Industry Trend Analysis - Wireless Alternatives To Augment Fixed Broadband - JAN 2018

BMI View : Two novel initiatives should help deepen broadband availability in built-up areas and extend rural broadband coverage in Saudi Arabia. However, the lack of prior use potentially weighs on mass-market success, while user preference for mobile broadband over fixed broadband poses further downside risks .

Zain KSA is deploying Nokia's FastMile wireless broadband solution in the western and southern regions of Saudi Arabia, including the cities of Jeddah and Makkah. FastMile allows MNOs to offer fixed broadband access to homes and businesses by leveraging their existing mobile networks. So far, FastMile has only been used by Finland's Ukkoverkot to improve the mobile data specialist's network performance and is as yet unproven commercially. FastMile will generally be deployed using the 1800MHz band in rural environments and in suburban areas where no fibre or copper network is available; in that regard, Saudi Arabia will provide an ideal initial commercial outing, both for the solution and for Zain.

This development comes after the Communications and Information Technology Commission ( CITC) introduced a unified licensing regime in October 2016, which allows Zain to provide fixed line services. The increase in throughput should enable Zain to build additional revenue streams as well as help attract new subscribers.

Operator-led initiatives are not the only ways countries can address broadband shortfalls, however. Saudi Arabia's Ministry of Communications and Information Technology ( MCIT) and OneWeb have signed a Memorandum of Understanding to jointly develop solutions to connect 237,000 homes throughout the country, bringing affordable, high-speed, low latency broadband access to those living in rural and remote areas. OneWeb is a US-based company that aims to provide high-speed broadband connections through low Earth orbit (LEO) satellites. It will reportedly begin commercial service in Saudi Arabia in 2020. However, OneWeb only received regulatory approval from the US Federal Communications Commission ( FCC) in June 2017 and does not expect to launch its first two test satellites until May 2018. Therefore, as with Zain's use of FastMile, there will be no short term lift to our view of Saudi Arabia's broadband market.

Nevertheless, the two initiatives do fit into the long-term Saudi Vision 2030, which aims to achieve a developed digital infrastructure with high-speed broadband coverage exceeding 90% in densely populated cities and 66% in other urban zones. Already in 2017, the MCIT has signed a series of agreements with ITC, Zain and STC to increase high-speed broadband coverage in the kingdom's underserved areas to 70% by 2020, through boosting infrastructure investments, including fibre-optic connections.

Moderate Growth In Fixed Broadband
Saudi Arabia 3G And Broadband Forecast
f = forecast. Source: BMI, regulator

Our broadband forecast envisages a total fixed broadband subscriber base of 20.8mn in Saudi Arabia by the end of 2017, rising to 23mn in 2021. This would give the country a broadband penetration rate of approximately 65.1%. Meanwhile, we predict 3G/4G mobile subscribers to reach 34mn by 2021, with a penetration rate of 97%. Recent broadband enhancements announced by industry stakeholders present some limited upside to our fixed broadband forecast, albeit in the longer term. In particular, the expansion of fibre-optic networks will change the dynamic slightly, with consumers likely to upgrade to faster speeds and use broadband services for a growing range of content and online products, particularly where delivered by cost-efficient solutions such as FastMile and OneWeb

Any new technology that can expand high-speed broadband coverage in a country as vast as Saudi Arabia is welcomed, but due to their newness it is difficult to gauge their potential impact in the short to medium term. We still believe that more ubiquitous mobile LTE networks will continue to dominate the broadband market, constraining fixed broadband growth expectations.