Creating and empowering an impartial, robust, honest, clear, and accountable regulatory and supervisory establishment is, by expertise of just about all nations with a thriving telecommunications sector, indispensable for the event of a viable sector. To evaluate the necessity for a revived regulator within the context of enabling the telecom sector to be a, and even, the spearhead of financial growth, Govt had a digital sit-down with Kamal Shehadi. Shehadi is just not solely an professional on regional telecom operations; he was the chairman of Lebanon’s telecom regulatory establishment within the first years after its formation.
By Govt’s reckoning, the once-promising nationwide telecom regulator has fallen into deep dormancy. How do you, as its first chairman, at present consider the function of Lebanon’s telecommunications regulatory authority, the TRA? Do you agree that all the telecommunications and ICT sector has been stagnant or in a state of arrested growth for too a few years, and the way, in your opinion, may the sector, and the TRA be revived?
I’ll begin with the second a part of the query; how do you revive the telecom trade and the ICT trade generally? Right here, I need to give attention to two totally different associated points. First, the telecom industry in Lebanon is in dire need of new and large investments, new management, a competitive market structure, and the ability to draw on international networks that promote innovation. That is one thing that can’t occur with the present market construction. So, we have to work on reviving the telecom trade, which requires injecting non-public investments [into existing operators] and permitting [strategic buyers] to bid for big percentages [of ownership] with a controlling stake in every [existing or newly formed telecom operator].
Right this moment, all the telecom trade in Lebanon is producing not more than $100 million of income for the federal government. That is down from a excessive of $1.2 billion, solely three years in the past. [Networks] can not proceed for for much longer. To [engender investments into the networks] it’s good to have a unique market construction, the federal government monopoly over cellular providers in addition to mounted [network] must be ended instantly. That’s the one hope [for reaching] a vibrant, dynamic telecom trade.
And if I’ll add a notice of warning, nobody ought to be advocating [for] the privatization of the cellular or telecom industries in Lebanon on the premise of how a lot revenues they might generate, as a result of that’s not the problem. Right this moment, it’s concerning the survival of the trade which may solely be secured with an enormous injection of capital into these firms and their networks, together with, in fact, reforming the market construction taking it from a monopoly to a aggressive one.
There’s one other trade you’ve talked about, which has at all times been essential, even 15 years in the past, after I [assumed office] as Chairman of the TRA in 2007. That is the ICT trade or the digital or tech trade as it’s known as at present. Tech has at all times been the promise of a rustic [brimming] with expertise comparable to Lebanon. [Actually, this potential for creating jobs and generating profits for the country is] the rationale I went into telecom [and] into the TRA. [However, today] the tech trade is in want of consideration and nurturing. Nevertheless it additionally must be given an opportunity to thrive. It is among the few promising industries in Lebanon at present, and I don’t see anybody specializing in this trade on the coverage facet. To reply the primary a part of your query, the TRA, having an impartial Telecom Regulatory Authority is an instrument, and a vital one, to attain the aims that I discussed earlier a couple of aggressive telecom trade and vibrant expertise trade.
You’ve talked about privatization. If it had been to occur, how would it not change the present telecom actuality or the worth proposition and financial affect of the state-owned telecom sector?
Reforms to the telecom trade, whether or not by means of privatization and, in fact, transformation right into a aggressive market can’t be an remoted initiative. And by itself, it is not going to actually change the dynamic of the general economic system. There must be a restructuring of each the banking and public sectors. And above all, there have to be a restoration of stability between the exterior and inner [sides] of the economic system. The equilibrium [of the internal and external balance of trade and payments] is important [to address the] overseas foreign money downside.
Reforms to the telecom trade can contribute to [creating such equilibrium] as a result of it [can bring] a whole lot of billions of {dollars}, and perhaps a few billions of {dollars} as investments into the nation over numerous years. I’m not saying [that reform of the telecom sector would be about the price or about] cash going to the Treasury. [The issue is] not about getting cash for the Treasury. Anybody who argues that privatization ought to occur as a result of it’s going to assist shut the finances hole, the debt hole, or the debt service hole, I believe is dropping the plot.
Privatization is important because this is one of the most important industries in the real economy. Telecom and digital [developments] necessitate investments, opening as much as the remainder of the world, bringing in worldwide experience, [in order to elevate] Lebanon again to a stage the place it was once: a pacesetter within the [regional] telecom area.
If new license bids had been to be made, can you are taking me by means of what you visualize could be the method of negotiation and vetting?
The precedence at present ought to be to denationalise the three networks that exist, two cellular and one mounted… Concurrent with privatization, there’s received to be an public sale of licenses, and using the frequencies over the following 15 years or so. The one technique to obtain privatization because the sale of operations is to maneuver away from [the government’s telecom] monopoly. [On this condition], I believe all three [operators] may very well be privatized with a single public sale. It must be executed in a method that with every successful bid, the investing firm [is awarded] a license and the community that they’ve been [bidding on]. Regulation 431 is obvious that the phrases of that license need to be outlined by the TRA, after which submitted to and authorized by the Council of Ministers. [Whereas] these licenses need to be issued by the Council of Ministers, solely the TRA has the authorized mandate at present to draft these circumstances.
However in that regard, would the TRA need to be revised or up to date both in issues of the legislation, human capital, or its mandate? Would the TRA, as it’s located at present, be able to challenge all of the required paperwork and launch the entire course of for creating a brand new sort of public-private partnership in telecom?
The TRA board undoubtedly must be appointed and given time to usher in new blood and strengthen the group. Do we have to make modifications to the legislation [to be able to launch tenders for licenses]? Given that point is of the essence, [the answer is] no, we don’t. Would it not be good to make modifications to the legislation? In fact. We began drafting this legislation, and I labored on it as an professional marketing consultant, starting in 1999. After the legislation was enacted [in 2002], the decrees had been issued years later, and the TRA was appointed in January 2007. This leads me to suppose that if we had been to tinker with the legislation, it’s going to take one other yr or two. So can we do it? Sure, the TRA wants time to prepare, the TRA wants time for the board to be appointed and put together the work, and the Larger Council for Privatization might want to get its act collectively. There’s lots of work to be executed there. We’re speaking about months and months of diligent work. However getting it prepared, sure, if there’s a group that’s devoted, given the correct atmosphere, it is a matter of some months, not years.
On condition that in keeping with the brand new competitors legislation, policing of anti-competitive conduct falls beneath the jurisdiction of the Ministry of Economic system and Commerce, will unique dealership rights be affected within the telecommunications sector?
There is a matter of business legislation and there’s a contest legislation that’s been [held up] for years that offers with this matter. Now, by way of the telecom trade, there aren’t any unique company or unique dealership rights. All of those rights, these distribution rights, wholesale and retail, are contracts that may be negotiated. The telecom trade, I believe, is just not the main target of the unique company dialogue.
How will issuing licenses evolve, contemplating rising applied sciences comparable to FinTech, 5G, and such?
First, the license mustn’t specify what can and can’t be executed by way of new providers, as a result of the providers you talked about, from FinTech to well being tech, to synthetic intelligence, and using machine studying, all aren’t regulated [by the TRA]. That is aside from information privateness, which is an important element of the regulatory construction. Licenses, in keeping with Lebanese legislation, need to authorize the development and the funding in networks, the sale of cellular and glued providers, and the commercialization of those networks. The legislation at present doesn’t enable [the TRA] to manage all the opposite providers that you just talked about, from FinTech to others. Nonetheless, these could be regulated at present by the sector regulator. So if it’s FinTech, there may very well be and there are rules that the central financial institution of Lebanon points; whether it is well being tech, there will likely be different rules that perhaps the Ministry of Public Well being [could co-determine].
However within the backside line, this [provision of services] is just not for the TRA or for the ministry of telecom to manage, besides from the one perspective of knowledge privateness and information safety. I’m in favor of very strict information privateness and safety laws and regulation; there have to be an empowered authority to implement these rules. An information privateness legislation has been authorized by parliament; it’s not preferrred, however it meets 80 to 90 % of the necessities. It’s not fairly aligned with the GDPR, [the General Data Protection Regulation of 2016] which is the European customary, however it’s shut sufficient [to protect data privacy] till we will amend and enhance this legislation.
Along with the GDPR regulation, the European Fee not too long ago has been shifting ahead on a digital markets act (DMA) that’s designed to curtail the info exploitation and market energy of on-line behemoths. This act, much like GDPR, is predicted to have world implications. However within the Center East, we’re nonetheless very removed from attaining GDPR. How can we shut this psychological hole between a really fast-moving information trade the place digital providers are the longer term, and regional mindsets, which appear caught in a earlier period?
This hole is at present much more surprising than it was 15 years in the past when it already existed. If I had been chatting with Lebanon-based companies which have digital ambitions and ambitions to promote and market their providers in Europe or to European residents, I’d advise them to guarantee that they’re compliant with GDPR and all [other] European laws.
If we take into accounts the demographic and geographical measurement of Lebanon, what number of telecom gamers do you suppose the market can soak up?
This can be a very tough query as a result of Lebanon is a small market. The essential factor is to have competitors. Now, the law is clear that there have to be at least three mobile operators and I think that [three operators] are the maximum we can take. [At issue] isn’t just the market measurement, it’s concerning the distribution of spectrum. As a result of the extra you divide the spectrum between totally different gamers, the upper the price of protection, until you do what some persons are advocating [for], which is [selective coverage], ‘give me some spectrum, and I’ll cowl whoever I need to cowl in any space that I need to cowl.’ It doesn’t work that method.
When you may have public telecom licenses, for instance as a cellular operator, you may have protection obligations. To offer this protection of many of the territory, [operators] have to have sufficient spectrum. And as we transfer from one stage of expertise to a different, from 3G to 4G, we require much more spectrum. From 4G to 5G, we’re gonna want an entire lot extra spectrum. Then, when you set that threshold excessive sufficient, you could just be sure you are creating an trade that’s aggressive, however on the similar time capable of maintain itself. [You cannot allow things to] degenerate right into a state of affairs the place you may have small gamers that [exist] simply because they’ve a license to entry spectrum, however are unable to outlive, make investments, and innovate. Thus we have now an enormous challenge with the market construction. By way of public telecoms, I believe three is the utmost quantity; by way of different suppliers like information suppliers, you may have an extra small variety of these.
Do you particularly imply DSPs when referring to different suppliers?
Sure. what’s known as [data services providers and internet services providers] DSPs and ISPs. By the way in which, I believe that the entire class must be revised. Within the Lebanese market, ISPs and DSPs are one and the identical, which duplicates the construction, duplicates their price. The problem is how do DSPs survive? This can be a essential query for a regulator to reply; how do these information suppliers survive in an atmosphere the place cellular operators provide broadband with 4G and later perhaps larger speeds, [such as] 5G? Are they capable of compete with them? Or do they merely change into resellers? These are questions that the regulator has to consider and supply an answer that’s authorized by the Council of Ministers as a result of, in it, there’s the construction of the trade.
Whereas researching this particular report, we spoke to a number of individuals who had been advocating bundling the infrastructure and preserving it beneath the federal government whereas letting the TRA license the service layer. Based on these concepts, a state-owned supplier would wholesale the infrastructure providers and on this method guarantee that the price of the infrastructure is decreased. Is that one thing you see as viable?
I might want to have a look at [such proposals to evaluate them] however I can let you know one factor; it’s silly for anybody to think about that the general public sector in Lebanon for the following 5 to twenty years can have any funds to put money into something apart from what’s socially pressing, [such as] social providers, training, and healthcare. [The state] can’t be spending no matter they’ve in an space the place the non-public sector can make investments and may make investments higher.
[Secondly], I believe it’s cheap [to aim for] a 3rd [operator] as a competitor, however even that’s going to be a stretch. I don’t suppose a 3rd cellular operator in most nations makes a revenue. That isn’t to say that we shouldn’t have a 3rd one, it might be helpful for aggressive dynamics. Lebanon wants an enormous influx of overseas direct funding and this could solely occur if these giant industries are opened up for personal funding or Public-Personal Partnerships (PPP). PPP nonetheless is probably the most promising avenue and never simply on a nationwide stage, [but also] on a municipal stage, [since it] is probably the most promising avenue to draw investments and wealth discovered outdoors the nation.
Certainly, the proposals that the state ought to maintain on to possession of the infrastructure that this possession ought to be retained ‘in the interim’ and in addition talked about co-investment and PPP choices.
While you put the qualifier ‘in the interim,’ the query turns into what you imply. Is ‘the time being’ one, two, or 5 years? I agree that [temporary state ownership of the infrastructure is called for], however having stated that, I’m not speaking about ‘the time being’ [in a non-specific way]. I’m saying that if we’re pondering six months to a yr down the street when real reforms are being applied, [the question needs to be solved] if this trade ought to stay in public fingers. Ought to there be one single community [infrastructure]? [On this,] I can let you know that there’s not one expertise from world wide the place a single wholesale community has confirmed to be a viable possibility.
Lebanon is in dire want of regulatory competency and moral regulatory establishments, which mandates placing a excessive precedence on staffing the TRA with probably the most educated consultants that may be discovered. How can we incentivize our expatriate consultants in telecommunications, comparable to your self, for instance, to just accept positions on the TRA?
The reply to your query is that I’ve seen within the final two years, particularly because the October demonstrations, an enormous outpouring of dedication and goodwill from youthful generations and curiosity in public points, in coverage points. These of us who had been in Lebanon within the 90s and early 2000s, all shared a priority that there weren’t sufficient good younger individuals being drawn to public service. Right this moment I’m comforted as a result of I noticed over the previous few years how individuals had been partaking with the nation and saying ‘that is my nation, I need to enhance the state of affairs in Lebanon; I need to deal with these in poor areas, I need to present protection.’
When given the precise alternative, there are a lot of proficient Lebanese men and women who could be prepared to roll up their sleeves and get to work in public service. However you need to present them with the political atmosphere that begins with a parliament pushing for reforms, and a authorities implementing them. Until this occurs, you’re not going to draw expertise. Nobody needs to waste their time for a title or to have a place within the public sector.
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