Kuwait: Improving connectivity

In recent weeks, the Ministry of Communications (MoC) has ordered Kuwait’s internet service providers (ISPs) to reduce their pricing by at least 40%. While this move could boost the number of users, some industry participants say that it is the ageing, government-owned, fixed-line communications infrastructure and lack of a clear regulatory framework – and not elevated pricing – that is limiting market expansion.

According to a September 25 announcement by the MoC, the maximum annual subscription fee for domestic internet will now range from KD48 ($170) for a one-megabyte-per-second (MB/s) service to KD200 ($710) for an 8 MB/s connection. The new fee structure will go into effect following the publication of the new rule in official newspapers. While ISPs will be required to lower their prices, the charges they incur from the MoC for access to the fixed-line network will also be reduced. An official from Gulfnet Communication, one of the country’s four major ISPs, told the Kuwait Times that its annual cost of providing a 1 MB/s line would fall from KD40 ($142) to KD8 ($28).

This is the second time in the past 13 months that fixed-line internet prices have been cut, with the MoC having imposed a 40% reduction in August 2011. While prices were historically high in Kuwait relative to other GCC countries, this is no longer the case. For example, in Bahrain, customers of Bahrain Telecommunications (Batelco) are annually charged the equivalent of KD120 ($426) for a 1 MB/s line and KD360 ($1278) for an 8 MB/s service. Batelco also has presence in Kuwait, thanks to its 44% stake in Qualitynet, a local ISP that accounts for around 45% of the local fixed-line internet market.

In theory, lower prices could mean an increase in the total number of fixed-line broadband customers. This appears to be the goal of the government: the minister of communications told the Kuwait News Agency (KUNA) that the aim of lowering prices has been to ensure internet availability to all segments of society.

However, according to Essa Al Kooheji, the general manager of Qualitynet, pricing is not the primary barrier to additional customers signing up for internet service. Instead, he told news agency Reuters that the largely copper-based, fixed-line network, which is owned by the government, is not capable of meeting an increase in consumer demand.

“We receive a lot of calls from customers who want to upgrade and take the maximum speed for the price available, but they cannot do so,” Kooheji said. “The government should put more effort into improving the telecom infrastructure, rather than cutting prices.”

Another factor that may be hindering further development in the provision of internet services is the lack of an independent regulatory agency. Oversight of the IT sector currently falls to the MoC, which also provides fixed-line telephone services and licences the network out to ISPs. The absence of a dedicated regulator may be holding back the sector, Nael Al Awadi, the general manager of the human resources and administrative affairs department at Qualitynet, told OBG.

“The need for a regulator is paramount for the industry to evolve,” he said. “We need set rules, licences and tariffs so we can better assess the environment in which we are working,” he said. The government has in the past said it plans to establish an independent regulator, but there have been no concrete developments in this regard.

While the provision of fixed-line internet may be facing some potential barriers to expansion, the supply of mobile internet appears poised for further growth, with the MoC announcing on October 6 that it was authorising Kuwait’s three mobile telephone providers – Zain, VIVA and Wataniya Telecom – to introduce 4G LTE high-speed data services.

Mobile internet could certainly be the way forward for Kuwait. According to Zajil Telecom, the first licensed ISP in the country, there were 427,716 wireless broadband subscribers (including 3G, 3.5G and 3.75G) in 2010, up from 392,400 in 2009. The firm predicts that this figure will reach 508,169 in 2012 and 553,905 in 2013. A much smaller percentage of the population opts for fixed-line broadband, with 127,351 DSL subscribers in 2009 and 136,266 in 2010.

While many in Kuwait are opting to access the internet through their mobile devices, better fixed-line infrastructure may well be necessary if the government is to realise its goal of becoming a regional financial and commercial centre. At the same time, a greater degree of privatisation of certain key assets – such as the fixed-line network – could also help boost the market and prompt services to evolve more quickly.