Innovation in the Middle East: Cornering the content market

10 January 2013 |


A flood of activity at the end of 2012 suggests the Middle East is bolstering itself as an international content and ICT hub. Could 2013 be the year the region’s content ecosystem finally takes off?

In November, UAE carrier du and data centre provider Equinix announced an alliance to establish a major carrier-neutral hub at a Dubai data centre.

The move was fresh on the heels of du establishing datamena, a transit zone designed to allow international customers to host and distribute content and trade data capacity. In October, internet exchange DE-CIX launched its UAE-IX internet exchange in Dubai, which is hosted in the datamena facility.

du’s UAE rival Etisalat, which launched its Smarthub service for the region’s operators and content players in 2011, also stepped up its offering in November – launching Smarthub IPX, a neutral mobile internet exchange in its Fujairah-based Smarthub facility to allow regional and international mobile operators to peer with each other on a neutral basis.

All these developments maybe UAE-centric, but region-wide carriers seem sure to sit up and take note if they lead to a ramp up in content flow. It could help carriers capitalise on the Middle East’s rising international bandwidth.

Oman’s Omantel, for example, cites figures forecasting the region’s monthly internet usage per person to rise from about 2.3GB in 2010 to 10.6GB in 2015.


A hub of hubs

du and Equinix’s content hub is aimed at allowing carriers, content providers, financial service and enterprise customers to co-locate data infrastructure. The data centre’s capacity is 44,000 square feet in an initial phase, with a planned opening at the start of 2013 set to usher in a new phase of content growth for the new year.

Mahesh Jaishankar, vice president of investments (special projects) at du, says additional facilities will be built for about another 50,000 square feet in early- to mid-2013.

Jaishankar refers to later plans for another similar facility in Abu Dhabi as an extension, to give customers “data centre diversity”. He predicts this will happen in 2014, but will largely be demand-based. According to Jaishankar, the existing hub is already rapidly signing up customers, with a strong list of prospects.

Dick Theunissen, CMO at Equinix, agrees the situation was previously inefficient from a cost and user perspective, describing the hub as the region’s “first properly carrier-neutral and open hub”. “As it establishes itself, it will drive down costs from a transit perspective,”
he adds.

He says latency improvements are key to its attraction, with customers lost if they have to wait more than seconds for a video to load. This could be critical because many players cite video as a key future content driver in the Middle East, with a push towards more local and Arabic content. Omantel, for example, predicts that video will constitute about 15% of the region’s overall internet traffic by 2015.

Theunissen says however that challenges remain in the UAE’s telecoms market, with high access and bandwidth prices. “To drive usage and the user experience, there is no escape from bandwidth prices coming down in the long term. This is relevant for other regions too,” he adds.

Etisalat will meanwhile hope that its Smarthub IPX exchange takes off as 4G grows and mobile content providers and users seek faster web access.

The company already launched the initial Smarthub offering in 2011 to provide a regional ecosystem for content providers and attracted a significant number of partners. Rashid Ali Al-Ali, director international sales, carrier and wholesale services at Etisalat, says that since then, Smarthub has “exceeded expectations and is growing exponentially”.

“The combination of networks and localised content has created a center of gravity whereby the ISP’s, carriers and mobile operators can reach the content with the latency and cost structure they need,” he says. “This has had snowball effect whereby more carriers join because there is more content and more content joins because there is a wider audience.”

Of the du and Equinix annoucement, Al-Ali welcomed the competition, adding that the launch of the Smarthub IPX continues to position Etisalat ahead of the pack. “While certainly other players will seek to emulate our strategy, we believe that the first mover advantage and the momentum we have created with Smarthub will ensure its continued success,” he says.

“The significant investments that we have made and continue to make in core capacity and capability are required as a prerequisite
for a credible hub to achieve economies of scale.”

 


Finding neutral ground

Alan Mauldin, research director at TeleGeography, believes there was a need for a neutral internet exchange and a neutral colocation operator in the Middle East and welcomed the moves from DE-CIX and Equinix. “That said, I wouldn’t expect a sudden, massive shift in content that has been previously housed in Europe and the US to the Middle East,” he adds.

Nonetheless, some believe other content hubs could soon open in the region. “I’m sure that as the market continues to deliberalise other hubs may start as well, although we have a good headstart,” says Theunissen.

 

Navneet Singh, director of global interconnect and capacity at Qatar’s Qtel, says the carrier is in the process of developing a similar concept, but did not provide further details.

Ingemar Jönsson, general manager of operations at Omantel’s wholesale business unit, says Omantel has no short-term plans to create a content hub similar to that of du and Equinix, although the opportunity could grow in a few years’ time.

Jönsson points out that a very limited amount of local and regional content is produced in Oman and that “the opportunity for peering exchanges does not make much sense unless you have large volumes of content originating from your own network”.

He says, however, that the company needs to find a way to boost the amount of locally-generated Arabic content: “Bearing in mind how society is changing gradually and also triggered by the Arab Spring, people are becoming more open and want to participate in shaping society and share their ideas with others. More openness has contributed to more local content.”

Jönsson says this trend will be spurred by a young Middle Eastern population, with “their spirit and creativity a catalyst to a growing portion of local content” and that 4G roll-outs will bolster this further. “What we see as an opportunity, that has partly already materialised, is carriers in the region colocating with us and we offer them IP transit. At the same time, we have some of the largest content providers and content delivery networks hosted locally,” says Jonsson.

Both Qtel and Omantel are seeking to increase their number of cable landings and data centres to further improve connectivity. Omnatel struck deals earlier this year with Akamai and a “major global content provider” to partner on delivering content in the GCC region and is seeking further deals. “The logical step is to establish the lowest layer in the value chain,” says Jönsson.

Similarly, Singh says that Qtel attempts to ensure a direct peering connection with Google for transit capacity at the nearest possible point. At present, Qtel has peering points with the company in London and Mumbai and is exploring the option of adding one in the UAE to further reduce latency. Furthermore, the company is seeking to work closely on peering with Arabic content providers like Al Jazeera.

Lessons from Google and YouTube

Mohamad Mourad, Gulf regional manager at Google, says the internet giant is partnering on local caches with many of the region’s carriers, bringing content closer to users once data traffic reaches a certain threshold and helping improve the speed and user experience and minimise cost.

Commenting on the Middle Eastern market, Mourad believes that “development of the different pillars of the digital ecosystem, including elements like connectivity, content hubs and digital platforms, are key to content acceleration and creativity.” 

 


At present, Mourad says online local content in the region is not as diverse as it could be. Google says there are 359 million Arabic speakers worldwide, but only 3% of online content is Arabic”.

He says countries like Saudi Arabia, UAE, Morocco and Egypt are particularly advanced, with 46% of the UAE’s internet users accessing YouTube every day and 77% more than once a week, some of the highest numbers in the world.

Indeed, the growth of online video content could be a future driver for the growth of local content and ultimately hosting infrastructure. Mourad says there are 260 million YouTube video views in the MENA region every day and the major media and content outlets are following them online. Some 60% of those questioned in the UAE also use their smartphones to access YouTube and 65% in Saudi Arabia.

He says the launch of video advertising on YouTube in some of the region’s markets earlier this year in a revenue-share model has been a key move, helping create a monetisation platform for small as well as larger partners and incentivise strong content creation.

“We need to move as many roadblocks as possible,” says Mourad. He adds that this is happening, but it “requires a lot of investment and education.”