For a long time, media convergence was a case of traditional media adapting to the online world. But increasingly, the chosen platform for convergence is mobile devices.

The iPhone and other smartphones have been credited with spurring this change, along with internet-enabled mobile devices, such as e-readers and the iPad. Such gadgets have changed the way media is consumed. Today it is estimated that only 10 per cent of mobile phone usage is used for voice services.

More time is spent using data services such as internet browsing, social networking, instant messaging, gaming, mobile TV, video on demand and navigation-based applications. The quality of the data experience has become just as, if not more, important than the voice experience.

“The mobile platform is very present in the region. There has been a good adoption of smartphones, which makes it easier to adopt mobile convergence,” says Santino Saguto, managing director of media consultancy firm Value Partners Dubai. The large young population in the Middle East has fuelled this uptake and growth in consumption.

Broadband penetration at end of 2009 (percentage)
UAE  14.6
Qatar 8
Saudi Arabia 7.8
Morocco 3.7
Jordan 3.6
Tunisia 3.5
Palestine 2.3
Oman 1.4
Egypt 1.3
Yemen 0.2
Source: Arab Advisors Group  

This was evident with the launch of the iPad in the UAE, which was heavily sought on the grey market for double the retail price. This is a clear sign of the hunger for new technology and the opportunities to satisfy it through convergence.

The big media producers are also interested in mobile phones as a new platform for marketing their products and services.

But all of these services require infrastructure capable of dealing with higher speeds and greater bandwidth. Governments across the Middle East have responded by investing substantially in telecoms infrastructure. Studies have shown that a 10 per cent increase in broadband penetration leads to as much as 1.6 per cent increase in gross domestic product (GDP) growth. Over the next five years, more than 2 billion people globally will connect to the internet through broadband, and most using mobile phones. An estimated 150 million of these users will be based in the Middle East and North Africa (Mena) region.

Connection disparity

There has recently been a big push towards broadband in the Middle East. However, the overall penetration level in the region is about 17 per cent, significantly lower than Europe and the US. But, the levels vary greatly between the countries. It is high in places such as Qatar and Bahrain, but very low in others, such as Syria and Sudan. The disparity reflects the varying economies and income of the countries.

However, governments in such emerging markets are also investing in the sector to increase penetration. There has also been a marked rise in fibre-optic development, which provides a much faster connection than asymmetric digital subscriber line (ADSL), currently the prevailing broadband technology in the Middle East.

But despite the investment, fixed-line broadband is expensive. Mobile broadband is a more affordable alternative having benefited from liberalised mobile markets and new licences.

Currently, there are 22 operators in 15 countries in the Arab world offering third-generation (3G) mobile services. These include local and international video calling, mobile internet, mobile TV, video mail, video monitoring and multiplayer gaming. Communications consultant Arab Advisors Group lists these 15 countries as Bahrain, Egypt, Iraq, Jordan, Kuwait, Libya, Mauritania, Morocco, Oman, Qatar, Saudi Arabia, Sudan, Syria, Tunisia and the UAE.

While Iraq’s main mobile operators do not offer 3G services, they are offered by the country’s two WiMAX (Worldwide Interoperability for Microwave Access – another type of broadband wireless access) operators – Itisaluna and Kalimat. The long-awaited fourth licence will be Iraq’s first 3G operator. But even with the under-developed infrastructure and low mobile and internet penetration rate, Iraq was the first to offer mobile TV via DVB-H (digital video broadcasting-handheld) – a service that has benefitted from the frequent power cuts and the Iraqis’ insatiable appetite for news.

However, 3G will soon become outdated. A more viable option to meet demand is long-term evolution (LTE), a type of fourth-generation (4G)wireless technology. LTE has the capacity to carry up to 150 megabits of data a second. It enables high-speed internet browsing, high definition (HD) video-playback and can better cope with content demand.

Infrastructure upgrades

So far the most sophisticated infrastructure has been installed in the GCC. Bahrain-owned operator Batelco has teamed up with Sweden’s Ericsson to expand and upgrade its mobile network in preparation for a migration to LTE.

Saudi operators, STC and Zain KSA, are also updating their infrastructure to LTE. STC has appointed Chinese equipment provider Huawei to deploy a pre-commercial LTE network, which will be the largest in the Middle East.

Qtel and Jordan’s four major mobile operators are also planning to upgrade their networks to LTE. Libya’s Al-Madar al-Jadeed will be making the jump straight from 2G to 4G.

Once the infrastructure is in place, convergence will enable operators to increase average revenue per user (ARPU) in an increasingly saturated market. By 2013 there will be more than 266 million mobile subscribers in the Middle East. By 2020, there will be 50 billion connected mobile devices around the world according to Ericsson. The mobile phone is fast becoming a significant platform for content consumption.

The Middle East’s young population is the industry’s greatest opportunity. More than 30 per cent is aged between 15 and 29. In the GCC, this age group is thought to make up almost 70 per cent of internet traffic.

The US-based Internet Corporation for Assigned Names and Numbers’ recent approval of Arabic letter domains is expected to bring more Arabic-speaking users online and make the internet more accessible.

Social networking websites such as Facebook and Twitter are some of the most frequented by users in the region. Increasingly, content producers are creating websites and applications specifically for mobile device usage.

A good example is BBC Arabic, which incorporates video, audio, text and images onto its mobile website. “In 2009, BBC Arabic enjoyed a 35 per cent growth in online usage in the Middle East. The highest growth for the website has been in mobile usage with about 1 million page views every month last year,” says online and interactivity editor Mohamed Yahia.

Forming partnerships with content producers to provide users with differentiated services could increase ARPU. Operators can localise global content, as has been the case with satellite channels adopting TV formats to suit local audiences. It also paves the way for other services, such as mobile banking. Dubai-based Etisalat has teamed up with Citibank to launch a mobile money transfer service.

Operators can exploit the services and content to create opportunities to monetise the platform by selling advertisements based on user preference. “By making this advertising more contextual, the idea is to appeal more often to consumers and be seen as helpful, rather than intrusive,” says Ericsson marketing director for the Middle East, Jeremy Foster.

Mobile advertising has the benefit of providing performance metrics on advertising impact, something that TV and radio are unable to do. “This will mean that the metrics provided by these old broadcast mediums will come under scrutiny as it will be hard to prove just how many people listened to an advertisement,” says Foster.

But operators and media companies have yet to find a business model that benefits all parties involved. The high piracy rate and the region’s unwillingness to pay for content is a big problem. Advertising alone may not be a suitable option for content with high production costs.

“The big media players are afraid to buy premium content because they’re afraid they can’t monetise it,” says Saguto. Some operators are also hesitant to invest in LTE fearing they will not recover due to market liberalisation and competition from fixed broadband.

The Arab world also suffers from a lack of sufficient content. While the open-source nature of Google’s Android platform, Apple’s App Store and Facebook has provided an opportunity for Arab developers to create applications, investment in such companies is limited.

“The content market has yet to reach maturity. Funding is easier to get than a few years ago, but investors observe our business with doubts as they tend to be from an older generation and have only just started to trust new media,” says Fathi Ben M’barka, founder of Tunisian-based digital agency Streamerz.

Founder of online forum Arabcrunch, Gaith Saqer, agrees. “After Yahoo’s acquisition of Maktoob, more people started to invest,” he says.

The most recent investments include a video application for Twitter called TwitVid set up by a Jordanian. “But we need to see more venture capitalists at a regional level. Few websites produce quality content in the Arab world,” Saqer adds.

Paradigm shift

The general lack of regulation in the region is a challenge for the sector’s development. “Discussions are in their infancy and it’s not clear exactly which direction they’ll head, which ministries will lead the converged strategy and what role regulators will play,” says Foster.

One of the biggest challenges to convergence development is the mobile handset. An LTE-enabled device is not commercially available yet and unlikely to be released before the end of 2010. It is estimated that about 60 per cent of mobile phone usage will be based on video services, but the current short battery life cannot cope. “We can expect the technology to be developed at the handset level in the next three to five years,” says Saguto.

Media and telecoms convergence is still in the early stages of development. The internet has become truly mobile and there is a new way of thinking, the ‘paradigm shift’, which operators need to work through. Every market may not respond in the same way, so adopting a standard strategy is unlikely to work. But telecoms operators in the Arab world are in a good position to maximise the opportunities. The young population is also open to change and new technology. But in order to succeed, operators must ensure user experience is top priority and a fair pricing strategy is established.