Internet access connections in the six Gulf countries of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE) grew by 33 percent during 2002 and their revenue rose an impressive 53 percent during the same period, according to IDC's latest study, Gulf States Internet Access Services Forecast and Analysis, 2002-2007.
By the end of 2002, aggregate Internet access connections in the six countries stood at 1.32 million. Broadband contributed a mere three percent of total connections, although its revenue contribution approached 12 percent for the year.
Penetration rates vary across the region and by customer type. According to the IDC study, large and medium businesses enjoy a very high penetration rate, while 1-9 employee sites and SoHo have the lowest penetration rates.
Penetration of households is highest in Kuwait, followed by Bahrain and the UAE. Overall, Kuwait has the highest penetration rate of total sites, at 38 percent, followed by the UAE at 31 percent, Bahrain at 26 percent, Saudi Arabia at 16 percent, and Qatar at 10 percent. Oman, at just nine percent, suffers the lowest site penetration rate among the six countries.
"Clearly, connections growth, going forward, will hinge on the ability of Internet Service Providers (ISPs) in the respective countries to market Internet access connections to the least penetrated market segments. In most of the countries, this means increasing penetration in the consumer and small business segments," according to Mohsen Malaki, senior analyst with IDC CEMA. "For ISPs to be able to tap into these two segments, an understanding of the main inhibitors of Internet adoption within each segment is required," he added.
For the small business segment, the IDC study outlines two main inhibitors of Internet connection adoption: a targeted pricing strategy and a lack of awareness and education about the use of the Internet.
"It is no longer sufficient to produce generic business tariffs for Internet connections, whether dial-up or broadband," says Malaki, "ISPs need to formulate prices that take into account the bandwidth usage patterns of small businesses, which will result in lower prices for this segment."
Nonetheless, IDC has seen promising signs of a more coordinated approach to increasing Internet awareness and education for the small business segment within some countries of the Gulf, particularly Bahrain and the UAE.
In both countries, ISPs have launched Internet awareness seminars in their local markets, in partnership with the local chambers of commerce and industry. "Such efforts could go a long way in educating the small business community about the benefits of the Internet for their particular businesses, guaranteeing the ISPs revenue growth in the future, while introducing the benefits of the Internet to the local business community," claims Malaki.
For the consumer segment, IDC has identified PC penetration, a shortage of compelling content, affordability, and Internet literacy as the key inhibitors for continued growth. These factors impact the growth of connections to different degrees within each country, with some of the smaller Gulf states, such as Kuwait, Bahrain and the UAE, enjoying much higher levels of PC penetration and Internet literacy than the rest of the region.
"Remedying the inhibitors of growth on the consumer side requires a more coordinated approach between policy-making bodies, telecommunications operators, and ISPs," asserts Malaki. There are signs of such public-private partnerships in some countries of the region, involving subsidized PCs for households and schools.
Efforts are also underway to introduce formal ICT education in schools and universities, which should in the long-term help alleviate another inhibitor, Internet illiteracy. Finally, locally relevant content, as well as Arabic language content, remains limited, and in need of further initiatives.
Looking ahead, IDC expects the total Gulf Internet access market to exhibit a compound annual growth rate of 14 percent for connections and 18 percent for revenue over the 2002-2007 period. In 2007, the market will reach 2.6 million connections and revenue of $1.1 billion.
By far, the largest driver of growth in connections and revenue will be broadband, while both dial-up and leased lines to the Internet will witness a more modest growth curve. IDC believes the dial-up market will continue growing throughout the forecast period, with the exception of Kuwait, where dial-up connections should start to decline in 2005, largely due to cannibalization of dial-up connections by broadband Internet.
As for leased lines to the Internet, IDC forecasts assume a large proportion of medium-sized businesses and cyber cafes that are currently leased line customers will switch over to broadband solutions upon availability. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
