April 2000

Mediterranean Area

As in the rest of the world, the progress of the ‘information society’ (IS) has become an important challenge for the economic and social development of Mediterranean countries. For several years, public and private players have become increasing interested in enabling the development of infrastructure networks, technologies and information society applications, in order to facilitate these countries’ integration with the global economy and society.

New information and communication technologies are seen as key components of growth.

However, the current situation in the Mediterranean countries shows considerable differences in the development of information technologies and the progress of telecommunications liberalisation. Availability and quality of telecommunication infrastructures, use of application and corresponding training, regulation, political evolution, all these factors are extremely different according to the countries.

So whilst some countries (such as Israel, Cyprus and Malta) are experiencing very rapid growth of their telecommunications infrastructures or have even reached a level approaching that of the European Union countries, others (including Syria and Algeria) still have a long way to go. In any case, in most of these countries telecoms and even more so the Internet, have so far only achieved very limited penetration, making it difficult to create a general understanding of the concept of the information society.

This document is designed to give a broad perspective of telecoms and IS policies throughout Mediterranean countries, with a particular emphasis on the liberalisation process, and public and private sector policies in this area. The first section of the document concentrates on the telecommunications sector and a second section covers IS policies. It is based on the contributions of national contractors involved in the ESIS II project.

I - General telecoms policy

1. The regulatory background

1.1 The penetration of telecommunications and focus of national policies differs to a large extent from country to country

The development and spread of basic telephone services and public pay-phones, let alone data or Internet services, is still in its infancy in most of the Mediterranean countries. This situation is regarded as a major barrier to social and economic development. Despite the poor state of the services currently on offer, demand for increasingly sophisticated telecoms services is growing ever stronger in most of these countries, and is driving significant reforms.

The countries in question can be divided into several distinct groups:

• Israel has seen the greatest deregulation and a high degree of penetration for telephone services (reaching the level of 44 fixed lines per 100 head of population by the end of 1999, and a penetration rate of 45% of the population for mobile)

• Cyprus, Malta and Turkey are official candidates to join the European Union and, with this in mind, will need to update their regulatory regimes to bring them into alignment with EU directives. High levels of economic development and political self-determination have led to high penetration rates for fixed telephony services (63 lines per 100 head of population in Cyprus, 53 in Malta and 31 in Turkey).

The need to conform with the principle of ‘acquis communautaire’ (body of EU law) means that the following elements, in particular, will need to become part of the national law in each of these countries:

• an end to monopolies by a specific deadline
• the separation of regulatory from operational functions
• the setting up of a framework to enable the development of a competitive market. This includes a set of rules dealing with universal service, licensing, tariffs and consumer protection
• the development of open access to all networks (interconnection principles), the requirement being that every telecommunications operator may access existing infrastructures on a fair and equal basis, at a reasonable price.
  
• Egypt, Jordan and Morocco are currently involved in restructuring programmes in their telecoms sectors, including planned privatisation of historic monopoly operators and modernisation programmes. These actions should enable rapid growth of the penetration of fixed telephony services, as well as of mobile in the short to medium-term. Partnerships with international operators are an important element of the overall policies being followed both in the fixed and mobile sectors.
  
• Lebanon and Palestine are currently experiencing a phase of (re)construction in their telecoms sectors.

• In Algeria, Syria and Tunisia the telecoms sector remains firmly closed to competition. However, a number of developments have taken place which have stimulated the Internet industry. In Syria, for example, a programme has been launched to construct an Internet backbone which should be completed by the end of 2000. Once in place, 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.

The table below gives an overview of the regulatory situation in the Mediterranean countries

Table 1: Regulatory overview of Mediterranean countries

COUNTRIES	REGULATORY OVERVIEW
ALGERIA	- Potential for private companies to build and run networks - Deregulation of Internet service provision, under regulatory conditions set out in ministrial number 98-257 of 25 August 1998 decree
CYPRUS	- The basic law governing the sector is the Telecommunications Service Law of 1954 - Data transmission, value-added services, Internet access and terminal equipment are all open to competition - In 1998, the council of ministers agreed to establish an independent regulatory authority - A new telecommunications law is being prepared: Cyprus has made a public commitment to comply with EU principles by 31 December 2003
EGYPT	- Telecom Egypt being partly privatised: 10% of shares should be sold by the end of 2000, and another 10% by the end of 2001. - Some telecommunications services are open to competition (mobile telecommunications (2 operators), pay-phones (2 concessions), pre-paid international calling card services, Internet access 60 ISPs recorded) - Creation of the ministry of telecommunications and information in 1999 aimed at modernising the sector. Its objectives include developing intelligent services, value-added services and ISDN
ISRAEL	- Sector has been open to competition since 1 June 1999 (there are currently three mobile operators, Bezeq CDMA, Cellcom TDMA, Hutchison GSM 900, and 30 ISPs) - Moving towards full privatisation of Bezq
JORDAN	- Telecommunications Law of 1995 is a first step towards open competition. This includes creation of the TRC, deregulation of Internet access (Jordaniant ISPs include Firstnet/ATT and Global One), deregulation of data networks for closed users groups (12 licences have been awarded to private organisations), and so on - Partial privatisation of JTC in December 1999 - End of JTC’s monopoly on voice services is planned for 2004
LEBANON	- Recent draft law prepared by the minister of post and telecommunications proposes a complete re-organisation of the telecom sector (deregulation, privatisation) - Preparation of a law on privatisation
MALTA	- The Telecommunications Law of 1997 separated the operation of the network(under the ministry for transport and communications) from the regulatory functions (under the ministry of economics) - Malta is candidate to join the EU. The process of integration will involve acceptance of ’acquis communautaire’. Maltese government announced that it will soon indicate its policy regarding the application of ‘acquis communautaire’ in the telecoms sector. In the first quarter of 2000, Malta opened formal negotiations with the European Commission.
MOROCCO	- The telecommunications law of 7 August 1997 specifies the new regulatory framework, preparing the opening of the sector to competition: the former publicly-owned ONPT is to become a limited company, and the independent ANR is instituted - Publication of ministerial decrees in 1998 defining the conditions of application of the telecommunications law of August 1997, particularly concerning the conditions of supply for a deregulated public network, interconnection regulations and so on - Partial privatisation of Maroc Telecom potentially in 2000, Set up of a second mobile operator, Medi Telecom (Telefonica, Protugal telecom, BMCE, Afriquia) in mid 1999. ANRT is to issue three VSAT licences in 2000.
PALESTINIAN AUTHORITY	- Evolution towards a clearer regulatory framework
SYRIA	- Deregulation is currently not envisaged. Nevertheless, alternative ISPs should be allowed by the end of 2000 when the Internet national backbone is completed (although they will be obliged to use the national backbone)
TUNISIA	- Opening to competition of telecoms is being discussed, to take place from 2003 onwards (currently there are seven ISPs serving the public sector and two serving the private sector). - Signed the WTO agreement on telecommunications in February 1997.
TURKEY	- The new telecommunications law enacted in 2000 forecasts in particular the end of Turk Telekom’s monopoly on basic services for 1 January 2006, the partial privatisation of Turk Telekom by the end of 2003 and the creation of an independent regulatory authority. Some sectors – including value-added services, Internet access (80 ISPs) and mobile (two operators) – are already highly competitive. - Official candidate to join EU. This will necessitate a review of legislation to ensure that it is aligned with EU directives - Signatory of WTO agreement on telecommunications

 

Telephony penetration’s indicators in the Mediterranean countries Graph 1 Graph 2

 

1.2 National policies

The policies which have been put in place include the following major areas of activity:

1.2.1 Investment programmes

With an average of only 18 telephone lines per 100 head of population in 1999, the Mediterranean zone is lagging well behind the European Union (52% in 1998) and even the Central and Eastern European countries (20.5%).

However, it is important to note that:

• there are very significant differences between countries in the zone
• the Lebanon, Morocco and Turkey are moving very quickly to catch up

The development of information technologies is seen as an important factor in promoting economic and social progress.

A number of countries have instigated investment programmes in this area, which are summarised in the following table.

Table 2: Examples of modernisation programmes

JORDAN	Enhancement of penetration of telephone services. Three pay-phone operators have been licensed. Implementation of wireless local loop. National Telecommunications Programmes (1999-2010): digitising of PSTN improvement of public telecommunications network capacity, with the aim of providing more than 1,350,000 lines installation of regional optical fibre transmission links to connect Jordan with its neighbouring countries of Saudi Arabia, Egypt, Syria, the Lebanon, Iraq, Palestine and Israel.
PALESTINIAN AUTHORITY	- Installation of 600,000 new lines and upgrade of the existing network. The required investment is estimated at US $550-600 million over 10 years.
SYRIA	Objective of penetration rate of 20% for telephone services by 2002.
TUNISIA	A 300 million dinar investment scheduled in 2000, to develop the telecoms infrastructure

 

1.2.2 Universal Service

The implementation of universal service is a key component of development policies. Countries seek to ensure a minimum set of services is guaranteed to the whole of the population, at an acceptable price and quality. Indeed, universal service is one of the cornerstones of the principle of market liberalisation. It consists of two key dimensions:

• a social dimension targeting socially disadvantaged groups of people who need access to telephone services

• a geographic dimension which enshrines the principle of identical tariffs and charges, irrespective of geographic location, across the whole area served by a basic telephone service.

Free-market laws alone can not make this happen, so it is essential for the national regulators to establish specific regulatory frameworks to guarantee universal service.

Establishing true universal service is a complex task, because it must take into account a large number of parameters including: the country’s socio-economic conditions, the level of development of the network, the use of telecoms services and so on. Broadly speaking, regulatory authorities must answer three major questions which constitute the core of universal service:

• how should universal service be defined for the country in question (should universal service cover the whole population? which services should be included?…)?

• how should the cost of universal service be calculated?

• who should pay and under what conditions?

How should universal service be defined?

The definition of universal service depends on the nation’s actual state of development, so it differs from country to country. It is also clear that the definition of universal service can vary over time. It evolves according to the state of deployment of networks and services, as well as citizens’ purchasing and usage behaviour.

Universal service for the whole population

Usually, universal service translates as one telephone per household. But, less developed countries may prefer the notion of ‘universal access’, which simply means having easy access to a telephone. In this instance, the difficulty lies in defining ‘easy access’. Depending on their level of development, countries may have different definitions. For example, it could be defined as an objective of one telephone per household in urban areas and one telephone per village or settlement in rural areas.

Which services should be included in the definition of universal service?

The notions of ‘telephone service’ and ‘minimum service‘ are defined under telecommunications laws. Usually, basic services such as directory services, phone booths and information services are included under the heading of telephone service.

Definitions usual differ according to the country’s state of economic development. Indeed, most developed countries are extending the definition of universal service to include additional elements over-and-above basic telephone services. In some developed countries, universal service now includes RNIS services, Internet access to schools and many other value-added services.

Quality and affordability are the other main issues for universal service, and several methods can be used to determine what might constitute an affordable price.

Universal service cost

Universal service cost definition is a complex process. In a competitive, multi-operator environment, the cost of universal services must be transparent and clearly evaluated. Different parameters must be taken into account, including: cost elements (direct costs, common costs, etc), allocation methods (total costs or incremental costs) and so on.

Who pays for universal services?

Typically, providing universal services is a loss-making activity for operators (generally the historic monopoly-holders). In new, deregulated environments, all licence-holding operators must play a part in the financing of universal services. This means that the regulatory authorities have to deal with a number of key questions, including which operators pay for which cost components of universal service and which operators might not have to pay. So regulatory decisions have an important impact on the development of competition. Today, many countries in the process of liberalisation (such as Hungary and Poland) are setting up ‘universal service funds’. Generally these funds are not managed by the state, but either by the regulator or an independent body.

In the Mediterranean countries, the degree to which the regulatory framework has been developed varies widely. However, universal service appears to be a central concept. The development of a specific regulatory framework is seen as an essential way of accelerating social and economic development and an important factor if the country is not to fall behind in the development of the information society.

1.2.3 Privatisations and selective competition

Some countries in the Mediterranean zone have begun the process of privatising the historic monopoly operators or opening certain sectors (such as mobile) to competition.

Privatisation is seen as a vital way of transforming companies’ management methods, injecting capital and know-how, and accelerating the introduction of new technologies.

Examples of privatisation initiatives

• In Egypt, in the near future, the government intends to start the privatisation of Telecom Egypt, selling 10% of the company’s stocks by the end of the year 2000 and 10% by the end of 2001. The government has yet open several areas to the private sector : pre-paid international calling card services, pay-phones and mobile telecommunications

• In Jordan, privatisation of JTC was part of a broad privatisation program of state-owned enterprises. On January 2000, a France Telecom led-consortium bought 40% of JTC’s shares, a deal valued at $508 million (see national report), the government remaining the majority shareholder with 51% of shares. The consortium is planning to invest $400 million in JTC in the next five years to upgrade the telecommunications infrastructure.

• In Morocco, the government should privatise Maroc Telecom (ex-IAM) in 2000 or 2001. This operation follows the liberalisation of the mobile sector which occured in 1999 with the establishment of a private GSM operator in competition with Maroc Telecom

• Privatisation of the national operator should also occur in Lebanon where a broad privatisation law is in preparation.

The table below shows the evolution of the ownership of historic operators across the Mediterranean countries.

Table 4 : OVERVIEW OF STATUS OF HISTORIC OPERATORS AND REGULATORY AUTHORITIES IN THE MEDITERRANEAN COUNTRIES

COUNTRIES	HISTORIC OPERATOR	OWNERSHIP	REGULATORY AUTHORITIES
ALGERIA	Ministry of Post and Telecommunications	100 % State owned	Ministry of Post and Telecommunications
CYPRUS	Cyprus Telecommunications Authority (C.Y.T.A)	100 % State owned	Ministry of Commerce and Industry C.Y.T.A
EGYPT	Telecom Egypt	100% State owned	Ministry of Post and telecommunications Telecommunications Regulatory Authority
ISRAEL	Bezeq	54 % State, 20% Gad Zeevi, others	Ministry of Communications
JORDAN	Jordan Telecommunications Company (JTC)	60 % State owned 40 % consortium led by France Telecom	Telecommunications Regulatory Commission (TRC) (Telecommunications law of 1995), independent from the operator.
LEBANON	Ministry of Posts and Telecommunications	State	Ministry of Posts and Telecommunications To note, the Investment Development Authority of Lebanon (IDAL) helps the government to implement large infrastructure projects and works in close relationships with ministries. Ministry of Economy is consulted on specific competition and consumer protection issues.
MALTA	Maltacom Plc	- 60% State owned - 20% domestic market - 20% international institutional investors	Ministry of transport and Communications Telecommunications Regulator (placed under the responsability of the Ministry for Economic services)
MOROCCO	Maroc Telecom (ex IAM)	Limited company, State owned	Ministry of Communication The National Agency of Telecommunications (ANRT) Regulation instituted by the Prime Minister in 1997, is independant from IAM
PALESTINIAN AUTHORITY	Palestine Telephone Company (PalTel)	Palestinian Authority (» 25%) and private investors (» 75%)	Ministry of Post and Telecommunication Economic Adviser, Office of the President
SYRIA	Syrian Telecommunications Establishment (STE)	100 % State owned	Ministry of Communications
TUNISIA	Office National des Telecommunications (ONT) (Tunisie Telecom)	owned	Ministry of Communications ONC
TURKEY	Turk Telecom	100 % State owned	Under the Ministry of Transport : Directorate General of Communications and Directorate General of Wireless Communications

Generally, the opening up of the telecoms sector necessitates large-scale investment from foreign investors.

1.2.4 Recourse to foreign capital

Agreements with foreign partners are really seen as vital to spread out networks and services. At the same time, operators who operate in markets which are already open to competition, such as Western Europe, the United States and Asia, are facing stronger competition. International expansion is seen as essential to develop new markets.

Many examples of increasing Western operators investment in the Mediterranean area can be found :

• France Telecom is present in Egypt in Mobilnil, in Lebanon in the mobile operator Cellis (66.7% FTML / 33.3% local investors) (incorporated in August 1994 with a capital of $30 million), in Jordan in JTC,

• Vodafone Airtouch is present in Egypt in the mobile operator Misrfone,

• CGSAT (Vivendi) also participates to Misrfone,

• Telecom Finland is present in Lebanon in the second mobile operator Libancell, but with a very little part of shares (14 % Telecom Finland / 86 % local investors)

• Telefonica and Telecom Portugal are main shareholders of Medi Telecom, the second GSM operator of Morocco, recently licenced, with 39.5 % of capital each. Medi Telecom Consortium paid a licence fee of 1 080 000 billion dollars, one of the most expensive in the world.

1.2.5 The largely positive influence of competition on the expansion of telecoms markets

It has often been shown that the introduction of competition into a market plays a very important role in encouraging growth. In the mobile sector, as in the area of Internet services (2 fields broadly open), competition has forced all the players to pursue more aggressive commercial policies, resulting in significant price reductions, product and service innovations and considerable improvements in network quality (More details and analysis of market developments can be found on the ESIS II web site, under the heading ‘Basic facts and Indicators’).

If we focus on mobile penetration growth between 1998 and 1999, one can see that all countries knew very fast rates, even those where the penetration is the most important as Israel and Cyprus.

It is worth noting huge growth in Egypt (450%), mainly explained by the fact that 2 competitors are present in the market. In Morocco, the future launch of Medi Telecom’s GSM services should enable a rapid growth.

II - Information society policies

Developing the ‘information society’ is becoming a major challenge for the economic and social development of Mediterranean countries. Progress towards the information society entails significant changes, mainly linked to increasing globalisation in terms both of companies and national economies.

In countries with medium to high-income levels and adequate public and private structures, new information technologies can facilitate a better dissemination of knowledge, new organisational structures and economic growth and increase in employment. On the other hand, the insufficient level of infrastructure development, limited access to hardware and low levels of purchasing power amongst the population explain why the Mediterranean countries have found it difficult to promote and diffuse information society developments and benefits.

Then it is obvious that the "Information Society " brings also with it a major risk of growing disparities between regions and countries.

In less developed countries, the implementation of wide-ranging public policies is essential to progress towards information society.

Examples of main IS policies and applications are presented below. One can find more details on the ESIS II database.

1. Umbrella policies

Umbrella programs are key elements of the diffusion of Information technologies. Several governments have set up Information Policy Councils, responsible for developing the country’s information society policies. For instance:

• In Turkey, it exists several official bodies as the Electronic Commerce Co-ordination Committee,

• In Cyprus, information society policies are driven by a number of state and semi-state organisations. The Department of Information Technology services of the Ministry of Finance is responsible for the implementation of all Information Technology projects designed or required by the Public sector. The Institute of Technology is a semi-government body responsible for formulating training policies and for providing information on a wide spectrum of matters to enterprises and the public. Additionally, the University of Cyprus is heavily involved in the promotion of IS projects dealing with health and education.

• In Israel, a new parliamentary sub-committee for the Internet and Information Technologies was established in March 2000. It will work on a large set of subjects : Internet 2, Personal identification, Electronic commerce, …

• In Syria, the Syrian Computer Society (SCS) established in 1989 as a non-governmental, non-profit organisation, is aimed at promoting and contributing to the diffusion of information technology. The SCS is working closely with the government on different subjects as education and training, conferences organisation with the collaboration of scientific institutions, Currently, the main pillars of IS policy in Syria are the computerisation of all governments establishments and the diffusion of Internet over public institutions and private sector.

• In Morocco, three prioritary axes of IS policies are Human ressources (training), promotion of large projects (administration) and infrastructures (telephony density, up-grade)

2. Areas of application for IS

2.1 Government

Computerisation of public administration, governmental agencies, national and regional authorities is an important area where IS policies may be applied. Programmes are aimed at improving the efficiency of public administration, facilitating communication with citizens and Information gathering. For example:

• in Jordan, an ambitious program would be prepared targeting the computerisation of the government,

• in Palestine, the Ministry of labour established the HTTC (Training Center for Advanced Technical Skills), a training center specialised in computer-based training.

• in Malta, the Prime Minister developed the Information Systems Strategic Plan (1999-2000) which deals with information systems projects within the Maltese Public Sector;

• in Syria, several projects are also aimed at the computerisation of ministries,

• in Tunisia, the National Agricultural Network (AGRINET), managed by the Higher Agricultural Institute for research and Teaching (IRESA) connects agricultural institutions,

• in Cyprus, under the Civil Registration Project, the Ministry of Interior plans to introduce a smart card in order to replace the traditional identity card. A central archive is to be created which will be accessible by all district authorities and will enable the transmission of data necessary for the issue of a set of legal papers (passports, electoral booklets, …),

2.2 Research and education

Research and Education are important areas both in terms of the use and development of IS-related programmes. For instance:

• in Jordan, it is interesting to mention a project aimed at implementing a network linking the Ministry of Education and schools,

• in Syria, in collaboration with the SCS, the Ministry of Education elaborated the "Syrian National Policy for Information Technology in Education" in 1995. This program includes the introduction of computers in schools,

• Tunisia planned to increase the number of technological university graduates by 300% to reach 4050 by 2001/2002 from 1600 in 1996/1997. Thus, a particular attention is given to scientific course. A vast program intended to quadruple training capacity over 7 years should raise the trainee graduation rate from 15 000 to 60 000. The Tunisian government plans to spend 5.3 million dinars to equip schools with computers,

• In Cyprus, the University of Cyprus participates to the Q-MED programme (an extension of the QUANTUM Trans-European Research Network Infrastructure Project)

2.3 Transport

• In Turkey, the State Highways Administration has several IS projects, among with a project regarding automatic toll payment, traffic management, emergency communications management, …

2.4 Medicine

• An international telemedicine link has been established between hospitals in Jordan and hospitals in the United States. It the support for tele-education and videoconferences applications

• In Tunisia, the National Health Network (RNS) managed by the Ministry of Public Health Computer Center connects over 64 hospitals and provides access to Internet

• In Cyprus, the Department of Information Technology Services is focused on the computerisation of the Health Information Support System. The project is aimed at supporting the management of patients in hospital and rural health centers
  
• In Turkey, the Ministry of Health plans to establish a national communication network for medical and health related purposes called UMEDIA

3. Low developments regarding e-commerce and digital signature

The development of a regulatory framework for e-business (focusing particularly on respecting people’s privacy, authentication and security) has become a great priority in most developed areas (United States, European Union, Japan, …) and significant advances have been realised.

The European Commission adopted a Directive on electronic-commerce and several members yet issued national laws aimed at recognise the validity of digital signature as proof of authentication.

Low penetration of Internet and e-commerce in Mediterranean countries explain the low development of e-business related regulation. One can not that in Morocco, digital signature issues were recently discussed. The aims of the bills are as follows : legal equivalence between a piece of data and its written form whether written or electronic, technological neutrality regarding electronic data protection, autonomy for all parties to favour contractual requirements. We may outline that Tunisia is paying a special attention to e-commerce", a National Commission for Electronic Commerce was set up in 1997. Tunisia has launched several projects of e-commerce in different sectors (agriculture, tourism, industrial goods) and is preparing a regulatory framework.