Surf’s up: Rapidly expanding broadband usage supports an increasingly dynamic ICT sector

A revolution of sorts has been taking place in Oman over the past decade. Around 8% of the country’s population was using the internet in the latter half of the 2000s, at a time when the countries of the OECD had averages hovering between 40% and 60%. By 2011, however, the percentage of internet users had soared, reaching nearly 70%, according to data collected by the United Nations International Telecommunications Union (ITU) – no small feat considering fewer than one out of a hundred individuals used the internet in 1998.

Effects Of Uptake

The country’s rapid uptake of the web could have a major impact on its economic future. For the government, a spike in internet users, along with the overall integration of more technology in everyday life, could represent a major opportunity. The authorities have committed to a long-term plan of economic diversification, the centrepiece of which is the expansion of knowledge-based industries. For the private sector, a growing pool of internet users could translate to a larger amount of potential customers, hungry for everything from mobile data to location-based apps and from server space to online retail. A combination of public and private stakeholders are working to speed up these changes, with several government initiatives under way to boost technology education, encourage tech-based entrepreneurship and ensure that the benefits of development are widespread. Ross Cormack, the CEO of telecoms provider Nawras, told OBG, “The key to the national IT infrastructure strategy is delivery of broadband to the mobile user, home consumer and business. Each of these requires different types of services delivered in a different manner.” Telecoms operators are doing their part, doubling down on infrastructure investment to continue improving the accessibility and quality of web connections. Foreign majors such as Microsoft and Motorola have also joined the sultanate’s ICT market, and a broad array of home-grown ICT services companies are rising up to serve users both at home and abroad.

A Guiding Hand

The authorities in Oman have laid out an ambitious set of goals in Vision 2020, the government’s economic blueprint for the country’s economic future. Two cornerstones of the plan are the cultivation of more information and communication technology (ICT) activities and the gradual creation of a knowledge-based economy. Oman’s ICT development is crucial within the broader framework of Vision 2020, contributing to the stated goals of growing e-government services and increasing technological uptake among the local population.

The state’s main actors in the sector are the Ministry of Transport and Communication, the Telecommunications Regulatory Authority (TRA) and the Information Technology Authority (ITA). The ministry has a mandate to provide local, national and international phone and internet services, expand e-government and assist citizens in utilising these tools. It has been an important player in all aspects of communications throughout the Sultan’s reign. The TRA is responsible for overseeing the development of the telecommunications market, including operators who have heretofore been the main investors in broadband infrastructure. ITA, meanwhile, was created on May 31, 2006 by Royal Decree as an autonomous body. Unlike the ministry’s mission, ITA’s revolves around the country’s ICT sector, including projects relating to infrastructure, e-government and improved coordination among state agencies. ITA’s Digital Oman strategy is to support the local IT industry and raise the level of individual competency, while expanding the scope of e-services.

E-Government

One of ITA’s principal goals is creating a unified e-government architecture that allows secure interconnection among state agencies as well as a customer-centric e-government portal to provide access to government services. The idea is to build a central location for residents to obtain information, submit forms and access other public services via the internet. The official e-government services portal was first launched during 2009.

Since then, the portal has grown and developed. On June 12, 2012 the Council of Ministers approved the e-Government Transformation Plan. On October 22, 2012, the ITA publically announced the plan, which outlines the authority’s most recent goals for implementing the country’s e-government system. These goals include streamlining state agencies’ webpage interfaces, expanding online transactions and e-services and increasing public participation through online polls and surveys. These efforts in developing e-government have not gone unnoticed. Between 2010 and 2012, Oman climbed from rank 82 to 64 in the UN’s world e-government survey. Developing e-government likely contributed to the country’s overall tech-readiness as well, which jumped from rank 87 to 40 in the World Economic Forum’s Networked Readiness Index.

Broadband

Increasing broadband access has also been high on the government’s ICT priorities. The authorities hold that the spread of broadband infrastructure is key to ensuring that Omani businesses can be internationally competitive. The TRA has been an important player in this realm. To encourage infrastructure development, the TRA launched its National Broadband Strategy in early 2010. The ultimate goal of the plan is to ensure that every residence and business in the sultanate has access to broadband from several different providers and several different technologies.

The government is approaching this goal in phases. By 2017 it aims to raise broadband access to 60% of the population, according to a June 2012 statement by Mohammed Al Futaisi, the minister of transport and communication. The ministry has set different targets for different parts of the country. Government offices, universities and industrial and commercial areas are slated to receive download speeds of up to 1000 mbps. About 80% of urban areas are slated to receive between 5- and 100-mbps connections, and rural areas are set to receive 3- to 5-mbps connections, according to the statement. The country’s two internet service providers (ISPs) – Oman Telecommunications Company ( Omantel) and the Omani Qatari Telecommunications Company (Nawras) – are doing their part. Both operators offer fixed and mobile broadband, services that have seen massive investment in recent years.

Mobile

Mobile is currently king when it comes to broadband. The technology is still relatively young in the country. Nawras launched its mobile broadband services in 2008, while Omantel launched in 2009. Indicators point to a rapid uptake of the technology. From mobile broadband’s introduction in 2008 through 2011, the number of mobile broadband subscriptions has ballooned, growing by a factor of 25 from 20,412 to 531,493, according to data from Nawras and Omantel.

Several factors have contributed to mobile broadband’s rapid growth. New technologies, namely third generation mobile communications (3G), smartphones and more sophisticated processor chips, were all catalysts. The advent of 3G contributed to much faster data transfer rates, while easy-to-use phones and better processors meant that devices delivered smoother user experiences and became accessible to broader swaths of the population. The increasing popularity of mobile applications and social networks also played an important role, driving demand for mobile broadband. “We are seeing huge changes in customer behaviour driven by demand for data,” Martin Lyne, the chief marketing officer at Nawras, told OBG. “Everything from social networks sites to apps to streaming media are increasing customer hunger for more data.” A burgeoning youth demographic was also critical. Youth made up nearly a third of Oman’s population, or 908,000 of the 2.78m people, in 2010, according to the UN and World Bank. This large youth population has likely contributed to the fast pace of technology adoption.

Although mobile broadband usage has increased rapidly, it does not appear to be losing steam. The data point to significant growth potential. Only about 18% of the population used mobile broadband in 2011. This ratio is roughly one-tenth of the traditional mobile sector’s penetration, which was about 180% in 2011. As a larger portion of the population adopts mobile data, carriers could see several opportunities to provide new services and create fresh revenue sources.

Fixed Infrastructure

While mobile has led Oman’s recent broadband revolution, fixed access also represents an important part of the overall broadband mix. Unlike mobile services, fixed started from a smaller base of potential users and has correspondingly seen more modest growth. The market in 2011 had less than 3% penetration according to data from telecoms operators and the World Bank. The government, however, is working to accelerate the expansion of fixed services. In 2009 the TRA conducted a policy review and released some new initiatives, one of which was the goal of raising fixed broadband penetration to 25%. Indications so far point to an increasingly fast pace of development. Between 2008 and 2011, the number of fixed broadband subscribers more than doubled from 31,600 to 79,275, according to data compiled from Omantel’s and Nawras’s 2011 financial reports.

History

There are several factors contributing to the country’s heretofore mobile-oriented growth. For one, the sector is still maturing. A national economic re-orientation began when Sultan Qaboos bin Said Al Said ascended to the throne in 1970. At that time, the sultanate’s fixed infrastructure was not as extensive as other countries’ in the region. In that year, Oman had 557 fixed telephone connections, according to data from the ITU. To put that number in context, neighbouring Kuwait, with a significantly smaller area but roughly equal population at the time, had 38,000 fixed telephone connections. It was a decade later in 1980 that leaders organised the General Telecommunications Organisation (GTO), which began to push the country’s telecommunications sector forward. Oman’s large area, over 300,000 sq km, and mountainous terrain contributed to higher upfront costs for such infrastructure.

To address these challenges, operators are working with the government to accelerate the roll-out of more fixed infrastructure. Data indicate that the sector’s revenue structure could offer incentives for investment. The average revenue per user (ARPU) for fixed internet has also climbed in recent years. Between 2007 and 2011, ARPU nearly doubled, growing from OR19 ($49.50) to OR34.40 to ($89.65), according to data from the TRA. In fact, out of fixed internet, fixed voice, payphone and mobile services, fixed internet was the only service that saw ARPU growth over the five-year period. Although ARPU could come down as more users adopt, current indications point to opportunities to expand services and grow the fixed-subscriber pool.

Starting Small

Advances in broadband infrastructure and growth of the broadband user base could offer added momentum to tech-based enterprise development in the sultanate. The government has been keen to cultivate more local know-how in ICT and small and medium-sized enterprises (SMEs), goals that are directly related to the authorities’ broader vision of a more knowledge-based economy. One of the largest undertakings has been the creation of Knowledge Oasis Muscat (KOM), a technopark on the outskirts of the capital. As an economic free zone, businesses operating in KOM enjoy perks like 100% ownership and exemptions from income tax. To cater to tech enterprises in particular, the complex offers benefits like high-speed internet and preferential telecom services rates. The idea is to create a zone where tech businesses, both big and small, can concentrate and innovate. So far, KOM has been able to attract several important players in the global ICT sector, including Microsoft, Hewlett Packard, Motorola and Huawei.

The Knowledge Mine, KOM’s SME incubator, meanwhile, is spearheading the growth of small-business development. “We need to not only provide funds for start-up ventures but continued support. Somebody may have a lucrative idea but not the soft skills to execute it effectively,” Mohammed Hamed Al Maskari, KOM’s director-general, told OBG. “Soft skill development and a structure to support this is vital.” To address those needs, the Knowledge Mine was created to support Omanis who are looking to commercialise their ideas. For entrepreneurs that relocate to KOM, the Knowledge Mine has access to business mentoring and low-cost facilities. Creating more SMEs could offer a boost not only to Oman’s budding ICT sector but also to the economy by producing opportunities for technologically educated Omanis and providing incentives for younger generations to pursue tech-related fields.

Education

The foundations for success in a technopark such as KOM lie in an population that is well versed in developing technologies. To ensure that families with less extravagant budgets are not left behind, the ITA launched its National PC (NPC) initiative in January 2011, in partnership with incumbent telecoms operator Omantel. The programme allocates a free laptop to families who benefit from social insurance and have at least one child registered in the K-12 school system. NPC also provides a laptop subsidy for students in their first year of higher education. Omantel, meanwhile, offers beneficiary families a free modem and free or discounted service packages, so beneficiaries are able to use their computers on the web.

From its launch in January 2011 to October 2012, the initiative has facilitated the distribution of over 70,000 PCs and the IT training of 6000 individuals, ITA CEO Salim Sultan Al Ruzaiqi said in the announcement of NPC’s third phase. Distributing PCs to families that benefit from social insurance could provide major opportunities in the future by expanding technological literacy and tapping potential from a broader pool of Omanis. Indeed, as a larger segment of the population becomes proficient in computer operation, the ICT sector stands to benefit, since such a development would only grow its pool of potential customers and employees.

Online Retail

A population that is growingly tech-savvy could also create opportunities online retail in the sultanate. Online retail across the GCC is still in its infancy, but growth is on the horizon. Online transactions across the region totalled $3.3bn in 2010, according to a report released by the UK-based Interactive Media in Retail Group (IMRG) and Visa. The pair estimate online retail in the region could grow to as high as $15bn by 2015. The UAE was the highest online spender ($1.9bn), followed by Saudi Arabia ($520m), Qatar ($375m), Kuwait ($280m), Bahrain ($175m) and Oman ($70m). Given its current low baseline, the market has major room for growth. Indeed, the sector is still relatively young in the sultanate.

The government produced the country’s Electronic Transactions Law in 2008, which was Oman’s first step toward creating an online retail ecosystem. The law takes important steps like defining and legalising electronic transactions that could be treated as binding contracts in the sultanate. Progress is also under way on the National Public Key Infrastructure (PKI), a system managing the digital certificates that form the electronic identities of people and organisations. The project is set to allow transactions to be digitally signed and exchanged. Industrial Management Technology and Contracting (IMTAC), a Muscat-based business technology solutions provider, is spearheading the formation of the PKI. The challenge is to ensure that transactions can happen quickly but also securely. “Today you do a lot of transactions via manual signatures which will be completely converted to digital signatures once the PKI is in place,” IMTAC vice chairman Fareed Al Hinai, told the Oman Economic Review in September 2012.

“It is part of ITA’s digital society strategy.”

Finding Applications

Increasing online retail could also support public trust in the security of online transactions. This development could facilitate growth in other online services, like apps, mobile payments and cloud services. The expansion of the global apps market has been dramatic since 2008. The two largest app store operators, Apple and Google, announced that they had 18bn and 10bn app downloads, respectively, by the end of 2011. These apps are increasingly catching the eyes of investors, as well. The share of mobile venture capital flowing to consumer apps grew fourfold between 2005 and 2011, from 5% to over 20%, according to San Francisco-based investment bank Rutberg & Co. With developments in mobile broadband, meanwhile, telecoms operators could also see more opportunities to connect with customers via mobile payments. “We are reaching a tipping point where financial services and banking services are coming together with mobile services to make payments easier,” Martin Lyne, the chief marketing officer at Nawras, told OBG. “We are working through regulations with stakeholders to make this happen.” Making it possible to pay for mobile services on the go could offer a number of benefits to both the IT and mobile sectors. Once customers can pay for services via their phones, operators can likely redirect investments going into payment outlets like kiosks and retail centres to other areas of their businesses. Online mobile payments could make usage more convenient, and perhaps, as a result, encourage higher usage.

In The Cloud

Growing use of apps and mobile payments could encourage more cloud computing, as users become more adept in using their mobile devices. Cloud computing developed as an alternative to keeping files, applications and other data on a local hard drive. Using cloud technologies, all of this data can be kept by a third-party service provider’s servers, which can make all of those files available on any device with an internet connection. This technology is appealing to smaller businesses, since the lack of a locally owned server means lower overhead costs. In addition, the ability to access data from anywhere opens opportunities for remote working, collaboration and other innovations.

There are two major prerequisites for cloud computing to really take off: bandwidth and security. Since the cloud requires large amounts of data to be transferred almost constantly, bandwidth is a key concern. Ongoing development of mobile and fixed broadband should only expand opportunities for cloud-based services. As for security issues, the ITA launched the Oman National Computer Emergency Readiness Team, an agency focused on studying cyber safety and ways to make internet use more secure (see analysis).

Outlook

With mobile and fixed broadband penetration on a rapid increase, major investments flowing into ICT infrastructure and expanded state support for tech enterprises, positive changes are afoot. There are some challenges on the path to development. Although both operators have been aggressive in infrastructure investment, demand has also surged. To that end, the country’s National Broadband Strategy is set to be crucial. Ensuring that regulation facilitates continued growth is also a concern. Continued communication among government agencies and private stakeholders could be critical in that regard. Technology firms may also find a temporary dearth of well-trained Omani technicians to suit the scale of growth. Expansion of education programmes, however, could remedy that in coming years, churning out a larger cohort of technologically trained nationals. The adoption of new technologies among younger Omanis should also help nudge the country in that direction. Indeed, the younger segments growing up with mobile technologies today could help in developing Oman’s ICT sector of tomorrow.

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The Report: Oman 2013

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