Profiling Internet Users in Egypt: Understanding the Primary Deterrent Against Their Growth in Number

Mohamed A. El-NAWAWY <nawawy@intouch.com>
InTouch Communication Services, SAE
Egypt

Abstract

Since January 1996, Egypt has led the region (Africa and the Middle East/Arab States, excluding Israel) in the availability of Internet services at a wide scale. This was done through the private-sector Internet service providers (ISPs) that were allowed to own and manage their network infrastructure[1]. The government placed almost no restriction on Internet content and commercial spreading. Nevertheless, today the Internet user penetration within the Egyptian population is under 0.4 percent[2]. The primary deterrent and reason for the low number of Internet users in Egypt is awareness and education. Secondary deterrents may include telecom infrastructure, computer penetration, Internet access costs[3], and other factors. But their significance is relatively diminished when compared with the primary deterrent.

This paper aims to show and establish the primary deterrent to the growth of Internet users in two ways, which are (1) comparatively and by process of elimination and (2) by studying the Egyptian Internet users' profile. Egypt's population, Internet users, and income numbers are compared with other Arab States, solely for the purpose of normalizing the language and cultural factors when reviewing the deterrents to Internet users' growth.

This paper adopts the view of a "practitioner"[4] rather than an academic. The author sees that this "down-to-earth" view is -- like the Internet -- built from the bottom up. For Egyptians to be "citizens of the world" and for Egypt to overcome the primary deterrent, this paper will serve as input to whomever wishes to support efforts to bring Egypt more into the new world order. This paper is, again, nonacademic and depends on view and analysis, which can or may contribute to the nation's development process, and may stand corrected where necessary.

1. Introduction: building the case

1.1 Egypt: Geopolitical advantage

Egypt, a nation of more than 65 million people, is geographically situated in North-East Africa and has benefited from the expensive man-made water passage of the Suez Canal, which has shortened the travel distances of ships for more than 100 years. Also for the Internet, the Suez Canal (and the overall geographic location of Egypt) has positioned Egypt to be the passage for several undersea fiber optic cables (FLAG, Africa-1, SEA-ME-WE2, and others). Other more contemporary advantages of Egypt include (1) a relatively prospering economic regime as Egypt's economic evolution (liberalization and privatization) meets global economic expectations and (2) a proven track record of relative political stability.

1.2 Egypt: economic indicators

The Gross Domestic Product (GDP)[5] for Egypt was forecasted to near 350 billion Egyptian pounds. Per capita income is approximately U.S.$1,500, maintaining an average annual growth rate of 4 percent over the last 10 years. The stock market capitalization neared 30 percent of the GDP for fiscal year 1998-99 and is steadily growing[6].

1.3 Egypt: telecommunications and information technology summary

The telecommunications and information sector witnessed tremendous improvements in the last two years. Telecom Egypt, SAE is the result of corporatizing the state-owned telecom monopoly, which was done early in 1998. At the same time the Egyptian Telecommunications Regulatory Authority (TRA) was established. Soon Telecom Egypt, SAE is scheduled to become publicly traded. Most significantly, by presidential decree, the Ministry of Communications and Information Technology (MCIT) was institutionalized in the fourth quarter of 1999. MCIT takes the telecommunications sector away from the transportation sector and keeps it as a primary focus, next to information technology (IT). This is proof of the government understanding the convergence of the worlds of IT and telecom, and both of their overall importance.

The teledensity in Egypt nears 8[7], witnessing an improvement by a factor of 10 over the last 20 years[8]. Telecom Egypt, SAE is announcing ambitious growth plans to add hundreds of thousands of telephone lines. The mobile telephony (GSM service) started late in 1996 by the government. Soon thereafter, the service was privatized and competition was introduced. Today both GSM providers in Egypt have an aggregate subscriber base of 1 million (02/2000), which is almost half the number of mobile subscribers in the entire Arab States[9].

The total number of IT companies nears 1,200 companies. The annual consumption of the Egyptian market exceeds 170,000 PCs per year, 55 percent of which are locally assembled. [10]

1.4 Egypt: Internet history and present

Internet access in Egypt dates back to 1993, mainly through governmental and educational organizations. Commercial Internet access was also available from mid-1993[11]. In January 1996, the government made an official address authorizing the private sector to step into the provision of Internet services. Commercial ISP efforts that existed before this date were seen within the "legal gray" area. Today Egypt has thriving competition in the ISP market predominantly based on the "service price favor." Egypt still remains in the lower third (or less) in terms of hosts per capita globally[12].

1.5 Egypt and the rest of the Arab states: Internet market synopsis

1.5.1 Egypt

By mid-1996, 12 ISPs were competing for a growing market. By 1998 this market neared a total of 120,000 users featuring 25,000 to 30,000 subscribers (each subscriber account is used by 2.5 to 3.5 users)[13]. In September 1999 the total number of Internet users grew by 42 percent to near 200,000. With a 4:1 user-to-subscriber ratio, some see this to lead to 50,000 subscribers. Those who disagree discount the number of subscribers to not exceed 35,000 to 40,0000 subscribers, basing their argument on a larger subscriber-to-user ratio (>5).[14]

1.5.2 Arab states

For the Arab States in 1999, the aggregate total number of Internet users is 1 million. The numbers of subscribers range from 236,000 to 338,000, thus registering a growth of 43 percent over 1998. Saudi Arabia, which introduced Internet services locally earlier in 1999, featured a 140 percent increase, whereas in Lebanon the subscriber count increased only by 60 percent. The United Arab Emirates grew by only 34 percent to reach 82,000 subscribers, which marks the largest subscriber base in the Arab States. [16] The aggregate population of the Arab States nears 275 million people, with an aggregate GDP (for all Arab States) of U.S.$700 billion, making the Arab States' income per capita about $2,500.

2. The case: Internet users in Egypt

Explanation: The teledensity in Egypt is 8, nearing the average teledensity in the Arabic States (which is 7.3). Egypt has 25 percent of the population of the Arab States and its pro-rata share of 25 percent of the Internet users. As for Internet subscribers, Egypt has less than 40 percent of its pro-rata share. (Egypt has 15 percent of the Internet subscribers, thus featuring 166 percent higher user-to-subscriber ratio than that of the Arab States' average). Egypt income per capita is also 60 percent of the Arab States' average. However, this is not the reason for the lower Internet subscriber base. Two factors explain why:

• The costs of the mobile phone service and the Internet in Egypt are similar (shown latter in detail). Egypt has 100 percent more than its pro-rata share of GSM subscribers. Both the ISP and mobile phone markets in Egypt are liberated/privatized.
• The cost of Internet access in Egypt is (on average) 52 percent of the average in Arab States. Most Arab States charge hourly Internet rates rather than flat-fee-based service (very common among Egyptian ISPs).

Conclusion: After normalizing the factors of language and culture (compared with Arab States), infrastructure (teledensity is similar), and income/cost (lesser income in Egypt maybe balanced against lesser cost of Internet services), the number of Internet subscribers in Egypt is still lower than its arithmetic and logical pro-rata share, compared with the rest of the Arab States, and compared with subscribers to other value-added telecommunications services (mobile telephony) within Egypt.

The author does not see that Internet and mobile telephony applications are necessarily comparable (competitively or otherwise). The association is based on the subscriber numbers and similar service economics (shown later in detail).

3. The primary deterrent to growth of Internet users

There are numerous deterrents: infrastructure, individual income, language, culture, awareness, education, and others[18]. Which of these is the primary deterrent to Internet users' growth in Egypt?

3.1 Not infrastructure (Telecom and computer)

Egypt has teledensity exceeding the Arab States average by 8 percent. Egypt public policy supports the Internet growth. With a growing annual consumption of 177,000 PCs for 1999, and 1,200 IT companies, Egypt has a comparatively similar IT infrastructure, and an even more thriving private sector at the Internet services level than the rest of the Arab States. Hence, Telecom and IT infrastructure are not the primary deterrent.

3.2 Not culture or language

The reason this paper compares Egypt's numbers with those of the Arab States is because the Arab States have a similar culture and similar language capabilities (potentially seen as Internet barriers because the Internet is predominantly English). Hence, as Egypt has significantly less than its pro-rata share of Internet subscribers compared with the Arab States, then the culture and language may be a secondary deterrent.

3.3 Not individual income or service costs

It is true that income per capita in Egypt is less than the Arab States' average by 40 percent. This may be balanced against the lesser cost of the Internet in Egypt by a factor that nears half as compare with the rest of the Arab States. Additionally, consider the case in the following comparison for users of value-added communications service within Egypt.

Early in 1996, Internet services in Egypt are launched into the mainstream through the governmental full sanctioning for private-sector ISPs. November 1996 marks the launch of mobile phone services in Egypt. Thus, both services were rolled out in the mainstream in 1996. To subscribe to the Internet, the premium cost represents the cost for the hardware, which was approximately 5,000LE[19]. Premium cost for the mobile phone nears the same, as each line premium + GSM set charges near 5,000LE as well. The monthly charges for the Internet may be under 150LE (including local PSTN[20] costs). For the mobile phone the costs were similar; the monthly invoice for a moderate user may near (or slightly exceed) 160LE. Hence, it is safe to say that both Internet access and mobile telephone services commenced in a similar timeframe, and with similar premium and recurring charges. Premium and recurring charges for both services went down, more on the side of the Internet. Yet today 1 million people pay for their mobile subscription, while only 50,000 pay for the Internet subscription. These are services offered within the same nation, with the same income per capita. Yet the willingness to invest in one value-added communications service exceeded that of the Internet by 17 times (or more).

The conclusion is simply that the Egyptian mobile phone users' see enough added value in the mobile phone service to pay its charges. Only 5.8 percent of these people see enough value in Internet use to pay for it. Hence, the buying power of the individual is not the primary deterrent.

The remaining deterrent group is that of awareness and education. By a process of elimination, this is the primary deterrent.

Conclusion: The primary deterrent for Internet users growth in Egypt is an individual awareness and education factor. Solving this issue alone may increase the number of Internet subscribers up to 10 to 20 times.

4. The final proof: Egyptian Internet user's profile

Again, there are numerous deterrents: infrastructure, individual income, language, culture, awareness, education, and other[21]. Overcoming the awareness and education deterrentss is -- in the opinion of the author -- the most pressing. Additionally, the author sees that solving any of the aforementioned deterrents, other than awareness and education, will have marginal (if any) impact on the growth of Internet users. But, as the awareness and education issues are resolved, the issues of computer penetration, income per capita, service costs, and infrastructure will appear more as relevant deterrents that must be overcome.

The following profile comes from an ISP as an example of the average customer:

• A third of the subscribers/customers are committed for one month of service, a third for one quarter, and a third for a whole year.
• Primary subscriber contact per account was selected to be two-thirds male and one-third female.
• Half were small and medium enterprises (even home office users).
• Because the ISP is active in Egypt's two major cities only, 80 percent of the customers were from Cairo and 20 percent from Alexandria.
• Out of the total specimen customer base, 10 percent used credit cards.
• Half of the customers used the Internet for two years or more.

Explanation:

• As one observes the Internet utilization patterns, it is immediately clear that more Internet utilization is between 2pm and 5pm and that the peak utilization happens between 8pm and 2am. That is to say, during the weekdays the peaks of Internet use are before people go home from work, and through the evening until the early hours the following day. The author sees this utilization to be predominantly nonbusiness related.
• From the applications standpoint (a) half of the surveyed group use ICQ or some other form of interactive communications; (b) a quarter of the users do not use e-mail; (c) all of them browse the Internet; but (d) only 20 percent use the Internet as a medium for office/LAN connectivity. The most direct business use for the Internet is office/LAN connectivity, followed by e-mail.
• SME subscribers share the account in the office and use it from home in the evening. The user-to-subscriber ratio in Egypt could be more than 10 for some accounts.
• Entertainment, communicating, downloading software, and news are the most commonly sought items for Internet users in Egypt, followed by shopping and education. A third of the surveyed group does not use the Internet for business at all. Business items' use ranked lowest.
• Half the surveyed sample use the Internet on average from one to three hours per day. One quarter of the surveyed sample use the Internet on average less than 15 minutes per day.

The use of the Internet in Egypt is not for business at large. Thus the value-added presented by the Internet is limited, and so is the user's willing to pay. The reason why the Internet business value is not felt is because of the primary deterrent: education and awareness.

5. Conclusion and recommendations

"Awareness" is different from "education." Education herein refers to systematic and formal education. Awareness is the build-up of street-smart characteristics imposed by society or business or both.

For Egyptian individuals, awareness and education are the primary deterrents to increased use of Internet in Egypt. To counter, the recommendations "short list" may include the following:

1. Formal education must lead. Students in most public schools get little or no exposure to computers until they graduate. In the early 1990s, an engineering school in a leading Egyptian university allocated four computers for 1,600 students. Formal education must develop a national program to make sure that within an n-year period, each undergraduate student becomes a frequent user of computers and the Internet. The divide in responsibility of schools from universities (two different ministries[23]) should never hinder coordination of this plan. In my opinion, there is no higher priority for our nation's educators.
2. Public campaigns and community efforts are required for awareness development[24]. The media plays a tremendous role. Associating individuals in the media with technology and the impact of technology is key. In mass communication this is called "glittering generality." The Internet/IT needs a national face. MCIT has a tremendous role herein.
3. Local content for children is a priority. Arabic content -- part of awareness -- is another priority. Both must be private-sector development efforts for which the government must serve as a catalyst. As the schools through education make their market available to the private sector, competition will lead to the ignition of creativity, and prices will diminish.
4. All deterrents mentioned herein are significant, but nothing compares with awareness and education. Policy makers must work on all deterrents in parallel as part of a national plan. Currently (year 2000), 60 percent of the resources should be at the formal education and awareness development level. In a year or two, this concentration of resources may shift to include focusing on other deterrents: infrastructure (telecom, IT) as well as income and cost issues.
5. Government should serve as a catalyst to encourage businesses to provide services on the Internet, in areas like the stock market[25] and on-line banking. These applications invite individual interest and, hence, raise awareness. Additionally, it raises the value-added of the Internet utilization and thus customers' willingness to pay (hence, more subscribers). This being the least charging action item would provide the "pull" to bring forward users of these application that wish to capitalize on the availability of their application resource on the Internet.

Acknowledgments

The author wishes to thank Emad El-Azhary, cofounder, vice chair, and CTO of InTouch, for his review and support of this paper. Thanks also go to Raed Mounir, customer care manager at InTouch, for supporting the survey effort. Additional thanks go to Magda Ismail with whom previous work was coauthored, and from which this work drawn.

Author

Mohamed El-Nawawy graduated from the American University in Cairo in January 1992, where he majored in computer science and minored in electronics. Since his second year in college, El-Nawawy has been a part-time employee participating in various freelance development projects. After cofounding InTouch, Egypt's first value-added communications services company and ISP, in January 1992, El-Nawawy held the position of director of business development responsible for sales, marketing, and finance. In September 1997 he assumed the position of managing director responsible for the entire welfare of InTouch. El-Nawawy is a member of IEEE, ACM, and ISOC and a board member of the Internet Society of Egypt, which he cofounded. In Janueary 1998 he also became chairman of the InTouch board of directors. He coauthored the paper "Overcoming E-Commerce Deterrents in Egypt," presented at INET'99.

Notes

[1] The earliest commercial ISP activity dates back to 24 June 1993 (InTouch.COM). But it was only in January 1996 that through the government's open support for commercial ISP efforts that large-scale Internet advertizing took place (02/96). Competition among ISPs started in April 1996.

[2] According to MCIT (January 2000), the total number of Internet users is 250,000.

[3] Overcoming Deterrents and Impediments of Electronic Commerce in light of Globalization, Egypt -- A Case in Point. INET'99. http://www.isoc.org/inet99/1g/1g_3.htm.

[4] Read author bio (footnote #2).

[5] Gross National Product.

[6] Derived from the Ministry of Economy, Monthly Economic Digest, November 1999. Volume1 No. 9.

[7] 8 lines for every 100 people.

[8] El-Aalam El-Youm Newspaper, 18 August 1999, page 7.

[9] The ITU (International Telecommunications Union) forcasted in its report on the Arab States Telecommunications Indicators of 1996, that total mobile subscribers in the Arab States will near 2.0 million subscribers by year 2000.

[10] El-Aalam El-Youm Newspaper, 26 June 1999.

[11] InTouch.Com registered on 24 June 1996 as the nation's first ISP.

[12] ISOC referral, April 1998.

[13] The World Factbook 1998. Central Intelligence Agency, U.S.A. http://www.cia.gov/cia/publications/factbook/.

[14] El-Aalam El-Youm, 5 September 1999, page 7.

[15] Data Source is United Nations Statistics Division at http://www.un.org/Depts/unsd/social/main.htm.

[16] ibid.

[17] See footnote #11.

[18] Overcoming Deterrents and Impediments of Electronic Commerce in light of Globalization, Egypt -- A Case in Point. http://www.isoc.org/inet99/1g/1g_3.htm. In this paper a list of nine main deterrents of e-commerce in Egypt are listed and explained. One of the authors developed the paper further to include policy recommendations in OnTheInternet (ISOC Magazine), November/December 1999.

[19] LE stands for Livres Egyptien, or Egyptian Pounds.

[20] Public Switched Telephone Network.

[21] Overcoming Deterrents and Impediments of Electronic Commerce in light of Globalization, Egypt -- A Case in Point. http://www.isoc.org/inet99/proceedings/1g/1g_3.htm. In this paper a list of nine main deterrents of e-commerce in Egypt are listed and explained. One of the authors developed the paper further to include policy recommendations in OnTheInternet (ISOC Magazine), November/December 1999.

[22] Virtual Private Network.

[23] There is a Ministry of Education and a Ministry of Higher Education.

[24] Read article about Dr. Sherif Hashem article titled: "200,000 Internet users in Egypt and the Information Centers are the solution," in Akhbar El-Youm Newspaper, 9 October 1999.

[25] An official in the Ministry of Economy in 4Q1999 "...in the previous, we pampered the money savers, now we will pamper the investor..." (meaning investor in Egypt's capital market).