Africa and the Middle East—Emerging Markets
There is an evolution toward liberalizing telecommunications regulations in emerging markets. This evolution is driven by the desire to attract private money. The government is the main driver of the economies in Africa and Middle East. It owns the incumbent telephone companies that have monopolies in their respective countries. African businesses that apply to the World Bank or the International Monetary Fund (IMF) for funds are required to meet conditions liberalizing and privatizing enterprises. Another factor in most of the countries is their desire to be part of the World Trade Organization, WTO to gain trading partners. Countries that join the WTO have to meet treaty liberalization clauses to open markets. They can then buy and sell goods with member countries.
A technological pressure eroding monopolies is the presence of cyber cafés and ISPs selling low-cost voice over IP illegally in Africa and the Middle East. This technology plus call-back is undercutting profits governments receive from fees for international and domestic long distance.
In both Africa and the Middle East, the key technology for new services is wireless—mainly in the form of cellular services. The appeal of cellular in building up poor countries' infrastructure is its relatively low cost compared to fixed-line service. In the article, “Cell Phone Surge Among World's Poor,” published in The New York Times on the Web, 19 December 2000, by Simon Romero, Ken Lupberger, Manager of Communications Investments at the International Finance Corporation, the investment banking arm of the World Bank, cited the cost of adding a new line as less than $600. It cost $1500 five years ago. Another benefit with cellular is that there generally are no regulations prohibiting competition in the cellular arena.
Most countries are adopting cellular services relatively quickly. In many African countries there are more cellular than fixed lines in service. As is the case in Europe, there are no fees for incoming calls to inhibit user acceptance. According to Guy Zibi, Manager, Africa and the Middle East for Pyramid Research, at least 80% of the cellular service in Africa and the Middle East is prepaid. All of these cellular networks are based on GSM or TDMA except Israel's, which uses CDMA. (See Chapter 9 for wireless technologies.)
Africa
Poverty and lack of infrastructure are enormous hurdles to telecommunications growth in Africa. The Internet is still in its nascent stages. PC penetration is improving, driven by the desire for Internet access. However, the initial base is so low from almost 0%, 50,000 to 100,000 PCs for populations of 25 to 30 million people. Personal computers are too expensive for consumers but business usage is growing. Governments are taking measures to increase PC purchases. Currently, 25% to 50% of their cost is made up of customs charges.
Fixed wireless also is starting to be introduced mainly for business rather than for residential customers. It is being deployed for Internet access more than cable and DSL. However, there are problems to solve with fixed wireless. Although it is less costly than laying cabling, installation of fixed wireless is still expensive. For example, the monthly price in Nigeria for fixed wireless is $1000. Even getting local electricity for the service can be problematic. Moreover, there is a lack of local expertise to install and manage the service. It is not unusual for the spectrum to be mismanaged and for operators to be given duplicate spectrum already in use by another carrier.
An exception to the lack of infrastructure and a middle class is South Africa. It's on par to some extent with Brazil, Argentina and Chile and has an emerging black middle class. There are some imbalances within the white population, but it is well off by western standards. South Africa has a larger base of businesses than the rest of Africa. Other countries with more advanced infrastructures than the rest of Africa are Botswana, Namibia and Morocco. Ghana, Nigeria and Uganda are the furthest ahead in deregulation of telecommunications. Of these countries with more advanced infrastructure, only Nigeria has deregulated its local service. Nigeria is the largest country in Africa and is considered to have the most potential growth in telecommunications.
The Middle East
Like Africa, Middle Eastern telecommunications markets are not open to competition and states still own the PTTs. However, the state telephone companies are wealthier than those in Africa. Thus, they have developed their network infrastructures but customers have limited options and high costs for specialized services. The most highly developed infrastructures are in the Gulf region countries of the United Arab Emirates, Qatar and Oman. Leased lines for voice and data communications are extremely costly. However, telephone lines to homes and business are not costly. Costs for ISPs to connect to international backbones via PTTs are high and ISPs pass these costs to subscribers. This results in $30 to $40 monthly charges for dialup Internet accounts.
The number of cellular users is growing faster than in Europe, Latin America and Asia because penetration rates are lower. According to Guy Zibi, in the Middle East, 5% to 10% of the population has cellular service compared to below 2% in Africa. Middle Eastern governments started to allow competition in cellular services in 2000.
According to Pyramid Research, LAN and PC penetration in the Middle East are low by western standards. Saudi Arabia, as of late 2000, had 1.2 million PCs, penetration less than 6%. In Kuwait and the UAR PC penetration was closer to 10% in the same period.