tunisia
Syria
Lebanon
We have also estimated the cost of providing coverage in the unviable areas in FEMIP countries
(adjusting for the ‘very remote’, i.e. the final few percentages of the population that live in the
most remote areas, based on the 2G coverage and are removed from our analysis as we consider
that the very remote areas to be served by satellite), using HSPA technology as an illustration as
well as the associated benefits per annum, resulting in a pay-back period 29 as shown in Figure 6.2.
Lebanon
Israel
Morocco
Tunisia
Syria
Egypt
Algeria
Jordan
0 2 4 6 8 10 12 14
Pay-back period in the unviable area (years)
Figure 6.2: Economic impact assessment across FEMIP countries using HSPA technology [Source:
Analysys Mason]
29
Pay-back is calculated on non-discounted terms.
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The pay-back period for fibre technologies (FTTC and FTTP) would be significantly longer than
those shown above for all countries studied because the costs are so much higher and there is little
evidence available at present to suggest that the economic benefits of fibre-based services
significantly exceed those from services delivered using other technologies, although this may
change in the long term.
‘Pillar VII: ICT for Social Challenges’ of the European Commission’s (EC) Digital Agenda for
Europe (DAE) states the following:
“Digital technologies have enormous potential to benefit our everyday lives and tackle
social challenges. The Digital Agenda focuses on ICTs capability to reduce energy
consumption, support ageing citizens’ lives, revolutionises health services and deliver better
public services. ICTs can also drive forward the digitisation of Europe’s cultural heritage
providing online access for all.”
It is implicit within much of the DAE that the EC believes there to be significant indirect (non-
monetary) as well as direct economic benefits for Member States, and the same logic would hold true
for FEMIP countries.
It is difficult to accurately measure or quantify the non-monetary benefits of broadband access.
However, the Broadband Stakeholder Group (BSG) (an industry-government forum in the UK
tackling strategic issues across the converging broadband value chain) commissioned a study30
from Plum Consulting on the economic value of next-generation broadband. The study identifies
non-monetary benefits, including environmental (reduced greenhouse gas emissions), reduced
congestion and enhanced competition. The Plum Consulting study classifies the non-monetary
benefits under various headings:
• educating citizens
• informing democracy
• cultural understanding
• social inclusion.
30
Plum Consulting for the BSG (June 2008), A Framework for Evaluating the Value of Next Generation Broadband.
Available at http://www.broadbanduk.org/component/option,com_docman/task,doc_view/gid,1009/Itemid,63/.
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Table 6.3 below is adapted from the findings in relation to wider economic and social benefits.
It seems reasonable to believe that e-health (tele-care, symptom monitoring, specialist consultation) and
e-learning (which can reduce the distance impact of highly distributed communities) can deliver
significant benefits to certain groups of society who have to date been excluded.
We have identified the socio-economic impact of broadband on developed countries (i.e. Australia,
the USA and European countries), which in principle could also apply to FEMIP countries. These
are presented in the table below. However, it should be noted that the specific characteristics of the
FEMIP countries need to be taken into account when evaluating the socio-economic impact of
broadband.
31
PricewaterhouseCoopers (2009), Champion for digital inclusion: The economic case for digital inclusion. Available
at http://raceonline2012.org/sites/default/files/resources/pwc_report.pdf.
Ref: 18398-282
Summary Report | 65
32
Darkins, A. et al. (2009), ‘Care Coordination/Home Telehealth: The Systematic Implementation of Health
Informatics, Home Telehealth, and Disease Management to Support the Care of Veteran Patients with Chronic
Conditions’, Telemedicine and eHealth, Vol. (10), pp.1118–26. Available at
http://www.liebertonline.com/doi/pdf/10.1089/tmj.2008.0021.
33
Kolko, J. (2010), Does Broadband Boost Local Economic Development? Available at
http://www.ppic.org/content/pubs/report/R_110JKR.pdf.
34
Dutz, M. et al. (2009), The Substantial Consumer Benefits Of Broadband Connectivity For U.S. Households.
Available at http://www.reelseo.com/wp-content/uploads/2009/07/CONSUMER_BENEFITS_OF_BROADBAND.pdf.
35
Davidson, C. M. et al. (2009), ‘Broadband Adoption: Why It Matters And How It Works’, New York Law School’s Media Law
& Policy Journal, Vol. 19, pp.14–56. Available at
http://www.nyls.edu/user_files/1/3/4/30/84/88/Vol%2019.1%20BROADBAND%20Adoption.pdf.
Ref: 18398-282
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Table 6.4: Impact of broadband for each of the benefits categories [Source: Analysys Mason]
36
Dutz, M. et al. (2009), The Substantial Consumer Benefits Of Broadband Connectivity For U.S. Households.
Available at http://www.reelseo.com/wp-content/uploads/2009/07/CONSUMER_BENEFITS_OF_BROADBAND.pdf.
37
LECG Ltd (2009), Economic Impact of Broadband: An Empirical Study.
http://www.connectivityscorecard.org/images/uploads/media/Report_BroadbandStudy_LECG_March6.pdf.
38
Milano, J. (2010), Where Jobs Come From: The Role of Innovation, Investment and Infrastructure in Economic and
Job Growth. Available at http://www.dlc.org/documents/WhereJobsComeFrom.pdf.
39
McKinsey&Company (2011), Measuring the Net’s growth dividend. Available at
http://www.mckinseyquarterly.com/Measuring_the_Nets_growth_dividend_2812.
40
Kolko, J. (2010), Does Broadband Boost Local Economic Development? Available at
http://www.ppic.org/content/pubs/report/R_110JKR.pdf.
41
Hamilton Consultants, Inc. (2009), Economic Value of the Advertising-Supported Internet Ecosystem. Available at
http://www.iab.net/media/file/flyin09-deighton.pdf.
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Finally, we highlight two references that support the idea that being online has a positive social
impact:
“Our analysis suggests that IT has an enabling and empowering role in people's lives, by
increasing their sense of freedom and control, which has a positive impact on well-being or
happiness.” 42
“The biggest uplift in life satisfaction is achieved by people getting online for the first time.
In their first couple of years online the difference that the internet makes in improving life
satisfaction is most noted. The BCS [see above] research also found the biggest benefit to
wellbeing from being online would be achieved by providing access to those on low
incomes and with fewest educational qualifications.” 43
42
BCS Chartered Institute of IT survey reported May 2010. See http://www.bcs.org/.
43
UK Online Centres (April 2011), The digital divide and happiness – a presentation of the evidence.
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7 Conclusion
This section provides our main conclusions from the study. It is laid out as follows:
• Section 7.1 presents the scenarios results
• Section 7.2 describes the main barriers to and opportunities for broadband development in the
FEMIP countries
• Section 7.3 provides an assessment of the investment opportunities in the FEMIP countries
The total costs required to achieve the Scenario 1 target ranges from EUR16 million in Gaza/West
Bank to EUR1162 million in Algeria. We believe that a significant proportion of the costs required
to deploy terrestrial technologies is likely to be unviable, with Lebanon, Israel, Gaza/West Bank
and Jordan standing at the lower end of FEMIP countries at 43%, 49%, 54% and 57%,
respectively, whereas in Egypt, Syria and Tunisia the proportion of unviable costs is expected to
be 100% of total costs required to achieve the scenario targets.
Table 7.1: Results for Scenario 1 for all FEMIP countries to reach 2020 targets [Source: Analysys Mason]
Table 7.2 shows the costs required to achieve the coverage targets set for Scenario 2 in 2020: 100% and
50% population coverage with a minimum real download speed of 4Mbit/s and 10Mbit/s, respectively,
for all countries except Israel, which has a target of 10Mbit/s for 100% population coverage.
44
Data for Algeria is for 2007
45
Data for Egypt is for 2008
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The total costs required to achieve the Scenario 2 target ranges from EUR19 million in Gaza/West
Bank to EUR1310 million in Algeria. We believe that a significant proportion of the costs required
to deploy terrestrial technologies is likely to be unviable, with Lebanon, Jordan, Israel and
Gaza/West Bank, standing at the lower end of FEMIP countries at 46%, 52%, 52% and 56%,
respectively, whereas in Egypt the proportion of unviable costs is expected to be as high as 92%
(the highest among FEMIP countries).
Table 7.3 shows the costs required to achieve the coverage targets set for Scenario 3 in 2020:
100% and 50% population coverage with a minimum real download speed of 10Mbit/s and
30Mbit/s, respectively, for all countries except Israel, which has a target of 30Mbit/s for 100%
population coverage.
The total costs required to achieve the Scenario 3 target ranges from EUR73 million in Gaza/West
Bank to EUR4019 million in Algeria. We believe that a significant proportion of the costs required
to deploy terrestrial technologies is likely to be unviable, with Lebanon, Gaza/West Bank and
Israel standing at the lower end of FEMIP countries at 15%, 17% and 22%, respectively, whereas
in Morocco the proportion of unviable costs is expected to be as high as 95% (the highest among
FEMIP countries).
46
Data for Algeria is for 2007
47
Data for Egypt is for 2008
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The level of investment required to achieve the coverage targets set for Scenario 3 is 1.5–4 times
higher than for Scenario 2 in all FEMIP countries except Israel, where it is 10 times higher. This is
because the deployment of broadband networks in Israel is already very advanced and actual
broadband coverage levels in the country are quite similar to the coverage targets set for Scenario
2. Likewise, the investment required to achieve the coverage targets for Scenario 2 is 1.05–1.5
time higher than for Scenario 1as very similar technologies in terms of cost are used to achieve the
targets for 100% population coverage in Scenarios 1 and 2. The large difference between the level
of investment required for Scenario 3 and that required for Scenario 2 is due to the use of fibre in
addition to wireless technologies to be able to achieve the Scenario 3 targets (as the cost of rolling
out fibre is much higher than the cost of rolling out wireless technologies). Therefore, the
government and operators in each FEMIP country will need to assess which one would be the
most economically viable option to provide access to broadband services.
In general, under all scenarios, countries are similarly ranked in terms of the investment required:
• The level of investment required in countries like Algeria, Egypt and Morocco is higher than
in the other FEMIP countries due mainly to the large size of these countries and their low
population density.
• The level of investment required in countries like Lebanon, Gaza/West Bank and Israel is
lower in the other FEMIP countries due mainly to the small size of these countries and their
high population density. In addition, the broadband infrastructure in Israel is at a relatively
advanced stage of development , which results in a very low cost to reach the targets for each
scenario (even taking into account that the target for Scenario 3 for Israel is much higher than
for other FEMIP countries and similar to the DAE target).
48
Data for Algeria is for 2007
49
Data for Egypt is for 2008
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The proportion of unviable costs is also similar across scenarios. Several factors other than those
related to the size of the total investment required have an impact on the viability of technologies,
which in turn has an impact on the proportion of unviable costs:
• Actual and expected evolution of broadband penetration – high penetration in countries such
as in Israel, Lebanon and Jordan has a positive impact on the cost viability, whereas low
penetration in countries such as in Syria, Gaza/West Bank and Egypt has a negative impact on
the cost viability.
• Actual and expected evolution of ARPU – high ARPU in countries such as in Israel and
Lebanon has a positive impact on the cost viability, whereas low ARPU in countries such as in
Morocco, Algeria, Tunisia and Egypt has a negative impact on the cost viability.
We believe that wireless technologies will be the main driver of broadband growth in most FEMIP
countries due to the limited footprint of the existing copper network, the quality-of-service
provided over the copper network, and the cost of rolling out fixed broadband technologies in rural
areas, among other factors.
Therefore, governments in FEMIP countries should consider very carefully the role that wireless
technologies should play in their national broadband plans. This may be different to European
markets where it is likely that wired technologies will play a more significant role.
It should be noted that if more ambitious scenario targets were defined for the FEMIP countries,
then we may expect the reliance on wireless technologies to decrease, unless there were policy
changes that would have a material impact on the supply side, e.g. significant amounts of new
spectrum at suitable frequencies being made available.
We also believe that satellite broadband will play a role in FEMIP countries, especially to cover
the last few percentages of the population living in the most remote parts of the country where the
roll-out of other broadband technologies would be economically unviable.
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Israel and Lebanon appear to have the most favourable macro-economic environment for
broadband development, whereas Algeria and Syria appear to be at the opposite end.
Table 7.5 presents the status of development of the broadband market in each FEMIP country.
Countries with the most advanced national broadband strategies are listed first.
Ranking of Existence HSPA HSPA+ Existence Efficient Roll-out of Expected date for
most advanced of 3G service service of LLU use of NGA award of
national operators availability availability LLU spectrum for
broadband mobile broadband
strategy
2.6GHz in short
Israel × × ×
term
Morocco × × Unknown
Algeria × × × × × In deployment 2015 for 800MHz
Launched
Lebanon × × × In progress 2015 for 800MHz
end 2011
Expected Limited to
2.6GHz available
Jordan × in late × school and
2015 for 800MHz
2012 universities
Tunisia × × × 2014 for 800MHz
Egypt Very limited Unknown
Gaza/WB × × × × × × Unknown
2014 at the
Syria × × × ×
earliest
Table 7.5: Status of broadband market development [Source: Analysys Mason, regulators]
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Israel and Morocco have the most developed broadband markets of all FEMIP countries, whereas
the broadband market is in its very early stages of development in countries like Syria and
Gaza/West Bank. The main factors that could boost the development of broadband in these
countries include:
• liberalisation of the telecoms market and privatisation of operators (e.g. Lebanon, Syria)
• launch of HSPA/HSPA+ mobile networks in countries where mobile broadband is not yet
launched (i.e. Algeria, Gaza/West Bank)
• emphasis on the efficient provision of LLU to alternative operators at reasonable prices
• implementation of a national broadband strategy over the short and long term
• availability of spectrum for 4G services as soon as possible (mainly in the lower bands – i.e.
800MHz)
• allowing the provision of broadband over satellite under reasonable conditions.
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Overall, taking into account the macro-economic situation in each FEMIP country, as well as the
dynamics in, and the outlook for, their respective telecoms markets, we expect that Israel and
Egypt are the two FEMIP countries that will present the biggest opportunities for broadband
investment, whereas the opportunities for broadband investment in Gaza/West Bank and Syria
would be significantly lower.
Table 7.7 presents the main investment opportunities that we are aware of, either based on public
information or identified based on interviews we have had with stakeholders in FEMIP countries.
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Many studies in the literature do not make a distinction between ICT, internet, broadband, and
high-speed broadband, and this makes estimating the specific benefit of broadband difficult. The
majority of studies also tend to be focussed on the USA rather than Europe which are arguably less
useful for comparisons with FEMIP countries.
There is a general lack of disclosure in the studies on the technologies used to deliver broadband,
although we expect most studies to have mainly considered fixed broadband. However, we do not
believe this to be a key concern: broadband services rather than technologies deliver benefits to
end users, and in the case of basic broadband, these can easily be delivered over fixed or mobile
technologies, so the fact that we expect mobile to be prevalent in many FEMIP countries does not
preclude us from drawing some conclusions from the existing, fixed-dominated, literature.
There is also little or no hard evidence for the benefits of high-speed broadband, mainly due to the
fact that these networks have not been in existence for very long. However, this is less of a
concern for the FEMIP countries, at least in the near- to mid-term, as the availability of ‘basic
broadband’ is still at a relatively early stage (with the exception of Israel).
The results presented in our analysis on socio-economic impact of broadband should be viewed
with caution as it is our view that isolating the true incremental impact of broadband remains very
difficult and subject to potential significant error due to the complex, cross-sectorial interactions
that occur in all markets.
We should not overlook indicators such as take-up as a useful guide of the benefits of broadband
to end users. In Western Europe, the Internet dial up in the late 1990s increased to over 50% in
some markets, but then fell off dramatically as basic broadband became available in the early
2000s as shown in the figures below. This is a clear demonstration of users valuing the incremental
benefits of broadband over dial-up, namely higher speed, and better user experience by virtue of its
‘always on’ nature.
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60%
40%
30%
20%
10%
0%
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Figure A.1: Evolution of dial-up Internet take-up in a number of European markets [Source: Analysys
Mason]
Broadband connections as % of households
90%
80%
70%
60%
and buisness sites
50%
40%
30%
20%
10%
0%
Jul-02
Jan-05
Jun-05
Jul-07
Jan-10
Jun-10
Mar-04
Mar-09
Feb-02
Feb-07
Sep-01
Dec-02
Aug-04
Nov-05
Sep-06
Dec-07
Aug-09
Nov-10
May-03
Oct-03
May-08
Apr-06
Oct-08
Figure A.2: Evolution of broadband take-up in a number of European markets [Source: Analysys Mason]
There is less data for next generation broadband take-up. Outside of the Nordic States, Western
European next generation broadband take-up benchmarks to date are low. This is partially due to
the existence of good copper networks (e.g. ADSL2+) and the ‘sweating’ of copper assets by
incumbents and local loop unbundlers. In addition, the delay in provision of wholesale access in
fixed networks in Eastern Europe has meant that in some areas new fibre networks were built by
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Summary Report | A–3
alternative providers; this has served to increase take-up relatively quickly. Due to these country
differences it is much harder to benchmark how next generation broadband penetration increase;
however, additional analysis does indicate that reaching 20% take-up after 5 years to be possible
as shown in the figure below, although this could be changed significantly by a wide range of
factors including pricing, competition and potentially regulation.
Connections as a share of FTTx homes passed
100%
90%
80%
70%
Czech Republic South Korea
60%
50%
Ukraine Lithuania
40% Norway Romania Japan
Russia Sweden
Estonia Slovenia
30%
Bulgaria Slovakia Denmark
Figure A.3: FTTx take-up against FTTx availability (homes passed) [Source: Analysys Mason, 2010]
The direct economic benefits of broadband are diverse, ranging from businesses being able to:
The balance of the above depends on the business itself, though there are strong similarities within
a given sector, and for companies of a similar size. In addition, it is expected that connectivity can
deliver benefits for government, for example through e-procurement and other process
efficiencies.
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However, despite a large number of academics and others researching this topic there still does not
appear to be a strong consensus on the quantification of the benefits of broadband, although
several suggest the impact on GDP to be of the order of 1%:
• Looking at a panel of 25 OECD countries in 1996–2007, Czernich et al. (2011) find that a 10
percentage-point increase in broadband penetration raised annual GDP per-capita growth by
0.9–1.5 percentage points
• Zhen-Wei Qiang and Rossotto (2009) 50 (writing for the World Bank), concluded that a 10%
increase in broadband penetration increased GDP growth by an additional 1.21% when
looking at 66 high-income countries; and by an additional 1.38% in the remaining 120 low-
and middle-income countries.
• Milano (2010) 51 suggested that investment in ICT (like broadband) contributed almost 0.8% to
the average annual real GDP growth in the USA from 1994 to 2000.
McKinsey 52 recently estimated that the Internet (if considered as a ‘sector’) contributed to between
0.8% and 6.3% of GDP, with the lower figure being Russia and the upper figure being Sweden.
France, Germany and India were all in the middle of the range at 3.2% contribution, although a
much larger proportion of India’s contribution was due to trade balance (exports). Whilst this
study focussed on the contribution of the ‘Internet’ it seems reasonable to assume that this is
closely related to broadband as this has been the key driver of the mass market take-up of Internet-
delivered services in the last decade. McKinsey also concluded that as markets mature the
contribution of the Internet to GDP growth increases; for example, in France the contribution
increased from 10% in 1995-2009, but in the later period 2004-2009, it was 18%. Across the range
of mature countries they considered, the Internet contributed 21% to GDP growth, so for
economies growing at 5% per annum, the impact of the Internet (assuming it is closely related to
the impact of broadband) would be around 1%.
However, there are ‘benefits sceptics’. Some claim that GDP growth is a cause of higher
broadband penetration and not vice-versa, and it is apparent that much of the work in this area fails
to address this cause and effect problem satisfactorily. Others claim that broadband plays a role in
actually destroying jobs by negatively impacting traditional industries. We are not aware of any
studies that have undertaken a robust analysis of the net impact on jobs at anything more than a
local level.
50
Qiang, C. Z. and Rossotto, C. M. (2009), Economic Impacts of Broadband, Information and Communications for
Development: Extending Reach and Increasing Impact. (World Bank: Washington, D.C.), pp. 35–50.
51
Milano, J. (2010), Where Jobs Come From: The Role of Innovation, Investment and Infrastructure in Economic and
Job Growth.
52
McKinsey Global Institute, May 2011. Internet matters: The Net’s sweeping impact on growth, jobs, and prosperity.
The countries covered were: Sweden, UK, South Korea, Japan, USA, Germany, India, France, Canada, China, Italy,
Brazil and Russia.
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Summary Report | A–5
It is our view that broadband is likely to play a larger role in maintaining (protecting) jobs rather
than creating large numbers of new jobs in many economies. Nevertheless, this still provides a
useful reference point for comparing the potential order of magnitude benefits against the costs of
deployment, and for Governments and others who aim to promote market development, the case
for intervention still holds whether jobs are being maintained or created.
For the purposes of this work, we have used the studies listed above as a guide to assessing the
potential benefits of broadband. We have assumed that broadband can have a maximum potential
impact of 1% of GDP for a ten percentage-point increase in broadband penetration of the
population.
From our economic-viability analysis (see Section 5) we have calculated the size and cost of
deployment in these unviable areas. We then estimate the potential GDP impact in the unviable
area, adjusting for the fact that GDP per head in the unviable area will be significantly lower than
the national average.
It is not possible to accurately correlate the unviable area with the geographical distribution of
GDP. Hence we have made an assumption that, firstly, GDP in the unviable area is the national
GDP scaled down by the number of households in the unviable area, and secondly, further scaled
down by a factor of 50% 53, reflecting the fact that some industry sectors contribute more to the
“rural” economy, e.g. agriculture and mining, than others, e.g. services.
We then calculate an economic ‘payback’ period, i.e. the number of years it takes for the
cumulative benefits to exceed the costs of deployment in the unviable areas.
53
The factor of 50% is an assumption.
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This annex includes a list of the stakeholders interviewed in each FEMIP country in the context of
this project. Note that we did not interview any stakeholders in Algeria, and in the case of Egypt
we only interviewed EgyptSat, a VSAT (very small aperture terminal) operator.
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FEMIP for the Mediterranean
The study evaluates the market, business and financial aspects for the development of Telecom broadband access for
the Mediterranean Partner Countries. To do so the current status for access to Telecom broadband services among
the people in the region is analysed. Based on this analysis the study identifies the investment needs to increase the
number of people having access to broadband. All in all, the study estimates the investment need for the rollout of
broadband infrastructure in the Mediterranean Partner Countries based on a common target scenario for broadband
service coverage by 2020.