Esis Extension / Lebanon / Alternative Networks / Update Memo 5

The following report outlines new developments in the past three months and the state of on-going developments.

There is nothing new to report concerning alternative networks. The only events that could possibly bring about some changes are linked to the expected privatization process. However, this process does not seem to be launched before early 2001, mainly because of the coming legislative elections in August.

Compared to the prevailing systems in the neighboring Arab Countries, the Lebanese economic system may appear as the most liberal of them all. Surprisingly however, the Government in Lebanon has a long tradition of monopolistic practice especially in the telecommunication and energy sectors. In spite of that, the macroeconomic policy remained very open and liberal in particular in what relates to the freedom of circulation of persons, goods and capital. This stance prevailed even during the most difficult periods of the military turmoil that stretched over fifteen years from 1975 until 1989.

The legal system in Lebanon has been influenced by the French legal doctrine for historical reasons. The Civil Code, the Code of Obligations and Contracts and the Commercial Code constitute a sound and secure basis for all types of business activities. However, because of the long lasting turmoil (1975-1989), some legal texts are no more adapted to the fast changing business environment. This is why a special reform committee composed of magistrates from the Ministry of Justice along with experts from various governmental bodies as well as members of Parliament has been set up to modernize the system. The updating process is evolving in parallel with a sustained effort to enact new laws to serve the needs of the organizations in a rapidly changing economic environment. Important examples in this respect are the law on Intellectual Property rights voted in 1999 and the law on privatization vote in early 2000.

The Lebanese judiciary is presently considered overworked and understaffed. Some court cases could therefore stretch over many years.

In spite of the openness of the economy, there are some sectors where the law is setting some limitations to the activity of foreigners. The real estate sector is the most common example. Some other cases exist where activity, though not a state monopoly, is restricted to a small number of operators as is the case in the audiovisual business (see reg report). In the banking sector, also, certain restrictive regulations exist concerning the activity of foreigners. Apart from these specific instances, the press is often reporting cases of corruption as well as bureaucratic procedures hindering the development of sound market transactions. Some of these difficulties are being overcome by the implementation of a ‘one stop shop’ procedure under the authority of IDAL the Investment Development Authority of Lebanon reporting directly to the Prime Minister.

1.3 Attitude of the incumbent operator towards alternative network providers.

As mentioned in the reg report, the trend is presently towards privatization of some public utilities. In case this privatization is launched, it is assumed that free competition will have better chances to prevail. The privatized bodies will, therefore, have to adjust to a new environment. It is unrealistic to think that influential figures in the Administration will easily accept such limitation to the power they presently have. Indeed this is a main reason behind some parliamentary opposition to the privatization option. The High-ranking directors in the MPT and the Ministry of Hydraulics and Electricity are recurrently criticizing the intended policy of privatization. In any case, the privatization issue seems to be now delayed de facto because of the coming legislative elections due in August and September

Apart from the recently voted legal framework permitting the privatization process to start, no new regulatory developments seem to appear shortly. The law provides for the setting up of a High Privatization Council (HPC), composed of the Prime Minister and the Ministers of Finance, Economy, Labor and Justice. Ad hoc panels of experts will support it. This HPC will have a role even after the privatization takes place in order to monitor unauthorized changes in foreign ownership and full compliance with the law. A regulatory authority will also be created to protect the consumer interests and safeguard free and fair competition. It is evident that the spirit of this law is targeted through bringing a wide range of international investors into the Lebanese economy.

2. Inventory of the major "public utilities" with a potential for use in IS applications.

Lebanon has no natural resources except water, which is available from ground water, springs and boreholes. The main river sources are the Litani River and the Awali River (south), Nahr Ibrahim and Nahr ElKalb (north). The Assi River (Bekaa) is for a short stretch in the Lebanese territory then flows north into Syria.

The water sources in Lebanon are controlled by the Ministry of Hydraulics and Electricity Resources which overseas the 22 water authorities on the national territory. These Water Authorities are in charge of the day to day running of the water network system and are mainly financed, for running this activity, through customer payments. The central government provides for the amounts needed as investments in heavy equipment and building.

Two major projects are now being considered to enhance the water network system in Lebanon. The Awali-Beirut conveyor is contemplated as a means to alleviate the shortage of water in the capital. An investment amounting approximately to $150 millions seems necessary for this 33-km conveyor. The implementation could be granted to a foreign company on a BOT basis.

The other big water project concerns the Bisri dam on the Awali River situated to the south of the country. No clear option however has been taken until now concerning the financing of this project estimated to about $160 millions.

The network of Lebanese roads is well distributed throughout the country. It comprises more than 6000 km of roads. However, all structures are not similar as they vary in width, load capacity and condition. International roads stretch over 530 km, primary roads over 1650 km, secondary roads over 1340 km and local roads over 2810 km. The coastal highway stretches from Tyre in the south to Akkar in the north, Beirut being in the middle. Another highway links Beirut to Damascus crossing mount Lebanon and the Bekaa valley. A new highway is presently being built, over a length of 60 km approximately, and involving the construction of 34 bridges, 10 viaducts and 9 intersections. It will link Beirut to Damascus through the border city of Masnaa and from there to all neighboring Arab Countries. The financing scheme of this "Arab Highway" seems to be a BOT contract over a thirty years period.

The public authority in charge of generating, transmitting and distributing power in Lebanon is Electricité Du Liban (EDL). This entity reports to the Ministry of Hydraulics and Electrical Resources. Founded in 1954, EDL has always been the official monopoly provider of electricity in Lebanon. Two concessions were granted by EDL to two small companies for power distribution in the region of Zahlé (Bekaa valley) 30 000 customers and in the coastal region of Jbeil (Byblos). An old concession for generating and distributing electricity in the north (Kadisha valley) has been recently bought by EDL.

The overall production of electricity in Lebanon is close to 1500 MW with the following repartition by type: 1030 thermal, 280 hydraulic and the rest from gas turbines. This supply is considered enough to meet the demand and provide electricity 24 hours a day but due to some failure in the distribution system, some regions in the country do not enjoy that much hours of power supply. Recently the bombing of two distribution stations in the neighborhood of Beirut by Israeli planes has restricted the power distribution in most regions of the country.

The power system in Lebanon is undergoing some extension through new power plants as domestic and industrial demand is expected to grow. EDL’s experts are participating in many international committees for renewable energy resources including wind and solar power, but no feasibility studies have been made so far.

The only authorized operators using the network are from the public sector: either Ministries or Public Entities under the tutelage of a Ministry.

None of the operators mentioned above is providing services other than what is genuinely of its own business. However, the 2 GSM operators who are granted licenses since 1994 are planning to offer microwave data transmission services. The system will probably use conventional microwave transmitters and use the network of the GSM relay stations to carry the signal. This evolution is pending the privatization process.

A press release by Sodetel (www.sodetel.net.lb) (a mixed capital company where 50% belongs to the Lebanese State, 40% to France Telecom and 10% to Telecom Italia) has launched an upgraded proprietary network at the end of 1999. Libanpac, which is a national network for data transmission X25, will be offering telecom link services among different locations all over the Lebanese territory. Sodetel announced also the upgrading of its Internet services through an international link right to the backbone of France Telecom at Bagnolet in France.

Two new items could have interesting repercussions on the possible availability in the near future of alternative networks.

1. According to press reports appearing recurrently around mid February, the Lebanese Government is said to have signed with the international carrier Skybridge a memorandum of understanding whereby Lebanon would become an equity partner and service provider in the Middle-East and North Africa. According to further information taken from the website < www.skybridge.bc.ca >, the President and CEO of Skybridge are quoted to have said: "This memorandum of understanding is a step forward in our relationship with this country. The Ministry of Post and Telecommunications has clearly understood all the competitive advantages the country could benefit from with a system such as Skybridge in order to bring Lebanon to the leading edge of satellite broadband multimedia communications".

According to the local press reports, this partnership with Skybridge will be achieved through a combination of public and private investments. It will be the first step towards the creation of Skybridge Middle-East, that additional telecommunication operators from the region will be invited to join.

As an access system, Skybridge will complement and extend terrestrial networks and help operators to solve the "last mile" problem by providing an instant broadband connection to users that previously only had narrowband access.

The Skybridge system will help optimize the use of the radio frequency spectrum by operating in the Ku-band and its services will be delivered locally through national and regional telecommunications operators and other service providers.

The system has a wide range of capabilities, as it will support in addition to traditional telecom services:

A major limitation to this line of thought is the recent row between the MPT and the two private GSM companies about the possibility of transforming each BOT contract now in effect into a twenty year license for a 1.35 bn$. At this occasion the possibility of a third operator implementing a UMTS technology has been associated with the name of Vodaphone. The issue is not clear yet as to the outcome of this dispute.

2. The MPT / OGERO authority is announcing that ISDN lines are expected very shortly. Although no date for the implementation has been clearly stated, an invitation is addressed to the potential customers to call on OGERO if he wants to discuss "his requirements for the ISDN BA service".

For this purpose, OGERO has published a brochure presenting also a short explanation of the ISDN service and the benefits it can provide to its user.

Please note that this report has been prepared under the sole responsibility of the ESIS II contractors.
It does not necessarily reflect the views of the Commission, nor does the Commission accept responsibility for the accuracy or completeness of information contained herein.
The ESIS Team of contractors welcomes any additional information or corrections.