Development of a digital economy is a critical part of Bahrain’s Vision 2030 economic development plan, and the kingdom has been at the forefront of regional IT advances. The past 12 months have seen the government take major steps forward on its ambitious goal of creating a National Broadband Network (NBN), as highlighted in its third National Telecommunications Plan (NTP), which will build on development that has already seen the kingdom become a leading provider of data and internet services within the Gulf.
While overall economic development has been affected by a slow recovery in the aftermath of the global financial crisis and both local and regional instability, these challenges have created new opportunities within the IT sector. The government has increasingly worked to reduce unemployment via support programmes for IT entrepreneurs and tech start-ups, while ongoing egovernment initiatives have created a welcoming and attractive business environment for foreign players. At the same time, new submarine cable connections will help to meet significant data demand, ensuring sustainable IT growth well into 2015 and beyond.
Bahrain was one of the first Gulf nations to establish a telecoms link to the outside world, connecting to the Indo-European undersea telegraphic cable in 1864. Since then, the nation has frequently been a first mover in regional IT development. Bahrain was the first country in the region to install a mainframe computer in 1962; complete the digitalisation of telephone switches in 1992; and launch internet services in 1995. It was also the first in the region to operate WiMAX wireless and next-generation networks.
In 2003 the government created the Bahrain Internet Exchange (BIX) under Decree No. 47. Overseen by the Ministry of Transportation, the BIX is tasked with creating faster and more affordable internet services within the kingdom, as well as offering infrastructure for internet traffic between various internet service providers (ISPs). The Telecommunications Regulatory Authority (TRA) regulates prices, while BIX sells its services to licensed ISPs. According to the TRA, as of 2013, there were 14 licensed ISPs in Bahrain, the three largest of which were the country’s main telecoms operators: state incumbent Batelco, Zain Bahrain and VIVA Bahrain.
The BIX and TRA are both working to achieve a number of overarching policy goals under Vision 2030, including construction of an NBN. BIX has tried to introduce more international internet connectivity into the market, providing services to smaller ISPs and backup for larger ones. Today its membership consists of 13 separate groups, including IT companies and the government’s Central Informatics Organisation.
The World Economic Forum’s 2014 “Global Information Technology Report” ranked Bahrain 29th in the Network Readiness Index, supported by affordable ICT access, which ranked 25th out of the148 countries surveyed. Individual uptake remains among the best in the world, standing at 14th, while the kingdom also ranks very high in its percentage of internet users, at 10th highest in the world. More impressively, Bahrain ranked third in terms of the number of households with a personal computer, on par with Nordic countries, while the government ranked 14th worldwide for its strong vision to develop the sector.
The International Telecommunications Union (ITU) reported that at the end of 2013, 82% of households in Bahrain had internet access and more than 90% had computers, some of the highest rates in the world. The ITU also reported that fixed, wired broadband subscriptions hit 175,000 by 2013, or 13% penetration, above the world average of 10% and the GCC average of 7.6%.
The TRA reported that at the end of the third quarter of 2014 there were 1.84m broadband subscriptions, a 12.2% year-to-date increase. During the same period, broadband penetration reached 140%, with growth continuing to be driven by mobile broadband subscriptions, which accounted for 91% of the total broadband subscriber base.
In its most recent breakdown of broadband figures, the TRA reported 394,000 broadband subscriptions from a fixed location in the first quarter of 2014, while the standalone broadband subscriber base, including dongles and tablets, accounted for 55% of all subscriptions. Fixed wireless (or WiMAX) represented 32%, while fixed wired accounted for the remaining 13%. Add-on broadband to voice and pay-per-use mobile broadband represented 86% of mobile broadband subscribers.
Perhaps one of the most significant advantages of this liberalised sector is Bahrain’s reputation as one of the most open economies in the Arab world. The kingdom ranks 13th on the 2014 Index of Economic Freedom’s list of freest economies worldwide, ahead of the UK, the Netherlands, Germany and Sweden. The kingdom is the only GCC member offering unrestricted voice-over-internet-protocol on applications like Skype. Meanwhile, the nation’s multiple trade treaties, including a free trade agreement with the US, have been particularly beneficial for IT firms, offering ease of access to international expertise and creating opportunities for outsourced software development.
The market is also characterised by affordable internet services. In June 2014 the ITU announced that Bahrain was one of just a handful of countries that had achieved the broadband commission’s target for affordable broadband services, at 5% or less of gross national income (GNI) per capita. The kingdom ranked 34th in the ITU’s ICT price basket, with fixed broadband services costing an average of 2% of GNI per capita.
Face The Nation
The NBN has been a high national priority since the launch of the third NTP in 2012, and a number of governmental agencies have concluded that the kingdom will face severe challenges to future growth if it does not establish a secure, ultrafast broadband fibre-optic network spanning the entire country. Indeed, IT competitiveness could help the kingdom regain some of its attractiveness to financial institutions and other multinationals looking to gain a foothold in the GCC in the wake of a period of consolidation that has seen many companies concentrate operations in the UAE and Saudi Arabia.
The government has committed around BD26m ($68.9m) to the development of internet infrastructure from 2013 to 2017, as BIX announced it had invested $30m to connect the kingdom to Indian company TATA’s Gulf cable network in 2013, with the NBN to be built around pre-existing fibre-optic cable networks in order to minimise construction costs. Upon completion, the NBN is expected to provide high-speed nationwide coverage in excess of 100 Mbps for residential users and 1000 Mbps for businesses. In February 2014 Batelco signed a memorandum of understanding with the Bahraini government to build the NBN, with both parties agreeing to work in partnership to investigate whether Batelco’s current fibre network could be used for as a foundation for expansion.
Boosting speeds and service quality has entailed enhanced connectivity to regional networks, particularly those in India and Europe. Bahrain has seen significant upgrades in internet speeds following a series of connections to submarine cable systems in 2013. As of February 2013 the TRA reported two operational submarine fibre-optic cable systems providing international capacity to the kingdom: the FLAG Alcatel-Lucent Optical Network (FALCON), a GCCwide system connected to Egypt, Yemen, Sudan and India that came on-line in 2007, and the Fibre Optic Gulf (FOG) cable, a submarine cable running along the Gulf from Kuwait to the UAE that has been operational since 1998. In addition, Saudi Arabia is able to access submarine dark fibre cable via the GCC Interconnection Authority (GCCIA) network, with licensed operators deploying terrestrial cables across the King Fahd Causeway to service the Bahraini market.
New connections have further boosted connectivity in recent years. The Gulf Bridge International (GBI) submarine cable system, for example, forms a self-healing fibre-optic ring around the Gulf, offering 2.56 Tbps of capacity to GCC nations, Iran and Iraq. GBI also provides connectivity to India and Europe through the acquisition of fibre pairs on the MENA submarine cable system. GBI signed a partnership agreement with Batelco, activating the network’s first circuit in the kingdom in 2012; and although GBI does not currently hold a telecoms licence in Bahrain, third-party access to the network’s landing station in Hidd is offered under a landing party agreement between Batelco and GBI.
TATA’s Global Network Gulf Cable Project, meanwhile, has deployed a submarine cable along the Gulf, connecting Saudi Arabia, Bahrain’s Amwaj Island, Qatar, the UAE and Oman. TATA has entered into agreements with operators in each country, offering an initial capacity of 12.4 Gbps and a design capacity of up to 1.2 Tbps. The BIX and TATA’s aforementioned June 2013 deal will connect the kingdom to TATA’s Gulf cable via a 50-km cable, while TATA moved in October 2013 to establish a multi-protocol label switching point-of-presence through Batelco’s data centre in Manama.
Apart from Batelco, other service providers have moved to enhance their offerings through international link-ups. Alternative operator Kalaam entered into a strategic alliance with India’s Bharti Airtel in February 2014 to establish direct interconnection with Airtel’s point-of-presence in London, gaining access to Airtel’s global network infrastructure. The agreement will allow the company to expand its data services portfolio, while also boosting connectivity over low-latency routes in the Middle East.
More recently, VIVA Bahrain and UK-based BT Group signed an agreement in April 2014 to build a Global Internet Protocol Exchange interoperability hub in Bahrain. Set to launch in the first quarter of 2015, the hub is expected to diversify service options and improve communication and service quality. Under the agreement, VIVA will provide hosting and connectivity, opening a new route to the regional market for BT’s global internet protocol (IP) exchange voice and interoperability service. For their part, VIVA Bahrain customers are expected to benefit from BT’s high-definition voice quality and reduced roaming rates.
A separate terrestrial cable network is also set to deliver more bandwidth to Bahrain. In 2013 a consortium including Zain, the UAE’s du, Vodafone and Zajil announced the creation of a GCC-wide high-bandwidth regional transmission cable system, the Middle East-Europe Terrestrial System (MEETS) to link the UAE, Qatar, Kuwait and Bahrain. Involving the construction of a 100G optical transport network offering speeds of up to 200 Gbps, MEETS will be constructed on top of a 1400-km terrestrial fibre-optic network owned by the GCCIA, which is itself owned by GCC member states. The operator consortium signed a 15-year lease with the GCCIA to activate and manage the network, which launched in the first quarter of 2014.
Fight Fibre With Fibre
Access to Batelco’s infrastructure has been a somewhat contentious issue as data demands increase. Although Batelco had long been classified as a significant market power (SMP) by the TRA, its market share and revenue base have eroded since market liberalisation began in 2002, and recent regulatory decisions may end up helping the company regain its position in the market.
In March 2014 the TRA issued a final SMP determination to deregulate both the wholesale and retail markets for fixed broadband internet access to residential and small business customers. This move followed public consultation on an earlier draft decision, with the TRA confirming that Batelco is no longer an SMP operator in the retail or wholesale consumer fixed broadband segments. Batelco will, however, continue to hold SMP status in the business retail and wholesale fixed broadband markets. Batelco will no longer need regulatory approval to change its consumer broadband prices, following stiff market competition that saw the company’s share of retail broadband subscribers fall to 20-30% in 2012 from nearly 80% in 2008. Batelco will also no longer face ex-ante regulations on its residential retail fixed broadband tariffs, and will not be required to offer its copper or fibre infrastructure for local loop unbundling, bitstream access or wholesale digital subscriber line (DSL) resale to competitors. While these services can still be provided to other ISPs on an unregulated basis via commercial agreements, Batelco must also fulfil existing contractual requirements in relation to termination of current services.
According to the TRA, the decision was driven by changing competition within the consumer broadband segment, with DSL services overtaken by WiMAX-based services since the previous SMP determination in 2008-09. The intervening period has also seen demand for fixed broadband diminish substantially alongside growing 3G and fourth-generation long-term evolution (4G LTE) services. However, Batelco’s solidified grip on crucial infrastructure has led to criticism from other operators, especially in the wake of 4G LTE rollouts in recent months (see Telecoms analysis).
The eGovernment Authority (EGA) was established in 2007 to ensure effective delivery of government services to residents and visitors. The government’s website today details most conditions, procedures, laws and regulations in English, including those related to business licensing. As of December 2013, the bahrain.bh online portal had 280 services, collected BD50m ($132.5m) in revenues and had over 50m page views, according to an EGA report.
Bahrain was one of the first countries in the GCC to offer an online visa service, in 2009, and further streamlined business licensing processes through the Business Licensing Integrated System (BLIS) project, which began in June 2010. The BLIS project, a central component of the kingdom’s initiative to boost competitiveness, launched a pilot phase in 2013 with full services expected in 2015. The National eGovernment Strategy for 2016 aims to bring over 90% of key services used by Bahraini residents and businesses online, including business and office registration, work permits, banking services, environmental compliance and e-tendering of government contracts.
In September 2013 Vivian Jamal, the executive director of the Bahrain Economic Development Board (EDB), announced that the EGA and the kingdom’s tender board are currently in the process of launching an etendering system for all government contracts, with the Ministry of Municipalities and Agriculture now accepting online applications for building and advertising permits. The government plans to make reclamation and digging applications available online next.
These efforts have earned the country high marks. The World Trade Organisation (WTO) praised its e-government services in 2014 for fostering investment, while the World Economic Forum’s 2014 “Global Information Technology Report” ranked Bahrain’s government 14th out of the 148 countries reviewed in terms of its strong vision to develop the sector.
Indeed, the government has been a driving force behind the introduction of a host of initiatives to encourage IT skills development and boost employment in the kingdom. For example, the government initiative Tamkeen was established in 2006 to provide training and support for certification programmes, including IT training. The TRA likewise recognises the importance of promoting internet literacy.
IT training has taken high priority in the private sector as well. In November 2012 incumbent telecoms operator Batelco opened an innovation centre at its headquarters in Hamala. The Ideas Centre features a model home with digital smart controls for lights and sound, as well as digital signage and interactive marketing displays. The centre also includes an entrepreneur’s zone for ICT project development. Batelco’s Ideas Centre was preceded by the University of Bahrain’s Incubator Centre, launched in 2010 in cooperation with the Bahrain Development Bank.
VIVA Bahrain has also invested heavily in developing IT capacity, establishing a $300m fund to drive innovation in e-health, e-learning, e-banking, e-commerce and applications in Bahrain and the GCC. The operator also teamed up with iVEDix, a data analytics and mobile visualisation tech company based in New York, to share business intelligence and analytical strategies. Meanwhile, Tenmou, Bahrain’s first-ever angel investor group for start-ups, was launched in 2011 with support from the EDB and the private sector as a way to foster entrepreneurship and provide capital (see analysis).
These initiatives, coupled with the kingdom’s offering of 100% foreign ownership of IT companies, as well as a zero-tax environment, have made it an attractive destination for IT investors. The EDB reports that a number of major multinationals have opened regional offices in the kingdom, including Cisco, HP, Huawei, Microsoft, Software AG, TATA Consultancy Services, Tech Mahindra and WIPRO.
Bahrain’s intellectual property legislation includes the Copyright Law of 1993 and the Patent, Design and Trademark Law of 1995, which stipulates that works may be separately registered, albeit through a cumbersome and expensive process with the Ministry of Information, granting greater protection to the creator of the copyrighted material.
While Bahraini laws pertaining to the protection of patents, trademarks and copyrights have been described as inadequate, the kingdom has ratified a number of major international agreements including the Berne Convention for the Protection of Literary and Artistic Works and the Paris Convention for the Protection of Industrial Property. The kingdom is also a signatory to the Patent Cooperation Treaty and the Trademark Law Treaty, both signed in March 2007.
In 2013 the US Trade Representative to Bahrain reported that the kingdom’s record on intellectual property rights protection and enforcement was mixed; however, in its March 2014 “Trade Policy Review”, the WTO said that Bahrain authorities are keen on further developing intellectual property protection and the ability to diligently handle any violations using a wide spectrum of penalties. It also reported progress made in reducing copyright piracy following the launch of an enforcement campaign based on inspections, closures and improved public awareness. “Continuous monitoring by the Copyright Protection Office (CPO), both in Bahrain and, in cooperation with Customs at the border, has ensured a decline in rates of piracy.”
With accomplishments in e-government initiatives, intellectual property rights protection and market liberalisation, Bahrain’s IT sector has much to offer. The market has some of the highest mobile penetration and internet usage rates in the world, while new efforts to improve IT training and entrepreneurship should help to support economic development and diversification as the government moves to inject technical know-how and capital into its burgeoning startup sector. New connections to submarine cable systems will help operators meet growing data demands, while the planned NBN will make a considerable impact on regional competitiveness and business attractiveness, giving the sector a positive long-term forecast.
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