The Kurdistan Region’s ICT sector has had a good year in 2014—and given the sector’s strategic importance and relevance to the rest of the Region’s economy, security and politics, it is important that the sector’s growth and development has been strong. Internet penetration rates have been climbing steeply with major growth in local internet services providers (ISPs), mobile penetration rates—already relatively high at roughly 93% within the Kurdistan Region—are continuing to rise, and major ICT hardware manufacturers are working their ways into the market, often through local distributors and partners.

The public sector is quickly developing its own hardware to make the KRG work more effectively and efficiently. However, while there is much to be please about in the sector, there are still challenges: regulatory challenges are slowing the roll-out of 3G and 4G/LTE wireless technologies at the level of major mobile operators, as well as local ISPs. Internet penetration, while growing quickly, is still quite low by international and regional standards. Within the finance sector, banks and financial institutions are not sufficiently integrated technologically to provide interbank lending or ATM services—to the detriment of both banks and consumers. Finally, despite the efforts of very effective training centers, and heavy investment from both the public and private sector into the Kurdistan Region’s human capital, the level of technological literacy among much of the Region’s workforce is still in development. While the many advances in the Region’s ICT sector are to be commended, there are still gaps in the market—and still much room for investment in the sector’s continued growth.

Internet provision in Kurdistan started from a very low point—the first international cables to bring data in and out of Kurdistan were established in just 2007-2008 by Newroz Telecom. Since then, however, distribution and penetration have grown quickly. While there are still only three international fiber optic operators carrying data into and out of Kurdistan (one through Turkey, two through Iran), investment in ICT infrastructure within Kurdistan has spread provision widely—and has jumped past the traditional stages that many countries have followed. While landlines have stagnated in Kurdistan for decades, leaving many without traditional phone services, new companies are jumping ahead to develop fiber optic cable networks in their place. Fast data networks such as these not only provide fast Internet, but VOIP phone and digital, broadband TV as well.

Within Erbil and Duhok, Newroz Telecom, exploiting their control of the Kurdistan’s only fiber optic cables into Turkey, is the central player in Internet provision. Not only has the company run cables in and out of the country, but it was also the first to bring fiber to the curb (FTTC) technologies to businesses and residences within Kurdistan. The company’s growth and investment have brought Internet connectivity to hundreds of thousands of homes and businesses since its establishment in 2005. More recently, the company has begun aggressively pursuing wireless technologies, particularly 4G/LTE provision, initially and perhaps most visibly through FastLink, its sister company. Such technologies promise to bring high speed broadband both to more subscribers within cities, but also to smaller villages previously unserved by ISPs.

Within Slemani, GoranNet, a Faruk Group company, is the leading ISP. The company works with IQ Networks and Al Sard, both of whom operate cables into Iran, as well as Newroz Telecom, to distribute Internet bandwidth in the governorate. By teaming with KurdTel, the operator of landlines (which are currently primarily standard copper cables) within Slemani, GoranNet is working to develop an extensive fiber optic cable network within Slemani, and hopes to make fiber to the home (FTTH) and fiber to the business (FTTB) infrastructure widespread within the city, drastically increasing Internet speeds.

Despite the progress, there is significant opportunity for further investment in the Kurdistan’s Internet provision. First, despite the currently low rate of Internet penetration, Kurdistan’s international fiber connections are becoming a bottleneck. According to Aram Daro Noori, General Director of GoranNet, while service and pricing for international data have greatly improved in recent years “thus far, the market is not very competitive…fees are significantly higher than in Europe or the US, which have much more developed and liberal markets for these services. ” Deregulation in the international data market may improve this situation.

Additionally, expansion of wireless networks could allow for a much faster expansion of Internet penetration, and much faster rates than development of hardwired infrastructure. While the major mobile operators provide relatively slow GSM Internet to smartphone users, the use of the latest technologies in wireless data transmission, 4G/LTE, is beginning to bring fast wireless Internet access to computer users with limited access to hardwired options. FastLink, a company that uses small mobile devices to connect computers, smartphones, and tablets in Kurdistan to the Internet through 4G/LTE networks, is the Region’s leader in this technology. However, as regulators in both the federal government’s Communications and Media Commission (CMC) in Baghdad, and the KRG’s Ministry of Telecommunications (MOT) in Erbil cut regulatory burden and issue licenses for more ISPs to employ fast new wireless technologies, it is likely that the Region’s major ISPs will be quick to follow.

Some companies are already using wireless technologies in innovative ways. TarinNet, an ISP and ICT firm that provides the KRG with much of their Internet coverage, uses a point-to-point network of towers to distribute data around Kurdistan using WiMAX technologies. This allows high volumes of data to travel long distances without the expense or hassle of wired options or 4G/LTE technology.

While service and pricing for international data have greatly improved in recent years thus far, the market is not very competitive… fees are significantly higher than in Europe or the US, which have much more developed and liberal markets for these services.

Hardware & Infrastructure, Public & Private

The Kurdistan Region’s ICT system is, like all others, based fundamentally on a foundation of hardware and infrastructure. Companies, such as Lebanese-based IT company CIS, as well as the aforementioned TarinNet, are quickly importing cutting edge network and computing equipment, through partnerships with global leaders in the sector, such as Cisco, Microsoft, Alcatel-Lucent, and others. Such hardware is used broadly across all sectors in the Region’s economy, from enabling inter-bank connectivity, to developing private datacenters for the Region’s largest companies.

The largest ICT projects of 2014 have been carried out by the public sector. The Department of Information Technology (DIT) is overseeing the development of an intranet, connecting all branches of the KRG, with all KRG data stored on a single, enormous datacenter based in the Kurdistan Region. According to Hiwa Afandi, director of the DIT, project will bring major efficiency gains to the Region’s public sector, by centralizing many of the processes and procedures that each agency currently must undertake independently. While budgetary constraints may delay the project, its magnitude is regardless bound to make waves in the Region’s ICT sector, as well as the whole of the KRG’s public sector as previously cumbersome processes are streamlined. This will also create a significant amount of work for the foreign and local private sector. While the DIT is developing sensitive and secure IT infrastructure itself, much of the Department’s work will rely heavily on the private sector for consulting and advisory, project outsourcing, and equipment.

Penetration and Data

Mobile Operators

The Kurdistan Region’s mobile phone operators are, by far, the biggest actors in the sector. Asiacell, a Slemani-based mobile operator (and Faruk Holding company) is the largest publicly traded Iraqi company, valued at roughly $5 billion. Zain Iraq, based in Baghdad but with operations in the Region, has even more subscribers throughout the country than Asiacell, and is expected to list on the Iraq Stock Exchange soon. Korek Telecom, based in Erbil, is smaller than the other two, but growing faster. International telecommunications providers have taken notice of the potential of these companies: Ooredoo (formerly QTel), a Qatari telecoms giant is a majority shareholder in Asiacell; Orange (formerly France Telecom) holds a 20% stake in Korek; and Zain Iraq is part of Zain Group, the MENA-focused telecom giant based in Kuwait. The CMC has only auctioned licenses to these three operators. While there has been talk of issuance of a fourth mobile operator license by the CMC, in recent years little seems to have come of it.

3 Mobile Operators in Kurdistan

Growth in the sector, which has seen breakneck speeds in past years, is likely to begin to level off in coming years. Current mobile phone penetration in the Region is estimated to be 93%. However, the Region’s neighbors in the Gulf have rates reaching 120% or more, suggesting that there is still ample room for net growth in Kurdistan’s mobile penetration. However, much growth in the Region will come not from penetration rates alone, but deepening of the mobile sector through mobile data provision and smartphone use. Only small numbers of the Region’s population is estimated to use smartphones with data plans. However, movements in the sector suggest that this is likely to quickly grow. The Region’s mobile operators are currently restricted to provision of slow GSM data provision. However, the CMC plans to auction licenses for 3G provision to mobile operators soon, with 4G/LTE licenses hopefully in the pipeline. Access to these extremely fast wireless technologies are predicted to encourage more mobile phone users to seek out smartphones and data plans—driving much of the sectors future revenue growth.

Enabling the End User

While much of the Kurdistan Region’s workforce has a basic command of computer use, employers believe that there is still much to be desired in terms of the Region’s computer and technical literacy. This is, however, quickly changing with the entrance of companies that invest heavily in training their employees, public sector training initiatives, and independent training centers teaching computer literacy. MSelect, an HR and recruitment firm, has recently opened a Training Center with branches throughout the Kurdistan Region. According to Allegra Klein, the Center’s director, intermediate computing is one of the most in-demand courses in MSelect’s offering. There is reportedly still much room for investment in the ICT training sector, however. According to Godar Ibrahim, CEO of Awrosoft, “for both government and the broader population, there is a major gap in basic skills, which presents opportunities for companies willing to invest in training centers and ICT-focused education.”

Some firms addressing the needs of the Kurdish workforce through development of custom software, tailored to the needs of locals, with local IT support on hand to assist in any challenges end users are facing. Awrosoft, for example, a company that writes bespoke software, creates programs that use Kurdish language, with the ability for local companies to customize the software to suit their needs, and with a local support team standing by in Erbil—benefits that massive, global software companies could never provide in this market.

However, ICT literacy is probably most important for the future growth of those in the ICT sector itself. Antoine Kawkabani, CEO of CIS-Iraq, a firm that imports, installs, and maintains ICT equipment in the Kurdistan Region, considers the creation of Kurdistan as an “IT enabled society” to be of central concern to further growth in the sector, as well as the development of the broader economy and society. As an employer that heavily invests in the capacities of his local workforce, he is personally pushing society in this direction. He believes that more can be done, however. “Developing technical capacity in schools will help to mature the market in the long term, as young students become increasingly acquainted with, and interested in, technology and computing,” he told IIG. “A broad ICT system cannot be successful without educating students in IT, and this must begin at a young age.”

“The KRG's DIT spent the initial part of 2014 conducting research on what IT skills are most in need of attention and training in the public sector, and are in early stages of rolling out training programs. As part of this process, the department is also establishing an internationally recognized certificate center to increase the technological literacy of employees.”

While the private sector is quickly bringing cutting edge technologies and connectivity to the Region, and conducting widespread employee training, such broad and deep goals of integrating IT literacy into society requires public sector support and coordination as well. Fortunately, the KRG has made this a central focus. According to Hiwa Afandi, KRG Director of IT, his office is working aggressively to educate members of the KRG’s expansive public sector in ICT skills and processes. The DIT spent the initial part of 2014 conducting research on what IT skills are most in need of attention and training in the public sector, and are in early stages of rolling out training programs. As part of this process, the department is also establishing an internationally recognized certificate center to increase the technological literacy of employees.

While much has been accomplished as far as enabling and educating Kurdish society to take advantage of the innovation and potential that the Region’s ICT sector offers, full technological literacy will take time to develop. According to Kawkabani, “it takes an interested and engaged new generation before the market for ICT can truly mature.”