November 2000

Egypt Update Memo

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

1 - Introduction and Summary

New developments over the past 3 months have been recorded in the fields of telecommunications and internet, e-commerce, education and research and labour.  These are described in sections 2.5, 2.6, 2.7 and 2.10.  In addition, there has been substantial development relating to new international relationships and agreements as described in section 4.

As reported in the Quarter IV  Master Report,  the market for Radio and TV is monopolised by the state-owned Union of Radio and TV of Egypt which consists of 13 TV stations and 11 radio channels. The market for broadcasting TV and radio programs is monopolised, whereas the market for subscriber TV is also monopolised by the state owned company CNE, which broadcasts for the subscribers a set of five TV channels (CNN, M-Net, etc.).

The existing radio and TV stations fall under the jurisdiction of the Minister of Communications. The Radio-and-TV Union issues all the relevant licenses.

All operating stations have to comply with the code of conduct described in the laws mentioned in the regulatory framework section.

2 - Information Society Policy

2.1  Historical Overview and General Legislation

Historical Overview

Media: The market for radio and TV is monopolised by the Egyptian Radio and TV Union, which operates 13 subscriber TV stations, 11 radio channels and one subscriber TV station called CNE. In this respect, there are no privately owned broadcasting TV stations in Egypt.

Telecommunications: Telephone services were first introduced in the late 19^th century. In 1918, the Egyptian telephone and telegraph administration was established and operated until the Egyptian telecommunications organisation was founded in 1957.

The Arab Republic of Egypt National Telecommunications Organisation (ARENTO) was established under law 153 in 1980. In 1998, it was renamed as “Telecom Egypt”, and some telecommunications services were liberalized. Telecom Egypt operated under the supervision of the Minister of Transport and Communications until September 1999, initially as the sole provider of certain telecommunications services in Egypt.

In 1977, the telephone system was severely congested and became virtually obsolete, as a result of the cable networks being in poor condition. The telecom network consisted of 375,000 lines of switch equipment therefore the expansion of the telecom infrastructure was essential. Transmission networks were increased from 8,900 in 1981 to 90,000 in 1994, fibre optic cables and digital switches replaced copper ones. From 1981 to 1992, the number of telephone lines increased 4 times at 17% per annum, and in 1996 the number of telephone lines reached 4.2 million. Nowadays the number of telephone lines has increased to reach 6.7 million.

The capacity of telecommunications networks increased from 160 circuits to 3680 in 1991. In 1996, the number of international circuits nation-wide reached 5560.

In 1996, Telecom Egypt announced the establishment of new venture for operating GSM telephones. In November 1997, Telecom Egypt invited qualified international companies to submit proposals for the implementation, financing and operation of a second GSM 900 network.

In the first quarter of 1998, Telecom Egypt finalized the concession of the pay-phone service to two private companies, and proceeded with the privatization of the state-owned GSM network.

In late September 1999, a new ministry was established” the ministry of telecommunications and information” to undertake the responsibility of transferring the Egyptian society to the second millennium towards an information-based society, and Telecom Egypt fell under the responsibility of the said ministry.The Ministry of Telecommunications and Information, headed by Dr. Eng. Ahmed Nazif, aims at enhancing the usage of technology and telecommunications systems in all the government organizations. This, in return, will help simplify the provision of services to citizens, eliminate bureaucracy, and maximize productivity. The ministry created a number of working groups during December 1999. The private sector and Telecom Egypt massively participate in these groups which comprise the following :

• A legal working group which is assigned the drafting of a new Telecommunication Act for Egypt. This would recommend a stronger private sector participation in the operation industry, as well as many other issues such as the quality of services. The draft is expected to be ready late January.

•  A technical planning working group aimed at assessing the current infrastructure and the convergence towards an integrated master-plan for telecommunications in Egypt. It is a plan that covers all telecommunications players, these being the GSM operators, the payphone operators, the data communication operators as well as Telecom Egypt. This plan should be ready to be implemented by next June and should take care of interconnections between the various players now and in the future.

• A business development and service definition working group that works on the short term on marketing and pricing recommendations for existing and new services offered by Telecom Egypt. The private sector will help bringing these new services to the end users. An example is the Intelligent Network (IN) services which use the premium rate and toll free services (800) in greater Cairo. The premium rate, based on revenue sharing between Telecom Egypt and the ISPs, has been already announced and introduced with some providers while the 800 service will be introduced soon for the different business sectors. Pilot implementations have been already completed. The ISDN primary rate using 128kb/sec has been tested on national and international level and is being priced with affordable prices. ISDN primary rates up to 2 Mb/sec will be tested and announced soon. This will help the international video-conference with bandwidth-on-demand facilities. The long term objective of the said working group  is to help on issues like the development of a business plan for the telecommunications services in Egypt, taking into consideration the privatization of Telecom Egypt which is expected to take place in the first quarter of the year 2000

• The fourth working group is concerned with human resource developments in telecommunications and IT, and negotiates a new human resource development plan in cooperation with multinational organizations.

Present general legislation

Media: The Union of radio and TV which was established under law 13 of 1979. It is a dependent  authority that follows the directions of the minister of Telecommunications and Information. It is managed by a board of directors from different ministries (information & media, planning, foreign affairs, commerce) and from the House of Representatives.

Telecommunications: Telecommunications Regulatory Authority. Important steps have been taken towards separating operations from regulatory activities in the telecommunications sector. The main elements of the regulatory framework were embodied in law 19 of 1998 which was followed by a presidential decree no. 101 on April 4^th, 1998, establishing the Telecommunications Regulatory Authority (TRA), headed by Mr. Abdel Rahman El-Shaer. Telecom Egypt was incorporated as a joint stock company under Egyptian Companies Law 159. Presently the following telecommunications service providers operate in Egypt, functioning under the Telecommunications Regulatory Authority:

1. Telecom Egypt

2. Two licensed GSM companies (Mobinil & Misrfone)

3. Two licensed providers of payphone services (Menatel & Nile Phone)

4. Two VSAT Service providers  (Local Alkan Trading Group and NEC)

5.  Low earth orbital satellite systems (Iridium)

Key legislative measures

Media:

TABLE 1 - Key measures

  Telecommunications:

TABLE 2 - Key measures

Liberalization Timetable

Minister of Communication and Information Technology (CIT) announced offering of up to 20 percent of Telecom Egypt during the fourth quarter of this year (2000). The offering, valued at around LE 19 billion, will be offered as IPO (Initial Public Offering) and as private placement on international markets.

Nevertheless, on Thursday, October 19th, the Telecommunications and Information Technology Minister Ahmed Nazif has announced the postponment  of the privatisation process of Telecom Egypt, due to unfavorable local and international stock market conditions. No new date has been set for the privatization of Telecom Egypt, which had been scheduled to sell up to 20 percent of the company at the end of the November 2000. A further 5 percent will be offered to its employees.

2.2  Umbrella Policies and National IS Strategy

The national project for technological development, announced by His Excellency President Mubarak involves the set-up and use of the telecommunication and information industry to serve development objectives in Egypt.  The establishment of the Ministry for Telecommunications and Information was the first practical step towards the implementation of this national project.  This took place concurrently with the completion of studies conducted by international consulting houses and businessmen consortiums affiliated with the telecommunications and information sector, which recommended that the implementation of the national plan for telecommunication be accelerated.

The National Plan for Telecommunication and Information project under the Ministry has the objective to translate the national project for technology development into a tangible reality through the set-up and implementation of a number of ambitious projects as well as the activation of the necessary actions for the realisation of  a boost in industry, exports and career opportunities for youth.

In a latest development over the past quarter,  the Chairman of  the General Authority for Investment and Free Zones (GAFI) has  announced the approval of 2 IT companies in the Nasr City Free Zone.  The decision to launch the two IT companies comes in response to the incentives and facilities offered by the GAFI which will provide land with infrastructure and lifetime exemptions.

Umbrella Policies

Three broad goals of umbrella policies are defined under the National Plan for Telecommunication and Information Technology. These are as follows :

• Promotion of the national demand for information and its application.  This includes accelerating the rate of implementation of the national information projects and increasing the rate of investment in information technology in ministries and institutions.  More specifically, this involves appointment of an information technology consultant in each ministry, establishment of a project implementation follow up unit in the Ministry of Telecommunication and Information, and preparation of secretarial plans for information in each ministry.  In addition, there is a  modification of the five year plan for the nation starting from the financial year 2000 / 2001 involving an  increase in investment in information technology, as well as tendering for a number of information projects to be carried out by the private sector.

• Acquisition of international global market share.  Towards this there has been an establishment of an institution for the development of software exports. The aim of this is to study the international market in the areas of communication and information and identify the domains in which the Egyptian industries can find an external market.  Furthermore, the objective is to assist the Egyptian companies in obtaining contracts for implementing projects abroad, as well as to study the requirements of the national companies and co-ordinate with the government through the Ministry of Telecommunication and Information to overcome the obstacles hindering exports.  

• Development of human resources.  This includes provision of the manpower needed for the communication and information industry, orientation of youth and children to join the information age and increasing society’s awareness of the information and communication technology.

The policies include establishment of information industry pools which focus on: 

• selection of locations that are close to densely inhabited and service conglomerates in the New cities.

• a gradual process of starting with limited areas and expanding gradually

• implementation being carried out by the private sector through companies that are  charged with the establishment of the infrastructure, construction, operation and management.

Additionally, the plan aims at the establishment of alliances with the international industry, modernisation of the communication infrastructure and establishment of the legislative environment for industry growth.

2.3   IS Application Areas

The main developments during the past quarter relate to the fields of telecommunications and internet, e-commerce, education and research and labour.  These are described in sections 2.5, 2.6, 2.7 and 2.10 below.

2.4 Government and Administration

No new developments

2.5   Telecommunications and Internet

In a new development during the past quarter,  the international Internet circuit rates have been cut  by 30%. Specifically,  Egypt's Minister of Communications and Information Technology Ahmed Nazif has reduced prices on international calling and internet bandwidth. This is part of a strategy  by the Ministry to position Egypt  as a leader on the Internet. The price cuts will immediately affect the country's ISPs, with the tariff for international half circuits reduced by 30% for variable speeds reaching 2 Mbits/s for Internet traffic. The price cuts are then expected to be passed on to subscribers at the discretion of the ISPs.

As a result of the lowered prices of international bandwidth, the Minister also announced that Internet access that is paid per minute via the regular phone bill (instead of pre-paid subscriptions with an ISP) will be cut as of October 1. The per-minute tariff for the use of this 900-code Internet access via the intelligent network will be reduced by 50%. This brings the cost down to ten piastres instead of 20 piastres during day use.

In another development, a new internet infrastructure is being provided, following the award of government contracts.  This will add to the old international bandwidth provided by the government body IDSC of  10 mb capacity which is no longer sufficient even during off-peak hours. Two private companies, namely EgyNet and Nile Online, are creating the new Internet infrastructure.  EgyNet has already started providing services in the financial sector, completing phase one of a fiber-optics project to provide a broadband Internet connection of 45 MB.  Ultimately it will build a 210 megabit per second (mbps) connection to allow fast Internet access for up to five million subscribers, allowing Egypt  to become an Internet gateway for region.

Nile Online recently won a government contract to build and operate an advanced network across all provinces in co-operation with International IT companies. The resulting company, which is being set up with a capital of 400 million Egyptian pounds (about US$110 million) brings together a number of local and regional shareholders including telecommunication companies and financial institutions.  It is expected to  start operations very soon, with a backbone capacity of 45 Mb.

A further development has been the announcement of a three-year expansion plan for the telecom sector, by Ahmed Nazif,  Minister of Communications and Information Technology. The Minister announced plans to expand the fixed line penetration rate among residential users to 90% from the current 40%.  This will be achieved through the installation of a new fiber optics network. The expansion plan will be implemented over several phases with an initial cost of US$ 1 billion. The first phase of the project, covering the Greater Cairo area, is estimated to cost LE 40 million over the next six months. Meanwhile, there is a five-year plan for the sector aiming to increase fixed line penetration from the current 10% of the population to around 20% by the  end of fiscal year 2005.

In addition, in an effort to make computer use affordable to more people, a new internet connection service has been made available to everyone who has a telephone and computer. The service enables users to dial and be connected via InTouch communications’ servers. The rate stands at  20 piasters per minute between 8 am and midnight and 15 piasters per minute other hours, while usage is billed along with monthly phone charges through Telecom Egypt.

Telecom Egypt has announced that Cairo is soon to be connected to the FLAG Telecom global city-to-city network. The connection will allow the two companies to offer managed high bandwidth services (MBS), and other IP-based services to businesses in central Cairo.  It is expected that this will evolve into the first major Internet exchange in the Middle East. By connection to the cable, carriers and ISPs in Cairo will be able to access a full-channel managed bandwidth service for connection to other city centres. Services will be governed by a service level agreement.

Finally, Egypt has sent its second NileSat communications satellite into orbit in August 2000.  It will be capable of broadcasting more than 100 digital television channels direct to homes. Also equipped with Internet and IT facilities, it is anticipated that the new satellite will alleviate some of Egypt’s bandwidth problems.  The new channels and Internet series will be operated,by the end of September 2000, from the ground control station in the Al Hammam area on the Northern coast.

2.6 Electronic Commerce

In the context of the National Plan for Telecommunication and Information the promotion of electronic commerce is targeted through the following key objectives :

• preparation and development of the necessary Egyptian legislation.

• enhancement of the work flow in financial institutions and the securing of financial deals conducted via the electronic networks.

• enhancement of the work flow in some governmental institutions such as Customs and Exports and Imports supervisory institutions.

•  raising awareness as to the importance of electronic commerce and carrying out training programs for the business sector.

• increasing the capability of the communication network for information transfer to accommodate the growing demand of electronic commerce applications.

In a new development which is ultimately expected to boost e-commerce in Egypt, Lucent Technologies has signed a US $51 million contract with the Egyptian Company for Networks (EgyNet) to expand its national asynchronous transfer mode (ATM) backbone data services network. The network will provide Internet access and video broadcast capability for EgyNet's business customers.

The current expansion project will provide EgyNet's national data network with high-capacity multiservice switches supporting ATM and frame relay, DSL access concentrators and router/bridges.

In the future, EgyNet plans to introduce new services, such as video on demand, and e-commerce, to its business customers.

2.7 Education and Research

The Information and Decision Support Centre (IDSC) of the Egyptian Cabinet has represented Egypt in a symposium organised by the International Bank for Reconstruction and Development (IBRD) as part of its first programme for  implementation of remote-education international centres.

The Minister of Communication and Information Technology (CIT), Ahmed Nazif, announced an agreement made with Egyptian computer manufacturing companies to import 100,000 machines for local universities. The computers will be offered to enrolled university students on a minimal installment basis. It is expected that there are currently 250,000 university students who could benefit from agreement.

In another development, the Egyptian government has announced an ambitious plan to raise the IT knowledge.  Towards this, the Future Generation Foundation together with Microsoft Egypt, is offering a set of scholarships for young IT Professionals in Egypt. The scholarships will offer training courses that qualify the individuals to obtain certificates of Microsoft Certified System Engineer (MCSE) , Microsoft Certified Solution Developer (MCSD) and Microsoft Certified Data Base Administrator (MCDBA).

Furthermore, the  Information Technology Institute (ITI) and Mentor Graphics Egypt (MGEG) are offering 25 scholarships fully covered tuition fees for nine months, in addition to a monthly allowance for exceptional candidates, for VLSI Design and EDA Tools Diploma. The goals are the development advanced design skills of VLSI circuits, high development capabilities of Electronic Design Automation tools (EDA) and  acquisition of adequate efficiency levels very rapidly for work in Hi-Tech companies.

Finally, Egypt has joined the global net of Tele-education, the World Bank affiliate, which will help in increasing the co-operation between Egypt and the World Bank in the fields of training and education. The objective is to increase the exchange of experience and knowledge between Egypt, World Bank and other members countries. Dr. Hisham El Sherif the chairman of the Regional Information Technology and Software Engineering Centre has stated that the centre will carry out the implementation of education and training programs in co-ordination with the World Bank and under the supervision of the Ministry of Planning and International Co-operation.  

2.8 Transport

No new developments

2.9  Health Care

No new developments

2.10 Labour

Ahmed Nazif, Minister of CIT, and Cisco International’s regional director have signed an agreement to proactively address Egypt’s lack of skilled IT engineers. The two-part agreement consists of a technology-planning program, namely a US$1 billion three-year investment program aimed at establishing an Egyptian high-speed telecommunications network and a human-resource development program.  The human-resource development program’s initial objective is to establish regional and local training academies for potential Egyptian IT engineers, with the ultimate goal of making Egypt the first Cisco Network Training Hub for the Arabian and African region.

In another development,  Lucent Technologies has pledged US$10 million over the next two to three years to recruit and train professionals in the fields of software development and wireless communications. In an attempt to increase the number of communication-related software design and engineering graduates, US$2 million of the US$10 total will be targeted to helping the government develop its IT education infrastructure.  

2.11 Competition

No new developments

2.12 Access for all

No new developments

2.13 Copyright, intellectual property rights

No new developments

2.14 Public access to data

No new developments

2.15  Privacy, data protection, consumer protection

No new developments

2.16 Security

No new developments

2.17 Freedom of expression and information as far as the distribution via electronic networks is concerned

No new developments  

3. Institution and Organisations in charge of IS regulation

3.1  Ministries

No new developments

3.2 National Regulatory Authorities

No new developments

3.3. Office for the protection of economic competition

No new developments

3.4. Consultative councils

No new developments

3.5. Bodies in charge of RTD policy

No new developments

3.6.  Organisations in charge of the promotion of the IS

No new developments

4.  International Relationships and Agreements

Egypt is participating in a US$500 million investment  project in a fiber-optics network linking Italy, Egypt, Greece, Cyprus, Turkey and Israel. Telecom Italy is the major shareholder amongst several partners forming a new company, Mediterranean Nautilus Ltd., to oversee the project.   The 7000-Kilometer Nautilus 1 (MN1) submarine system will be gradually implemented during 2001. The band capacity 3.84 Terabits per second can transport over 3,000 billion bits per second of Internet traffic or 45 million phone calls simultaneously or 300 hours per second of digital video.

In another development, Telecom Egypt (as well as other  carriers from other African and Arab countries) has already reserved its stakes in Africa One, the US$1.9 billion project involving Global Crossing and Lucent that is placing a fiber optics ring around Africa, and which will be ready by 2002.

The project aims at giving African countries direct connectivity to each other, and will enable Egypt to save substantially on transit fees.   The 32,000-km network with a capacity of 80 Gbits/s will have up to 30 landing stations. In the first phase, 19 will be implemented in Africa, one of these being in Egypt’s Mediterranean City of Alexandria.

The Minister of Communications and Information Dr. Ahmed Nazif has announced a plan that will be implemented to increase the value of the information technology industry via benefiting from the Indian expertise in this domain.   The Indian Minister of Science and Technology has visited Egypt to meet with Dr. Nazif and confer with Egyptian companies on data technology and for discussions on boosting co-operation between the two sides.

Finally, Dr. Ahmed Nazif, Minister of Communication and Information Technology, has signed an agreement for the development of programs and applications between Egypt and United States. The objective is to develop the programs and applications domestically and then market them in the American Market.

5. Market: Privatisation, foreign investment, mergers, acquisitions, call for tenders

Since the creation of the Ministry of Communication and Information Technology, tenders have gone out to open 250 tele-centres, aimed at providing technology, Internet access and advice to young children, youths and professionals.  Twenty percent of the funding for the first 250 centers (about 1.1 billion UK sterling), plus free internet connections, will come from the state.  

6.   Standards

6.1. Standardisation bodies dealing with IS issues

No new developments

6.2. Relevant standards

No new developments