Over the past 15 years, Dubai has developed one of the most advanced IT sectors in the GCC region. As of early 2016 more than 90% of the UAE’s population reported using the internet on a regular basis, according to the UN’s International Telecommunication Union (ITU) and UNESCO. Usage in Dubai, the country’s largest and most tech-savvy urban agglomeration, is likely even higher, though no city-level data is available. “Dubai’s vibrant multiculturalism presents more opportunities than challenges, and this rapidly evolving society has a distinct need for innovations to keep up with growth,” Volker Bischoff, general manager and vice president of Robert Bosch Middle East, told OBG.
ICT is at the heart of the seven-year Dubai Plan 2021 (DP2021). DP2021 builds on more than 15 years of investment in advanced technology by the emirate’s leadership, in conjunction with a wide range of blue-chip private sector technology companies. Together, the government and the private sector have turned Dubai into a centre for technological innovation in the Middle East, with the Dubai Smart City (DSC) project a testament to the emirate’s ambitions. “Between now and Expo 2020 Dubai will see a huge amount of investment in technology,” Sudhir Kumar, a partner and head of corporate communications at regional professional services firm Morison Menon, told OBG. “This new business will benefit not only the emirate itself, but the region at large as well.”
Hard Work Ahead
Bringing the DSC project to fruition will not be easy. Dubai’s government and ICT industry face a variety of challenges. For example, the UAE’s mobile market is at present a duopoly, with two mobile operators – the Emirates Telecommunications Corporation (Etisalat) and the Emirates Integrated Telecommunications Company (du) – offering similar services at similar prices, which are relatively high by regional standards. An infrastructure-sharing agreement, which has been in development for the past four years, was only recently acceded to by both operators and has yet to be fully implemented. More broadly, while the ICT sector has grown rapidly in recent years, ensuring the industry’s long-term sustainability will require a significant increase in home-grown innovation and creativity (see analysis). With this in mind, both the government and the private sector are working to encourage local entrepreneurs and small and medium-sized enterprises (SMEs), both of which are considered to be key to the future growth of the sector.
Many local players are optimistic. “The ICT offerings in the UAE are more advanced than in other countries, as a result of the government’s projects,” said Andrew Horne, the general manager of Xerox in Dubai. “Data, cloud computing and cybersecurity are major growth areas here. Dubai has the potential to become a global data centre hub.” Indeed, in May 2015 the Dubai Open Data Committee – which was set up by royal decree in November 2014 – delivered a draft open data law and a strategy and roadmap for its implementation. The law was subsequently issued in mid-October 2015.
The history of Dubai’s ICT industry is a history of free zones. The targeted development of a modern technology sector in the emirate began in October 1999, when TECOM Investments, a subsidiary of the state-owned firm Dubai Holding, announced the formation of Dubai Internet City (DIC), the emirate’s first ICT-focused free zone. When it opened for business in January 2000, DIC attracted an initial group of 100 companies. Since then this has grown substantially.
In 2003 DIC launched the First Steps business centre, which was aimed specifically at nurturing ICT SMEs and entrepreneurs. By 2006 more than 900 technology companies were active at the DIC, including both small enterprises and large multinationals. In 2007 the free zone launched the Dubai Outsource Zone (DOZ), which offered incentives for technology companies focused on outsourcing. “Significant IT outsourcing is one of the latest trends we are seeing in Dubai, with major government IT projects starting to be tendered to third-party companies,” Aaron White, general manager of the Middle East and Pakistan at Hitachi Data Systems, told OBG. “Even though the public sector was initially reluctant to do it for fear of losing control, it is now being embraced.”
Today the DIC and the DOZ comprise the largest ICT hub in the MENA region, with more than 1600 companies in total, more than 60% of Fortune 500 companies and a workforce in excess of 15,000. In October 2014, on the 15th anniversary of the launch of DIC, the Crown Prince, Sheikh Mohammed bin Rashid Al Maktoum, announced a Dh4.5bn ($1.2bn) programme to expand Dubai’s commitment to the technology sector. In 2005 Dubai’s government launched another ICT free zone, Dubai Silicon Oasis, which has attracted a number of large tech companies and start-ups to the emirate, including the Japanese firm Fujitsu, US hard drive manufacturer Western Digital Technologies and Dubai-based telecoms security firm 3W Networks, among many others. Another upcoming zone is the D3 smart city. The project aims to create an integrated work, live and play model that delivers a high living standard, while also being environmentally sustainable.
The project was launched as part of the framework of the Dubai Plan 2021. At the Internet of Things World Forum in Dubai in 2015, D3 showcased technologies to improve safety and mobility, part of the effort to create the most technologically advanced city in the world. “Cities like Dubai are aiming to become global technical hubs, which in turn means opening up to better technologies, stronger infrastructure and wider accessibility to their population,” Harald Öttl, senior director of emerging EMEA at Autodesk, told OBG.
A variety of entities are involved in regulating and developing Dubai’s ICT industry. At the federal level, the Telecommunications Regulatory Authority (TRA), formed in 2003, has a mandate to manage all aspects of the telecoms and ICT industries in the UAE. The authority is charged with regulating and enhancing service provision of all types, issuing licences, ensuring that licensees meet licensing requirements, and promoting and developing the country as a centre for telecoms and ICT innovation and development. The TRA also manages the UAE’s ICT Fund, launched in 2007, which serves as a key source of financing for ICT-related developments in the country. At the emirate level, DIC, DOZ and a host of other free zones (Dubai Media City, Dubai Knowledge Village and Dubai Studio City, among others) are overseen by the Dubai Creative Clusters Authority (DCCA), which was formed in late 2014 to replace the Dubai Technology and Media Free Zone Authority. The new authority, formed as a result of Law No. 15 of 2014, has a tripartite mandate to regulate Dubai’s 20-odd free zones, develop the emirate’s free zone clusters and promote Dubai’s creative industries. “The DCCA’s mandate is very wide,” Dnyanesh Kamat, a consultant on media practices at the authority and previously at TECOM Investments, told OBG. “We support entrepreneurship and SMEs and we want to help develop the talent pool across a wide range of industries. The internet and the technology sector are vital to Dubai’s success so far, and we want to keep it that way.”
Progress In Numbers
As of the end of 2015 there were 1.23m active fixed-line broadband internet subscribers in the UAE as a whole, up from 1.09m at the end of 2014 and 1.02m at the end of 2013, according to the TRA. In more detailed statistics issued in September 2015, the regulator reports that between 2013 and 2014 the number of subscribers using high-speed fibre to access the internet rose by 14.7%, to reach 88% of total fixed-line internet subscribers by the end of 2014.
Other broadband subscribers connect via long-distance WiMAX wireless subscriptions or traditional copper telecoms lines. Much of the growth in broadband customers in recent years has taken place in the residential market, which expanded from 772,000 subscribers in 2011 to 969,000 subscribers at the end of 2014, according to the TRA. The number of business subscribers rose from 102,000 to 121,000 in the same period. At the end of 2014, 75% of residential subscribers and 78% of business subscribers had a high-bandwidth connection of 4 Mbps or faster, up from 47% and 25%, respectively, at the end of 2011. Given this move to higher-bandwidth connections, it is perhaps not surprising that broadband market revenues have been increasing steadily in recent years. In 2014, the latest year for which statistics were available at the time of press, total internet revenues reached Dh4.6bn ($1.3bn), up from Dh4.3bn ($1.2bn) in 2013, Dh3.8bn ($1bn) in 2012 and Dh3.3bn ($900m) in 2011. Similarly, for business subscribers average revenue per user (ARPU) has jumped significantly over the same period, from Dh919 ($250) in 2011 to Dh1136 ($309) in 2014. Residential ARPU has remained flat over the past four years, averaging Dh260 ($70) for the 2011-14 period. It is worth noting that while the federal regulator does not track data for any of the seven emirates individually, most market observers agree that Dubai is likely out in front of the federation in terms of ICT uptake and usage.
While broadband penetration has been rising rapidly in recent years, at the end of 2015 just 14.3% of the UAE’s population used fixed-line connections to access the internet. The great majority of the population of 9.3m accessed the internet via mobile phones and other handheld devices. The UAE had 17.9m mobile telecoms subscribers as of the end of 2015, representing a penetration rate of 209.9%, up from 199% in 2014, 193% in 2013 and 168% in 2012, according to TRA data. According to a survey by media information company Nielsen, in mid-2014 the smartphone penetration rate in the UAE was at 77%, among the highest in the world. Furthermore, 81% of mobile phone owners between the ages of 16 and 34 have smartphones.
The UAE is consistently ranked in the top 10 in the world on various ICT-related metrics. According to the ITU, at the end of 2014 the UAE ranked 15th in the world in terms of individuals using the internet, for example, with 90.4% of the population surfing the web. In the Gulf only Qatar and Bahrain had higher rates, at 91.5% and 91%, respectively. On the ITU’s ranking of percentage of households with internet in developing countries, the UAE ranked fourth, at 90.1%. Similarly, the nation ranked first among Arab states and 23rd in the world on the World Economic Forum’s (WEF’s) Networked Readiness Index (NRI), which assesses an economy’s capacity to deploy ICT to boost competitiveness and development. The nation also ranked first in the world on a handful of individual NRI indicators, including ICT use and government efficiency, the importance of ICT to the government’s vision of the future and the impact of ICT on access to basic services. In the WEF’s 2014 Global Competitiveness Index, which measures economic competitiveness, the UAE jumped to 12th globally, up from 19th in 2013, though changes in the system have seen the country slip in the rankings since. The nation ranked second in the world in government procurement of advanced technology products and third in terms of quality of overall infrastructure in 2014. A new indicator was added to the index in 2015 – tertiary education is now a key metric – and the UAE ranked lower that year, at 17th overall.
To help recover lost ground, key reforms were adopted in late 2015 and early 2016. The Dubai Smart City Office (DSCO) was established in December 2015, with a director-general and deputy director-general appointed to its board to enable the office to begin to develop policy and launch partnerships to further the project. In February 2016 the Dubai Smart Government Establishment announced its efforts to structurally harmonise with the DSCO in four areas: linked services for companies and people; services for Dubai City; shared federal government apps; and shared facilities for Dubai City. This partnership is expected to fully take root in 2017. New legislation was also adopted in March 2016. Law No. 2 of 2016 created the Dubai Data Establishment to enhance the publishing and exchanging of data, and support the creation of a knowledge database to serve the public and private sectors. These reforms pave the way for more flexible administration in the DSC’s development.
New Development Framework
A handful of development plans and programmes seek to boost Dubai’s reputation further. DP2021, the emirate’s recently established overarching development framework, was launched by Sheikh Mohammed as a continuation of the Dubai Strategic Plan 2015, which was established in 2007. ICT played an important role in this earlier initiative, as evidenced by the rapid growth of the emirate’s various technology-focused free zones since the programme began. The ICT sector is expected to be a cornerstone of DP2021 as well. The goal is for the entire city’s services and facilities to be available on smartphones by the plan’s end. DP2021 is organised into five development areas, namely people, society, economy, government, and place and experience, with separate targets for each. Additionally, the government has launched a handful of separate autonomous plans in recent years, which dovetail with DP2021. For instance, the DSC initiative directly concerns the ICT industry. Under the DSC plan, the government is working to digitise and streamline daily life in the emirate, targeting a wide range of processes and sectors, from traffic management to environmental protection, health care and government services to improve day-to-day life. With more than 1000 individual initiatives under way or planned, the DSC project aims to boost connectivity and generate data in telecoms, tourism, utilities, education, buildings, public safety, transport and health care. The government is accomplishing this through the creation of a dedicated office, the Smart Dubai Office, which began operations in early 2016. The office enables all stakeholders to be more agile, by reducing redundancies and streamlining regulatory procedures.
In July 2015, for example, Dubai’s Roads and Transport Authority (RTA) announced that it had linked up every traffic signal in Dubai – 408 in total – to the emirate’s traffic control centre, via 3G wireless technology. “The system enables diagnosis, management and synchronisation of the timing facility to ensure the efficient and optimal functioning of the traffic signals control systems,” Maitha bin Udai, RTA’s CEO, told local media. “If there is a need for additional traffic signals, they can be easily and quickly linked with the control centre at a cost lower than previously incurred when telephone lines were used.”
Indeed, private sector firms creating smart solutions and technologies have seen opportunities grow in recent years. “Dubai is the region’s biggest opportunity for connected cars, supported by positive growth forecasts for car and 3G-4G phone ownership, as well as the government’s Smart City initiative,” Bosch’s Bischoff told OBG.
In general, DSC aims to bring all government services and infrastructure online, in an effort to streamline the delivery of services and boost connectivity between the government and inhabitants. “In the past, we had our computers and laptops connected to the internet,” Rabih Dabboussi, the general manager of Cisco UAE, a key contributor to the DSC initiative, told local media in September 2015. “Now we have so much more – our eyeglasses, our wearables, our shoes, our watches, the sensors that are [used] in ocean monitoring and measuring the amount of oil pumped from the sea beds. All of these now enhance the experience of a smart city.”
The DSC initiative is being implemented in conjunction with a wide range of private sector partners, including Cisco, du and the Massachusetts Institute of Technology’s Senseable City Lab. The project is formally set to run until 2017, though implementation will likely continue past this date, given DSC’s correlation with DP2021.
In conjunction with the establishment of the DCCA in late 2014, Dubai has recently renewed a long-standing focus on encouraging local creativity, innovation and entrepreneurship. In 2015 Sheikh Hamdan bin Mohammad bin Rashid Al Maktoum, the emirate’s crown prince, oversaw the adoption of the Dubai Innovation Strategy (DIS) in the context of the Year of Innovation. The strategy includes 20 initiatives aimed at shoring up Dubai’s reputation as a centre for ICT innovation and entrepreneurship. “Software and solutions companies are being built around the government’s commitment to ICT and the smart cities initiatives,” Dalya Al Muthanna, president and CEO of GE Gulf, told OBG. “The government’s drive for efficiency is integral in the burgeoning ICT sector.”
The DIS, which falls under both the DP2021 and the UAE’s federal-level National Innovation Strategy (NIS), will initially focus on 10 sectors, including renewable energy, transport, education and government services. The strategy is designed to be implemented by the government in close collaboration with the private sector (see analysis).
In August 2015 du and Etisalat, the UAE’s two fixed-line operators, announced that they had begun the process of implementing an infrastructure-sharing agreement that has been in development since 2009. The deal, which is expected to be fully in place by the end of 2016, will allow du to provide broadband, calling and, eventually, internet protocol television (IPTV) services on Etisalat’s network, and vice-versa. Etisalat, the UAE’s legacy telecoms operator, owns the largest fixed-line network in the country. In 2005 du was launched to bring competition to the market. Until now, however, both providers have had a significant presence in their respective geographical areas – du in Dubai and Etisalat everywhere else. One outcome of this situation has been consistently high broadband prices. According to ITU data, the UAE ranked 55th in the world in terms of broadband affordability. Under the infrastructure-sharing agreement, subscribers are allowed to switch between the two operators for broadband and fixed-line telephony services. The operators plan to offer IPTV switching before the end of 2016, at which point “triple-play” services – which include calling, broadband internet and TV – will be available throughout the country on all fixed-line networks. Triple-play package subscriptions have become increasingly popular in recent years. In 2015 some 46% of broadband customers subscribed to these products, compared to 37% in 2014, 31% in 2012 and 17% in 2011, according to the TRA. The full implementation of the infrastructure-sharing agreement has the potential to push down prices for standalone broadband and triple play alike, which could result in an uptick in new subscribers.
Driven By Data
Given Dubai’s current focus on boosting connectivity under the DSC and other initiatives, it is no surprise that data management and data security are also considered to be key areas of future growth in the emirate. “Cybersecurity is the number one concern in the boardroom today, as identified in the FIS and BankDirector 2016 Risk Practices Survey,” Wissam Khoury, managing director for the Middle East and Africa at FIS, told OBG. “Traditional hacker prevention measures are no longer sufficient to prevent a break in and loss of security, as evidenced by recent events around the world where financial institutions have been targeted. One key to success is to quickly and precisely detect the anomalous activity via a data analytics engine, to help prevent a cyber incident.”
Both du and Etisalat have made moves into data-hosting in recent years. For example, in 2012 du partnered with the US-based firm Equinix to establish an $80m data centre in Dubai, which opened in 2013. Similarly, in October 2014 Etisalat launched a tier-III data centre in Abu Dhabi. The firm already runs data centres in Dubai and Al Ain. Finally, Khazna Data Centres, which was formed in 2012, operates two data centres in the country, one each in Dubai and Abu Dhabi. Khazna was wholly owned by the government of Abu Dhabi until mid-2013, when du bought a 10% stake in the firm. “Demand for over-the-top content is rising rapidly and expected to change the needs of service providers,” Hassan Al Naqbi, CEO of Khazna Data Centre, told OBG. “Online streaming services are becoming similar to live TV, and high-definition movies are a source of intense pressure on data delivery. People expect decent performance. The closer the data is to you, the faster it can be downloaded. Given tests of a 5G mobile network by du and Etisalat in late 2015, providers are clearly taking steps to deliver, which means they will need the backing of data centres.”
US-based EMC Corporation has been expanding in the region, and SAP MENA helps organisations generate new opportunities for innovation.
The numerous ongoing developments of Dubai’s ICT sector are taking place against a global backdrop of volatile capital markets, regional instability and a significant decline in the price of oil, all of which complicate the emirate’s growth plans. Nonetheless, local players and market observers alike have forecast continued expansion of the emirate’s ICT market. “Technological literacy is extremely high here,” Kamat told OBG. “People adapt to new technology very fast – Dubai parallels Japan in that way. So there is growth potential here across a whole range of cutting-edge technologies that would be ahead of the curve elsewhere in the world.”