Trapped in inertia

Lebanese telecoms remain in tatters while government dithers over reforms

By Sami Halabi

The Lebanese know little of modern telecommunications due to their governments disinterest in implementing serious reform of the sector (Photo: Sam Tarling)

Shame is a word used to describe the painful feeling arising from the consciousness of something dishonorable, improper or ridiculous. All of which seem to apply to Lebanon’s telecommunications sector — once the beacon of Middle Eastern telecommunications.

To get an idea of how far Lebanese telecommunications has fallen, a small case study can be considered. In January 1995, Lebanon was at the forefront of the regional telecom industry, with some 512,000 mobile subscribers and 612,000 land-line subscribers. At this time the United Arab Emirates had just introduced mobile telephony and had 737,000 fixed service subscribers, according to the International Telecommunications Union (ITU), the United Nations agency for telecommunications which works with governments and the private sector to promote best market practices. Last month, Etisalat, the UAE state-owned mobile telecom company announced that it had reached 100 million subscribers across the 18 countries in which it operates. Lebanon has just reached around 2.4 million subscribers, around half of the population. Fixed line penetration totaled only 750,000 in March 2009 according to the World Bank.

Riad Bahsoun, telecom expert at the ITU, said Lebanon might reach 100 percent market penetration in second-generation mobile telephony in 2014. That is just four years before the end of Global System for Mobile’s (GSM) generation lifecycle, the measure by which a technology can exist as relevant in a market. In other words, it will take Lebanon another four years to fully adopt what is, even now, relatively obsolete technology, and even that limited progress is nowhere near certain.

Bahsoun, previously identified by the media as a contender for telecom minister, estimates that because best practices have not been followed in Lebanon since 1994, some 12,000 potential jobs have been lost and between $10 billion to $12 billion in revenue squandered. Last year Etisalat made $8.4 billion in revenues and reached a mobile penetration rate of over 200 percent in the UAE alone.

“We lost money, we lost chances, we lost jobs and we lost our dignity,” said Bahsoun.

What now?

Whatever the opportunities lost, one thing is for sure: the wholly government-owned and controlled sector has been making a pretty penny off its current pricing structure, which by far exceeds prices offered in neighboring countries.

According to Lebanon’s finance ministry, $1.36 billion was transferred to the national treasury from the telecom sector’s surplus last year, which exceeds the figure of $1.27 in revenues announced to the press by the telecom minister Charbel Nahas in February. The prices of bandwidth in Lebanon are also amongst the highest in the world, with one megabit per second (Mbps) of dedicated bandwidth costing consumers and businesses $1,350 per Mbps per month.

“If an Internet Service Provider (ISP) is located in Kuwait, Qatar, Bahrain, the UAE or Saudi Arabia, the cost [of dedicated bandwidth] is $100 per Mbps per month,” said George Jaber, director of business development and partnerships in the Middle East North Africa at TATA communications.

But it is not just government ownership that impedes the telecommunications sector from achieving rates of growth similar to neighboring countries. All decisions related to pricing and revenue sharing are decided upon by the 30 member Cabinet, comprising Lebanon’s fractious political elements, while the sector’s governance structure has facilitated political interference, allowed the public sector to maintain its grapple-hold, and made decision making a long and tiresome affair.

Thus, it’s little surprise that Abdulmenaim Youssef, the head of Lebanon’s incumbent public operator, Ogero, also heads the Directorate of Operations and Maintenance at the Ministry of Telecommunications (MOT), whose job it is to oversee Ogero’s operations. Youssef has held both positions for half a decade and cannot be removed from either without a cabinet decision.

The current Telecom Minister, Charbel Nahas, was handpicked by the opposition leader Michel Aoun in a long, drawn-out battle that held up the cabinet’s formation for five months. No one from the ministry, including both director generals and the minister, responded to Executive’s repeated requests to comment.

“Ogero has the capacity today to offer more than two megabits per second. [They could offer] up to 4 Mbps, but they cannot do it because they do not have the tariff structure,” said Gaby Deek, president of the Professional Computer Association of Lebanon (PCA), a non-profit ICT association. The tariff structure cannot be put in place until agreed by the cabinet.

The issue becomes even more egregious when one considers that “half of government revenue from telecom last year was taxes,” according to Deek, who is also a member of the Lebanese Broadband Stakeholders Group, a local lobby group that pushes for broadband in Lebanon. Nahas has repeatedly stated that he seeks to separate commercial activities from taxes in the sector, but ultimately it is not his decision alone.

Change price, change structure

The only recent respite for the sector came in February 2009 when the cabinet decreased longstanding tariffs on mobile communications to levels that are still well outside of regional norms.

A recent World Bank report found that “these price reductions combined with MOT investments into mobile networks, together with the new management fee structure (which creates incentives to expand the subscriber base) have resulted in renewed marketing efforts by the managers of the two mobile service providers, a shift from pre-paid to post-paid subscribers, and recent increases in mobile penetration, yet there was no improvement in the quality of service to the consumers who are still suffering poor quality of service.”

The report also stated that a 10 percent increase in broadband penetration would result in gross domestic product growth between 1.2 percent and 1.5 percent “on a recurring basis.”

The “new management fee structure” the World Bank refers to was an agreement between the Lebanese government and the country’s two mobile operators, Alfa and mtc touch, who currently manage the mobile networks. The yearly one-time renewable contracts had accorded Alfa $6.75 per subscriber and mtc $6.66 per subscriber, in tandem with an aggressive expansion plan implemented by the operators and the ministry. As Executive went to print, the expansion was still underway and a second phase “is being discussed with the MOT to increase capacity up to 1.7 million customers,” for each operator, said Claude Bassil, general manager of mtc touch.

The MOT implemented a revenue sharing agreement with the operators for a period of six months, starting February 1, whereby each firm receives a monthly fee of $2.5 million plus 8.5 percent of revenues generated by the networks. The contracts can be renewed twice for a period of three months at a time.

“Since it is a revenue sharing model, the more revenues the MOT gets, the more revenues mtc touch gets,” said Bassil. “It is, however, more challenging than the previous model because then there was latent demand which we were capturing. But now we have to maximize revenues and increase ARPU [average revenue per user], which has never been easy anywhere in the world.”

Bassil’s company has repeatedly stated that it seeks to acquire a mobile license to own and operate their network, but this has not come to pass and Lebanon’s finance minister has stated to the media that privatization would not occur this year and was only a possibility in 2011.

“Until the privatization process is activated, we will do our best to continue managing MIC2 [the official name of mtc’s network],” said Bassil, who claims his company constitutes 57 percent of the mobile market. “Like any reasonable contract, the current management agreement allows for any party to request an adjustment or a review of certain conditions in case of major changes.”

Even though both mobile operators have expressed their continuing “commitment” to the Lebanese market, one can only wonder how long the operators will have the appetite to stay in a market while not being able to own their operations and set their own prices.

A new plan, sort of…

On the surface, not all the news coming out of the sector is disheartening. In late January, Minister Nahas presented a plan to raise the legal bandwidth in Lebanon from 2 Gigabits per second (Gbps) to 120 Gbps, a dramatic increase of Internet capacity in Lebanon. Lebanon’s total bandwidth is unknown due to the presence of grey and black market participants that make up “40 to 60 percent of the market,” according to Habib Torbey, head of the Lebanese Telecommunications Association (LTA).

All of this will come at a cost. Nahas has stated that he and the finance ministry have agreed to spend $166 million on the expansion plan and include the figure in the next budget, which has yet to be approved by the Cabinet or by Parliament. Lebanon is also expecting to finally connect itself to the International Middle East Western Europe 3 (IMEWE3) network by May, according to the minster. A submarine cable extending from Tripoli to Alexandria, Egypt, would link Lebanon to the network and effectively allow the country to stop relying on Cyprus for an international Internet connection via the CADMOS cable.

Despite media reports stating that Lebanon’s bandwidth will increase to 30 Gbps upon connection, documents obtained by Executive show that the actual capacity of the cable is 300 Gbps upon connection and can increase to 3,840 Gbps. An official from one of the companies investing in the cable, who spoke on condition of anonymity, said that Ogero had invested some $45 million in the cable. The official also said that because Lebanon will only be connected via one of the three fiber pairs — a subdivision of a fiber optic cable — the initial capacity Lebanon will have access to is 120 Gbps, which can be upgraded later to 1.2 terabits per second.

Many in the country are welcoming the addition to Lebanon’s infrastructure, yet it is still “not enough to meet current demand, especially if we intend to have real broadband,” said Mahassen Ajam, commissioner of Lebanon’s Telecommunications Regulatory Authority (TRA).

The finance ministry could not confirm, however, either the cost of the expansion plan or that it did indeed include the IMEWE3 connection, as a spokesperson at the ministry said Ogero is given a lump sum each year to spend at its discretion. Moreover, several experts have contested the proposed timeframe for connecting Lebanon to the cable on technical grounds.

Despite repeated requests to the press office at the telecom ministry for details on the expansion plan, none were forthcoming.

“They haven’t given us a single detail [either] which shows you that something is not right,” said Torbey who is also president of GlobalCom Data Services, which owns Inconet Data Management (IDM), one of Lebanon’s largest ISPs. “If we are not up to speed with the details, then that means that there is not much in terms of details.”

According to the PCA’s Deek, the expansion plan is comprised of 23 projects. Contacted directly by Executive, Imad Maatouk, a department head at the general directorate of construction and equipment at the telecom ministry, would not confirm how many projects comprised the expansion plan, but stated that the ministry was still “studying” the plan. Maatouk also explained that the ministry was still in the process of issuing the tender book and added that “the minister is an economist, so surely his budgeting will be based on things that are very clear.”

Nonetheless, the lack of information has led some to cry foul.

“Because of the inaccuracy of the design it plans to use, the telecom ministry will spend a minimum of $166 million on this project, while it can build a more advanced network for a maximum of $40 million,” said Bahsoun, who is also a member of the International Telecom Council of Lebanon (ITCL), a group of Lebanese nationals in the diaspora who are high-level telecom executives and lobby for best practices.

The cost of the project is also much higher than the $64 million scheme proposed by the last Telecom Minister, Gebran Bassil, in March 2009.

Youssef — the head of Ogero and the MOT’s directorate of operations and maintenance — and Minister Bassil (Michel Aoun’s Son-in-law) were at loggerheads over implementation of the $64 million project.

An intelligence briefing document from the office of the former telecom minister, dated August 27, 2009, obtained by Executive, states: “The project is opposed…by Dr. Youssef, but this everyone knows [sic].” The document also states that, “The managers who are in charge of implementation, Naji Andraos and Aurore Feghali are apparently deliberately delaying the implementation for political reasons.”

Notably, the $64 million plan did not include details regarding the technology, or cost, of the “access layer,” the final crucial link between the telecom infrastructure and the user. Similarly, the structure of the access layer in the current $166 million plan had yet to be finalized, according to Maatouk.

Regardless of what form the access layer will take, the gap in proposed spending is still significant and unexplained. “It makes a big different because up to three-fourths of the cost of the initial $64 million of what was being proposed was related to digging; now it is $166 million and no one knows why,” said Bahsoun.

He explained that in 2002 the ITU presented the Telecom Ministry with an national backbone plan that did not apply the traditional method of creating several “rings” on the national and metropolitan levels, but instead went from the customer to existing infrastructure while allowing a redundancy buffer to ensure continuous service.

“This is what specialist’s call the cost of ignorance and this explains the large gap between the two budgets for the same project,” said Bahsoun. “As we all know, ignorance indeed is very costly.”

Without proper information, no one knows for sure when Lebanon’s telecom troubles will start to clear. The only thing that is certain is that the longer the current situation persists, the more opportunities the country misses.

“You cannot imagine after the crash of Dubai, how many companies contacted us to evaluate the possibility of switching their headquarters to Beirut,” said Torbey. “The single obstacle that prevented them from doing so was the poor performance and high prices of telecom connections.”

First published in Executive Magazine’s March Issue


Lebanon’s elephant in the room

As the public debt looms, many prefer to look away

Lebanon's new cabinet has $50 billion of debt weighing on its shoulders (AFP)

by Sami Halabi

Lebanon’s relationship with debt closely resembles an addiction to alcohol. For starters, it’s quite evident that the country wasn’t thinking straight when it took out loans with interest rates of more than 35 percent to fund its post-war reconstruction. Then, instead of accepting the inevitable fiscal hangover and reforming its institutions, the country continued to borrow money (mostly from its own banks) and spend it on those same institutions that never shaped-up. In order to remedy this situation, it may be wise to refer to the American Psychological Association’s summary of the ‘12 Step Program’, which has helped many overcome alcoholism. The first step states that recovery requires one to “admit that one cannot control one’s addiction or compulsion.”

Lebanon has yet to truly admit that it has a problem. At nearly $50 billion and 154 percent of Lebanon’s gross domestic product, the debt is mounting and the only policy the Lebanese government has enacted is to swap the short-term debt for long-term debt, in an attempt to keep its head above water just that little bit longer.
Now that Lebanon has a new government, a line is again being drawn in the sand between those who believe reducing the debt is the single largest economic problem the government must deal with, and those who consider it to be “perfectly sustainable,” as does Lebanon’s Central Bank Governor, Riad Salameh.

The “sustainable” theory goes that, given the high liquidity levels in Lebanese banks, they have the cash on hand to continue lending to the government to fund its spending; given Lebanon’s high GDP growth rate, government revenues in the form of taxes will grow, bringing down the yearly deficit and, given that the American dollar is forecast to drop in value and most of Lebanon’s debt is priced in dollars, the value of the debt will fall all by itself anyway. If Lebanon is attracting billions of dollars of investment inflows and registering record growth numbers, then why rock the boat? In time, the debt will reach a manageable ratio relative to GDP and the problem will solve itself.

That’s the rosy version, and a line put forward by prominent members of Lebanon’s banking sector, though such optimism may be easier when they hold around $110 billion in assets and are profiting from much of the debt anyway. The rest of Lebanon, however, hasn’t the luxury to be so cheerful while the country runs a deficit of 10.5 percent of GDP and has spent 20 percent more in the first three quarters of 2009 than it did in 2008. Even though these figures may be within global norms today, one must remember that elsewhere in the world government expenditures have skyrocketed to bailout their economies.

There are only two countries in the world that are in a worse state than Lebanon in terms of their burden of debt — one of them is Zimbabwe, where the local currency value has all but evaporated, and the other is Japan, the world’s second largest economy.

Japan already has some of the best infrastructure in the world; Lebanon doesn’t.

With the debt looming overhead, not only is the Lebanese government less able to provide or upgrade their antiquated public services, they also have less ability to fledge many sectors that people depend on such as agriculture or industry, not to mention protect their strategic and military interests. Lest we also forget that another conflict with Israel would completely wipe out Lebanon’s new-found investor confidence, or the fact that our politicians can hardly be trusted not to start another political debacle, putting us back in a situation of low, no or negative growth.
Those who believe Lebanon’s debt is sustainable because of the country’s economic growth tend to gloss over the fact that growth has not been uniform across all sectors, and that this is resulting in an economy that lacks diversification — the Lebanese are placing all their eggs in just a few very large baskets. To make matters worse, other untapped potential markets for development — such as water resources, refining and hydrocarbon development — are still taboo for Lebanon’s economic policy makers.

Basic economic theory, and history for that matter, dictates that for every boom there is a corresponding trough, which means that at some point in the near future the debt will not seem as manageable as some view it during this current growth cycle. Hence, as one European Commission economist stated last October, Lebanon’s fiscal situation is, and will likely remain, “unsustainable.”

Even the likely privatization of telecoms and electricity, from which the proceeds will go to reducing the principal on the debt, will not prove to be a panacea. At present valuations, Lebanon will not get much in return for these national industries due to their dismal state.

A focus on growth should always be a priority for an economy, but the kind of growth currently on the table boxes the economy in and tries to shield it from the inevitable reality of having to deal with the debt. An economy’s sustainability comes from its versitility and ability to grow on many levels — not just its ability to pay the interest on the debt it hopes will go away.

First published in Executive Magazine’s December 2009 Middle East issue

As the public debt looms many prefer to look away

The Big Broadband Joke

Why Lebanon’s Internet sprints at a snail’s pace

by Sami Halabi

The long hours Lebanon’s Internet users spend sitting in front of their computers waiting for content to download is not the fault of some computer conspiracy. The decrepit state of the Internet is the result of poor governance, suffocating bureaucracy, illegal internet providers and sectarian politics.

lebanon slow internet connection

Illegal Internet networks made headlines last month when a microwave transmission connection installed on top of the Barouk Mountain in the Chouf region of Lebanon was alleged to have been taking bandwidth from Israel.
The incident set off a wave of accusations from Member of Parliament Ahmad Houry, part of the March 14 parliamentary bloc that won last June’s elections, against the present care-taker telecom Minister Gebran Bassil, who is part of the Free Patriotic Movement (FPM) opposition party. Houry claimed Minister Bassil was somehow involved in facilitating the illegal connection.

Hezbollah, allies of the FPM, said that the connection was discovered in April but “a large political party” had prevented the station from being raided earlier. The minister, who did not respond to requests for an interview, has denied the allegations. The station was installed in 2006, however, when Marwan Hamade — a March 14 ally — was telecommunications minister.

Sources in the telecommunications industry, who asked not to be identified in order to speak freely, told Executive that the station owner has not been arrested, which is “very weird,” said Habib Torbey, head of the Lebanese Telecommunications Association (LTA).
Mohamad Safa, an adviser to Bassil — who stressed that he speaks for himself and not the minister — said there were “many partners involved” in the Barouk business, which he claims is now being made an issue in order to maintain the “oligopoly” of Lebanon’s legal Internet providers, who are losing market share to unlicensed providers.
“Some of them [the partners] have been arrested and some have not, but there are no real details because these are security-related matters,” he added. “No one will be able to tell you who the ‘godfather’ is, and if they do they are lying.”
Ironically, the Barouk incident has also cast light upon how technically uncomplicated it would be to increase bandwidth in the country.
“The official sector has [a bandwidth of] only 1 gigabit per second (Gbps). The Israeli antenna of Barouk alone had 10 Gbps,” said Riad Bahsoun, telecom expert at the International Telecommunications Union (ITU), a UN agency for information and communications technology; Bahsoun also advises the Lebanese government on telecom issues. Telecom Minister Bassil recently contradicted this statement though, saying the station was only transmitting 300 megabits per second (Mbps).

Does Lebanon have broadband?
Illegal Internet providers in Lebanon service more than half the market, and for good reason —  Lebanon’s legal internet is slow.  Even with these illegal suppliers, however, Lebanon’s market is grossly undersupplied.
Many Internet service providers, like Cyberia and IDM, as well as state provider Ogero, claim they provide broadband internet service.  That assertion is debatable.
“Nothing [in the market] is really broadband,” said the LTA’s Torbey when asked why his company, GlobalCom Data Services, which owns Inconet Data Management (IDM), one of Lebanon’s largest Internet Service Providers, advertises their Internet service as broadband.

The definition of broadband is foggy. The International Telecommunication Union (ITU) defines broadband as a transmission capacity that is 1.5 to 2 megabits per second (Mbps). In the United States, the Federal Communication Commission is currently seeking public comment on what should constitute broadband, with the goal being to help consumers. The current minimum bandwidth to qualify as broadband in the US is 0.75 Mbps. The Organization for Economic Co-operation and Development defines broadband as 0.25 Mbps in at least one direction. This rate is the most common baseline that is marketed as “broadband” around the world.
Salam Yamout, co-founding member of the Lebanese Broadband Stakeholders Group, a local lobby group that pushes for broadband in Lebanon, defines broadband as 100 Mbps “at the access point for businesses and people who require it.”

The Internet speeds available to the Lebanese public today vary from 0.125 Mbps to 2.3 Mbps.  Lebanon’s Internet download speed averages 0.59 Mbps, according to Ookla Net Metrics, an Internet diagnostic company. Ookla says the world average is about 10 times that, at 5.5 Mbps.
It’s astonishing to think that these speeds represent major  progress since Digital Subscriber Line (DSL) technology became available in the summer of 2007.
“The introduction of DSL was a very good step although it was long, long, long overdue,” said Leila Serhan, country director at Microsoft Lebanon. “It is still a very shy step and [the slow speed] is definitely hindering the introduction of a lot of the services you can get on the Internet.”
That hindrance has led to a low penetration rate for Internet service, resulting in a vast untapped market for broadband Internet. With ADSL penetration, a precursor to broadband Internet, at less than 10 percent of the population and consumers willing to adopt new technologies, there is ample room for the market to grow, yet it has not.
“There is no network and there is no infrastructure,” said a multinational telecommunications executive who asked to remain anonymous in order to speak freely.
The lack of decent Internet has also hindered Lebanon’s business world. Khalil Letayf, deputy general manager of Société Générale de Banque au Liban and a member of the Lebanese Broadband Stakeholders Group, explained that because of the lack of broadband, his bank has to incur extra costs to make physical backups instead of transferring data over the Internet, due to of the lack of reliable infrastructure. He said that, as a result of operating in such an environment, the risk factors associated with all the banks have increased.

Why so slow?
Lebanon’s Internet market does not run on a network made for data, but rather one made for voice. The current network was built by Siemens, Ericsson and Nokia in the early 1990s with $1.3 billion of funding from the World Bank. There has been no comprehensive plan for improving the infrastructure since then.

Lebanon’s telecommunications market
“What Lebanon has done since 1994 is build [its telecom infrastructure] in blocks,” said the ITU’s Bahsoun. Bahsoun explains that in the 1990s telecom operations like Internet and mobile were separate, and “back then they didn’t know that all these [Internet and communications technology] services, were going to converge.”
Since then, there has been little restructuring and Lebanon’s telecom ministry today is a fragmented body with two general directorates, a separate office that deals with mobile communications and miles of red tape holding it all together.
Meanwhile, regional telecoms have stayed on the cutting edge of Internet technology and service. Telecom services have been combined and broadband with hassle-free, high-speed upload and download is a reality across the region — but not in Lebanon. Transfering data is a costly and cumbersome process that involves the converting the data into a format suitable for transmission over Lebanon’s archaic network. The result for consumers is low quality and speed in tandem with high costs. The economy surely suffers, as broadband penetration has become a key economic indicator. The World Bank estimates that every 10 percent increase in broadband penetration accelerates economic growth by 1.3 percent.

Where’s the problem?
Because the government only allows Internet service providers (ISPs) a miniscule amount of bandwidth — the measure of available data communication resources — there is no variety in the market. The packages offered by the county’s ISPs are identical in terms of speed, meaning all the options available are relatively similar. What makes matters worse is that the ISPs impose download ceilings or charge for additional downloads above a certain level. This has resulted in a situation where the typical Internet user in Lebanon pays eight times more than a typical user in similar countries like Jordan and Egypt.

Internet cost of download
Unlike the rest of the telecom sector in Lebanon, which is owned by the government, the retail Internet market does operate under conditions of limited competition. That fact has spurred the growth of several ISPs and Data Service Providers (DSPs). Both are licensed by the Telecom Regulatory Authority (TRA), Lebanon’s telecom regulator — the only difference being that DSPs are assigned a certain frequency they can use to provide services. At present, there are around 20 ISPs and 6 DSPs and many are owned by the same people who typically have connections to politicians. One example is the CableOne DSP, which also owns the Lynx ISP, and is partly owned by Karim Hamade, the son of Lebanon’s previous telecom minister Marwan Hamade. One of the largest DSPs, Sodetel, is half owned by the Ministry of Telecommunications itself and Solidere, the large real estate developer which was founded by the late Prime Minister Rafiq Hariri.  The Hariri family also hold a major stake in the Cyberia ISP.
No matter how many connections exist or how much competition there is, without adequate infrastructure and capacity the market cannot grow. The problem is rooted in the amount of available bandwidth in the country and who controls it. Officially, the total amount of bandwidth in the country last january did not exceed 260 Mbps, according to the Telecom Regulatory Authority (TRA), but most observers put the figure today at around one Gbps. This, however, does not take into account the illegal market which controls “40 to 60 percent of the market,” according to Torbey. The Ministry of Telecommunications distributes all the bandwidth in the country and does not release detailed information, even to the TRA.

How to make it better?
In order to legally increase the level of bandwidth however, sizeable investments have to be made to create a “national backbone” in Lebanon. The national backbone will be like an information superhighway that connects the major cities of Lebanon.

Internet prices in Lebanon
“Instead of a superhighway, what you have are small, small roads,” said Kamal Shehadi, chairman of the TRA. “The connectivity between these places is not what it should be.”
Bassil has announced several projects in order to upgrade the current infrastructure, including an upgrade of the existing system like the backbone project.
One development expected to take place is a pilot project in the Hamra and Ashrafieh districts of Beirut that will, in theory, lay down fiber cables. The $14 million project aims to supply better connectivity to residents as well as provide a reference for a previously announced project to build a national backbone that the ministry estimates will cost around $64 million. But even the pilot project has yet to commence and the budget has not been approved by the Council of Ministers.
“They need decisions and they have not got all the decisions,” said the ITU’s Bahsoun.
The decisions in question must be made by the telecom ministry. The telecom ministry today consists of two general directorates, the Directorate of Operations and Maintenance and the Directorate of Construction and Equipment. Moreover, the Directorate of Operations and Maintenance, headed by Abdulmenaim Youssef, also controls the government-owned company that runs the current Internet infrastructure holder, Ogero.

A mess of a ministry
“It is one of the most embarrassing aspects [of Lebanese telecoms] that the person implementing and supervising [the implementation] is the same person,” said Safa, the telecom minister’s advisor.

Youssef did not respond to repeated requests for comment. He was appointed to both posts by Lebanon’s former telecom minister Marwan Hamade in 2005. Beyond being a gross contravention of efficient corporate governance, the position that Youssef maintains has made it almost impossible to ascertain who is in charge of what at the ministry. When Executive called Naji Andraous, the director general of construction and maintenance, to acquire information about the status of the pilot project’s progress, Andaous’ office said that Youssef was in charge.

Kamal Shehadi, chairman of Lebanon’s TRA
Kamal Shehadi is the head of Lebanon's telecomminications regulator

“Abdulmenaim Youssef is reluctant to progress in Lebanon [sic],” claimed Bahsoun.
Youssef held the position of general director of the Directorate of Operations and Maintenance from 1995 to 1999, when he was imprisoned and later released in an extremely politicized struggle for control over the telecom industry. He is widely seen as the representative of current caretaker Prime Minister Fouad Siniora and his political coalition’s interests.
“[Youssef’s] appointments were made at the behest of the previous governments and Prime Minister [Siniora],” says Safa.
It is worth noting that Safa is an advisor to telecom minister Bassil, who is part of the opposition to Siniora’s ruling March 14 coalition. The minister has become the focal point of Lebanon’s most recent political debacle between Michel Aoun, Bassil’s father in-law, and Saad Hariri, the prime minister-designate. Aoun is insisting that Bassil maintain his position at the helm of the telecom ministry.
But the fight over control of the sector seems to run much deeper than the ordinary squabbling between Lebanon’s politicians. Lebanon’s telecom law, Law 431, outlines the legal procedures that should be followed in order to reform the sector. The trouble is that the law has been implemented in pieces, and as such, its interpretation has been a contested topic between the TRA, the telecom ministry and all the political and commercial interests pegged to both bodies.
“If you implement [the law] in parts, especially when politics are involved, you take the parts that you like and the spirit of the law is lost,” said Safa.
The law calls for the creation of a joint stock company called Liban Telecom that will be granted a license to operate for 20 years and provide all other telephony services to the public. Liban Telecom will also acquire the assets of the current operator, Ogero, which includes the current Internet and phone network and any upgrades made to it.

Internet speed in Beirut lebanon
The latest point of contention between the ministry and the TRA is how to increase the bandwidth in the country. Having already announced the expansion projects, the ministry’s current direction is to start by increasing the bandwidth themselves. Critics say the process is hampered by the inner workings of the ministry, especially Youssef’s offices.

Evasive and unaccountable
“The minister asked in a letter about how the E1s are being distributed and the Abdulmenaim Youssef says ‘don’t respond,’” said Bahsoun. (An E1 is a measure of bandwidth equal to 2 Mbps). “When the minister calls [to follow up], he says ‘I don’t know, the letter went missing.’”
Even the Telecom Regulatory Authority’s annual report criticizes the telecom ministry because it will “only release limited information” about the current DSL market, “and as a result, it has been difficult to analyze the root causes of this slow development.” The report goes on to state that “it can be concluded that while some of the problems stem from anti-competitive behavior, others relate to the lack of appropriate investments.”

Proposed Telecom Regulatory Authority liberalization scheme
Factor in the political rivalries in Lebanon and the prospect of broadband becomes even less probable.
“If your objective is to make the minister fail then, you move like a tortoise and tell people that the minister does not act,” said Safa. [As stated above, calls to Youssef’s office to respond to these, and other statements, were not returned].
The other option on the table would be to allow the private sector to install, operate and provision broadband services. However, this too has become a point of contention between Lebanon’s ministry and its regulator.
The TRA wants to offer three “National Broadband Carrier Licenses” to the private sector which would allow them to install the fiber optic cables needed to facilitate broadband Internet and sell the services to end users. One of these licenses would legally have to go to Liban Telecom and other two would be offered in an open international auction. The proposal has been opposed by the minister who has issued his own policy paper stating that he would offer the already existing DSPs (data service providers) one of the two remaining licenses.

TRA vs the telecom minister
The ministry’s position has in part been facilitated by the fact that the law has not been fully implemented and Liban Telecom, the body that the TRA is mandated to regulate, does not exist.

Telecommunications Minister Gebran Bassil
Bassil was telecom minisiter until late 2009

“The [ministry’s policy paper] has a schizophrenic nature,” said Shehadi. “On the one hand it said the TRA is not respecting the law and it is being autonomous. On the other hand it said clearly ‘I want to change the law to make the TRA depend on and report to the minister.’”
Law 431 does say the minister is granted the authority to “establish the general rules for the regulation of telecommunications services in Lebanon” but it also says the TRA has the authority to “organize the bidding process, and issue, execute, oversee, amend, enforce, suspend and revoke licenses.” The minister’s policy paper also criticizes the TRA for not issuing licenses.
“That is bull,” said Shehadi angrily. “The TRA prepared the tender for the mobile licenses and this process was suspended by political decision, not by the TRA. The TRA has [also] issued licenses to about 6 DSPs and about 20 ISPs.”
Shehadi also criticized the minister for not forwarding the TRA’s draft licensing regulation to the Shura council, Lebanon’s highest court, in order to begin the bidding process. Safa defended the minister’s right to amend the legislation if he sees fit.
As far as the DSPs are concerned, they are happy to go along with the minister’s policy because it serves their purposes by protecting them from large international players.
Shehadi, on the other hand, says this policy and the position of the DSPs are putting Lebanon’s economic future at risk by erecting barriers to trade and going against the government’s stated liberalization policy.
“The four wireless service providers who claim, pretend or call for protection from foreign investors are jeopardizing Lebanon’s accession to the World Trade Organization, and Lebanon’s trade commitments to the European Union and to all of our trading partners, for very specific, vary narrow private interests,” Shehadi said, adding that any international player in his right mind “will ally with one of the incumbents,” so they should not fear international entrants.
“We are not trying to recreate a new monopoly or oligopoly,” protests the LTA’s Torbey. “We do believe in competition and free markets. He said that the TRA “cannot start with a clean slate as if nothing has happened in the past,” referring to their presence in the market and the preferential treatment they seek to gain.
Law 431, however, does state that “no discrimination or restrictions shall be imposed on providing the services, as no such restrictions shall be imposed on owning or operating the necessary infrastructure to provide these services.”
But it seems politics have once again stunted the implementation of the law. “In principle the TRA is right, but the minister is the political representative and implements the politics of the government,” said Safa.

Liban Telecom and sectarian politics
When it comes to political appointments in Lebanon, horse trading is commonplace and as such the country’s politicians have yet to come to a consensus over the chairman and board of directors of Liban Telecom. Each delay makes the situation in the telecom industry worse and facilitates the wrangling for power over the sector. So why hasn’t Lebanon Telecom been established?
If it is ever created, Liban Telecom will be regulated by the TRA, thus releasing the control the ministry currently wields over the network as well as dissolving the current operator of the network, Ogero. This will mean that Youssef and the interests that he represents will also have less control over the sector.

Internet service providers (ISPs) in Lebanon

Law 431 also states that the government “may, within a period of two years of the establishment of the company [Liban Telecom], sell a portion not exceeding 40 percent” to a strategic partner. That strategic partner could be anyone from the operators who are present on the market, such as Zain and Orascom, or those allied with political parties in Lebanon that have a stake in the telecom industry.
Whether or not there is a setup in the works may be one thing, but the creation of Liban Telecom also seems to hinge upon another of Lebanon’s more unpleasant sectarian realities.
“The [future] board of Liban Telecom will need to split according to the confessions of the members and a lot of power has been given to the chairman. The chairman will have to be decided on the basis of confession,” said Safa.
Here again there seems to be some horse trading at play because to appoint a member of one confession to a major post means there has to be a balance somewhere else. Sometimes that balance is not maintained and institutions function (or malfunction) without the presence of supervisors, or the intended accountability structures. The Lebanese government to date has failed to even appoint all of its mayors — the very officials who are responsible for providing basic services to the country’s population — let alone appointing the board of a nonexistent entity like Liban Telecom.
“You are in a country where there are sectarian issues,” said the ITU’s Bahsoun. “You have ministers who don’t know why they are ministers; it’s a system.”

Supposing Lebanon’s bickering politicians do eventually work out their differences over the telecom ministry, Liban Telecom, privatization, the national licenses, international commercial interests and the implementation of Law 431, serious work will have to be done to implement a national backbone. This would seem to be a tall order for Lebanon’s politicians who still cannot agree over the formation of a cabinet, let alone implement a progressive economic policy. One can’t forget that the same politicians who are hampering the advancement of an essential economic development tool were also elected last June by the people who still pay exorbitant fees for archaic Internet access.

But, as the ITU’s Bahsoun said: “If the people are happy, what can you do?”

First published in Executive Magazine’s September 2009 issue