BROADBAND COMPETITION STILL SLUGGISH BUT FUTURE CAPACITY

UNCLAS AMMAN 002782

SENSITIVE
SIPDIS

STATE FOR NEA/ELA

E.O. 12958: N/A
TAGS: ECPS EINT EINV TINT JO
SUBJECT: BROADBAND COMPETITION STILL SLUGGISH BUT FUTURE CAPACITY
GROWTH COULD ACCELERATE INDUSTRY

REFS: A) AMMAN 2490, B) 07 AMMAN 4717


1. (SBU) Summary: An estimated 21% of Jordanians use the internet
but only 3% of the population subscribes to an internet service.
Jordan is currently served by 20 internet service providers (ISPs)
which resell service from Jordan Telecom Group/Orange (JTG).
Jordan's broadband service remains expensive and slow in spite of
the recent launch of two WIMAX competitors. Prices are expected to
fall significantly when a second submarine cable becomes operational
in 2009 which will triple capacity and end JTG's monopoly over
international access. Internet service from the National Electrical
Company (NEPCO) could further increase competition. End Summary.


21% of Jordanians Use the Internet but Just 3% Subscribe
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2. (SBU) The Department of Statistics reports that Jordan has 1.2
million Internet users in a country with a population of 5.7 million
for a 21% penetration rate. The number of internet subscribers is
far lower and estimated at approximately 170,000 (3%). The study
further estimates that 33% of homes have computers but only 16% of
them are connected to the Internet. Ministry of Information and
Communications Technology Acting Secretary General Afram Jamil told
EconOff that internet penetration is low in Jordan for four reasons
that he thinks will not change quickly: cost of internet service;
low computer ownership rates; insufficient Jordanian content in
either Arabic or English; and least important, some social and
ethical concerns about the Internet and its content.

Former Telecommunications Monopoly Still Dominates Internet
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3. (SBU) Al-Ansari Al-Mashagbah, Director of the Regulatory
Department of the Telecommunication Regulatory Commission (TRC),
explained that while internet service in Jordan has been liberalized
with 20 service providers, the data lines themselves remain the
property of Jordan Telecom Group/Orange (JTG). As a result, all
ADSL and dial-up ISPs in Jordan rely upon Orange's local fixed-line
loop infrastructure for interconnection. This reliance on Orange's
infrastructure has long been blamed for the high price of Internet
access and the slow adoption of broadband services within Jordan
(ref B). JTG is required to provide access to licensed ISPs and TRC
has the responsibility to resole disputes between JTG and the ISPs.



4. (U) A September report by Arab Advisors Group estimated that JTG
has a 50% market share in internet service and earned $12 million
from internet revenues in the first half of 2008. This is a 30%
increase from the same period in 2007 but is still tiny compared to
revenues from mobile and fixed line services which are both ten
times greater (ref A). Ibrahim Akinci, Marketing Director of Zain,
said that his company and others share the rest of the market with
similar internet products since they all re-sell the same JTG
services.

Quality of Broadband Limited by Capacity
--------------


5. (SBU) Raed Bilbessi, CEO of Int@j, Jordan's information
technology industry association, said that although the government
has named 2008 "the year of broadband" that broadband service in
Jordan remains slow and expensive. He said Jordan has significant
network capacity challenges and that JTG will not lower its
broadband prices because it does not have the bandwidth to serve
additional customers. Ghiath Sukhtian, executive Vice Chairman of
VTEL, agreed and said Jordan's current capacity will be further
challenged by an increase in Blackberries and other internet-enabled
devices and especially from increased online video downloads.

WIMAX Has a Wi-Minimal Impact
--------------


6. (SBU) TRC officials had hoped that the launch of WIMAX, an
Internet technology that uses fixed, local radio cells to provide
high-speed wireless Internet access, would increase competition and
significantly lower prices but this has not yet happened (ref B).
Mamoun Balqar, Vice-Chairman of TRC, said that the first WIMAX
launch by Umniah had serious technical problems which hurt the
technology's reputation and limited sales. He said that while ATCO,

the second WIMAX service provider, had a smoother technical launch,
the overall reputation of WIMAX continues to suffer and hurt sales.
Akinci said that WIMAX in Jordan has struggled because of poor
indoor signal quality but added that if the service quality
improves, JTG will be forced to improve its service or lower prices.
Al-Mashagbah said that three additional WIMAX providers have
received licenses and are expected to begin offering service soon.


New Capacity from Submarine Cable
--------------


7. (SBU) VTEL is currently planning to build an optical fiber
network in Jordan with a capacity of 64 STM-1s which will more than
triple Jordan's current network capacity. This new network will
have international gateway access by connecting to the recently
commissioned Falcon cable system and via connections with Iraq,
Syria, and Israel. Sukhtian predicted that most telecommunications
companies in Jordan would buy VTEL capacity for either primary
services or back-up redundancy. Sukhtian predicted that this second
submarine cable will be operational in September 2009.


8. (SBU) Bilbessi was optimistic about the opening of a second
international gateway as a means of lowering broadband prices since
it would break part of JTG's monopoly. He expressed some concern
that lowered prices will lead to increased use and that without an
investment in telecommunications infrastructure that speed and
quality will plummet further. Jamil said that the negotiations for
this cable were extensive and difficult because Jordan's small
market size makes it difficult to justify a large investment in
telecommunications infrastructure. Sukhtian predicted that
broadband prices could fall 80% once all of the new capacity is
operational and opined that "JTG is making a bundle today."

Hey, You Guys! Internet from the Electric Company
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9. (U) Another form of competition may also come from the National
Electricity Company (NEPCO) which is working to develop a "dark
fiber" offering. This would provide internet service through the
existing national electricity network. An agreement was signed this
summer between NEPCO and Hadatha Investment Company. Broadband over
power lines (BPL) is a technology being tested worldwide to extend
broadband service to remote geographical areas with existing
electrical service where the cost of laying fiber or cable is not
financially viable. Existing power grids are modified with the
addition of broadband equipment. Internet data is then transmitted
via radio frequency energy on the same line as the electrical
current but because they vibrate at different frequencies the two do
not interfere with one another. Comment: At this time, it is not
known whether this service, which is designed to provide NEPCO with
an additional revenue stream, will strain Jordan's already
over-burdened electric grid. End Comment.

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