Can you tell us about GoranNet’s progress in terms of developing Slemani’s fiber optic network and FTTB infrastructure?
So far, GoranNet has five or six trial projects within Slemani, most of which are within the newer apartment complexes that have been built around the city. We have deployed fiber to the home (FTTH), fiber to the building, (FTTB), as well as VDSL in these building complexes. Our projects have thus far been quite successful and we have received very good feedback from our customers, so we now have a plan to expand these technologies. We have been pursuing this project alongside the local hardwired telephone network operator, KurdTel, as they have the license to operate and install fiber-optic networks within the boundaries of Slemani. We are currently in the process of establishing a joint venture between the two companies, GoranNet and KurdTel. We have not yet signed the deal, but things are going ahead as planned, and we are optimistic that we will sign the contract within a month or less.
Can you tell us about the specifics and scale of this project?
We plan for FTTH deployment in Slemani to be a five-year project. Within the five years, we plan to install roughly 50,000 FTTH fiber optic connections, in three phases. The first phase will be in parts of the city where KurdTel does not have any presence yet. Instead of KurdTel installing the traditional copper cables, we have decided to skip this step and move directly to fiber. We will then move into the newer neighborhoods built around the city. Finally, we will build the network within the boundaries of the city itself. Over the five years, depending on the exact technology and vendors we use, capital expenditure on the project is expected to be between $25-50 million.
In terms of growth of subscribers to GoranNet, we are seeing very quick growth. Before last year, our growth rates were somewhere around 15-20%. However, since last year, from June last year until this year, we have seen an increase of 100-110%, and we expect growth at these rates to continue for some time.
International cables seem to be a bottleneck in terms of bringing data in and out of the country. Are there any plans for new cables into Turkey or Iran?
This issue is a bottleneck; thus far, the market is not very competitive. The services that are provided by the operators of the cables have improved drastically over the past year, and the prices have dropped. However, fees are significantly higher than in Europe or the US, which have much more developed and liberal markets for these services. The Ministry of Telecommunications (MOT) currently has three licensed operators of the international cables. One is Newroz, which operates primarily in Erbil and Dohuk, with some presence in Slemani, and operates a cable connected through Turkey. IQ Networks and Alsard Fiber, the two others, operate out of Slemani and operate cables through Iran. There was a plan for the government to issue a fourth license, also going through Iran, but we understand that the plan has been scrapped, and the ministry does not have a plan to issue a fourth license. However, I do not think that the decision to limit connections, as appears to be happening, is healthy for the market.
For 4G/LTE wireless networks, can you provide a background of the regulatory and licensing structure within the KRG to operate these networks, as well as your take on the technology’s future in the Region?
Basically, there is an informal understanding between the MOT in the KRG and the Communications and Media Commission (CMC) in Baghdad, whereby the CMC handles the major GSM operators, Asiacell and Korek, and the MOT has some level of jurisdiction over the fixed line operators and local ISPs in the Region. The only obstacle that the CMC has created for local ISPs is that they have issued a statement to all of the vendors operating in Iraq that it is illegal for them to sell any LTE equipment unless the operator is licensed by the CMC, or if they get formal approval by the CMC. However, some companies are working in LTE, including FastLink, which suggests that there are work-arounds for those regulations. Overall, I do feel that the CMC could create much more opportunity for the whole country if they opened these markets for other Internet providers. Regardless, within the KRG at least, I am quite optimistic that we will see major growth in the LTE market soon.
Reliable data on Internet penetration rates in the Region is difficult to find, perhaps because it is growing so quickly. Do you have reliable data?
We primarily use the data provided by the Ministry of Planning (MOP). However, it seems that the data from the MOP are understated, at least within Slemani and Erbil. In general, the numbers that we see vary wildly, and we do not know which are reliable—we have seen estimations from 5-6% up to 40%. However, in terms of growth of subscribers to GoranNet, we are seeing very quick growth. Before last year, our growth rates were somewhere around 15-20%. However, since last year, from June last year until this year, we have seen an increase of 100-110%, and we expect growth at these rates to continue for some time.
As an ISP, how would you characterize the regulatory environment of the ICT sector, broadly?
Much could be done to improve the market and the overall system. We have seen consistent improvements over the past two years. However, there is still a lot to be done, especially in terms of opening the market for an increasing number of fiber operators and issuing licenses for more cables into Turkey and Iran. At the same time, we feel that there is a huge waste of frequency resources within the Region. We see some companies that hold licenses for upwards of 50-60 MHz in a spectrum that are using only 20-30% of it. But because it has been issued and registered, much of the frequency is sitting unused. Additionally, I believe that the local government could open new spectrums, particularly in the digital dividend ranges, as television channels are going digital, opening additional space at lower frequencies. The 700 MHz range, for example, could be very useful for LTE, both for operators and consumers. Deployment would be much cheaper because the penetration of lower frequencies is much better than that of higher frequencies. Additionally, the MOT could open new frequencies for operators, which would create a healthier market overall—both for operators and consumers. Unfortunately these reforms are moving slowly. The digital dividend ranges are occupied by TV stations, and it is difficult to ensure that these stations switch fully to digital broadcasting. However, it is very doable, and something that the government can and should make progress on.