July 1999

Mediterranean Countries Synthesis of Master Reports

1. The regulatory aspects

The opening of alternative networks* is a powerful means to introduce competition.

In the European Union, the opening of the telecommunications sector included 2 steps. In the first, the provision of services was liberalised, whilst the networks remained under the monopoly of historical operators. In the second step, new entrants were given the possibility of providing leased lines, to build networks or to use alternative networks to provide telecommunications services to the public. This process occurred within a European regulatory framework aiming to create a harmonised telecommunications area throughout the EU. The harmonisation concerned both technical and regulatory aspects (harmonised standards, equipment and networks, …). The process took over ten years, and took place within developed telecommunications markets, indeed, the full liberalisation of networks and services in the European Union was only completed in January 1998.

The situation is very different in the Mediterranean area. Indeed, the political and economic policies are very different as well as the degrees of development.

As the area is very divided, we can distinguish three categories of countries :

• Israel, the most liberalised country: as of June 1999 (date of the quasi-full liberalisation of telecommunications) the process of liberalising alternative networks was nearly complete.

• Cyprus, Egypt, Jordan, Morocco, Turkey, Malta. Alternative infrastructures are still closed in these countries :

• a legal framework dealing with the concept of "alternative infrastructures" does not yet exist

• the elaboration of a regulatory framework is part of the trend of reforms and new laws dealing with the liberalisation of the sector

• the opening of alternative infrastructures will take more or less time according to the global agenda of liberalisation

• the liberalisation of mobile and Internet sectors should accelerate the liberalisation of alternative infrastructures. Alternative infrastructures could be used to provide mobile operators with the backbone of a network. In Morocco for example, it is possible that a partial liberalisation of certain alternative networks will occur after the issue of the second GSM licence

• utilities (railways, electricity utilities, …) and private enterprises can develop alternative networks for their own telecommunications needs.

• In Syria, Tunisia and Algeria there is currently no plan dealing with the liberalisation of alternative infrastructures.

2. The Actors

The potential actors can be distributed into two categories, the local loop operators and the long distance operators. Their potential future positioning in the telecommunications market depends on a set of factors. As can be seen from the national reports, it is not expected to happen before 2003 and onwards.

Basis for entry scenarios on the telecommunications market

The table below summarises the regulatory context in several countries.

Evolution of the regulatory status of alternative infrastructures in several countries

The status and the key vectors of change for the local loop operators and for the long distance operators are presented below.

• The local loop operators

• Status

Mainly composed of cable operators. Cable TV networks are under-developed across the area, excluding Israel. Most of the time they are State owned and State operated. In some countries however, competition has been introduced in the broadcast of TV programs.Cable networks are still closed.

• Key assets

The possession of the local loop and direct contact with the customer base are key resources that any telecommunications operator seeks to exploit. Important potential economic development of the cable networks via the provision of Internet services

• Potential customers target

-Residential
-Carrier’s carrier

• Key vectors of change :

-Opening of the sector and liberalisation. Indeed, the liberalisation of alternative infrastructures for the provision of Internet backbones is a core debate in some countries.
-Booming demand for Internet services and the resultant increased demand for telecommunications services could lead both the public and private sectors to up-grade cable networks.

• National long distance operators

• Status

- National long distance alternate infrastructures are owned by utilities (railways, motorways, electricity and gas utilities, …) and by companies such as banks or airlines. They are currently used for internal telecommunications needs only.
- As is outlined in the national reports, nearly all the utilities, as well as other companies who own alternative networks, are state-owned.
- The national reports outline that the alternative networks in these countries need up-grading in order to meet high quality standards.

• Key assets

Usually an extensive long distance outreach.

• Potential customers target

Operators

• Key vectors of change

Alternate infrastructures are closed. Nevertheless, the introduction of competition into key sectors such as the mobile and Internet sectors could accelerate their partial or total opening in the medium term.

Main vectors of change are:

1) Privatisation programs

Currently, several Mediterranean countries have started privatisation programs and are reforming the status of their Utility Companies. These are, in most cases necessary changes prior to any opening of alternative networks. Jordan, for instance, has launched an important program of privatisation which concerns in particular all the owners of networks. The Jordan Electricity Company is in the process of privatising, the Aqaba Railways, the Royal Jordanian Airlines and others companies are to follow. Turkey has also planned the privatisation of administrations. In Morocco, the issue of a new GSM licence in July 1999 could accelerate the change of status in certain national utilities. This could provide the new operators with network capacity. In another way, one can note that Tunisia, whose telecommunications sector is still very closed, has launched a privatisation program in recent years which, for the moment, excludes utilities and alternate networks. Syria has no plans to privatise the owners of alternative networks.

Regulatory frameworks will have to be drafted in such a way as to guarantee certain requirements, such as fair competition and accounting transparency. For example, in most cases the process of transformation in the status of the alternative networks will include the creation of entities dedicated to telecommunications activities.

2) Profit perspectives for the owners of alternate infrastructures

It is clear that "pressures" from owners of alternative networks will have a major impact on the agenda of liberalisation.

Utilities have not yet made plans to become telecommunications operators. Nevertheless, the anticipated liberalisation and the emergence of demand for networks services from mobile and internet operators could incite them to elaborate strategies of development in this new sector.