November 2000

Mediterranean Countries Synthesis of the Update Memos

Synoptic Tables - October 2000

1. Introduction

The liberalisation process and the emergence of a multitude of new technologies should lead to a major transformation of the Mediterranean telecommunications landscape. Alternative infrastructure liberalisation will play a key role in the shaping of the future telecommunications industry. Newcomers will be able to compete with incumbent operators

As far as supply is concerned, the ability of alternative infrastructure owners to bring about the rapid modernisation of their networks and to propose a diversified provision of services will be an important condition of the development of the sector. Today, alternative infrastructures remain rather closed in most of the Mediterranean countries.

As far as demand is concerned, new operators (such as mobile operators and ISPs), main potential users of alternative infrastructures, whose needs have not always been met, should see the development of competition in a very positive light.

Moreover, the liberalisation of alternative infrastructures should favour the development of the information society, given the multiple side-effects, in particular the more rapid expansion of new communication and information technologies.

It is clear that the alternative infrastructure market is significantly less developed in the Mediterranean area than Central and Eastern Europe. Furthermore, there are major differences in the level of development between the Mediterranean countries themselves

The liberalisation of alternative infrastructures should favour the development of the information society, given the multiple side-effects : the development and diversification of the offer, the quality increase of networks, the prices decrease, etc.

The purpose of this document is to provide a synthesis of developments that took place between July and September 2000 in the field of alternative infrastructures.

The two first parts of the synthesis remind our definition of alternative infrastructures and national contexts. The third part provides a summary of developments that have taken place during the last three months in Mediterranean countries.

This document is based on the contributions of the national contractors to the ESIS II project. For more information, please see national reports or the master synthesis.

2. Definition

In this report, alternative networks are defined as those infrastructures owned and operated by public players (e.g. utility companies: electricity and gas suppliers, pipelines, highways, railways, …) or private companies (such as banks, …), that have the potential to be used for the construction of telecommunications networks and the provision of services.

Alternative networks were developed by companies for whom telecommunications are essential and whom, in general, public telecommunications networks were not able to provide with all the services they needed (performance, confidentiality, competitive tariffs, customised functionalities, …). They are usually kept for the specific needs of their owners.

Our definition of alternative networks also includes telecommunications infrastructures operated by new entrants in competition with incumbent operators such as cable networks, new wireline and wireless networks.

Today, telecommunications liberalisation in several countries, together with a growing demand for communications capacity emanating from ISPs, mobile operators, etc. could drive infrastructure owners to prepare an entry strategy into the telecom market. Nevertheless, these players are waiting for high quality networks and services. It is clear from reading national reports that the real development of an alternative infrastructures supply will necessitate considerable preliminary investment in order networks to be upgraded. This, in addition to the need for a regulatory opening and public enterprises statutory changes.

3. National contexts overview

The process of opening up alternative infrastructures is proceeding at very different paces, in the different countries. Indeed, political and regulatory policies are very different as well as markets levels of developments .

Israel : a fully deregulated market

Israel has seen the greatest deregulation and alternative networks are liberalised since 1999.

Cyprus, Malta and Turkey : the perspective of EU integration / not yet a legal framework dealing with alternative infrastructures

Cyprus, Malta and Turkey are official candidates to join the European Union and, with this in mind, are updating their regulatory regimes to bring them into alignment with EU directives.

In Cyprus, the current law on telecommunications was enacted in 1954. Internet access and data services are opened to competition. A new telecommunications law is to be elaborated. There is currently no legal framework dealing with alternative infrastructures.

In Malta, the government’s plan to liberalise the telecommunications sector has been approved in July 2000 : it forecasts the full liberalisation on January 2003 the 1^st, while Internet services provisioning is yet liberalised. Today, Melita Cable, the monopoly cable TV operator has said it had big ambitions in the telecommunications field. No other alternative operator is yet declared. (see new developments below).

Early 2000, Turkey enacted a new law on telecommunications preparing the liberalisation of the market. The main axes of the new regulation are the followings : end of Turk Telekom monopoly by the end of 2003, partial privatisation of Turk Telekom. Today, the provisioning of data and Internet access services is opened (80 ISPs). Alternative infrastructures supply should organise itself in the future.

Morocco : an alternative infrastructures market in its infancy … the need for legal reforms and development strategies

In Morocco, the telecommunications law of 1997 has set up a detailed regulation for the opening of the sector. It is clear that the emergence of new operators : the second mobile operator Medi Telecom, new ISPs, new VSAT operators, and, in the near future, new long distance fix operators, could accelerate the formation of an alternative offer. Nevertheless, important barriers still exist both juridical (public status of potential actors, for the most part national utilities) and technical and strategic (for the potential players, the need to up-grade networks infrastructures and to elaborate development strategies).

Egypt, Jordan, Lebanon and Palestine : involvement toward privatisation

Egypt and Jordan are currently involved in restructuring programmes in their telecom sectors, including planned privatisation of historic monopoly operators and infrastructures modernisation. Alternative networks are not allowed but current liberalisation operations (mobile, data and Internet sector for the provision of services) could accelerate the pace. Furthermore, both countries are engaged in privatisation programs of main State companies and potential players. It is worth noting that in Egypt, a working group recently created by the Ministry of Telecommunications is suggesting a stronger private sector participation in the Egyptian industry.

Lebanon and Palestine are experiencing an economic trend toward privatisation. For Lebanon, the previous country report estimated that the privatisation process could be launched in the beginning of 2001. However the arrival of a new government following the legislative elections of summer 2000 could delay the privatisation process. Indeed, the new governmental team could reconsider the whole privatisation strategy (cf below). The situation is evolving very slowly in Palestine

Algeria, Syria and Tunisia: telecommunications markets are very closed and no alternative operators can be identified

In Algeria, Syria and Tunisia there is no legal framework dealing with alternative infrastructures and the telecom sector remains rather closed to competition.

However, important developments have taken place in the Internet industry in the 3 countries.

In Syria, for example, a programme has been launched to construct an Internet backbone which should be completed by the end of 2000. Once set, it is envisaged that a number of Internet service providers (ISPs) will be licensed to operate.

Algeria has also opened up this particular part of the market in 1998. Furthermore, in August 2000, the Parliament has adopted a new telecommunications law that gives opportunities for more competition. It is also interesting to notice that in Algeria an ordinance of 1995 stipulates the privatisation of public companies. Furthermore, a decree of March 1996 reinforces the above ordinance by the recommendation of the creation of an institution that will be in charge of the privatisation process. More recently, a privatisation program begun that concerns the following sectors : energy, banks and insurance, services and telecommunications. It is interesting to note that in June 1998, a law ended up the national monopoly that Air Algeria used since its creation in 1963.

In Tunisia, a privatisation programme has started concerning mainly cement factories, mechanical construction and the textile sector. The telecommunications sector is not yet concerned.

4. New developments

Countries reports mention several developments that have taken place during the last three months. They show a general trend towards telecom market deregulation. Here are the most important events that have taken place in the region :

• New laws have been enacted in cable TV, regulatory authority and telecommunication field.
• Some national strategies have been set up to attract foreign funds.
• The infrastructure upgrading is going on.
• New competitors are emerging in the most liberalised markets.
• The privatisation process is evolving.

Generally speaking, the most notable developments of this three last months occurred in Israel, Malta, Cyprus and Turkey.

On the contrary, some countries seem to have undergone a very quiet period with no development concerning the alternative networks (Palestine, Jordan, Tunisia, Syria, Morocco, Algeria).

As said above, several recurrent issues are identified within the whole of these countries. There are tackled below:

• New laws have been enacted in cable TV, regulatory authority and telecommunication field.

Israel has know an evolution of its legal framework :

The general attorney has set up the mode of payment of the cable TV concession extension. It will be determined by an independent arbiter.

In the previous report, it was mentioned that Israel Railways had been awarded a telecommunication operator licence. Now, the general attorney ruled that Israel Railways will have a license to rent its optical fibre but not to provide the public with voice telecommunications services.

Cyprus is reforming its telecom market to reach the European Union standards:

Cyprus is continuing its reform to reach the European Union standards in a view to integrate the Union. The national report mentions that a law on the setting up of an independent Authority is currently under review. Regulatory developments concerning alternative networks would be expected to take place following the set up of a such relevant authority.

Turkey is legislating in the cable TV field :

A by law for digital TV broadcasting has been introduced by the telecommunication regulation council. It occurred after a dispute between digital TV companies and the Higher Council of Radio and Television who had declared digital TV broadcasting illegal. This matter underlines the trend towards liberalisation in a view to enter in the European Union.

The Algerian parliament has adopted a new law related to telecommunication sector :

On august, 5^th 2000, the Algerian parliament has adopted a new law which announces many changes. It gives the opportunity for more competition for private operators. It includes the liberalisation of the Post and Telecommunication activities.

• Some strategies have been set up to attract foreign funds.

The Electricity Authority of Cyprus is receiving advice from its Greek counterpart.

The Electricity Authority of Cyprus (EAC) is embarking in a more structured program of co-operation with its Greek counterpart (DEI). During the past three months, meetings have been held between the two parts. DEI has described its own experience to give some advice to the EAC to reach the European Union standards.

• The infrastructure upgrading is going on.

The only Cyprus alternative network is completely upgrading its network :

In terms of networks developments, the Electricity Authority of Cyprus (EAC) has continued the upgrade of its network. They scheduled the integration of fibre optics to all new transmission lines. The phase will be completed by the end of the year 2002 with a total length of fibre optic cable of 105 km.

Cable TV network will be upgraded by the end of the year in Malta :

It has been reported in the national report that Melita Cable TV, the monopoly cable TV operator, is progressing in upgrading its infrastructures. The Chairman had announced earlier this year that already 75% of the network has been upgraded. Moreover, he said that the work will be finished at the end of the year.

• New competitors are emerging in the most liberalized markets.

Another competitor in the telecom market in Israel :

As announced in the previous report, Israel Railways had been awarded a telecom operator licence. This has brought about the arrival of a third competitor : the Electricity company. Indeed, during the period, the company announced its will to establish a subsidiary to market the use of its own optical fibre network.

The beginning of the competition in Cyprus :

The only organisation with an extensive alternative network, the EAC, has announced on September 28, 2000 its intention to extend its activity into the telecommunication field. It is a serious competitor to the Cyprus Telecommunication Authority (CYTA) because EAC won’t meet with serious entry barriers. In reaction, CYTA is enhancing its strategic position in telecommunication markets abroad. In particular, it participates in a sub-marine cable system.

• Privatisation process is generally evolving:

The incumbent operator privatisation to come in Israel :

The national report mentioned the government intention to sell the 54 % of shares it has in Bezeq in order to respect the liberalisation of the market. The legal framework to supervise the privatisation should be set up in the coming months.

Turk Telecom to be privatised:

Early 2000, a telecommunication law had been enacted. It required the end of the monopoly status of Turk Telecom to be finished by the end of 2003. Thus, a tender was called during this period to privatise 20% of Turk Telecom but no bid was received. The government plans a new call for tender in the near future. The law final goal is to sell 49% of Turk Telekom shares.

In Lebanon, the general legislative elections have delayed the privatisation process :

The privatisation process should only begin in 2002 whereas it was supposed to start in 2001 (see previous report). This change is due to the recent general election (August,27 and September,3). Indeed, the new team will need some time to get to know the telecom issues. Furthermore, they may reconsider the whole privatisation strategy.

No major event regarding alternative infrastructures in Syria :

In Syria, the government has announced its intention to strengthen the public establishments to improve the public service.

The table below summarises the types of developments which have taken place in Mediterranean countries in the field of alternative infrastructures during the last three months.

New events quoted in the national reports in the field of alternative infrastructures in Mediterranean countries(July – September 2000)

Below we summarise the new developments that have taken place within the past three months in each country.

Israel adapting itself to an open and competitive market.

In Israel the legal framework is being adapted to the market’s evolutions. Indeed, the General Attorney decided that Israel Railways company will have a license to rent its optical fibre network but not to operate provide telecommunications services to the public. Following the ruling by the Attorney, the Electricity company announced it will consider establishing a subsidiary to market the use of its own optic fibre network.

A regulatory framework has been set up for the provision of licenses for new inland telecommunication providers. It is conditioned by several elements such as an imposed proportion of Israeli citizens among the board of directors, the company should have an experience in managing telecommunications systems and in servicing at least 50.000 customers.

Some telecom actors contenders are expected to participate in the frequencies allocation tender for the LMDS technology last mile home access. Others will rent infrastructures either from the historical operator or from cable TV companies.

Cable TV concessions are expected to expire by May 2005. The matters related to the ways to extend this concession or, instead, carry out a new tender have impinged on the concession of a licence to these companies to provide broadband fast internet access and IP telephony.

And at last, in parallel with the liberalisation decision, the government has decided to sell the remaining 54% of shares it has in Bezeq, the incumbent operator. This requires several limitations and a transition period so that the historical operator can adapt himself to an opened and competitive market.

Cyprus : a strong will to develop the telecommunication market impeded by a lack of legal framework and a lack of actors.

The only organisation with an extensive alternative network in Cyprus is the Electricity Authority of Cyprus (EAC). The national report indicates three main strategic developments undertaken by EAC :

• The continuation of its network upgrading.

Indeed, EAC is driving through a major upgrade of its infrastructure to be in position to face the competition emerging from the anticipated deregulation of the market. EAC is integrating optical fibre to all transmission lines. This project is scheduled to be finished by the end of 2002 with a total length of fibre optic cable of 105 km.

• EAC intention to extend its activities to the telecommunication field :

On September 28, 2000, M. George Georghiades, president of EAC executive council, has announced the extension of EAC activities to the telecommunication field. Moreover, EAC should offer a fibre optic technology service which should bring about a competitive advantage on the Cyprus telecommunication authority (CYTA).

• EAC in co-operation with its Greek counterpart the Greek electricity company (DEI) :

In the past, the co-operation between the two parts was based on a mutual exchange of a social nature. On September 13-14, DEI described to EAC on a meeting their own experience arising from the harmonisation process with the EU standards, environmental protection and renewable sources of energy. EAC is wishing to derive benefit from DEI know-how and experiences to reach EU standards.

In reaction to EAC announcement o extending its activity to the telecom field, the CYTA is enhancing its strategic position in foreign telecommunication markets. Indeed, the CYTA is participating in several sub-marine cable systems in the Far East to Northern Europe, in Israel and the Black Sea countries.

Currently, there is no legal framework nor regulatory authority for the application of transmission infrastructures to information society. Nevertheless, a law on the setting up of an independent Regulatory authority is currently under review.

Malta : slow evolution towards European Union standards with a limited existence of alternative infrastructure providers.

During the summer months there were no major changes in the area of alternative networks in the local scene. As mentioned in the previous report, the monopoly cable TV operator, Melita Cable, has big ambitions in the telecommunications sector. The company continues upgrading its cable infrastructure to provide a range of telecom services including Internet access and data services. The Melita Cable Chairman has announced that already 75% of the network upgrade had been achieved and that the work will be finished at the end of the year.

So far, no other utility company has expressed its intention to develop a telecom business. It is also worth remembering that there are several ISPs in Malta. According to recent regulatory statements, Melita has to offer ISPs a transparent interconnection to its network.

Turkey : continued liberalisation of the market in line with European Union directives

The two basics events that occurred in Turkey during the past three months have been :

• Turkey legislation on cable TV field :

A by law for digital TV broadcasting has been introduced by the telecommunication regulation council. It occurred after a dispute between digital TV companies and the Higher Council of Radio and Television who had declared digital TV broadcasting illegal. This matter underlines the trend towards liberalisation in a view to enter in the European Union.

Furthermore, the national report stress on the more accurate competition in the field of cable TV. Indeed, cable TV companies increased to 6, altogether covering a major portion of the country.

• Turk Telecom to be privatised:

Early 2000, a telecommunication law had been enacted (see previous report). It required the end of the monopoly status of Turk Telecom to be finished by the end of 2003. Thus, a tender was called during this period to privatise 20% of Turk Telecom but no bid was received. The government plans a new call for tender in the near future. The law final goal is to sell 49% of Turk telecom shares.

The telecommunication law, enacted earlier, also aims at promoting competition in the telecommunication sector. Indeed, the law allows the licensing of many private organisations. Thus, the national report mentions that many private companies and ISPs started offering data services, VSAT services and cable internet recently.

Lebanon: the legislative election will delay the privatisation process of at least one year.

The main event that has taken place in this period is the general legislative election that occurred on August 27^th and September 3^rd. The previous national report estimated the privatisation process to be launch in the beginning of 2001 but with the election the process might be delayed. Indeed, the new team will need some time to be aware of all the coming issues. Moreover, the new team might reconsider the whole privatisation strategy, what will delay even more the privatisation process. The national reports quotes that the privatisation process should rather start at the beginning of 2002.

It is useful to remind that there is currently no alternative operator in the field of telephone services in Lebanon. However, as mentioned in the previous report, two GSM operators-France Telecom mobile Liban (FTML) and Libancell- have asked to obtain an operator licence. They are planning to offer microwave data transmission services.

One can remember, as it was mentioned in the previous synthesis, that Sodetel (owned by the Lebanese state, France Telecom and Telecom Italia) has launched a national data network called Libanpac. Libanpac will offer telecom link services among different locations all over the Lebanese territory. Sodetel has also upgraded its internet services through an international link right to the backbone of France Telecom in France.

At last, the Minister of Post and Telecommunication has announced that ISDN lines are expected very shortly. However, no date has been clearly stated for the implementation.

Algeria : the new telecommunication law could allow the market liberalisation shortly.

An important event occurred in Algeria during this period. The Algerian parliament has adopted a new telecommunication law on August, 5^th 2000. The law is related to the Post & Telecommunication sector’s reform. It gives the opportunity for more competition among private operators. The reform also includes the liberalisation of the Post and Telecommunication activities.

It is important to remind that for the moment, the market had remained closed to competition, with the notable exception of the Internet access market, which is opened since 1998 (see previous report).

Syria : a closed market under public monopoly with a government’s will to strengthen public establishments.

The national report indicates that no changes have taken place regarding the alternative network. It is useful to remind that all important sectors such as telecommunication, electricity, water, etc, are still state-owned and are protected by sector public monopoly. Furthermore, the government has stressed that existing public sector establishments will be strengthened, priority being given to improve their services.

For the following countries, the national reports indicates that there have been no substantive changes during the last three months. Nevertheless, as we mentioned in the previous synthesis, these countries adopted general reforms oriented towards the telecom sector modernisation and liberalisation. We remind for each country the general characteristics of the ongoing reforms :

Morocco: the major obstacles to the implementation of alternative networks remain legal in nature.

The required changes are of different nature nature :

• of regulatory nature, as it will be essential to modify the status of state-owned utilities to enable them to become telecom operators (for instance, to introduce separation of accounts between different business entities, create discrete telecom subsidiaries and so on). Signs that the legal network is slowly evolving have been noted but there were no new developments reported during the last quarter in the future use of alternative networks.
• of strategical nature : there is only a very small number of potential sector players (such as motorway operators) who have their own telecom infrastructures capable of hosting interconnections with operators. Furthermore, it appears that few of them have yet expressed their willingness to diversify and enter in the telecommunications sector as alternative infrastructure suppliers.

Egypt: development currently under way of a new telecommunications law which will suggest a much greater involvement from the private sector.

There were no important changes during the last three months, but work on major developments continued. In particular, a working group set up by the Ministry of Telecommunications and Information is working on the definition of a new telecommunications law, which would recommend greater private sector involvement in the Egyptian industry. It shows a political will to deregulate the telecommunication market in order to reach the entire liberalisation of the sector.

Otherwise, alternative networks are still not allowed and Telecom Egypt still enjoys a monopoly on basic telephony and leased lines services. Nevertheless, the government is putting in place a policy of opening up the sector to private investment and deregulation, in order to help speed up modernisation. Some parts of the industry have already been opened up: mobile services, pay-phones, pre-paid international call cards and Internet services. No organisation was found yet to have developed commercial alternative networks because of the legal barrier preventing the establishment and commercial exploitation of any alternative networks.

Jordan: some months after France Telecom took an equity stake in Jordan Telecom, the programme to reform the major public utilities companies continues.

In Jordan, although the country report shows that there were no major developments over the past three months, significant changes have been under way for several months (see the previous country report and summary) :

• France Telecom had already acquired 40% of Jordanian Telecom in a deal valued at $508 million.
• This is part of an extended privatisation programme launched by the government with the aim of facilitating foreign investment and speeding up economic development.
• Other main utilities are under the process of being privatised :

• The Jordan Electricity Authority
• Aqaba Railways
• Royal Jordanian Airlines
• Jordan Cement
• National Electric Power Company (Nepco)

Palestine : a government willing to encourage private companies involvement.

The country report for Palestine indicates that there were no significant changes during the last three months. Nevertheless, one can remember that the previous country report indicated that the government wanted to encourage greater involvement of private companies in telecommunications. Amongst alternative players, Israeli company Guillat is offering satellite connectivity between customers and ISPs.

Tunisia : a virtually closed market

The country report for Tunisia shows that there were no changes during the last three months. It is interesting to remind that the telecommunications market is quite closed and there is no plan to open it in the near future. Nevertheless, there are several governmental initiatives aimed at promoting the Internet which should help the development of alternative ISPs. There are also a large number of governmental networks: the National Health Network (RNS) connects over 64 hospitals and, in particular, provides Internet access. In agriculture, the National Agricultural Network (Agrinet) connects agricultural institutions and dedicated centres throughout the country. In education, two national networks have been set up: the national university network (RNU) connects 87 universities, while the Edunet network provides connectivity to secondary and technical schools. In science and technology, the national research and technology network was set up in 1993 and connects research centres. (For more details, please see the previous national master report and summary).

The table below provides an overview of actors positioning

Main Alternative Actors

Synoptic Tables - October 2000