Oh really?

The Gulf News headline reads "Telecom watchdog to end 'monopolies' by year-end." The story says

etisalat does not have access to internet or fixed-line customers in Dubai Internet and media free zones and nearby residential districts, while du is largely restricted to these areas.

"From now until the end of the year, both operators are obliged to cover the whole of the UAE and customers will have the right to shift from one to another," a spokesperson for the Telecommunications Regulatory Authority (TRA) told Gulf News.
...
The TRA wants to "open the door for competition ..."

But what the story does not remind you is that the TRA does not allow the firms to compete on price. (Click TRA below for posts on this.) The reason given is that competition would be destructive. But destructive of what? Monopoly profit?

High prices and the state

Rising fast food prices in the UAE are viewed with concern by the state. Yet they are the result of higher costs to the retailers (mostly due to rising costs of imports transmitted through the fixed exchange rate with the dollar).

Meanwhile we wonder whether a reduction in the state's royalty burden on telecom profits (currently 50%) would be coupled with a change in state regulation that would allow price competition between etisalat and du. Price competition would reduce the burden of high prices on the people.

Shouldn't the mission of the Telecom Regulatory Authority be to promote competition rather than to protect competitors?

We also wonder why the telecoms don't capitalize their names.

du tells

Gulf News reports that du, the duopolist entering the telecom market once monopolized by Etisalat, has "finally" revealed its fees.

GN allows online comments to its articles. Many commenters have noticed that du's fees are essentially the same as Etisalat's.

du's fees are the same as Etisalat's because the TRA, the Telecom Regulatory Authority, is not allowing the two firms to compete on price.

Monopoly: A matter of national security? :: 7DAYS

Quote:

Sites such as Skype have been blocked in much of the UAE for months, but at the weekend were also blocked in other areas, such as free zones, which were previously unaffected by the telecoms proxy server block.
. . .
Some alleged the interests of operators such as Etisalat were being placed above those of consumers saying that “talking to family and friends cannot be against moral beliefs, the policy must be purely based on financial grounds.”An Etisalat spokesman defended the company saying it’s up to the TRA [the government regulatory authority] to allow or ban VOIP.

“Etisalat is just a communication provider which operates under the rules and regulations set by the TRA,” he added.

Last night Osman Sultan, the CEO of Du, the new telecoms operator due to begin in the UAE later this year, confirmed that his company would have to abide by any TRA ban on VOIP. Last night a spokesman for the TRA said it is currently studying the issue and had not come to a decision. But another TRA source, who did not wish to be named, added: “This is not just about cheap phone calls for consumers, there are aspects of national security and operators’ interest that has to be addressed and investigated.

If the TRA was interested in low prices for consumers, then perhaps it should have allowed VOIP to compete the Etisilat monopoly. Instead they have created the Etisilat v. Du duopoly. The duopolists are of course happy to have the TRA ban VOIP. They are happy, too, that the TRA will prevent Etisilat and Du competing against each other.

Du ... duopolist. Hey, I think I've figured out how Du got its name. Actually, I think Du spells its name du.

VoIP on hold in UAE :: Khaleej Times
Let's not do the du

Quote:

With the Telecommunications Regulatory Authority (TRA) yesterday ruling out any immediate policy decision on allowing the low-cost Voice over Internet Protocol or VoIP services, Etisalat's move to make yet another headstart over its new rival du appears derailed.
. . .
Etisalat, on an aggressive mode following the entry of UAE's second telecom operator du, has been launching several new products and services in a row to reinforce its leadership. It was hoping to steal a march by grabbing the first opportunity to launch VoIP before du, which is yet to streamline its services.

"Now, both players will get a level-playing field as TRA will take more time to finalise its VoIP policy," one industry analyst said.
. . .
VoIP, which is currently available in certain free zone areas of Dubai, allows the user to make telephone calls using a computer network, over a data network like the Internet.
. . .
Etisalat, which has been the monopoly telecom operator until the entry of du, used to block web sites offering cheap international calls through voice over Internet protocol technology.

As the BBC was just observing:

Perhaps one of the biggest annoyances for the mostly expatriate population in the Emirates is the inaccessibility of internet telephony sites like www.skype.com. This is widely seen as economic censorship; the state wanting to ensure continuing large profits through migrant workers making international telephone calls.

UAE Tax of the Day II

Quote:

EITC will pay Dh124.5 million for the licence ending Etisalat's monopoly on telecom services in the UAE. Etisalat does not have to pay any licence fee but both operators will have to pay Dh1 million as renewal fee annually.

Both operators are also required to pay royalty to the government.
. . .
Etisalat pays half of its profits as royalty. "For the second operator it is yet to be finalised and it depends on its roll out plans. It could be on a gradual, step-up basis."
. . .
The Telecoms Regulatory Authority (TRA) will ensure that competition is healthy but will not allow any price war, the chief said. "We will have a say in terms of monitoring prices to ensure that no unhealthy competition takes place. It is not fair to introduce a second operator and let them die," Mohammad N. Al Ganem said.

Economic theory tells us that a profits tax or a license fee (when the number of licences is fixed) will not affect the prices that consumers pay - all other things equal. Whatever level of sales maximizes profits also maximizes half of profits, or half of profits less the license fee.

But that assumes that the firms are free to choose their own level of sales or to compete on price. What we have here is the government milking the telecom cash cows. To make sure the cows have plenty of milk they are not allowed to compete on price - so, semantics aside, a profits tax with a limit on competition does affect the prices firms and households pay for telecom services.

Secret Dubai covers another angle on this story.

UAE's second telecom firm to start operations in mid-2006 :: Khaleej Times

Quote:

ABU DHABI — The UAE’s second telecommunications operator, Emirates Integrated Telecommunication Company (EITC), is expected to start commercial operations by the middle of next year. EITC will have a paid-up capital of Dh4 billion.
According to the Telecom Regulatory Authority (TRA), the new operator will be offering mobile services, which is expected to cover most of the UAE, fixed phone lines, Internet and other services.

The UAE government owns 50 per cent of the capital of the new company, while Mubadala Development Company and Emirates Communication and Technology LLC own 25 per cent each of EITC.

samuraisam posts links to additional reports on this story at UAE community blog.

See also the story at Emirates Today.

UAE to have telecom duopoly :: Gulf News

We're going from monopoly to duopoly. That's not much competition. Now, mind you, they will be regulated. But, to protect the consumer? No, to protect the competitors.

Quoting (emphasis added):

The UAE's telecom regulator will not allow open competition until 2015. Consumers are expected to be sandwiched between two government-owned operators for services in a planned duopoly, according to officials.

Mohammad N. Al Ghanim, director-general and board member of UAE's Telecommunications Regulatory Authority (TRA), yesterday told Gulf News, licencing of a second telecom operator is currently in progress, without competitive bidding.
. . .
The TRA is working out a price-control mechanism to eliminate the possibility of a price war.

"The new guidelines will dictate how both operators compete with each other in the market and it will address pricing mechanisms and other issues.

"We do not want a price war in the market. The two companies can compete on technology and service superiority," he said, without elaborating.

Still, competition limited to service quality is better than no competition at all.

UPDATE. Actually, not so much an update as providing this link to the Gulf News article on Etisilat's competitor. A few quotes:

The authority's resolution to grant a licence to the new Dh4 billion telecom provider follows a federal government intention to set up a new company in which the General Pensions and Social Security Authority and other private sector shareholders hold a 40 per cent stake.

Remaining stakes will be earmarked for private sector shareholders including a public offering component.

News that the UAE will get a new telecommunications company was widely welcomed yesterday, with industry captains expecting the move to yield better services at more competitive rates.
. . .
Stock market circles felt the company would be based in Dubai with operations throughout the UAE.
. . .
"It will be modelled along the lines of Etisalat," a regulatory agency spokesman said.A section of the market also observed the second UAE telecom licence is being awarded directly, without having been put through a competitive bidding process.

At the time Adventures in Dubai wrote "Etisalat-2 seems to be owned by various Gubmnt agencies, and is likely therefore to be no more than a palliative to the WTO rather than a genuine competitor who would drive down prices."

UAE ban on VoIP - Skype News

Skype is the latest in a line of VoIP sites to be blocked in the UAE as those of other VoIP specialists such as Net2Phone have been disallowed for some time.

State-owned Etisalat - the country’s only fixed line operator –claims it did not ban Skype, but that the decision was made instead by the Dubai government.

“It’s illegal to use voice over IP in the UAE and it is left to the regulatory authorities to allow or disallow such things,” Ahmed Bin Ali, public relations manager at Etisalat, told ITP Business. However, Bin Ali went on to admit that he didn’t know why a technology that is legal across most of the world had been banned in the UAE. “I don’t have the answer. Up ‘til now the technology itself has not been standardised,” he added.

Coincidentally, the Skype block comes as Etisalat itself prepares to launch its own VoIP service later this year. However, when quizzed on whether Etisalat might have been using its UAE government connections to ban VoIP competitors in advance, Bin Ali claimed this wasn’t the case. “That’s not a fair [accusation],” he said. “It (Skype) has been blocked because it is illegal to operate.”

While I'm not sure of the quality of this news source, Gulf News is not in question. Here's what Gulf News printed yesterday:

GN: Any plans to allow voice over Internet telephony (VOIP)?
MAG: This is not allowed. We have instructed Etisalat to block websites that allow Internet telephony. There is a difference between VOIP and Internet telephony.

TRA is studying and thinking about this issue but for now VOIP is not allowed and Internet telephony is definitely not allowed. Etisalat is cooperating with TRA.

About MAG: "The director-general of the UAE Telecommunication Regulatory Authority (TRA), Mohammad Al Ganem, was first with Etisalat where he held several positions including senior manager (product management)."

The Economist En Su Laberinto isn't happy.

Forecasting effects of competition in UAE telecom - Gulf News

Last Friday, the government said it would license a second cellular company in the UAE, which is expected to begin operations in the second half of 2006.

"Etisalat is alone in the UAE but operates as if it is in a competitive environment, flooding the market with cutting edge technologies and tempting customers with attractive offers," said Andrawes Snobar, a research analyst at Arab Advisors Group.
In 2004, Emirates Tele-communication Corp. (Etisalat), 60 per cent owned by the UAE government, was the first to roll out a third generation (3G) network that allows the transmission of bulky pictures and videos, among the Gulf Arab countries.

It also offers the cheapest mobile rates among 18 Arab countries, according to an Arab Advisors report published in March, which will be a stiff challenge to the new company.

Still, UAE tariffs are higher than in some other countries.

A mobile call in the UAE currently costs Dh0.24 during peak hours while it costs Dh0.17 in India; an international call to the US costs Dh2.12 during the peak hours but Dh1.18 in India.

Third firm? Meanwhile, the director-general of the UAE Telecommunication Regulatory Authority (TRA), Mohammad Al Ganem, answers this question from Gulf News:

Gulf News: Now that a second telecom licence is approved, will it pave the way for further liberalisation, perhaps for a third player?

Mohammad Al Ganem: Not now. We will let the second operator some time to acquire market share and then slowly liberalise the market. We have to give the newcomer time to stabilise.

Etisilat blocking internet phoning? - Gulf News
---QUOTE---
UAE residents were able to access at least two VoIP sites offering international phone calls at a fraction of Etisalat's prices. About two to three weeks ago, those sites were blocked. Angry letters of complaint were dashed to Gulf News and other media organisations.

Etisalat's head of public relations, Ahmad Bin Ali, denied using VoIP was ever legal. "Internet telephony up until now is illegal to use in the UAE. Etisalat can't make these laws. There's no law."
...
Users said blocking of website is uneven. Users in free zones said they are not blocked from VoIP sites.
...
The Telecommunications Regulatory Authority (TRA) was established late last year to oversee the introduction of competition into the UAE's telecom sector and to oversee telecom services....Abdullah Hashim, Senior Manager of e-Company, Etisalat's internet and e-business arm, said that while PC-to-PC "voice chats" which use VoIP technology are allowed, PC-to-phone calls are tricky.

"We are exploring the use of VoIP, but at the moment, PC-to-phone calls are not allowed because we could run into problems with the telecommunication companies in other countries."
...VoIP is popularly demanded in the UAE, with a high expatriate population, many of whom cannot afford or who don't want to pay Etisalat's international phone rates. This differs from computer to computer phone calls, which is used in the city's many internet cafes.
---UNQUOTE---