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The Free Internet Initiative (FII)

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The Free Internet Initiative (FII) INTERNET The Free Internet Initiative (FII) by Mohamed El-Nawawy, Chairman and Managing Director, TE Data Egypt's liberalised telecom sector introduced service-based competition. Instead of freeing prices, the government fixed Internet access at the price of a local call. The incumbent car- rier, Telecom Egypt, must share this call revenue with the ISPs according to the nation's reg- ulatory authority's formula. Internet users have no contract. They decide upon the ISP they will use each and every time they call for a connection. Consequently, the ISPs that consis- tently provide the best, most reliable, service get the customers. Mohamed El-Nawawy is the Chairman and Managing Director of TE Data, SAE, controlled by Egypt’s incum- bent operator Telecom Egypt. TE Data is responsible for packet switched services – managed data and Internet services. Mr El-Nawawy was a co-founder of InTouch Communications Services Egypt's first Internet service provider where he served both as Chairman and Managing Director until its sale. Mr El-Nawawy provided consulting services for various organisations, including Egypt's Telecom Regulatory Authority and Ministry of Communication & Information Technology. He co-developed Egypt's current ISP and Managed Data servic- es regulatory frameworks. Papers by Mr El-Nawawy on e-commerce and Internet growth impediments were published in the INet1999 and INet2000 proceedings. Mr El-Nawawy earned his degree in Computer Science and Electronics from American University in Cairo. Egypt is the largest Arab nation. Its co-locate within incumbent exchanges The IS/PDN provider earns more if it population of 70 million is nearly 25 and build up its own facility using the offloads at the local switch level and per cent of the total Arab population. incumbent operator's infrastructure, less when it offloads at the tandem One-third of Egypt's population is construct its own copper/fibre facility, switch level. under 15 years old and another third is use unbundled access infrastructure between 15 and 25 years old. Egypt (local loops) and offer DSL based serv- Objectives has more than 8 million PSTN (public ices, operate its own international switched telephone network) lines in bandwidth gateway, receive its own The FII's objectives are different for service. There are more than 4.5 mil- numbering from the TRA and sell the end-customer and the lion mobile subscribers in Egypt. services to both the retail and whole- market/industry. For the end-user, sale markets. the FII seeks to minimise price and In 1998, Egypt's government convert- maximise competition among ed the national incumbent operator, The Free Internet Initiative (FII) was providers. The FII's industry /market Telecom Egypt or TE, into a corpora- born out of the IS/PDN framework objectives are aimed at encouraging tion and created an independent that was established in 2001. The the offloading traffic from the PSTN telecommunications regulator, the Egyptian Free Internet Initiative (FII) and upgrading the operational capaci- Telecommunications Regulatory began its operations in January 2002. ty of the ISPs so that they can eventu- Authority or TRA. In 2001, a frame- The FII allows consumers to seam- ally provide infrastructure and servic- work for IS/PDN (Internet Services / lessly connect to the Internet by dial- es that, today, only the incumbent Public Data Network) operators was ing an ISP specific number, with no provides. presented to fully liberalise the busi- surcharge beyond the tariff set for a ness and further enable competition. normal local telephone call. The Customer Objective – Cost Subsequently, the telecommunica- IS/PDN providing the access revenue Reduction: the End User Price (EUP) tions law of 2003 further enabled the shares the call revenue with TE, the for Internet dial access is set by the elements of telecommunications com- incumbent. Accordingly the IS/PDN Regulator (TRA) and formatted to petition, establishing the concepts of must build a network adjacent to the equal the PSTN charges. This reduces network element unbundling by PSTN in order to offload the FII call the previous cost structure and, since licensed telecommunications opera- traffic to the adjacent network at the the incumbent collects it, is conven- tors and further establishing the level of the local and / or tandem ient. Single billing by the incumbent autonomy of the TRA. switch. The IS/PDN provider revenue TE, and the relatively relaxed payment share percentage is determined schedule it enforces, will apply. These A company with a Class A IS/PDN according to the point in the network changes go a long way towards reduc- licence has official permission to hierarchy where the call is offloaded. www.connect-world.com 48 Connect-World Africa & The Middle East INTERNET The Internet has become part and parcel of office life ing the gap between those who, in the tor's service for a month or longer and the PSTN: the PSTN was built to past, could afford Internet access and then suffering when the IS/PDN oper- accommodate voice calls; these have a those who could not. ator fails to provide the level of service Mean Hold Time of approximately desired. three minutes. Internet/Data calls, in Customer Objective – Pervasive contrast, have a Mean Hold Time of Competition: the system requires the Competition is also effectively main- more than 20 minutes. As customer to discriminate and selects tained for the ‘Class C’ operators, Internet/Data traffic increases, this among different service providers by those licensed to resell services (non- difference alone could throw the PSTN dialing a specific IS/PDN operator facilities-based competition), since network into turmoil. number for each access to the data the TRA provides each with a number- network. Consequently, IS/PDN oper- ing system, which permits it to switch Upgrade IS/PDN operator capa- ators must have available capacity, transparently between the services of bilities to the level of National and be ‘sharp’ – provide high grade different ‘Class A’ IS/PDN operators Operators – nearly eight operators service – at all times; otherwise, they using the class C's own numbering. were awarded Class A or Class B lose revenue instantaneously to a licenses and numerous ISPs were competitor. This is quite different Market/Industry Objective – accorded class C classification. A total from subscribing to an IS/PDN opera- Reduce the burden of Internet calls on of 214 numbering systems were www.connect-world.com Connect-World Africa & The Middle East 49 INTERNET Regulatory/Business Challenges “Since Internet access prices are equivalent to the Local Loop Management: the local loop provides ‘last-mile’ access to the local PSTN tariffs, market growth will depend upon customer. The local loop has always been an integral part of the PSTN and consumer awareness and education. Managing the belonged to the incumbent. Now the incumbent shares the loop and its services are carried side-by-side with market is now much more complex than in the past those of other licensed operators. The quality and management must now be when the only variable to manage was price.” closely audited by the TRA to inhibit abuses. Legal issues concerning secu- rity and consumer rights need also be addressed. awarded by the TRA. Each of the class new markets, create business plans A and B IS/PDN operators will effec- and train their staff appropriately. Market (PSTN Tariff Re-pric- tively learn to co-locate and intercon- ing) – Adjustments to Telecom nect with the incumbent, interconnect Egypt's PSTN local call tariffs may with other IS/PDN operators, operate Technical Challenges require readjustment of the IS/PDN a mainstream multi-vendor facility, revenue sharing arrangements. implement settlement against traffic originated/terminated and implement Billing System – Telecom Egypt, Awareness – Since Internet access customer care for a growing number of TE, had to prepare the complex billing prices are equivalent to the local PSTN Internet users. Those IS/PDN opera- and reporting systems – to handle the tariffs, market growth will depend tors are accumulating experience in revenue receipts and interconnection upon consumer awareness and educa- nationwide operations that will enable fee payments (revenue sharing) – that tion. Managing the market is now them to capitalise on future, addition- collect data from the switching plat- much more complex than in the past al telecom liberalisation. Future liber- forms of many different vendors. The when the only variable to manage was alisation might well open the access, billing system had to account for the price. last-mile market and, perhaps, give traffic from all the new operators and them broader rights to participate in service providers, and these use a wide Business Models – Class C other industry services. variety of platforms. providers are evolving; they provide value-added services such as spe- Some have criticised the fact that EUP PSTN Switch Convergence – cialised content. Egypt’s largest news dial access price was made equal to the PSTN switches are evolving as switch organisations are now using the FII, local PSTN call tariff. Some feel that manufactures add routing functions to having been licensed as Class C this would lessen effective competi- their switch platforms. The roles of TE providers. Yet original content is lack- tion. So far, though, by fixing the EUP and the IS/PDN operators depend ing; the Class C content providers at local call levels, IS/PDN operators clearly upon defined rules and the def- depend upon marketing to survive and have been pressured to build and initions of the services that each can there is little real, service-based, com- deploy their networks and facilities perform. The increased functionality petition. Models based upon revenue creatively to provide better service of TE's switches blurs the lines, in a sharing with Class A infrastructure and, in that way, capture call revenue.
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