Building the ICT backbone: Infrastructure is the nation’s main investment focus

With ICT both an economic enabler and an important sector in its own right, successive governments have made strong commitments to enhancing the country’s technical infrastructure. Expansion of the domestic broadband network is expected, while investors call for enhancements to international connectivity to strengthen Egypt’s position as an ICT centre.

BROADBAND PLAN: In November 2011, Egypt launched its National Broadband Plan, known as eMisr, outlining a range of ambitious goals for connectivity to be met by 2015 and 2021, with $2.4bn of public and private investment envisaged for the first four years alone. One of eMisr’s key focuses is on infrastructure, with an emphasis on developing high-capacity connections at public venues such as schools and health care facilities. It also envisages greater use of technology in the public administration, including better connectivity and improved storage of and access to data.

The roll-out of eMisr is expected to generate around 11,000 jobs per year and support broad-based economic and social development. The plan is seen as enabling investment that could help Egypt regain economic momentum through the stimulus effect of spending on infrastructure in the short term, as well as having longer-term impacts on growth. “The country’s network infrastructure is currently being upgraded, which will help Egypt to catch up with the global fixed line and mobile technology trends,” Mohamed Nofal, the CEO of HitekNOFAL, a technology systems manufacturer, told OBG. Research by the World Bank has suggested that a 10% increase in broadband penetration can yield an extra 1.38 percentage points of economic growth in emerging markets. A September 2012 report by telecoms firm Ericsson and Sweden’s Chalmers University of Technology, estimated that doubling Egypt’s broadband speed would lead to a 0.3% rise in GDP worth almost $688.59m, while quadrupling internet speeds would add around $1.38bn.

NEED FOR SPEED: Egypt needs higher growth to deliver more jobs for its expanding, youthful population, so the benefits of strengthening broadband, and raising its usage, should not be understated. Formal implementation of eMisr began in July 2012, with the establishment of taskforces to make more concrete plans on how to meet the goals. The new government that came to power in July 2013 retained Atef Helmy as minister of communications and information technology, demonstrating a commitment to continuity and confidence in the minister. Helmy has made implementing eMisr a priority of his tenure, and full implementation of the plan is due to be published by the end of 2013.

TARGETS: The target for first phase completion initially set for 2015 has now been pushed back at least a year, to 2016, and possibly further following the ouster of President Mohammed Morsi and the installation of the temporary military-backed government. Initially, eMisr envisaged that 75% of households would have access to 2-MB ps broadband and 98% of the population would be covered by mobile 3G networks by 2015. It also aimed to ensure that 50% of Egyptian communities had 25-Mbps internet connections, and 50% of third-level Egyptian administrative localities (small settlements and villages) were served with at least one 25-Mbps public access point. Other targets have been met on schedule, including ensuring that 4.5m households (about 22% of the total) have broadband services and 8m Egyptians (around 10%) subscribe to mobile broadband. “Development is not stopping,” Amr Badawi, former executive president of the National Telecommunication Regulatory Authority (NTRA), told OBG. “All operators are upgrading networks, and there is increasing uptake of broadband already. It’s not happening as quickly as we would have liked, but it’s certainly not at a standstill.” Targets for 2021 include ensuring 90% of households have access to 25-Mbps broadband and 90% of the population has long-term evolution (LTE) 4G coverage, with 9m households subscribed to broadband (around 40% of the total) and 14m (15%) accessing mobile broadband. All communities are expected to have access to 25-Mbps broadband by this date.

PUBLIC SERVICES & PRIVATE SECTOR: One of eMisr’s first priorities will be connecting schools and hospitals with broadband. This expected to modernise the administration of these public services and enhance service delivery. In schools, the internet will be used to improve teaching materials and develop job skills. “We believe broadband is essential for modern education, which is essential for the future of our country,” said Badawi.

The private sector has also broadly welcomed eMisr, recognising the importance of connectivity to economic and social development, as well as the opportunities for businesses to improve productivity and boost sales through the internet. Naturally, eMisr should be beneficial for ICT firms – revenues from broadband services in Egypt are projected to amount to L17.2bn ($2.45bn) by 2015, according to the plan. “The broadband plan in itself is good,” Karim El Fateh, the country director for Egypt at the US technology company Intel, told OBG. “It addresses the challenges of cost, spectrum allocation and priority areas for connectivity. It is in everybody’s interest to expand broadband to support GDP growth. With a computer and broadband, you are equal to anyone, anywhere.”

TE & LTE: Naturally enough, one of the foremost challenges will be ensuring that the physical infrastructure is in place. Legacy operator Telecom Egypt (TE) owns a substantial fixed-line network that can be used for broadband roll-out and operates an extensive broadband network through its subsidiary TE Data. But mobile operators are also playing a central role in expanding broadband coverage, through investments in 3G networks, and the forthcoming roll-out of LTE, which may be launched as early as 2014.

LTE is likely to be implemented fairly slowly and incrementally at first, due to the capital costs, the newness of the technology, and the fact that operators are currently focusing on 3G take-up, where there is still plenty of scope for growth. Furthermore, a wholesale switch to LTE will probably necessitate switching off some of the 3G capacity. “LTE is still a very new technology,” Wael Fakhrany, regional manager at Google Middle East, told OBG. “But it has incredible potential – it’s fast at up to 100 Mbps, and the internet is all about speed.” According to Saeed Al Hamli, the CEO of telecommunications provider Etisalat, LTE uptake will be key for preventing capacity constraints. “Moving into the future, a vital aspect for solid and sustainable economic growth and social prosperity is building a “connected” society through LTE technology,” he told OBG. Coverage may also be supported by the NTRA’s Universal Service Fund (USF). The NTRA was set up to compensate stakeholders for the cost of expansion in unprofitable areas, so financing some of the roll-out fits within its remit.

INTERNATIONAL CONNECTIVITY: The expansion of broadband capacity in Egypt should be supported by and complement the country’s growing international cable connectivity. Lying as it does between the Middle East and Africa, and on a major corridor between Europe and Asia, Egypt hosts a number of transcontinental cables, the capacity of which can be used to deliver higher bandwidth and enhanced global linkage to domestic clients. Egypt’s international bandwidth reached 230.22 Gbps in April 2013, up from 206.51 Gbps in May 2012, according to the MCIT (figures for April 2012 were not given). International connectivity is a priority for the NTRA, to enhance Egypt’s global telecommunications links, improve service quality and build the country’s position as global telecoms centre. ICT companies choose Egypt as a centre in part due to its fibre-optic connections, according to Olaf Krahmer, president and general manager of Cisco Systems Egypt. “Egypt is interconnected with more countries than any other in the world,” he told OBG. “In the next five to 10 years, up to 40% of global internet traffic will go through Egypt, from Asia to the Mediterranean and then Europe and North America, making it a strategic ICT location.”

Major international connections include the TE North subterranean cable, linking Marseilles with Abu Talat and a branch to Cyprus. Operational since 2011, it was the first cable network in the Mediterranean with commercial 40 Gbps wavelength, allowing capacity of 20 TB ps. In 2012, India’s Tata completed its own 9280-km network, offering a seamless connection between Europe and India via Egypt. However, other projects have run into difficulties: in March 2013, Orascon Telecom announced that it was suspending work on its MENA Cable, a $400m project linking Italy with India via Egypt, Saudi Arabia and Oman, after difficulties in obtaining permits for the Egyptian section. Policies thus have some way to go to catch up with the government’s ambitions and the willingness of the local private sector and international firms to build broadband capacity.