Call goes against Skype

The TRA has retained its ban on internet calling services to protect UAE telecoms, even though those offering the services say callers and providers can benefit from cheaper connections to the world.

Internet telephone services have revolutionised the way the world communicates, making it cheap or free on personal computers using services such as Skype. Many residents of the UAE have hoped to legally enjoy the same benefits as much of the rest of the world while avoiding toll charges, and looked forward to the announcement by the Telecommunications Regulatory Authority (TRA) of new rules for internet phone services last month.

But those hopes were dashed by fine print when the new rules were issued last month . The TRA permitted voice over internet protocol (VoIP) calls in the UAE as long as it was offered by the country's telecommunications providers - Etisalat, du, Yahsat and Thuraya - thus continuing to block other services such as Skype. The Emirates remains one of only four countries that does not allow Skype software to be downloaded and blocks access to the company's website.

Operators have argued that VoIP services such as Skype eat into their international call revenues, a very lucrative part of their business. In only five years, Skype has become the largest provider of international phone calls in the world and covers 12 per cent of the time spent on international calls. Skype claims to be an operator's best friend. Not only does it increase their data revenues by as much as 30 per cent, according to recent comments by Josh Silverman, the company's chief executive, it also believes that if more people use Skype, more people end up making international phone calls.

"What we're looking at here is a new way to look at communications," says Rouzbeh Pasha, the head of Middle East and Africa for Skype. "If [operators] look at the applying the same business model from 1991, of course [Skype] looks like something you wouldn't welcome. But if you look at where communication is going, over cellular devices rather than traditional telecoms switches, this is an opportunity for them."

In 2007, the Hong Kong telecoms company Hutchinson Whampoa agreed to install Skype on its UK mobile service in a move to grab customers in the crowded local market. While the international rates were a fraction of what competitors were offering, Hutchinson found that people were using their phones longer, says Mr Pasha. "They were making more money per user than they were before," he says. Operators also benefit from Skype's cash cow: its "SkypeOut" service, which allows its users to pay to call traditional phone lines and mobiles, while Skype pays the operators to access their networks.

"Operators need to bring value to the users," Mr Pasha says. "It's one thing if they have one option and they're blocked in. But users are smart people and can see what brings them value and what doesn't. If you bring them value, they'll start using the service." So who has the right business model: Skype or the traditional operator? The answer, says Steven Hartley, the principle analyst for the technology consultancy Ovum, is both.

Using Skype usually means that subscribers will buy a pricey data package that allows better service and that helps telecoms offset the loss of toll calls, Mr Hartley says. But in the UAE, with a large expatriate population and the business-centred environment, the dependence of telecoms on international call revenue is greater than in other markets. "The way the regulation in the UAE evolved, it's very much leaving how VoIP is delivered very much in the hands of operators," Mr Hartley says. "So operators are likely to want to do VoIP on their own and the chances for Skype is limited."

Although Etisalat took the TRA's announcement to trumpet its own VoIP service, albeit one geared for businesses, the company declined to comment on its future internet calling strategy in the UAE. Its rival du also declined to comment. Mr Hartley says a local VoIP service would pay off for both subscribers and operators. Subscribers enjoy lower rates while operators save money by not paying connection fees to foreign telecoms for internet-only calls.

"But if someone says you can sign up to any VoIP service you want, then you suddenly get this cannibalisation of international call revenues and that's a very big pot of money that UAE operators will want to protect," he says. UAE residents should not hold their breath for access to VoIP services any time soon. Mr Hartley figures a green light for Skype is likely to happen in at least two years, driven by the number of people in the UAE who have downloaded the application overseas.

Meanwhile, the TRA is firm in its stance that it cannot allow Skype to operate in the UAE without the company paying for a licence or setting up a partnership with an existing operator. "Today, our law does not give us the authority to allow any company to provide public telephone service without the appropriate licence," says Mohammed al Ghanim, the director general of the TRA. "This is a licensing matter. This is not a protectionism matter. We've been trying to establish a framework that is transparent and with very clear terms of conditions on how to work in the UAE."