Free internet access profitable in Egypt

Matfinn

This is a news article I sawon slashdot.org tonight. Mightbe worth a readif your interested. Certainly makes Eircom's and ODTR's arguments look silly. Here it is.

Egypt Boasts Free Internet Service
Sun Sep 8, 2:37 PM ET
By HRVOJE HRANJSKI, Associated Press Writer

CAIRO, Egypt (AP) - By now, subscription-free Internet service has pretty much proven itself an unprofitable anachronism.
Except in Egypt.

In this nation beset by creaky Net connections and outdated circuits, where computers remain a luxury for the vast majority, a free Internet strategy is boosting Internet access.

Since January, Egyptian users in the Cairo region have not been charged for dial-up Internet connections. All they pay is the cost of a phone call — less than 25 cents an hour.

That fee is split between state-owned Telecom Egypt and local Internet service providers. The higher the number of users and the longer they spend online, the bigger the profit.

Free Internet evaporated with the dot-com boom in the United States, Europe and Latin America. ISPs couldn't generate enough advertising revenue to cover costs.

In Egypt, however, the model appears to work. This country of 63 million counts just 900,000 Internet users among some 4.2 million across the Middle East.

Syria, too, says it plans to copy the Egyptian model to boost its subscriber numbers from a paltry 20,000.

The Arab region, where the Internet has been slow in blossoming, suffers from poor phone service. The number of phone lines per capita lags behind the developed world and most of Latin America and Asia.

According to the World Bank ( news - web sites), only Bahrain, Kuwait, Qatar and the United Arab Emirates have managed telephone penetration that exceeds 20 percent of households.

In Egypt, there are just 60 fixed phone lines per 1,000 people — compared to 102 in Syria, 471 in Israel and 661 in the United States.

As in other Arab and developing countries, fixed line communications are monopolized by stodgy government-run telecoms, a situation that the International Telecommunications Union and others say thwarts the spread of the Internet and affordable phone service.

State-owned telephone monopolies are major government revenue earners for these countries. In Saudi Arabia they account for second largest source of revenue, in Jordan and Egypt the third.

Egypt allows foreign telecoms to enter its market only as Internet service providers, in joint ventures and as equipment suppliers.

Despite such hurdles, the Internet is catching on among Egyptians.

A growing number of young users spend time online messaging friends, surfing for news (most local media are government-censored) or chatting about everything from repressive politics to Islamic matters.

Middle Eastern e-commerce opportunities are small, but Internet portals ( news - web sites) still offer goods for sale, despite the hurdles. Credit cards are not so widely used in the Middle East, mail and package-delivery services are inefficient and customs barriers are hard to surmount.

With the total cost of connecting now reduced by as much as 59 percent, free Internet has heightened competition among ISPs, who must compete on quality of service, marketing strategy and brand recognition, according to Arab Advisors Group, a Jordan-based telecoms research company.

Since the Internet was introduced here in 1993 and commercialized three years later, five big portals ( news - web sites) emerged atop the market of some 60 ISPs. The government's scheme gives ISPs 70 percent of dial-up revenues while Telecom Egypt gets 30 percent.

Analysts say hot competition will drive smaller providers out of business unless they move from cities to mostly unserved rural Egypt.

"It's good for consumers and will develop the country at the end of the day," said Fady Rafla, marketing manager of LINKdotNET, Egypt's largest ISP. "I'll have my population exposed to other cultures, develop the market and bridge the digital divide."

LINKdotNET set up Egypt's first online ad agency and formed a joint venture with Microsoft Corp. last year to offer the company's MSN network in Arabic. Like other leading portals, it is adding content, aware that tasty extras like MSN Messenger will attract users who stay online longer.

"This model has turned the market into a jungle," Rafla said. "It's the survival of the fittest — who has the most high-tech equipment, the biggest bandwidth, the most reliable connection, the best value for its customer."

Big ISPs like LINKdotNET can afford to invest in new infrastructure like fiber-optic cables to connect to U.S.-based Internet backbones because most are subsidiaries of Egypt's giant enterprises. LINKdotNET is majority owned by Cairo-based Orascom Telecommunications, the largest mobile network operator in the Middle East and Africa.

Still, the Internet market in Egypt is growing more slowly than the global average.

Rafla attributes that to unreliable and scarce phone lines and the lower living standard — the average yearly income in Egypt is just $3,700 — that discourages computer ownership.

Elsewhere in the Arab world, Egypt's free Internet model may catch on.

Syria said in March it is planning a similar move, but with higher phone charges. Currently, Syrians pay $100 for an initial subscription plus $20 per month and connection costs of two cents a minute.

Jordan and the United Arab Emirates also view the Web as a tool to develop their information technology sectors, but neither has announced plans to offer free Internet.

dathi1

exellent article....I've also seens posts in wireless forums where Egyptians have used converted Pringle cans and wifi cards to link across the desert to remote towns.