Identifier
Created
Classification
Origin
08BAGHDAD1023
2008-04-03 09:17:00
CONFIDENTIAL
Embassy Baghdad
Cable title:  

IRAQ'S PRIVATE-SECTOR TELECOMS FIRMS FORGE AHEAD

Tags:  ECON EINT ECPS 
pdf how-to read a cable
VZCZCXYZ0015
RR RUEHWEB

DE RUEHGB #1023/01 0940917
ZNY CCCCC ZZH
R 030917Z APR 08
FM AMEMBASSY BAGHDAD
TO SECSTATE WASHDC 6622
C O N F I D E N T I A L BAGHDAD 001023 

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/02/2018
TAGS: ECON EINT ECPS
SUBJECT: IRAQ'S PRIVATE-SECTOR TELECOMS FIRMS FORGE AHEAD
WHILE THE PUBLIC SECTOR LANGUISHES

REF: 2007 BAGHDAD 2820

Classified By: Economic Minister Charles P. Ries for reasons 1.4 (b) an
d (d).

C O N F I D E N T I A L BAGHDAD 001023

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/02/2018
TAGS: ECON EINT ECPS
SUBJECT: IRAQ'S PRIVATE-SECTOR TELECOMS FIRMS FORGE AHEAD
WHILE THE PUBLIC SECTOR LANGUISHES

REF: 2007 BAGHDAD 2820

Classified By: Economic Minister Charles P. Ries for reasons 1.4 (b) an
d (d).


1. (C) SUMMARY: Iraq's private-sector led mobile and wireless
telecommunications markets are developing apace. The
Kurdistan-based, Barzani family-affiliated Korek Telecom
recently concluded an interconnection agreement with Zain,
the Kuwaiti-backed leading nationwide operator. The
agreement marked a milestone: customers of Iraq's three
licensed nationwide global system mobile (GSM)
operators--Korek, Zain, and Qatari-owned Asiacell--can now
all call each other, greatly expanding the mobile service
available and integrating the national market.
Private-sector providers of Wireless Local Loop (WLL) and
Wi-Fi voice and internet services similarly continue to
expand their presence. While the private sector forges
ahead, however, Iraq's primary public-sector communications
bodies--the Ministry of Communications (MOC),the Iraq
Telephone and Post Company (ITPC),the State Company for
Internet Service (SCIS),and the Communications and Media
Commission (CMC)--struggle to perform their respective roles,
hampered by weak leadership, technical capacity and human
resource constraints, and ongoing security challenges.
Without stronger leadership, Iraq's public sector
communications institutions run the risk of rendering
themselves irrelevant or, worse, impeding the private
sector's progress. END SUMMARY.

--------------
THE PRIVATE SECTOR FORGES AHEAD
--------------


2. (U) Korek recently concluded an interconnection agreement
with Zain, paving the way for customers of Iraq's three
licensed nationwide GSM operators to call each other. Korek
users can now call Zain users, and vice versa. The agreement
is the most recent in a series of deals done by the three
nationwide GSM operators since they won their fifteen-year,
USD 1.25 billion licenses in an auction held by the
Government of Iraq (GOI) in Amman, Jordan, in August 2007
(reftel). Zain and Asiacell have a roaming agreement,
allowing their users not only to call each other, but also to
use each other's networks. Korek and Asiacell also have a

roaming agreement. (NOTE: Generally, an interconnection
agreement allows users of one network to call users of
another network; a roaming agreement also allows users of one
network to use another network to make calls when they are
outside the coverage area of their provider's network. END
NOTE.)


3. (C) The three nationwide GSM operators continue to build
out and upgrade their infrastructure and, in Zain's case, to
integrate assets it acquired when it purchased Iraqna, an
Egyptian-backed firm that had operated in central Iraq from
2004 to 2007 under a license granted by the Coalition
Provisional Authority (CPA). (NOTE: From 2004 to 2007, Zain,
which formerly did business in Iraq under the name MTC
Atheer, operated under a CPA license in the south, while
Asiacell operated in the north. Korek, under circumstances
many local contacts called into question, outbid Iraqna in
Amman for the third nationwide license. Cash-poor Korek is
now in buyout talks with UAE-based Etisalat. Zain acquired
Iraqna for USD 1.2 billion in December 2007, making it Iraq's
largest operator. END NOTE.)


4. (U) Zain, Asiacell, and Korek now claim roughly 7 million,
4 million, and 1.6 million customers, respectively, giving
the Iraqi GSM market more than 12 million subscribers and a
nationwide penetration rate of approximately 37 percent.
Penetration in urban areas is far greater than the national
rate: Baghdad's is roughly 70 percent. Pre-2003 mobile usage
was essentially nil. Moreover, all three providers are
upgrading their second generation (2G) technology to so
called 2.5G and 3G technologies, which transmit data in
addition to voice communications.


5. (U) Private sector providers of other technologies are
expanding as well. The CMC auctioned two nationwide WLL
licenses in 2006 and awarded a third license to ITPC. (NOTE:
WLL offers its users voice and internet services similar to
those of GSM but based on code division multiple access
(CDMA) technology. END NOTE.) ITPC, in turn, awarded more
than 18 sublicenses for firms to operate in each of Iraq's
governorates. Several WLL licensees are deploying networks
and now serve an estimated 250,000 subscribers. A handful of
internet service providers (ISPs) using long range Wi-Fi
devices cater to an estimated 250,000 subscribers in and
around Baghdad, Basrah, and Kurdistan. In addition, an
unknown number of local ISPs lease access to very small
aperture terminals (VSATs) and utilize shorter range Wi-Fi
devices to provide internet service to neighborhoods. Much

of this activity is unlicensed and unregulated, and in some
high density areas service has become "polluted," i.e.,
degraded by excessive and overlapping traffic.

--------------
THE PUBLIC SECTOR LANGUISHES
--------------


6. (C) The MOC has lacked genuine leadership since
ex-Minister of Communications Mohammed Allawi (Iraqiyya)
formally resigned in November 2007. (NOTE: Allawi is a
cousin of former Prime Minister Ayad Allawi and belatedly
withdrew from the GOI as part of Iraqiyya's withdrawal. END
NOTE.) Still a member of the Council of Representatives
(CoR),Allawi exerts some influence over the Ministry through
his relationship with Acting Communications Minister Jassim
Mohammed Jafar, who is the full time Minister of Youth and
Sport. Acting Minister Jafar, however, is unfamiliar with
communications issues and has been disengaged from his MOC
portfolio, visiting the Ministry infrequently and only to
attend to minimal administrative matters. Minister Jafar has
also proven unresponsive to USG efforts to contact him
regarding communications issues. Due in part to a lack of
MoC leadership, a draft telecommunications and media law to
replace CPA Order Number 65 has stagnated in the CoR since
its first reading in May 2007. The MOC has also been
reluctant to conclude a much needed cross-border
telecommunications interconnection agreement with
Turkey. (NOTE: EMIN raised this particular problem with
Deputy Prime Minister Barham Salih, and the DPM promised to
look into it. END NOTE.) Bureaucratic paralysis has also
prevented the MOC from proceeding to execute either of two
contracts it signed--one under former Minister Jowan Massum
and another under former Minister Allawi--to connect Iraq's
national fiber optic network to the global system of undersea
telecommunications cables.


7. (C) The de facto leadership vacuum manifests itself in the
operations of the MOC's two major state owned enterprises,
ITPC and SCIS. ITPC--Iraq's sole provider of landline
telecommunications services and owner of the country's fiber
optic backbone and microwave networks--has been feckless in
its efforts to build out, repair, and maintain this vital
infrastructure. Roughly 1.3 million Iraqis are landline
telephone subscribers, but only 60-70 percent of them
actually have service and only an estimated 25 percent pay
their bills. Fiber cuts resulting from improvised explosive
devices (IEDs) and errant digging on infrastructure projects
(often unrelated to communications) plague the network and go
unfixed: ITPC lacks a sufficient cadre of technically
competent engineers and technicians. ITPC presently has a
contract with Nortel to install equipment throughout the
existing national fiber network; the project has an estimated
completion date of March 2009, but ITPC's inability to test
the fiber as a precondition to Nortel's work has delayed
execution. ITPC recently contracted Nortel to do the testing
itself, which may help expedite the equipment installation.
If the fiber optic backbone were operating at its potential,
private sector firms and MNF-I would readily pay ITPC for
access to the network. ITPC's Director General (DG),Audai
Abdulamir, reportedly intends to resign in the summer, which
may leave the company even more adrift if the GOI does not
quickly appoint a more competent replacement.


8. (C) SCIS, Iraq's public provider of internet service, is
similarly afflicted by technical capacity and human resource
constraints. SCIS has roughly 260,000 mostly dial-up
internet subscribers. Since assuming, in September 2007,
operations and maintenance (O&M) for the USG-funded, USD 19
million GOI wireless broadband network (WBBN),the WBBN has
operated an estimated 60 percent of the time. Moreover, the
frequent service disruptions have delayed progress on a
related USG-funded project to install video teleconferencing
(VTC) equipment piggybacking on the WBBN. The WBBN links
(when it works) 42 GOI sites, including most of the
ministries and other key locations, such as the Prime
Minister's Office. (COMMENT: Successfully installing and
maintaining VTC capability throughout the GOI could reduce
the Coalition's need to travel to the red zone for routine
meetings at the ministries, saving security outlays and,
potentially, lives. END COMMENT.) One positive development
here: SCIS DG Kassim Hassani recently asked the Iraq
Transition Assistance Office (ITAO) for technical advice in
drafting an SCIS scope of work for a GOI-funded O&M contract
for the WBBN. ITAO is providing the requested assistance.


9. (C) The CMC, Iraq's independent telecommunications
regulator, has likewise suffered from weak leadership and
security challenges. The CMC, inter alia, allocates and
regulates radio spectrum for telecommunications services.
Formally comprised of a nine-member Board of Commissioners,
one of whom appointed as a chairperson, the CMC has limped
along with only four commissioners for months. The Chairman,

Siyamind Othman, intends to leave his position at the end of
his four-year term on April 18, 2008. Meetings with former
Communications Minister Jowan Massum (PUK, and daughter of
PUK CoR bloc leader Fuaod Massum) suggest that she is angling
to be the next chairperson of the CMC. The CMC may however
be leaderless if the GOI fails to nominate quickly Othman's
replacement, whoever it may be. (COMMENT: The net effect of
such a vacancy may be minimal: security challenges have
prevented the CMC from policing Iraq's radio spectrum
effectively. Past attempts to shut down unauthorized Wi-Fi
transmissions, which were polluting service, resulted in
violent intimidation and attempted assassinations of CMC
staff: the staff has been understandably reluctant to press
such matters since. END COMMENT.)


10. (C) COMMENT: Post's diplomatic engagement and technical
assistance for Iraq's telecommunications focus on promoting a
vibrant, private sector-led, independently regulated market
that delivers reliable, affordable services to all Iraqis.
Owing primarily to strong investor interest in penetrating
Iraq's still maturing mobile and wireless telecommunications
markets, the "private sector-led" part of this vision is
moving forward with alacrity. But, the private sector is
growing so much faster than the GOI's communications
institutions are developing, the government risks being
rendered irrelevant as a provider of basic services, the
trustee of the national backbone networks, and an independent
regulator. Worse, ineffective public institutions could
limit the private sector's progress, for example, by
preventing ISPs from buying access to a functioning fiber
optic and microwave backbone network so that the firms could
offer Iraqis more affordable high-speed internet access. The
GOI must appoint competent leaders to the MOC, ITPC, and the
CMC to ensure that priority issues--telecommunications
legislation, cross-border interconnections, O&M for the
national backbones, and spectrum management--are addressed.
The GOI must also prioritize training and education for the
upcoming generation of engineers and managers to ensure the
durability of any near term gains in institutional capacity.
END COMMENT
CROCKER