1. Telecommunications Regulatory Authority Oman ITU/BDT Arab Regional Workshop on “feasibility of rural connectivity” Khartoum- Sudan,5-7 September 2004 Universal Service Framework in the Sultanate of Oman

2. Introduction The Telecommunications Regulatory Act, issued by the Royal Decree No. 30/2002 established the TRA and is the primary legislation that set the grounds for deregulating the sector. One of the main objectives of the TRA set by the Act is to “ensure the provision of telecommunications services for the entire Sultanate within reasonable limits and charges” Among others, these services shall include in particular rural services

3. Legal Framework Article (38): The Minister, in the course of achieving the economic and social objectives of the telecommunications sector and after presentation to the Counsel of Ministers, shall decide the following:- To expand the telecommunications network in defined areas according to their geographical location, or number of inhabitants; or to install public payphones in these areas. To provide maritime telecommunications services. To provide telecommunications services to persons with special needs. The Authority shall be notified of the requirements for the expansion of the networks and services specified in the previous clauses. They shall be funded by the State Treasury pursuant to the provisions of the last paragraph of Article (39) of this Act.

4. Legal Framework (2) According to Article (39) of the Telecommunications Regulatory Act, the execution of the universal service provision is as per the following process: 1. In case the services to be executed are exclusive to the incumbent, as per its license, then the incumbent shall provide the services and carry out the work free of charge and without subsidy. 2. In cases where services to be executed are: a. Not exclusive to the incumbent b. The incumbent is not willing to provide them without subsidy TRA shall float a tender that takes into account the value of financial subsidy and the bidder’s technical capabilities.

5. Legal Framework (3) 3. In case no acceptable bid is submitted, the Authority can direct and entrust the incumbent to the provision of universal services in which case the State Treasury shall pay the incumbent the net cost of providing the service, implementing the rollout with a return (calculated on the basis of yield to redemption of medium term government bonds with an additional margin of 2%).

6. USF approach: Why? Results from a market study found that around 15% of the population did not have access to basic telecommunication services. These are rural/remote areas where topography is very difficult and population density is very low. Costs of expansion are very high. obliging the incumbent to extend coverage would lead to a drop in the company’s value.

7. USF approach: Why (2) The government decided to finance the provision of universal service. However, direct subsidies to the incumbent were disregarded to avoid fostering inefficiencies.

8. USF approach: Why (3) Along with the steps of liberalising the telecom market, it was decided to introduce competition to entrance to induce universal service provision. If the incumbent does not agree to provide the universal service in the identified areas without subsidy, new small operators will be encouraged to enter the bidding process for provision with lowest subsidy.

9. USF approach: Why (4 ) This approach is likely to encourage the incumbent to extend its coverage to delay the introduction of competition as much as possible. it would also increase the access to telecommunications services in the Sultanate at the lowest efficient cost.

10. Scope of Universal Service Universal service obligations cover: Basic fixed voice service Basic Data Service A technology neutral approach The service is to be offered on the fixed tariffs, to fulfill the affordability goal of universal service provision.

11. Coverage area in Oman fixed line (April 2004) RegionPopulationFixed lineTele-density (per 100 inhabitants Muscat631,031112,27118 Al Batinah652,66744,1757 Musandam28,2632,90710 Al-Dhahira204,25015,1557.5 Al-Dakhliya265,08324,4759 ASh’arqiah312,80719,6656

12. Coverage area in Oman fixed line (April 2004) Contd. RegionPopulationFixed LineTeledensity (per 100 inhabitant) Al-Wusta23,0582021 Dhofar214,33119,6849 Total2,331,490238,49110

13. Coverage area of Oman fixed line (April 2004)

14. Technologies For Rural Connectivity Historically Rural Radio Telephony (RRT). Nordic Mobile Telecommunication (NMT). Currently Global System for Mobile Communications (GSM) Very Small Aperture Terminal (VSAT).

15. Mobile Services Coverage area SubscribersSub. Dens.Penetration Muscat310,00079.4949.13% Dhofar75,0000.7735% Dhahirah53,0001.1925.95% Dakhliyah60,0001.8822.63% Sharqiyah70,0001.9322.39% Musandam5,2002.8918.40% Batinnah120,0009.618.39% Wusta1,0500.014.55% Total694,2502.2729.78%

16. VSAT Communications

19. Funding and service provision process

20. Funding sources Class I License – Public fixed and mobile telephone service 12% royalties on gross revenues for mobile license 10% royalties on gross revenues for fixed license Class II License – Public Value added service Royalty payment yet to be approved for various services Class III- Private Networks Not required to pay royalties

21. Existing Obligations (Incumbent License) “The Licensee shall not be entitled to any subsidy in relation to universal service or system expansion if these fall within its geographic coverage of the Basic Voice Service in the Licensed Area, including the expansions made in fulfilment of the System Expansion Requirements or the expansions made voluntarily as service areas”. The incumbent is obliged to cover 200 villages (identified) within their system expansion requirements. The incumbent is entitled to bid for universal service projects on equal grounds with other bidders.

22. Other issues in feasibility of rural connectivity Tariffs and interconnection Up scaling of pilot projects Monitoring of subsidies

23. Thank You Ahmed AL-Hadabi Junior Professional Frequency Dept. Telecommunications Regulatory Authority P.O.Box 579, P.C.112 Ruwi, Sultanate of Oman Tel: 00968 -574300 Fax: 00968- 565464 Email: alhadabi@tra.gov.omalhadabi@tra.gov.om Maitha Ali Jaffer Assistant Junior Professional Economics Dept. Telecommunications Regulatory Authority P.O.Box 579, P.C.112 Ruwi, Sultanate of Oman Tel: 00968 -574300 Fax: 00968- 565464 Email: maitha@tra.gov.ommaitha@tra.gov.om