Skype needs UAE licence to operate

The requirement means it is unlikely the low-cost internet calling service will be available soon.

Abu Dhabi // Requiring low-cost internet calling services to acquire a telecommunications licence means it is unlikely that popular services like Skype will be available in the UAE soon, industry watchers say. Skype transfers voice calls as packets of data over the internet, offering free calls from computer to computer and international phone calls at rock-bottom prices. Its website, where potential users can download the programme and pay for calling credit, is blocked in the UAE, as the Telecommunications Regulatory Authority (TRA) considers the service an unlicensed rival to the two national phone operators, du and Etisalat.

"We are in the process of establishing a framework that will enable companies other than du and Etisalat to be licensed and to provide such services," said a TRA spokesman. "But it's still premature to say when that is going to be." Operators like Skype offer cheap calls by running on a low-cost business model with few staff and minimal overheads. The company's bare-bones customer service system is almost entirely absent of human staffers. Such a model means these businesses rarely choose to acquire expensive telecommunications licences in individual countries.

"Because the internet-based operators can bypass the last mile, it doesn't make sense for them to invest in local licences," said Ghassan Hasbani, a vice president and partner of the management consultancy Booz and Company, and a specialist on the region's telecommunications sector. "They may have done that in a few markets, but it is not common." Representatives of Skype were not available to comment on their company's approach to acquiring telecommunications licences.

Most GCC countries consider transmitting voice over the internet to be an activity requiring a telecommunications licence, meaning only the incumbent national operators in each country are legally permitted to do so. Oman's government cracked down on internet-calling services such as Skype last year, saying that only the national operator, Omantel, could offer such a service. In Qatar, the situation is more liberal, albeit with a significant string attached. In July, the country's regulator responded to local press reports by clarifying that there were no legal restrictions on using the internet to make phone calls locally and internationally. But it added that it was illegal for a company to charge for such a service, as Skype and others do for calls from a computer to a landline or mobile phone.

The emergence of legal, consumer-ready internet calling services is "only a matter of time and regulatory acceptance", said Mr Hasbani. "Given the level of competition that is intended by the regulators - particularly in fixed-line communications - and the high costs of entering this market, regulators are looking at voice over IP [voice over internet protocol, or VoIP] as a further incentive for companies to enter the business," he said.

The TRA is working on a broad licensing initiative that, when implemented, will create new licence categories for telecommunications service providers. It would form the basis for new entrants to the market, providing services like internet calling. The TRA licensing framework for internet calling will protect consumers from poor service, according to the spokesman. "The framework will ensure that the end user is protected from being manipulated or cheated and will allow them to hold the provider accountable." Users would also have a means to recoup their money if they were unhappy with the service they paid for, he said.

Victor Font, the managing partner of Delta Partners, an advisory and investment firm focused on the telecom sector, said the TRA's announcement indicated that the UAE was "moving down the path of liberalisation", although in a more "prudent" way than other markets. "These days you can still use VoIP services, maybe not across the whole country, but in certain areas," he said. "Not allowing VoIP companies or companies to offer VoIP freely is something that goes against the trend that we've seen in liberalised and open markets. This is one step further in the normalisation of the sector here."

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