Government strategies help guide Oman's digital transformation

Operators in Oman’s IT sector have recently made big strides forward, moving beyond infrastructure to develop applications and applied business solutions for increasingly sophisticated customers. The government has made it clear that ICT is a key priority in improving the standing of Omani businesses in the international arena, and in 2017 the Information Technology Authority (ITA) was developing a 2030 Digital Oman Strategy (eOman) focused on developing IT skills, digital literacy and new technologies.

The drive to improve network connectivity across the sultanate is supporting the expansion of fixed broadband infrastructure in Oman, particularly fibre-optic networks, under the National Broadband Strategy (NBS). The expansions laid out in this strategy are already bearing fruit, boosting the quality and speed of broadband connections and facilitating a pivot among the country’s telecoms majors to embrace markets created by new technologies, such as services around “smart city” installations, big data and cloud services.

INTERNET SERVICES: Since the internet was introduced in the sultanate by Omantel in 1997, the country has seen dramatic gains in access. Oman was ranked first in the Middle East and 24th globally among 75 countries in a 2017 Inclusive Internet Index commissioned by Facebook and developed by the Economist Intelligence Unit to assess the enabling environment for the adoption and beneficial use of the internet. The index highlighted the country’s infrastructure as a key strength, propelling Oman to 17th of 75 countries surveyed on the strength of its 4G coverage.

Demand for broadband services – which denote internet access that is always on and is faster than traditional dial-up services – continues to grow in Oman. Driven by demand for residential connectivity, fixed broadband internet subscribers – including DSL and WiMAX – grew by 19.4% to 318,754 in the year to July 2017, bringing the household penetration rate to roughly 54%. Dial-up subscriptions meanwhile fell by 0.8% to 2545 subscribers at the end of April, according to NCSI data. Broadband network architecture that uses optical fibre in lieu of copper cables for last mile connection (fibre-to-the-home network, or FTTH), is available to licensed telecoms companies in Oman, including Omantel, Ooredoo and Awasr, as well as to government-run utilities and third-party service providers.

GOVERNMENT IN ICT: State agencies are the primary spenders in Oman’s IT sector, driving progress in ICT initiatives from data centres to cloud computing. In 2017, the ITA was in the process of developing a 2030 Digital Oman Strategy (called eOman) focused on developing IT skills, digital literacy and new technologies. The strategy will be used to develop policies and regulations based on ITA’s seven pillars, which include security, infrastructure, e-government and social development.

Successfully implementing the strategy and achieving desired objectives will require overcoming significant budget constraints and establishing a feasible roadmap. In this regard, the creation of the $200m Oman Technology Fund (OTF) within the country’s sovereign wealth fund, Oman Investment Fund, in October 2016 was broadly viewed as a positive signal, as it provides a means of generating new innovation partnerships. Pursuant to its mandate, the OTF announced a partnership with the Qatari Foundation (QF) in September 2017 aimed at supporting the creation and growth of tech start-ups and driving the shared development and commercialisation of new technologies.

While the IT ecosystem has become more established in recent years, the government’s capacity to invest in the sector has somewhat diminished, as the country grapples with a growing budget deficit amid the oil price downturn. The impact of the resulting belt tightening has been felt most acutely in the state’s adoption of certain technologies, with small providers, in particular, feeling the effects of lower investment in the sector. To mitigate the impact of the decline in spending, government agencies are therefore looking increasingly to the public-private partnership model to meet the demand for IT solutions and advance e-government initiatives. For example, the Ministry of Housing in 2017 was looking for a private sector partner to digitise and streamline interactions with the public. Customers in the private sector have also been cautious on spending in the oil price downturn, avoiding or postponing IT investments until the market improves. Those companies that are investing have recently become more selective and price-oriented.

REGULATORY CHALLENGES: The IT market is fairly young in Oman and as such is plagued by gaps and inconsistencies in sector regulations that the government has been working to remedy. Labour classifications in the IT sector, for example, occasionally lag behind the pace of growth in the industry, with the result that some companies have reported difficulties registering employees because certain job categories, such as 3D animators, are simply not recognised by the government. Responding to issues around recruiting for technical positions, the Ministry of Commerce, followed by the Ministry of Manpower, is expected soon to adopt the newest International Standard Classification of Occupations, making it easier to register a new position.

The government is also aiming to open up the market to increased competition to boost high-speed broadband coverage and access in rural areas. In April 2016 the Telecommunications Regulatory Authority (TRA) passed comprehensive legislation on “Access and Interconnection Regulation”, obliging all holders of public telecoms licences to provide interconnection services on an equal and non-discriminatory basis to all requesting parties and wholesale customers, and to provide requesting parties with access to certain physical infrastructure and other facilities. “The licensing framework today demands investments in infrastructure,” Milan Jovancic, CTO of TeO, told OBG. “That’s not going to change in any way. New regulations supporting interconnected access are another important step for the regulator to establish a framework to define infrastructure requirements.”

NATIONAL STRATEGY: Recently there has been a renewed push towards improving fixed broadband infrastructure, particularly fibre-based networks. The policy reflects the goals of the TRA, the ITA, the Ministry of Transport and Communications (MoTC) and other public entities in implementing the Digital Oman strategy, which calls for widespread internet access across the country.

Consumer uptake of high-speed broadband internet services has benefitted from significant improvements in service quality and a 30% drop in broadband prices over the past two years. As of 2017 for the same price of OMR30 ($77.90) per month, end-users in Oman have had the option of buying either ADSL or basic fibre, the latter offering significant improvements in speed and quality of connection. With user density at three or four customers per home, the high latency of ADSL connections is driving growth of fibre optic.

Responding to this growing demand, in September 2013 the Council of Ministers approved the NBS, charging the MoTC with overseeing its implementation in cooperation with the TRA. The NBS aims to encourage and promote investments in “soft” infrastructure to optimise investment in the sector, reduce the cost of services offered by providers, and overcome various constraints for the expansion of mobile broadband coverage, including spectrum limitations, provision of backhaul connectivity, the need for additional towers, and limited competition among broadband operators.

The three pillars of the strategy include reviewing the regulatory framework, stimulating demand for broadband (such as by increasing the percentage of fixed broadband take-up) and enhancing broadband infrastructure. The NBS also includes specific objectives aimed at spreading broadband access and usage to remote communities, which represent 23% of the total population. Due to current budgetary constraints caused by lower oil prices, however, the government is not currently prioritising the subsidies required for rural expansion. These areas would primarily be covered by satellite connectivity or by the Universal Service Obligation (USO) of both telecoms service providers, though that combined obligation is limited to a total of 300 sites. Because of the challenging cost ratios in rural and remote areas, neither Omantel nor Ooredoo are reported to be considering expansion beyond their USO obligations, and satellite connection projects are on hold until the government allocates the necessary funds.

OMAN BROADBAND COMPANY: State-owned Oman Broadband Company (OBC) was established in January 2014 to act as the delivery arm of the national strategy for the third pillar of the NBS, providing infrastructure (specifically fibre optic) with the objective of having 95%, almost full coverage of urban areas, with broadband infrastructure by 2030. The company is licensed by the TRA to construct and operate broadband infrastructure for use by licensed service providers on an equal and non-discriminatory wholesale basis. “Oman Broadband deploys passive fibre-optic infrastructure. Deployment is project based, meaning divided by areas. As soon as a certain area is completed, service providers are informed and their sale activities can commence,” Dubravko Horvatic, OBC’s commercial and strategy advisor, told OBG. “It is important to note, that Oman Broadband does not sell service to end users. End-users apply to one of the service providers, who then submit the request back to us for a delivery of a home connection.”

The impact of OBC network expansion activities has been swift, pushing down home broadband fees and increasing the quality and speed of broadband connections. This has enabled service providers to offer FTTH connection broadband services to a growing number of customers.

Specific planning objectives for OBC include extending coverage of its fibre-optic network to cover at least 50% of the country’s urban areas by 2020, rising to 95% by 2030. By the end of 2017 OBC aimed to provide coverage to a total of 210,000 residential and commercial units representing around 55% of Muscat Governorate, according to Salim bin Said al Alawi, general manager of projects at OBC, in a statement to the state-run Oman News Agency. OBC reports that adoption rates and demand for fibre connections in the capital have significantly surpassed early expectations.

In line with the government’s vision for a knowledge-based economy, OBC also increased network expansion activity outside of Muscat in 2017, undertaking civil works projects to connect optic fibres in Al Musannah and Salalah. The company that year was also working on implementing a project at the industrial estate and city centre in Sohar and in the wilaya (province) of Khasab.

Recent difficulties related to sourcing local companies to lay fibre-optic cables have reportedly been resolved, and the time required to connect customers to operator networks has dropped significantly. In the process of doubling daily delivery, OBC has helped to develop knowledge among local fibre-optic installers, many of which are now growing at pace with network expansion activities in the sultanate.

INCUMBENT OPERATORS: For the incumbent telecoms operator, Omantel, investments in IT are critical to sustaining growth in an increasingly saturated telecoms market. The firm is the market leader in fixed broadband, serving over 210,000 fibre and DSL home broadband customers in the first half of 2017. The company fully owns its own fibre-optic infrastructure, leasing out extra network capacity and operating alongside OBC in certain areas.

In July 2017 Omantel announced plans to accelerate the rollout of high-speed broadband in a joint deployment with Chinese equipment supplier Huawei in what is being referred to as the first “G.fast” network in the Middle East. The solution is aimed at making the process of constructing networks more efficient and repurposing existing copper lines in the basements of tall buildings to deliver fibre-like speeds using G.fast technology. Supported by the deployment of new technologies, Omantel plans to cover 90% of home subscribers in Muscat by 2020, offering speeds of between 200 Mbps and 1 Gbps in high-value areas. The firm’s broader aim is to position itself as a leading digital service provider, moving beyond advisory services and email exchange hosting into cloud applications, security and the internet of things (IoT).

The company’s ambitions in this space received a boost in 2016 with the establishment of an ICT unit and launch of the Omantel 3.0 transformation strategy, aimed at innovating and streamlining its digital “smart” home and business services. The initiative focuses on fully connecting businesses and devices, and developing smarter systems to save resources and improve efficiency. The company’s ICT business is also its fastest-growing line of work, registering a 150% expansion in 2016 and, according to Omantel officials, was on pace to grow significantly over the course of 2017 in terms of revenue, market share and operations. Purpose-built subsidiaries include Oman Data Park, which hosts data centres and cloud services, and mOmkin, established in April 2016 to specialise in smart cities and IoT communications services. Both will be key to sustaining growth and driving in-country innovation into the next decade.

Similar to Omantel, the country’s second-largest fixed-broadband operator by subscribership, Qatar-backed telecoms company Ooredoo Oman is engaged in significantly extending its home broadband network to communities across Oman. By the end of June 2017, Ooredoo had extended its Fast Home Broadband services to cover major cities within the governorates of Dhofar, Ad Dakhiliyah, Muscat, Al Batinah, Ash Sharqiyah, Ad Dhahirah, Al Buraymi and Musandam. Recent high-speed FTTH service expansions have targeted new areas of Muscat Governorate, including Aynt, Darsait, Hamirya, Wadi Kabir, Wadi Adai, Madinat Al Ilam, Al Qurum, Ruwi and Al Wataya. The company has also made significant upgrades to its fibre offering, providing superfast, buffer-free services of up to 1 Gbps, with unlimited internet access and free installation in areas under coverage.

INTERNET OF THINGS: The main thrust of Oman’s latest and most innovative ICT services is focused on smart city installations, which aim to deliver greater connectivity, automated intelligence and immersive technology. The combination of industrial and utility components, sensors and everyday objects with internet connectivity and powerful data analytics carries the potential to revolutionise smart metering and building management systems, saving millions in operational costs. Other applications where IoT systems can help manage resources include smart transportation and parking, tourism services, warehousing, and retail behaviour.

With required infrastructure services provided by telecoms and entities such as OBC, new smart city initiatives in Oman include a logistics city near Muscat, Duqm, and Madinat Al Irfan, which includes IoT municipal integration strategies in its urban development plans. The shift to smart city technologies and the IoT is in keeping with the Omantel 3.0 strategy, which is predicated on enhancing the smart capabilities of Oman, including the mOmkin subsidiary, which specialises in IoT communications services using technology designed by SIGFOX, a French company that builds wireless networks connecting low-energy objects like electricity meters.

CLOUD SERVICES: Cloud Service Providers (CSPs) are relatively new to the sultanate, dating back to 2012, when telecoms service provider Omantel and data centre company 4Trust launched the joint venture Oman Data Park (ODP). Rather than invest in a less-expensive Tier I data centre and establish ODP as a proxy for international CSPs (similar to what has been done in other countries in the region), Omantel created a Tier III+ data centre with a 99.98% availability factor, capable of meeting the criticality profile of vital infrastructure providers in Oman. ODP today offers co-location services, private cloud solutions and a public cloud portal launched in 2013 that includes infrastructure as a service and SASERP solutions for small businesses. ODP plans to launch Version 2 of the public cloud soon, as well as a third data centre in Duqm.

For the time being, ODP remains the only CSP in the country, operating its own cloud stacks and localising data. The company is actively seeking to partner with multinational CSPs like Microsoft Azure, Dell EMCs and Amazon AWS to build its ecosystem and assist with marketing, research and development, pricing on licensing, and product resale. As awareness and appreciation of the value of cloud services grows in the sultanate, ODP has seen relatively strong growth, in the range of 20-25%. A 2016 mandate issued to government entities to avoid co-locating outside of the country contributed to a significant boost in the number of public agencies co-locating their data with ODP. The company also anticipates a substantial increase in private sector uptake when market conditions stabilise. “In the next three to five years, outsourcing data centre and IT hardware requirements will become the primary option for businesses in Oman,” Maqbool Al Wahaibi, CEO of ODP, told OBG. “Companies find it of great help to be able to focus on their own initiatives instead of procuring hardware, servers, storage and creating their own IT environment. The model is similar to electricity as a metered utility; there is no need to have your own generator when you have access to a local power station.” Competition is likely to heat up in this space in the coming years, with companies like Omani internet provider Awasr already teaming up with German multinational software corporation SAP in September 2017 to start providing cloud computing services.

CYBERSECURITY: Rapid economic growth and new digital initiatives in the sultanate have introduced new challenges, and many organisations are beginning to recognise the need for an efficient cybersecurity system. The country has developed a strong reputation for cyber risk mitigation and remediation, being ranked number one in the Middle East and fourth overall behind Singapore, the US and Malaysia in the 2017 Global Cybersecurity Index compiled by the UN ICT Task Force.

The country maintains a robust organisational structure in this area, including a high-level cyberse-curity master plan and comprehensive road map for improving data security. In addition to responding to cyber incidents when they occur, the ITA issues cybersecurity policies and frameworks, and its Open Source Computer Security Incident Response Team (OCERT) regularly publishes information security warnings and notifications concerning various threats and vulnerabilities.

The sultanate’s ongoing commitment to cyber defence provides opportunities for local and foreign ICT security service providers to capitalise on strong demand growth in both the public and private sector. In this vein, global professional services provider EY opened a new 24/7 digital security operations centre (DSOC) in November 2017 to monitor the security of client IT systems in Oman and the GCC region. Senior EY officials told local press a key objective of the DSOC is to make the sultanate a hub for cybersecurity operations in the region.

OUTLOOK: Since the internet was introduced in the sultanate by Omantel in 1997, the country has realised dramatic gains in improving web access. Fixed broadband network expansion remains a key priority for the government as a prerequisite to meeting the development goals laid out in the 2030 Digital Oman Strategy, and progress on infrastructure development is expected to meet intermediate and long-term objectives clearly outlined in a range of official strategy documents.

Though the government’s capacity to invest in the sector has diminished in recent years, as a result of the impact caused by lower oil prices, major operators and small and medium-sized business are stepping up with innovations and digital transformation strategies in order to meet the demand for IT solutions from what is becoming an increasingly sophisticated customer base in Oman.

With Omantel and Ooredoo leading the charge, and a third mobile network operator set to emerge in 2018, the country’s ICT sector is bound to see increasing competition, and is rapidly moving beyond advisory services and email hosting into cloud applications, security and the IoT. The future therefore belongs to companies that can identify opportunities for innovation in these categories.