Choice of internet provider unlikely to drive down cost, analyst predicts

Residents can expect better value after this week’s announcement that they’ll be able to switch between fixed phone and broadband operators, but changes will likely come in service and not in price, an analyst said.

The country’s two telecom operators will likely compete on service, rather than price, say analysts. Charles Crowell for The National
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ABU DHABI // Residents can expect better value after this week’s announcement that they will be able to switch operators for fixed phone and broadband services, but changes will probably come in service offerings, not in price, an analyst said.

Jona A, an Abu Dhabi resident from the Philippines, said she was happy to hear du and Etisalat had agreed to share the nation’s fibre-optic network — a development that will give residents extra choice in service.

“I’m hoping the prices will go down because of competition,” she said, adding that she would consider switching companies if the incentive was there.

Although Monday’s announcement brought long-awaited changes to the nation’s telecoms landscape, Tareq Masarweh, a senior consultant with telecoms consultancy Ovum, said customers should expect to see the country’s two telecom operators compete on service, rather than price.

“I don’t think prices will go down a lot,” he said. “Competition won’t be price-based, it will be promotion heavy to get subscribers to join.

“Now, when you introduce a rival into a particular area, operators will be forced to offer a better quality of service.”

He said he expected companies to compete by offering value-added services and promotions such as free months and service add-ons.

Operators would also be expected to focus on the quality of their “customer experience”, such as meeting advertised speeds, and timelier and more dependable technical service, he said.

To bring broadband rates down in the UAE, Mr Masarweh said regulators would have to grant a licence for a third player into the market to compete with du and Etisalat. “Price-based competition is more likely to happen in markets that have three players or more. When a third entrant comes into the country, it starts becoming a price game,” he said.

“As long as you still have two players in a given market, I expect to see more promotion and marketing-driven campaigns, as opposed to price-based competition.”

Muhamed Rafi from Kerala said he hoped to see a dip in rates because price was the most important factor for him when choosing a service provider.

“I’m living in Mussaffah with my family, and there is only one provider, Etisalat,” he said. “If du offered me a better price, I would switch.”

Spokespeople from Etisalat and du said they were ready to sign up new customers immediately.

As the TRA’s announcement excludes television services, Mr Masarweh said a substantial number of residents in the UAE are already subscribed to value-added bundled services that include fixed phone, broadband, as well as television — which could become subject to competition in 9-12 months, du’s chief executive said this week.

With built in savings in bundling, he said they will see little incentive to switch providers for the sake of better broadband prices.

“The vast majority of fixed services subscribers are already accustomed to bundled services, as it’s been an integral part of operator fixed strategies,” he said.

“If you want to enjoy cost benefits and synergies, then you get all of your services from one operator.”