TRAs Telecommunications Liberalization Roadmap Dr Kamal Shehadi Chairman

TRA's Telecommunications Liberalization Roadmap Dr. Kamal Shehadi Chairman/ CEO Telecommunications Regulatory Authority March 11, 2009 UN-ESCWA, Beirut, Lebanon

Although reform has started with the establishment of the TRA, most telecommunications markets in lebanon are stagnant and suffer from lack of competition Current Indicators Penetration Number of SP Private / Stateowned Level of Competition Mobile Market 35% 2 State-Owned Monopoly Fixed Market 63% (*) 1 State-Owned Monopoly Internet Market 32. 5% (*) ~ 16 Private Competition ADSL Market ~ 7. 7% (*) ~8 Mo. T / Ogero Private (bitstream, line sharing) Limited Competition (*) per household 2

The TRA has assessed the strengths and opportunities of the telecommunications market in its reform and liberalization process Strengths Fixed Voice Mobile q Relatively good copper infrastructure q Regionally competitive price per minute Weaknesses § § § q Pent up demand for Mobile services q High Mobile revenues § § § Data § § Relatively competitive Lucrative segment New wireless technologies deployed Pent-up demand for data and internet services § § De jure Mo. T monopoly Low incentive to upgrade the infrastructure and introduce new technologies Low penetration rate Stagnant growth High charges Lag behind in terms of new technologies Low market penetration Limited choice in mobile bundled tariffs packages Shortage of adequate investments Shortage in international bandwidth Access controlled by the MOT High int’l bandwidth prices, and non optimal allocation of bandwidth among providers Incomplete Regulatory framework Opportunities § High pent-up demand important growth potential in all telecom markets § Appropriate Regulatory framework to attract investors. § Favorable social, cultural and demographic characteristics ( e. g. consumer’s early adopters of telecom services) 3

The TRA proposes the introduction of competition across all telecoms markets while allowing Liban. Telecom exclusivity over some services for a limited period of time 2009 Mobile * Network Operator 3 2010 2011 2012 2013 2014 ** Virtual Network MNVOs PSTN/ Basic Telephony Network Operator ? 1 ? Reseller and Vo. IP Access Broadband International Gateway National (core, metro and access) 2 Voice and Data Facilities Based Provider 3 Data Only Facilities Based Provider 2 **** Voice and Data Resellers Open licensing Market Review License Award Notes * The privatization of the mobile sector will depend on the regional and international financial markets conditions ** Two mobile operators and Liban Telecom **** Two National Broadband Licenses, subject to Co. M’s decision 4

TRA has made significant progress on the broadband roadmap The TRA plans to issue two types of Broadband Licenses q. National Broadband Licenses (NBLs) with: § Rights to build/offer (fixed and spectrum based) Access, National Backbone and International network/services § Obligations to meet access and national backbone rollout conditions with minimum build for fiber § Exclusivity period to interconnect new sites of other BL providers via its national backbone q Broadband Licenses (BLs) : § National or regional § With or without spectrum § Existing Data Service Providers continue to use their national Microwave backbone to backhaul existing sites § BLs originally rely on the NBLs for new site connectivity Broadband Deployment Timeline Broadband Policy Statement Spectrum Re-farming & RTU fees Draft RFA for Consultation ROW & (including BB Launch of License) Ducts NBL Decree Auction July 09 April 09 Q 2 09 December 09 5

TRA plans to launch an international public auction in order to establish across Lebanon, best in class core, Metropolitan, and access networks competition Fixed Mo. T Infrastructure National Broadband Licenses • Currently the Only provider of National Internet and Data Transmission • Needs major upgrade of National and International capacity • Allow CS/CPS whenever the market permits • Provide a best in class alternative National Networks (core, metropolitan and access), enabling the National Transmission of Data and provision of High Speed communications • Unleash competition on the access level and provide more choices to consumers ( including by incumbent data service providers) 6

The National Broadband Licenses and the Broadband Licenses will complement each other to provide competition at all levels of the broadband value chain Illustrative Sketches of the Core / Metropolitan and Access Networks Core Metropolitan Access Lebanon Beirut Ras Tripoli Bekaa Beirut Mazraa Saida Achrafieh Ras Beirut Sin El Fil User 1 Beirut Liban Telecom National Broadband Licenses User 1 Liban Telecom National Broadband Licenses for own use only User 1 Liban Telecom National Broadband Licenses TRA has already issued interim license for Incumbent DSPs. TRA has started a spectrum refarming exercise, which is intended t to free up some of the spectrum currently used by DSPs and other operators and make it available to new entrants as well as incumbents in a manner that allows optimal use of spectrum 7

The regulatory framework and the public consultation process adopted by TRA aim at ensuring the success of liberalization Drafting Stage Unbundling Regulation Draft Ready Stage VOIP Policy Statement National Roaming Accounting Separation Regulation Universal Service CS / CPS Consultation Stage Spectrum Refarming and Packaging Plan Improving FM Broadcasting Digital Migration Strategy for TV Broadcasting Access to Information Regulation Final Review (TRA Board) Liberalization Roadmap Broadband Policy Statement Pricing Regulation * Interconnection Interim Pricing Decision Spectrum Pricing Opinion Issued Significant Market Power Regulation Decisions: • VSAT, • Trial IPTV • Spectrum trial Allocation for Mo. T / OGERO Type Approval Regulation Quality of Service Regulation Interconnection Regulation Numbering Regulation National Numbering Plan Licensing Regulation Decision for establishment of call centers * Decision approved by the board, but will be issued concurrently with the Mobile Auction Award. Spectrum Management and Licensing Regulation Consumer Affairs Regulation Lebanese National Frequency Table

Lebanon's commitment üBring the country back to the international telecommunications scene through market liberalization üReconnect the Lebanese population with the world by building a thriving, innovative, and competitive telecommunications market place, driven by a technologically advanced infrastructure-based sector and offering services at internationally competitive prices and quality ü Promote the interests of telecom Lebanese consumers in the market to make sure they are getting good quality of service at affordable and competitive prices and that their right to safe, secure and confidential access to telecommunications is safeguarded üTRA is providing a regulatory framework in line with international best practices 9