Now that it has opened its first office in the Middle East, Skype, the Internet phone software company, is signaling its intent to grow in the region, despite opposition from regional telecommunication regulatory bodies and local telecom providers. Earlier this year, Egypt and Lebanon were the latest Arab countries to take a hard line against Skype, joining Gulf countries that long before banned access to the company’s website and made it illegal to use Internet phone software inside their borders. Such regulatory sentiment also has been directed at communication device providers — Research In Motion’s Blackberry still faces a potential ban in the United Arab Emirates, as authorities have declared its messaging technology a threat to national security.
Heading up Skype’s Middle East and Africa operations in such a contentious market is Rouzbeh Pasha. With Skype’s ability to provide low-cost international calls to anyone with access to the Internet, Pasha is upbeat about the company’s expansion plans. He tells Arabic Knowledge at Wharton that instead of being feared by regional telecom operators, Skype would prefer to work with them.
Some partnerships between Skype and Middle East carriers may soon be forged, says Mustafa Rana, chief technology officer at Dubai-based Emitac Mobile Solutions, which provides support for Research In Motion’s BlackBerry service in the Middle East. In a separate interview, Rana tells Arabic Knowledge at Wharton that local carriers with the most to lose in long distance call revenues will be the least receptive to discussing any form of cheaper service.
An edited transcript of the conversations follow.
Arabic Knowledge at Wharton: What does Skype expect from the Middle Eastern market?
Rouzbeh Pasha: Skype is focused on continuing to build a growing and profitable business. With the recent launch of the Arabic language version of Skype’s website at skype.com, we are making Skype accessible to even more people. We will continue offering free Skype-to-Skype voice and video calling, while expanding our paid for offerings, giving users anywhere great value.
Arabic Knowledge at Wharton: But the Middle East is a highly regulated market, and Skype is banned in a number of countries in the region.
Pasha: In some countries, local operators have chosen to restrict access to Skype’s global website so that it is not possible to download the software. However, once downloaded to a laptop or mobile, Skype can be used wherever there is an Internet connection. Across Egypt and Lebanon, for example, millions of individuals and businesses use Skype to make free video and voice calls, send instant messages and share files with other Skype users, and also use Skype to make low-cost calls to landlines and mobiles.
Arabic Knowledge at Wharton: The United Arab Emirates (UAE) is another Middle Eastern country that has banned Skype, despite the demand for the software. Dubai and Abu Dhabi are cities with a number of expatriates. There is enormous potential, but problems persist with the UAE authorities. What is Skype doing to tackle this issue?
Pasha: ….Skype is not a telecommunications operator and should not be treated as such. Skype is a Luxembourg-based provider of software applications that enable voice, video or messaging.… Skype is an enabling software, not a service.
Arabic Knowledge at Wharton: Is Skype looking for a partnership with a local telecom operator, like it has with Verizon in the U.S.? How much will it help Skype to boost its market share in the Middle East?
Pasha: Having a partnership with operators is only natural as our products complement each other. Our partnership with Verizon offers great value to consumers and is benefitting both companies…. Skype is currently in talks with a range of partners and operators across the [Middle East and Africa] region, as we are across Europe, Asia and the rest of the world.
Arabic Knowledge at Wharton: Skype has been based in Bahrain since June. What are your expectations?
Pasha: The office has been operational since September 1 to serve business operations and development in the Middle East. This is a representative office. It supports the Luxemburg parent company and will be staffed as and when needed.
Arabic Knowledge at Wharton: What about Africa? Although less profitable, it is a more extensive market than the Middle East.
Pasha: Our strategy for Africa, like elsewhere, is to make sure our products are easily available throughout the continent. We work hard as part of our global product development process to improve the quality of our voice and video products for markets where access to the Internet is via lower speeds and entry-level computing devices. We also have products on some of the popular mobile platforms in Africa, such as the Symbian platform [an open-source operating system used by Nokia, Samsung and other smartphone makers].
Arabic Knowledge at Wharton: How many users does Skype have world-wide, and in the Middle East in particular? What has been the progression of user growth in recent years?
Pasha: People who use Skype do so wherever they are in the world, and new people register every day. As of this past March, approximately 23 million concurrent users are logged into Skype at any given time. From the three months ended June 30, 2009 to the three months ended June 30, 2010, the average monthly number of our connected users grew from 91 million to 124 million globally.
Arabic Knowledge at Wharton: What does Skype say about the emergence of Google Voice in the U.S. and Canada? Will it have an impact in the Middle East?
Pasha: Competition is a sign of a healthy market that offers consumers a wide range of affordable services.
Interview with Mustafa Rana:
Arabic Knowledge at Wharton: What is the perspective on VoIP in the Gulf?
Mustafa Rana: The United Arab Emirates [UAE], for instance, does not allow VoIP from a consumer perspective. However, VoIP is allowed for enterprises that wish to use it for their own environment. So, if you have another office nearby, you can use VoIP to connect to it, as long as it remains within the premises [of your network]. But it is illegal to allow that VoIP outside access to the Internet. So, if you have multiple offices across the Emirates, the only legal way to do it is to get these lines from Etisalat or du, [the licensed telecom carriers in the UAE].
Peer-to-peer is fine. It is VoIP accessing a landline or mobile that would hurt the local telecom carriers. That’s where they would start losing revenue. However, if you tried to subscribe to a world calling plan with Skype, or an unlimited dial-in, dial-out plan, you wouldn’t be able to use the service here. And [the authorities] don’t need to find out if you’re using such a service. There are certain ports, and certain destination addresses on the Internet, which can be blocked.
Arabic Knowledge at Wharton: So the opposition to VoIP is chiefly motivated by economics?
Rana: That’s pretty evident. If you were able to receive Skype calls, even if it were peer-to-peer on your cell phone, that is potentially a revenue loss for the [state-sanctioned] carriers. That would be a problem, especially if the government owns the carrier. The government, or the government regulator, has to ensure that they do not lose their revenues.
Arabic Knowledge at Wharton: What kind of revenues?
Rana: There is one thing we have to understand. There is a huge difference between the UAE’s calling rates to and from outside. For instance, if you call the UAE from Pakistan, it costs you somewhere around 50 fils [14 US cents] a minute, but if you call Pakistan from the UAE, its about 2.85 dirhams [78 US cents] a minute.
Arabic Knowledge at Wharton: Skype has said it wants to partner with Middle Eastern carriers, which could actually help the state carriers, not hurt them.
Rana: Skype partnering with carriers is a pretty good concept. It has done that in the United Kingdom with [Hong Kong-based Hutchison Wampoa’s] 3 network, which offers a Skype subscription plan for mobile phones. They have gained an ample amount of users. I know of three or four Middle Eastern carriers, which are evaluating plans to allow Skype to work in a similar fashion on their networks. We’re talking about two different [countries] right now. It’s an experiment. They want to see how it will work out. But at the end of the day, the carriers that have high long-distance traffic volumes, such as Etisalat or du, would potentially not look at it.
Arabic Knowledge at Wharton: What do you make of a potential partnership between Facebook and Skype?
Rana: I know Facebook can filter out their content according to different economies that they operate in. So they could easily filter out Skype to ensure they don’t get shut down here. Also, most of the Gulf economies have already set up deep packet inspection [an Internet data management technology]. Once you do that, you can easily block access to VoIP services, like they’ve done for Skype.