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High costs hamper Iraq telecoms growth

High costs hamper Iraq telecoms growth

Development slow due to high prices of fibre optic cables; Regulator disputes slow 3G, fourth operator approval; Iraq could be regional gateway for telecoms, data traffic

May 5, 2011 2:38 by



Telecommunications should be one of the hottest growth industries in Iraq. But providers have yet to introduce 3G technology into a market where the military jams mobile phone networks to stop insurgents detonating bombs.

Poor infrastructure, high operating costs, conflicts between communications regulators and security problems are stunting development in a country slowly rebuilding eight years after the U.S.-led invasion that ousted Saddam Hussein.

Iraq holds a pivotal geographical position in the region and could be an important communications bridge joining the Middle East with Europe and Asia.

But security remains one of the country’s biggest concerns as Iraq’s army and police battle a weakened yet stubborn insurgency while U.S. troops prepare to withdraw by Dec. 31.

Jamming of mobile phone frequencies and poor data services are frequent complaints of Iraqis since the 2003 invasion that toppled its autocratic government and paved the way for a cellular phone market and unrestricted access to the Internet.

Mobile phone firms say military jamming costs them millions of dollars in maintaining and upgrading spectrum. Infrastructure damaged by bombs often takes time to repair due to curfews imposed by authorities because of fears of another attack.

Sometimes companies are forced to wait until security officials have investigated the attack.

Iraq’s mobile phone and internet providers also fret over the high cost of fibre optic cables, electricity and security. They say that feuding between Iraq’s Communications and Media Commission (CMC) and the Iraqi Telecommunications and Posts Company (ITPC) is hindering progress.

“We are competing in an environment which is very tough and difficult, especially security-wise and also because of the problem existing between the CMC and ITPC. We are caught between both of them,” said Saman Shali, general manager for network provider Kalimat Telecom.

“The lack of electricity puts a big burden on the expenses of all operators, not just Kalimat … A big chunk of revenue is going to this,” he added.

Iraq did not have a mobile phone market under Saddam but the industry has exploded in the past eight years. There are now about 23 million mobile phone subscribers, according to the CMC.

But landline and internet development has lagged badly. Iraq currently has 1.2 million landlines, of which only 800,000 are in working order, according to Communications Minister Mohammed Allawi. Internet penetration sits at three percent.

Allawi has said the ministry aims to boost fixed-line phone penetration and internet reach to 25 percent within five years through a $3 billion development project. It has allocated $500 million to spend on the telecoms industry this year.

NO CLEAR ROLE

However, uncertainty over the roles of the CMC and ITPC in Iraq has slowed down vital development work, including delays over the issuing of a fourth mobile phone operator licence and introducing 3G to the local market.

“The lack is the law. There is no clear definition between our roles,” ITPC Director General Kassim Al-Hassani said.

The CMC was established in 2004 to regulate government policy on communications but continues to rely on pre-2003 legislation. A new law is still waiting parliamentary approval.

The ITPC, established in 1919, has control over the fibre optic network, and works as a government entity and operator.

It has entered into partnerships with private firms to help develop infrastructure, but companies complain about its monopoly over fibre and say prices are exorbitant. The ITPC says it needs the capital to pay the wages of its 22,000 workers.

“Here in Iraq, for each megabyte, we pay $700 and this is only for local circuits, not international. But we have no other choice,” said Munaf Sabeeh, chief executive of fibre optic network operator Scopesky, which signed a 3-year renewable contract with ITPC for fibre in 2009.

By comparison, the cost of a megabyte in Europe or the United States is around $50-$80, the ITPC says.

CMC Commissioner Ahmed Alomary said part of the reason 3G and 4G had not been introduced into Iraq’s market was because operators did not have a strong fibre backbone.

Iraq’s three mobile phone operators, AsiaCell, Zain <ZAIN.KW> and Korek, who in 2007 each secured $1.25 billion licenses to operate in Iraq, use microwave links instead of fibre and have been criticised for their patchy coverage.

Zain has blamed reception problems on military jamming.

By comparison, Iraq’s semi-autonomous northern Kurdish zone is easier and more cost-effective to operate in, Zain and AsiaCell say, because it has steady electricity, a good fibre network infrastructure and is safer than the rest of Iraq.

By Serena Chaudhry and Aseel Kami

(Additional reporting by Shamal Aqrawi; editing by Mark Heinrich)



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