The widespread availability and use of broadband has both economic and social benefits, and broadband is an increasingly important factor in the development strategies of countries around the world. Demand for high-speed and reliable broadband has been growing worldwide, and that growth has been accelerated by the COVID-19 pandemic, which has made the public, businesses, and governments increasingly reliant on internet connectivity. A corresponding increase in the supply of broadband connectivity to meet rising demand requires robust investment in telecoms infrastructure. Broadband connectivity is not only important in its own right; it provides a platform for the growth of digital services including online communication tools, e-commerce, digital financial services, and e-government services, which together make up the foundation of a digital economy. Digital services are the enablers of a digital economy, and the success of digital economy initiatives largely depends on a robust, reliable, low-latency, and high-speed broadband infrastructure in the country. The growth and competitiveness of any economy in the world will increasingly depend on investments in the information and communications technology (ICT) sector.

In Egypt, the Ministry of Communications and Information Technology (MCIT) has been working to encourage the transition to a digital economy in alignment with Egypt’s Vision 2030, through the ICT 2030 strategy including the Digital Egypt project, which involves cooperation with the different ministries, state institutions, and authorities to support digital transformation and institutional development. As a result of the MCIT’s various initiatives in broadband infrastructure development, Egypt has witnessed a significant growth in broadband adoption, with mobile broadband subscriptions growing by 15.46% year on year (YoY) and fixed broadband subscriptions growing by 16.93% YoY in July 2020.

The strong growth in fixed broadband subscriptions highlights the demand in Egypt for reliable highspeed connectivity. Globally, high-speed broadband has been proven to drive not just consumer satisfaction but also economic growth. Therefore, across the world, more governments are deciding to play a key role in facilitating broadband infrastructure investment and network deployment. The MCIT’s Digital Egypt project is also in line with the shift from national broadband plans to national digital strategies with broadband infrastructure as an enabler.

This white paper analyzes the status of broadband and digitization in Egypt and the key developments in the region and globally. It offers recommendations for further evolution of the Egyptian ICT sector based on analysis of strategies and plans adopted by governments and regulators around the world.

The status of broadband

Egyptian broadband status

As part of its strategic initiative to develop Egypt’s broadband infrastructure in a bid to support the digital transformation of the country, the government of Egypt has been working with Telecom Egypt (TE), in which the MCIT holds an 80% share, to modernize the access network since 2014. According to a statement by TE, the company invested EGP12.7 billion ($790.3 million) in 2019 as a new shift in its fixed broadband offering in line with its large project to develop its network capabilities and improve the quality of internet services in Egypt.

In 2019, the MCIT launched a new broadband infrastructure initiative, based on which the regulatory authority issued a framework to service providers to move customers to high-speed internet with a minimum speed of 30Mbps instead of 5Mbps. As a result of this framework and incumbent TE’s bitstream agreements with Etisalat Misr and Orange Egypt, all operators were able to transition their customers to the new speeds, doubling the average speed of fixed broadband from 7Mbps in November 2018 to 15Mbps in November 2019.

The COVID-19 pandemic has further accelerated the growth in fixed broadband subscriptions: xDSL subscriptions grew by 6.1% quarter on quarter (QoQ) and 16.1% YoY to reach 7.99 million subscriptions at end 2Q20, up from 6.88 million subscriptions in 2Q19 (Figure 1). Mobile broadband subscriptions have also seen growth, from 36.89 million in 2Q19 to 41.79 million in 2Q20, a growth of 2.7% QoQ and 13.3% YoY. The fixed broadband subscriptions growth rate has been consistently higher than that of mobile broadband since end-2019, before the onset of the pandemic.

In 2019, the National Telecommunications Regulatory Authority (NTRA) issued two new licenses to Etisalat Misr and Vodafone Egypt to encourage other operators to invest in fiber infrastructure albeit in high-end residential compounds.

Middle East and Africa fixed broadband status

Levels of fixed broadband development vary widely within the Middle East. In the UAE and Qatar, the fixed broadband infrastructure is among the most advanced in the world: household fiber-tothe-home/business (FTTH/B) penetration reaches above 94% for both countries, according to the FTTH Council. In Egypt, fixed broadband penetration is quite advanced for Africa but low compared with the Gulf region (Figure 2).

Although fixed broadband development is much less advanced across the Middle East and Africa as a whole, growth prospects for the region are high. In the Middle East, the number of fixed broadband subscriptions in the region is forecast to rise from 41.2 million at end-2018 to 49.1 million at end2024, with the FTTx share of subscriptions growing from 36.7% at end-4Q19 to 45.2% by end-2024 as local governments and regulators push for broadband development.

Africa is recording strong demand for home broadband services, driven by the need for high-speed, low-latency internet to support home working, online education, and digital media. The take-up of fixed broadband services, which are delivered by technologies such as fiber, xDSL, satellite, and fixed wireless access (FWA), is growing strongly on the continent, despite the sharp growth in the mobile broadband segment. According to the latest Omdia forecasts, the number of fixed broadband subscriptions in Africa will grow by 36.6% over the forecast period, from 23.3 million in 2019 to 31.8 million in 2024. Over the next five years, xDSL will remain the dominant technology with 17.4 million subscriptions. However, FTTx, 5G, LTE, and satellite will record the fastest growth rates over the forecast period.

Egypt is quite favorably positioned in terms of fixed broadband 5GB prices and the purchasing power based on the analysis of the International Telecommunication Union (ITU) ICT Price Basket (IPB) data (Figure 3). However, it may be noteworthy that some of the countries, which have slightly higher prices for the same 5GB package but lower purchasing power parity, are offering high-speed fiber optic technology. This also indicates that consumers are willing to pay higher prices for higher speeds, which should just support investment in new technologies.

Across the Middle East and Africa, fiber is the fastest-growing segment thanks to the push from local governments and regulators as part of national strategies to support broadband development (see Figure 4). Although xDSL’s market share will decline over the coming few years, Omdia forecasts xDSL will still be the region’s biggest fixed broadband technology in 2025, accounting for 39.7% of fixed broadband subscriptions. This is because evolution to full-fiber connectivity is a gradual process with significant investment in infrastructure needed from all stakeholders. FWA will also see growth over the 2020–25 forecast period, from 26.7% of total subscriptions in 2020 to 34.1% in 2025, because FWA networks are typically quicker and less costly to deploy than wire-line alternatives. Advances in technology, through upgrades to LTE and, more recently, the arrival of 5G, mean that FWA is and will be increasingly capable of delivering faster and better services.

Omdia forecasts that by 2025, the global household penetration rate for broadband subscriptions will reach 62.1% with 1.33 billion fixed broadband subscriptions (see Figure 5). That is an increase of 138 million subscriptions over the next five years, with Africa having the biggest growth in percentage terms (37.3%). COVID-19 has led to an accelerated growth in fixed broadband adoption, which will continue as broadband networks evolve.

Digital economy status and trends in Egypt

Economic outlook

Egypt’s economy is expected to grow by 3.5% in 2020 in terms of real GDP, and it is the only country in the Middle East and North Africa region with a positive projection, according to the International Monetary Fund’s (IMF) October 2020 Outlook. This indicates that the Egyptian economy will be able to sustain itself through the pandemic despite challenges such as a sharp decline in tourism revenue and worker remittances, presenting an opportunity to maximize the growth.

ICT contribution to national GDP

According to the MCIT’s 2019 annual report, the ICT sector accounted for 4% of Egypt’s GDP in 2018/19, compared with 3.5% in 2017/18, up by 1.2 percentage points of growth since 2010/11. This highlights the increasing dependence on ICT for sustainable development and improvement in overall welfare through fighting unemployment, reducing poverty, and cutting transaction costs. Such growth in share can be attributed to increased ICT uptake, growing awareness of ICT’s benefits for work and personal use, the continuous upgrades of the telecoms infrastructure, a striving for digitalization by thriving enterprises, and the diversification in activities of ICT enterprises to provide advanced technologies to the local and international markets. Broadband investment has an impact on economic growth and overall competitiveness because it enables greater innovation and business efficiency. A number of studies have been conducted around the world to quantify this impact:

• The ITU’s analysis of more than 200 studies on broadband impact notes that a 10% increase in broadband penetration yields an increase in GDP of 0.25–1.5%.
• The OECD estimates that a 10% increase in broadband penetration can raise labor productivity by 1.5%.
• A European Investment Bank (EIB) study asserts that a doubling of broadband speeds can result in 0.3% GDP growth.

Developments in digitalization

In alignment with Egypt Vision 2030 and Egypt’s digital transformation strategy, the MCIT has been seeking ways to accelerate digital transformation across the country. These efforts can be grouped into three main pillars: digital skills and employment, digital government services, and digital innovation.

Government initiatives in digital development

Some of the key developments in these pillars are listed below.

Digital skills and employment

• The ministry began by training 3,600 professionals in 2018, at a cost of EGP100 million ($6.4 million). In 2020, there were 95,000 trainees in various programs designed through partnerships with multinationals such as Google, Huawei, and Microsoft.
• The MCIT has also launched the “Our Digital Opportunity” initiative to support small and medium-sized enterprises in implementing digital transformation projects. MAGNiTT, MENA’s startup data platform, ranked Egypt first in terms of the number of startup investment deals in MENA, according it 37% of the MENA region total in 1Q20. Deals worth $107 million were made in the first half of 2020, up from $95 million in 2019 and $84 million in 2018.
• The MCIT has also launched the “Our DigitalSix technology innovation hubs were also established in regional universities including Mansoura, Menoufia, Minya, Sohag, Aswan, and South Valley (Qena). The first phase of the Knowledge City is well under construction with completion due in 2021, and initial investments are estimated at EGP12 billion. Knowledge City is targeted to be the Silicon Valley of the country and is expected to draw foreign investment to Egypt. Opportunity” initiative to support small and medium-sized enterprises in implementing digital transformation projects. MAGNiTT, MENA’s startup data platform, ranked Egypt first in terms of the number of startup investment deals in MENA, according it 37% of the MENA region total in 1Q20. Deals worth $107 million were made in the first half of 2020, up from $95 million in 2019 and $84 million in 2018.

Digital government services

• The ministry has launched 50 digital government services in Port Said within the framework of the Digital Egypt strategy, with four new sets of services to be extended nationwide, including 36 digital government services.
• Around 5,300 government buildings have been connected through a fiber-optic network as part of the government’s plan for connecting the 32,000 government buildings nationwide within this network in 36 months, at a total cost of EGP6 billion

Digital innovation

• The MCIT also set up the Applied Innovation Center, through which partnerships will be forged with major international companies specializing in artificial intelligence. The first phase of the center focuses on health, agriculture, macroeconomy, natural language processing, and machine translation.

Digital services development

As data traffic grows and investments in network capacity to withstand the growth in data increase, telecoms service providers in the country have been launching digital services to monetize data. Some examples are as follows:

• Telecom Egypt launched its WE TV service in collaboration with Cable Network Egypt after the NTRA issued the license for IPTV service provision. Vodafone Egypt and Etisalat Misr also obtained licenses to offer IPTV services in closed compounds.
• The Administrative Capital for Urban Development (ACUD) signed an agreement worth $135 million with Orange Egypt to build and operate a data center according to the latest international standards.
• Telecom Egypt launched its digital wallet under the commercial name WE Pay in collaboration with Banque Misr, enabling its customers to send, receive, and store money using a smartphone application.
• Vodafone Egypt became the first and sole accredited provider using VMware-based cloud services in Egypt, offering a diverse set of cloud services including infrastructure as a service (IaaS). Vodafone also announced the expansion of its partnership with Dell Technologies to provide cloud-computing services to companies and government agencies.
• Global over-the-top (OTT) streaming service provider Netflix recently announced it will continue to invest in Arabic content and production, starting with Jordan and launching its first Egyptian television series in November 2020.

Omdia expects these digital services to bring about growth in multiplay as well as increased penetration of fixed broadband in the country.

Global strategies for developing broadbands

Broadband networks are the foundation of digital economies and a key driver of economic and social development. Nationwide broadband coverage is considered essential for the economic and social development of a country. However, governments are facing a challenge in ensuring broadband rollout across the whole country (not just in high-income areas). We are seeing more governments deciding to play an active role in network deployment, but these investments must be fiscally sustainable, and incentives for private investment should be preserved. A further challenge is how to make the best use of limited resources. To bridge the connectivity gap, three types of models have been internationally implemented, as illustrated in Figure 6.

Egypt follows the mixed model with NTRA’s Universal Service initiative. The public-private partnership (PPP) model solves two of government’s bigger problems when it comes to constructing infrastructure: financing and execution. This model is similar to that of many countries in the European Union, so the EU broadband state-aid rules can provide guidance on policy development.

Most countries have developed national broadband plans with different levels of achievement and continuity. Urgent public policies are required to accelerate digital infrastructure deployment and boost social and economic growth. Some of the national broadband plans in the region with their objectives and achievement have been highlighted in Table 1.

Digital transformation projects supersede national broadband plans

Digital transformation is now high on the global agenda, with governments and global institutions seeking to maximize the benefits of digital transformation for innovation, growth, and social prosperity. However, doing this requires a comprehensive strategy. Broadband infrastructure is a requirement, but so too is a strategy to get citizens to use it, and not just a strategy to encourage usage but usage that transforms how people do their work or live their lives:

• A national broadband plan will only guarantee infrastructure.
• A comprehensive national digital strategy will guarantee that the infrastructure is used in a transformative way.

While Table 1 illustrates that national broadband plans for many countries in the region have a focus on high-speed broadband connectivity through the deployment of fiber-optic networks, the national digital plans are specific to each country, capitalizing on the drivers of economic growth and increasing adoption of digital services. The MCIT’s Digital Egypt project is thus a noteworthy step forward in the development and adoption of the nation’s connectivity

 The role of growing cybersecurity 

As broadband connectivity and digital services adoption rise, and more companies and organizations virtualize their operations, the cybersecurity threat has increased. Cybersecurity has become a priority, and implementing security from the onset of technology projects is being recognized as an essential investment. Increasingly, cybersecurity must be implemented across the digital ecosystem, and to achieve this regulatory bodies, cybersecurity experts, vendors, and service providers will need to work together.

Next step for developing broadband in Egypt

Conclusion

Fixed broadband in Egypt has grown from a penetration of 25% in 2017 to over 35% in 1Q20. With the efforts of the MCIT, NTRA, and the operators, fixed broadband in Egypt has come a long way in terms of infrastructure, digital initiatives, and services. However, there is still further growth potential for high-speed fixed broadband for the right technology at the right price in the market. Consumers are willing to pay higher prices for high-speed connectivity, justifying capex by operators and allocation of universal funds by the government for the development of infrastructure. Detailed guidelines are laid out by organizations around the world on how investments in infrastructure can be effectively used to achieve targets for connectivity as articulated in the national broadband plans. Governments are also drawing up digital strategies and working closely with operators to ensure adoption of digital services and thus increase penetration of fixed broadband connectivity.

Recommendations

Egypt should continue to improve broadband customer experience

• The COVID-19 pandemic has emphasized how critical broadband is to everyday living, both during and beyond the pandemic, and how important it is that this is a high-quality service if it is to meet the increased consumer demands.
• Quality of experience (QoE) and quality of service (QoS) go far beyond just speed, and none of the important QoE/QoS metrics that consumers value and judge their service providers on can be delivered without first ensuring a high-quality home broadband connectivity. It is therefore imperative for service providers to have a platform that monitors the QoE in the home in real time and for the regulators to encourage and enforce QoE/QoS monitoring and set minimum requirements to ensure that networks are professionally designed and of a satisfactory quality.

Egypt should invest further in its broadband infrastructure

• Because of the COVID-19 crisis, economic growth across the globe is at its lowest for many years. However, with significantly more people working and being educated at home, broadband access has never been more important. In order to achieve the best chance of recovery from the pandemic, governments must look to invest in their national broadband networks.
• A deep fiber backbone provides diverse paths delivering high availability and supporting high-capacity connectivity from 200–800Gb. Availability is required for new 5G mobile applications and for new cloud applications.
• Future broadband applications will require a mix of certain network key performance indicators such as high download and upload speeds, low latency, and low jitter if they are to provide the right level of experience to the end user. Based on network measurement data, an end-to-end fiber-optic network is the best-performing type of network across all such metrics. Furthermore, it is virtually future-proof and is more reliable and secure than other forms of network, making it an ideal choice of infrastructure for residential and enterprise customers alike.
• However, deploying new fiber networks is also likely to be costly and could be a complex and lengthy process. Typically, the business case for fiber will require relatively high revenue per customer. These factors mean that for the near future, the viability of deploying fiber broadband networks in Egypt, as in much of the region, is likely to be restricted to certain settings such as high-end residential districts or other new urban developments. Examples of these developments are Neom in Saudi Arabia and Lusail in Qatar, which are positioned as smart cities to attract tourism and foreign investment.
• In markets such as Egypt that have a good amount of DSL coverage, it will often make sense to continue to utilize that DSL infrastructure for the near-to-medium term while operators and authorities plan to transition from DSL to fiber access networks over the long term.

Egypt should reduce the digital divide

• Nationwide broadband coverage is essential for economic and social development, especially after COVID-19. The pandemic has highlighted the remaining gaps in broadband coverage and reinforced the need to close the digital divide and designate networks as critical infrastructure. So ubiquitous broadband access is a key element in any country’s digital agenda. Often, high-speed network rollout is commercially viable only in densely populated areas, and nationwide deployment might require government funding. Economic stimulus packages have been seen in Norway, Poland, the US, and Germany since the start of the pandemic. However, the key challenge is ensuring widespread broadband rollout is funded while being fiscally sustainable and still preserving private incentives to invest. This challenge will grow in the coming years when economically viable areas are covered but the gap in rural areas with scattered populations widens.
• The Egyptian government should certainly get more involved in guaranteeing broadband connectivity for all citizens. Any state intervention should limit the risk of crowding out or replacing private investments, altering commercial investment incentives, or distorting competition.
  
   

Egypt should consider greater sharing of mobile and fixed facilities to overcome financial obstacles

• The best broadband policies allow facilities-based competition to successfully deliver broad coverage. Some regulators around the world have encouraged infrastructure sharing between operators to improve network economics and make larger high-speed network rollouts viable in rural areas. Good fiber coverage is needed for 5G, so access to telecoms facilities such as ducts will be crucial.
• The Egyptian government should ensure regulations allow for innovative deployment solutions. Infrastructure-sharing deals between operators to improve network economics, especially in rural areas, should be supported.
  
   

Egypt should continue investing in developing digital skills

• The government should continue and expand its initiatives to accelerate digital transformation including digital skills and employment.
• Digital transformation encompasses not only the infrastructure and platforms but also the people and processes.
• The ITU says that digital skills have an impact on the effective use of broadband, and employment opportunities are enhanced by developing digital skills specific to the nation’s economic growth drivers. The ITU recommends supporting the development of technical skills by teaming up with the private sector, which the Egyptian government has already undertaken and should continue to do.

Methodology

Data and information in this white paper is based on Omdia’s research and data tools, which are available at the Omdia Knowledge Center and Forecaster. Further sources include a combination of reports and data as published by operators and service providers, the MCIT, ITU, OECD, EIB, IMF, and Omdia.

Author

Srushti Ghisad
Research Manager, MEA
[email protected]

Matthew Reed
Practice Leader, MEA & Asia Pacific
[email protected]

Get in touch Omdia consulting
www.omdia.com
[email protected]

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