Project Charter by hTb9vBH

VIEWS: 9 PAGES: 47

									Information and Communication
          Technology
       PERSPECTIVES ON THE
       SAUDI ARABIA ECONOMY




                              Prepared by:
                                              Team
                              Revision:         1.2
                                        Sept., 2001
ICT Report
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 Any changes to the content of this document will be listed below. The updated document will be
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 Creation                                         Bob                   .5                    Sept, 2001
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 recommendations
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                                                                  TABLE O F C O NTENTS

 1.       INTRODUCTION .................................................................................................... 5
   1.1       EXECUTIVE SUMMARY AND BACKGROUND ................................................................ 5
 2.       DEMAND PROJECTION FOR ICT SERVICES ..................................................... 7
   2.1       KEY DRIVERS OF SAUDI ECONOMY .......................................................................... 8
      2.1.1Population Growth and Demographics ..................................................................................................8
      2.1.2Financial Resources ............................................................................................................................. 10
      2.1.3Market Growth..................................................................................................................................... 11
   2.2 FORECASTING ICT DEMANDS IN THE SAUDI ECONOMY ........................................... 15
   2.3 METHODOLOGY ................................................................................................... 15
     2.3.1 Population growth ................................................................................................................................ 15
     2.3.2 GDP/ Capita ......................................................................................................................................... 15
     2.3.3 ICT share of GDP ................................................................................................................................ 16
   2.4 COMPONENTS OF ICT IN SAUDI ARABIA ................................................................. 18
     2.4.1 Government Automation Projects ........................................................................................................ 18
     2.4.2 Electronic Workspace .......................................................................................................................... 19
     2.4.3 Teleducation ........................................................................................................................................ 19
     2.4.4 Telemedicine........................................................................................................................................ 20
     2.4.5 Telecommute ....................................................................................................................................... 21
     2.4.6 Teleshopping........................................................................................................................................ 22
     2.4.7 Tourism and Transportation ................................................................................................................. 22
     2.4.8 Media/ News/ Information/ Entertainment .......................................................................................... 23
 3.       ICT REQUIREMENTS AND IMPERATIVES ........................................................ 24
   3.1       TELECOMMUNICATION TECHNOLOGY TRENDS ........................................................ 24
      3.1.1Network Trends ................................................................................................................................... 26
      3.1.2Applications ......................................................................................................................................... 27
   3.2 IT TECHNOLOGY TRENDS ..................................................................................... 28
   3.3 TECHNOLOGICAL REQUIREMENTS ......................................................................... 30
     3.3.1 Core Technologies ............................................................................................................................... 30
     3.3.2 Access Technologies............................................................................................................................ 31
   3.4 IMPERATIVES FOR ICT SERVICES .......................................................................... 32
 4.       ICT ROLE IN DEVELOPING NATIONAL ECONOMY ......................................... 33
   4.1       ICT HISTORICAL INVESTMENT ............................................................................... 33
   4.2       BUSINESS MODEL ................................................................................................ 34
      4.2.1Telephone Call Cabinets ...................................................................................................................... 34
      4.2.2Internet Service Providers (ISPs) ......................................................................................................... 34
      4.2.3Pre-Paid Cards ..................................................................................................................................... 35
   4.3 ICT AS AN INDUSTRY ............................................................................................ 36
     4.3.1 Directly Enabled .................................................................................................................................. 36
     4.3.2 Indirectly Enabled ................................................................................................................................ 37
   4.4 FUTURE INVESTMENT ........................................................................................... 38

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      4.4.1         Telco Infrastructure.............................................................................................................................. 39
      4.4.2         Digital Economy .................................................................................................................................. 39
 5.      RECOMMENDATIONS AND SUMMARY ............................................................ 40
   5.1       RECOMMENDATIONS ............................................................................................ 40
      5.1.1     Role of Government............................................................................................................................. 41
      5.1.2     Role of Private Sector .......................................................................................................................... 42
      5.1.3     Role of Education ................................................................................................................................ 43
   5.2       STC SUMMARY ................................................................................................... 45




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 1.            Introduction
 The purpose of this document is to present the views of STC of the impact and future of
 Information and Communications Technology on the economy of Saudi Arabia.


 1.1           Executive Summary and Background
 The Ministry of Planning has asked STC to participate in a seminar entitled “The Saudi
 Arabia’s vision for 2020 “. STC, as the main telecommunications service provider in the
 Kingdom will focus on the Information and Communication Technologies (ICT) sector.
 The paper will focus on four themes:

 1. ICT Demand Projection,
 2. ICT Requirements focusing on Technology Trends and ICT Imperatives,
 3. ICT Role in Developing National Economy, and
 4. Recommendations.

 Information and Communication Technology is a new term that reflects the convergence
 of the two technologies: Communication and Information. ICT can have a great impact
 on the economy of developing nations since it will increase the sharing of knowledge,
 productivity, and the level of openness. Further more, the geographic obstacle to
 development will be reduced to what we can call ‘the death of the distance’. In a society
 like ours, where women and men workforce are not allowed to mix, such restrictions can
 be resolved without compromising our traditions by the proper use of ICT. ICT will also
 lead to reductions in consumer costs. A recent study by Andersen Consulting showed
 that the cost of a banking transaction can go from $ 1.27, in traditional bank branch, to
 $0.27 using ATM, and ultimately to $0.01 via Internet banking.

  In this paper, Saudi Telecom Company reflects on the future perspective of this new
 emerging field and how it would help other economic activities flourish. This paper
 represents STC’s view in the Symposium to be held 20-25 Oct. 2001 in Riyadh. The
 Symposium is organized by the Ministry of Planning under the theme ‘Vision for the
 Saudi Economy in the Year 2020’.

 A team of STC experts has participated in writing this document. When drawing the
 main headline of the effort, the following thinking model was followed. The demand
 created by the economy on the ICT industry in the future until 2020 needed to be
 identified. This demand is forecasted by simultaneous growth in three dimensions: 1)
 population growth, 2) the GDP, and 3) the Saudi market dynamics.



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 It was not an easy task to forecast the growth up to 2020. Reasons are; the forecast
 horizon is long. Second, there is a lack of precise figures and historical statistics which
 makes it difficult to extrapolate and anticipate the future. To mitigate this in future efforts
 we strongly recommend the establishment of solid simulation models to help in similar
 situations. In spite of this issue, the team has put forward a tremendous effort to gather
 as much as they could. Special thanks go to the Ministry of Planning, the World Bank
 EIU, and generally available information on the Internet. Then we looked at what the
 technology is going to offer in the next few years. Bear in mind that no one will dare
 forecast what the technology will look like in year 2020. This was not meant to be a
 science fiction novel. The main trends of both sides of the coin i.e., telecommunication
 and Information technologies have been reviewed and linked to the near future demand.

  ICT alone is not able to answer the challenge without the availability of a set of
 imperatives from government, private and education sectors. We foresee a great
 potential for ICT in developing the country and the well being of Saudi nationals. The
 potential comes from several angles. Indirectly, via enabling other sectors like
 telemedicine, e-Learning and e-Business as well as directly in the high tech industries
 where huge demand in the international market will be there for the years to come. We
 can confidently look to ICT as the second source of national income after oil.




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 2.            Demand Projection for ICT Services


 Even though predicting the future is a risky exercise, some efforts have demonstrated
 competence at this and we can learn from them. Methods of prediction, fall into three
 categories:

      1. Trend Extrapolation, which examines the consequences of current realities; it
         works best when limited to 5-15 years in the future and breaks down for longer
         projections because it does not account for how people react to the advancing
         trend.

      2. “Reading the Clearing”, which looks at the space of human practices --
         historical, cultural, social, and technological. "Clearing" is a metaphor for a space
         in the forest, a space in which motion and action are possible; actions outside the
         limits of the "clearing" are not possible. This perspective reveals that
         technologies do not "drive" social change, but rather interact with social
         concerns, interests, and moods, producing changes in people's practices and
         ways of doing things. This perspective is more successful than any other method
         for projections beyond 20 years.1

      3. Wishful Thinking, which expresses hopes, fears or expectations about the
         future but offers little grounding for these opinions; it is perhaps the most popular
         of the three methods, and the least successful.

 In 1893, the Newspaper Guild invited 74 leaders of the day to speculate what the world
 would be like 100 years hence and published their essays. In 1993, Historian Dave
 Walter collected them into a book called Today Then. Strikingly, very few of the
 predictions actually happened. Only five of the 74 authors discussed futures that
 resemble the world, as we know it today. The others confidently predicted that
 technology would eliminate the distinctions between haves and have-nots, reduce
 postage to one cent, eliminate most crime, and give people more time to advance their
 education, reduce taxation, and limit the scope of government. Only a few foresaw
 universal electric power and telephone, a communication system resembling the
 Internet, or a doubling of expected lifespan. No one foresaw world wars, the Interstate

 1
  Herbert Dreyfus derived the metaphor “the clearing” from the work of the philosopher Martin Heidegger (Dreyfus,
 1990). The “clearing” is the space of possible human action. Fernando Flores coined the metaphor “reading the
 world” to denote understanding how the world is moving (Spinoza, Dreyfus, and Flores, 1997).

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 highway system, genetic engineering, mass state education, broadcast radio or TV, or
 the computer.

 We wonder what an observer 50 or 100 years from now will think of the predictions that
 come from today. We see in retrospect that most of their predictions were wishful
 thinking. A few of their predictions were trend extrapolations, all leading to the wrong
 conclusions. The five who “got it right” were all clearing-readers.

 The task before us is to extrapolate trends over the next 15/20 years, which is about the
 empirical limit for extrapolations, and to read the clearing for predictions beyond that.
 We most definitely want to avoid wishful thinking. Consequently, there is a lot of
 emphasis on understanding all the assumptions behind every forecast.

 When you consider the fact that the ICT industry is characterized by rapid, sometime
 exponential growth, future estimation or projection for any particular year or period is a
 challenge. Therefore, we had to search for method to determine the demand for ICT
 taking in to account that this method should have logic and be reasonably acceptable by
 the reader.

 2.1           Key Drivers of Saudi Economy
 The first step in deriving an estimate of the demand of ICT services in the Kingdom is to
 understand the Saudi economy. This analysis has identified three main drivers of the
 Saudi economy:

     1. Population Growth and Demographics,
     2. Financial Resources, and
     3. Market Growth.


 Each of these areas is detailed in the following sections.

 2.1.1         Population Growth and Demographics
 Saudi Arabia has one of the highest birth rates in the world and the majority of our
 population is under 20 years old. Approximately 84% of the population is less than 40
 years of age and 46% less than 15 years of age. Also, according to the latest figures,
 the average Saudi household consists of five to six members.

 As we can see from these figures, and the graph below, almost half the population is
 young people with high capability to learn or adapt to future technological changes.




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 The number of young people in the country is one reason that PC penetration growth in
 the Kingdom is among the highest in the region with a annual growth rate of
 approximately 20%. It is estimated that Internet household penetration will grow to 42%
 by 2006.


    80%
    70%
    60%                                                               1997
    50%                                                               1998
    40%
    30%                                                               1999
    20%                                                               2000
    10%
     0%
                USA        Jordan   Lebanon   UAE   Kuwait    Saudi
                                                             Arabia


 Therefore, we expect that ICT will have strong demand in the future because of the high
 population growth rate and the increasing PC household penetration rate. Our young


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 people will expect automated and mechanized systems that will lead to improved
 efficiency and productivity.


 2.1.2         Financial Resources

 Our ability to grow and diversify our economy depends on stable world oil prices. Oil
 revenues continue to be the foundation of our economy. With this in mind, the
 government has established quantitative indicators for its 7 th five years development
 plan. These plans are comprised of three main dimensions: 1) diversification of national
 income, 2) privatization and finally 3) the Saudization program.

 The Saudi economy has continued to accomplish high levels of achievement and
 positive growth rate despite of the challenges experience during the 6th five years
 development plan, the severe fluctuation in the international oil prices as a results of the
 economical crises of South-East Asian countries.

                   It is expected that in the coming two decades GDP will continue to grow at
                    an average growth rate of 2.2% per year. This figure is very close to the
                    annual growth in the 6th five years development plan.

                   It is expected that the Kingdom will continue to play a major role in the oil
                    market as it still consider the largest oil producer in the world. Oil GDP is
                    also expected to grow at the fixed prices, with an annual average rate of
                    2.19% during the coming two decades.

                   The public sector is expected to grow with an annual rate of approximately
                    1.28% in the coming 20 years. In addition, the role of the public sector is
                    expected to grow especially in the fields of the production, services and
                    public utility sector such as electricity.

                   The government will continue to support directly the education, health and
                    housing services to the citizen. This support will decline over time as the
                    private sector begins to take a major role in these fields.

                   The Saudi private sector is expected to make very big move toward
                    improving its productivity, efficiency and remove all constitutional
                    obstacles encountered in order to be able to develop an professional
                    industrial environment based on their competitive advantages in the field
                    of the Petro-Chemicals and capital & power intensive industries.




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                   Long-term indicators predict that the added value of the private sector will
                    grow in an annual rate of 5.73% during the next two decades.

 We believe that the above economic indicators give positive impression about the future
 prospect of the ICT market. For example, the government plans to give more space to
 the private sector to participate in the development of the national economy that will
 result in more demand on ICT. In addition, 7th five years development plan showed the
 high support of the government to the education sector and medicine, which are major
 players in shaping the ICT demand/ market.


 2.1.3         Market Growth
 There are several issues that must be considered in predicting the size of the future
 Saudi ICT market: 1) the Saudi Telecom market will be partially liberalized, 2) Saudi
 Arabia will join the World Trade Organization, 3) the globalization and regional
 economic union of business and 4) the convergence of telecommunications and
 Information technology.

 The expected increase and the high growth in the number of business in the coming five
 years could have significant impact on the ICT demand in the future. It is expected that
 size of the business will increase by 25% in all business sectors as shown below:




                                                                  BUSINESS UNIVERSE GROWTH -- SAUDI ARABIA
                                                                              (2000 vs. 2006)
                                       16,862
                                                         2000                                                     21,213            2006
                                                                                                                                                    Total of 60K
                                                 9,556                   Total of 48K
                                                                                                                           12,022                   companies
                                                                         companies

                                                            5,039
                                                5,284 6,729                                                                        8,466 6,340
                                                                                                                           6,648

                                                                        432
                                                                   1,508                                                                         544
                                                                               Services                                                      1,897      Services
                                                    1,921                                                                      2,416
                                                                             Industry                                                                 Industry
                                    233                           236      Trade                                 293                        297     Trade
                                                189                                   Sector                               237                                 Sector
                                                             33         Finance                                                        42         Finance
                               Up to 19                                                                    Up to 19
                                            20-99                                                                      20-99
                                                         100 +                                                                100 +
                               Size (in Number of Employees)                                             Size (in Number of Employees)

                                                                                        Growth Drivers
                                                                               • Privatization, WTO membership
                                                                               • Internationalization
                                                                               • Assumption of 3.9%
                                                                                 yearly growth in businesses
                     Source:     STC five years strategic plan

                                                                                                -




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 2.1.3.1       Liberalization of the Saudi Telecommunications market
 Saudi telecom market is expected to be partially liberalized over the coming four to five
 years. This process began in 1998 when the corporation of the Saudi telecom was
 established, followed by liberalization of the ISP sector in 1999.

 The future plan is to start liberalizing the data sector in mid 2002, followed by partial
 liberalizing the mobile/ GSM sector in the mid 2003, and finally the PSTN or Landline
 sector in mid 2005. These events will have an impact on the ICT demand in the future,
 as it will encourage more business/ entrepreneurs to exist. It will also provide Saudi
 consumers with more choices, improved and new services, and lower rates.

 2.1.3.2       World Trade Organization
 The progressive growth in the world trade has been the main driver of the world
 economic growth through the last 40 years. Countries who isolated themselves from the
 WTO are now far behind while those, which adopted a model for interaction with the
 international organizations have achieved positive results and growth. Therefore, Saudi
 Arabia joining the WTO and realizing the advantages within the world economy, is
 consider of critical importance to the future development of the Saudi economy.

 Membership in the WTO will bring a wide range of benefits to Saudi Arabia. The
 required changes in the Saudi trade regime will provide the foundation for economic
 expansion in the Kingdom. Among other things, accession will require Saudi Arabia to
 remove protectionist barriers, to place ceilings on tariffs, to further open key services
 sectors to foreign participation, and to improve intellectual property rights protection.
 These changes will result in an open, transparent, and rules-based trade regime. The
 enhanced competition that will be engendered will introduce new efficiencies and
 growth prospects to the economy. The result will be an improved investment climate
 that will enable the country to attract substantial amounts of capital from both foreign
 and domestic investors.

 Membership will entitle Saudi Arabia, on a permanent contractual basis, to all the
 benefits that have been exchanged between GATT and WTO members during the last
 50 years. Foremost among these is protection against the arbitrary exclusion of exports
 from Saudi Arabia to other WTO member nations. Membership will also provide Saudi
 Arabia with a seat at the table of policy-makers who will shape the trade rules governing
 the global economy in the 21st century. Participation in such deliberations will be
 essential as Saudi Arabia seeks to preserve its position in the world economy.

 International trade interactions are expected to continue with liberalization and free
 customs duties and obstacles will be reduced for all industrial, agricultural products,
 services and goods. We will benefit from increased markets for our goods and services



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 and the reductions in import tariffs. More countries will join and adhere to world trade
 rules, which will achieve more growth at the international level.

 The process of liberalizing international trade, especially the services sectors, has
 started recently and it is expected to achieve good progress in the future (e.g. increased
 demand on tourism services). The current revolution in telecommunications, electronic
 business and media systems will contribute to a strong growth in providing these
 services across the Kingdom. Accordingly, we need to identify the services that we shall
 have relative advantages, or could achieve a relative advantage, and head strongly
 towards marketing such services in the international market.

 The Kingdom exports of the commodities and services to GDP has reached 41.4% in
 1419/1420H (1999) and it is expected to reach 44% by the end of the 7 th five years
 development plan, reflecting the importance and the progressive of this sector.


 2.1.3.3       Globalization and Regional Economic Union
 Regional unions and free trade areas will grow fast i.e. the members of European
 communities have increased recently and included countries from central Europe. In
 addition, the establishing of free trade zone for the Mediterranean Sea countries, which
 will foster trade between the Mediterranean Sea partners and provide them with
 proportional advantages. Also, the union in the of the South East Asia countries, pacific
 countries union will develop towards economic integration.

 At the December 1999 GCC Summit, members agreed to establish a customs union, to
 take effect in March of 2005, versus an original target date of 2001. The customs union
 will establish universal three-tier tariff levels for members at the rates of 0%, 5.5% and
 7.5%. These are significant decreases from Saudi Arabia’s current levels.



 2.1.3.4       Convergence of Telecommunications and Information Technology
 All indicators show the continuation of the fast revolution in information field. In the
 information era, demand increases on advanced products that include special
 technologies and designs and other innovations while demand will increase at a lower
 rate on the other commodities.

 The convergence of voice, video, and data onto a single data network is driven by total
 cost of ownership and economies of scale. Parts of the world that attempt to hold on to
 monopoly prices and practices will ultimately lose out to the forces of competition. All
 kinds of carriers and service providers who once survived by selling basic connectivity
 will be forced to find high value-added services to sell, and the basic connectivity

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 providers that survive will be extremely efficient and aggressive with respect to pricing.
 The first services these providers will look at will be those at the boundary of the
 enterprise network-policy management, security services, network operations,
 performance management, Web server farms, load balancing, and remote access, to
 name just a few.

 With the total predominance of the Internet Protocol and related standards, it has
 become less expensive to interconnect an enterprise's network with those of customers,
 suppliers and partners anywhere in the world. Reliable security and managed service
 levels are within reach. Wireless products are waiting in the wings to fill in the gaps
 where wire and optical fiber do not go, anywhere on the globe. Connectable non-PC
 devices are predicted to outsell PCs in a couple of years. The ease and low cost of
 global connectivity changes the meaning of work, makes many sorts of hierarchical
 organizational structures irrelevant, broadens the points of contact between suppliers
 and customers, and increases everyone's impatience with inefficient paper-based
 procedures and other barriers to direct access to information.

 Delays, queues, stockpiles, and redundancies are increasingly unacceptable to
 customers and increasingly costly to suppliers. Successful enterprises will not only
 develop automated management systems that traverse the end-to-end performance of
 critical applications, but they will also incorporate business functions directly into the
 management system. Thus, "order entry" or "credit card processing" or "shipping"
 functions might issue alarms when they begin to slow down, or automatically schedule
 additional workers and systems when a performance trend is detected. Systems and
 network management will be extended across entire business missions, not limited to
 hardware and software components.

 Over the next few years, telecom operators in general will have to transform their
 current network (pure voice carriers) to multi-purpose digital networks, which can create
 and brings lots of advantages and benefits to the ICT market in the future as shown in
 the diagram below:




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 2.2           Forecasting ICT Demands in the Saudi Economy

 Telecommunications and Information Technology are services that support national
 industries. However, we know that ICT is required and used by these industries to
 conduct their business. The main challenge of this research has been estimating the
 value of ICT in our national economy.

 In this chapter we will,

               1) Explain the methodology used to estimate the ICT demands
               2) Determine the future ICT demand
               3) List key ICT sectors


 2.3           Methodology

 To determine the demand of ICT on the Saudi economy, the team used the historical
 trends of:

         Population growth
         GDP/ Capita

 and then estimated the ICT Share of the GDP.

 The main source of information for the analysis is EIU report 2000, and the web sites
 www.eto.co.uk and www.planning.gov.sa .


 2.3.1         Population growth
 Population has been increasing at annual growth rate of 3.2% for the 1996-2000
 periods. We have assumed that the growth will remain the same for the coming 20
 years.


 2.3.2         GDP/ Capita

 GDP/ Capita has been increasing at a compounded annual growth rate of 2.02% for the
 1994-98 period. We have assumed that the growth will remain the same for the coming
 20 years.


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 2.3.3         ICT share of GDP

 Using the average of the GDP spent on ICT of 18 of the world economies, and the
 average rate of growth for the years 1993-1997, this information was used to baseline
 and estimate the ICT demand in Saudi Arabia.

 The average of ICT as a percent of the selected economies was 5.13% and the average
 growth was 5% each year.


 The table below illustrates the countries used to develop the baseline.


 Sample ICT as % of GDP for Selected Countries
                           Information and Communication Technology (ICT) %
                                                GDP
                               1993      1994    1995      1996     1997
Austria                         3.4       3.5     3.6       3.8       4.1
Finland                         4.3       4.6     4.7        5        5.2
France                          3.9       4.3     4.4       4.5       4.8
Germany                         4.1       4.1     4.3       4.2       4.3
Ireland                         5.1       5.4     5.4       5.8        6
Italy                           3.5       3.8     3.7       3.7       3.9
Portugal                        3.8       4.2     4.4       4.6       4.9
Spain                           3.5       3.3     3.4       3.7       3.8
Sweden                          5.3       5.8     5.9       6.1       6.2
UK                              4.8       5.5     5.8       6.1       6.3
Switzerland                               5.3     5.5       5.7       6.1
USA                                       6.1     6.5       6.8        7
Japan                                      4      4.3       4.5       4.6



          The GDP, the population and the ICT baseline were then used to estimate the
          ICT demand.


 Saudi Arabia: Key Economic Data (1996 -
 2000)
 (Current US$ billions unless otherwise noted)
                                                                              Avg Growth


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                                                      1996 1997 1998 1999 2000
 Gross Domestic Product                                 136 146 130 141 173
 Real GDP Growth (percent)                               1.4 1.9 1.8 0.5 4.5                    2.02

 Population (millions)                                 19.3    20 20.7 21.3 22
 Avg Growth                                             N/a 3.5% 3.4% 2.8% 3.2%                 3.2%

 Information and Communication                        4.91 5.13 5.39 5.66 5.94                    5%
 Technology (ICT) % GDP

 ICT in KSA                                            6.70 7.49 7.01 7.97 10.28


 Using the above assumptions on population, GDP and the percent of ICT of the
 economy were estimated and determined:

         Forecast population of Saudi Arabia for the coming years.
         Forecast the GDP/ Capita of Saudi Arabia for the coming years.
         Estimate the nominal GDP of Saudi Arabia for the coming years.
         Estimate ICT's current share of the nominal GDP.
         Estimate demand for ICT in 2010 and 2020



                           300


                           250


                           200


                           150


                           100


                            50


                            0
                                 1996       1997        1998      1999        2000      2010        2020
    Gross Domestic Product       136.4       146       130.1      140.9        173     211.30      258.08
    Population (millions)        19.3        20         20.7       21.3        22       30.1        41.3
    Demand on Economy            6.70        7.49       7.01       7.97       10.28    20.43       40.67

                                    Gross Domestic Product                       )
                                                               Population(millions    Demand on Economy




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 Using the average growth from 1996-2000, the above graph was produced to illustrate
 the demand of ICT on the Saudi economy. From US$10 billion in 2000, the demand will
 grow to US$20 billion in 2010 and then double to US$40 billion in 2020.



 2.4           Components of ICT in Saudi Arabia


 As illustrated above, ICT will grow from 5% of the GDP in 1997 to over 15% in 2020.
 Where will this growth occur? ICT economic activity for all businesses on all levels and
 across all sectors will increase. ICT will drive economic activity and the economic
 activity will drive ICT.

 Listed below are the main areas of ICT growth.


 2.4.1         Government Automation Projects
 The wide use of ICT within the Government leads to substantial financial benefits, not
 only to the Government itself but also to the Saudi community. Through electronic
 service delivery, the community can obtain public services online through a one-stop,
 user friendly and interactive service interface. They no longer have to queue in line
 physically in Government offices between regular working hours. The public can obtain
 Government services at their own place, and at their own pace. The social cost that the
 community can save is enormous.

 A specific Saudi Arabian aspect and a very good example of streamlining governmental
 activities using modern IT is the e-Umrah. Here specific efforts were taken by the Saudi
 Arabian Ministry of Hajj by identifying three ‘Umrah Application Service Providers’
 (UASP). These allow the online registration of about 5 million pilgrims every year. This
 approach will soon be extended with online payment options as well as the usage of
 smart technology to help identify and track pilgrims.

 In Ontario, Canada, you no longer need to go to a government office to license your
 automobile. Your renewal comes in the mail, and you can go to the local shopping mall
 and visit an electronic kiosk. You enter your plate and license number, your banking or
 credit card, and your car stickers are issued automatically. If you own any fines, you
 can pay via your card.




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 E-government enables us to provide more efficient and better quality public services,
 enhance customer satisfaction and better serve the community. With the use of
 advanced technology, we can streamline our procedures, re-engineer backend process
 and cut processing time. In short, we would be in a much stronger position to meet the
 ever-increasing demand and aspirations of the community in the Information Age.



 2.4.2         Electronic Workspace

 Office Automation involves the planned application of integrated information tools to
 improve the productivity of people in office operations. Although the handling of
 information by office people is the focus of this technology, other aspects of the office
 will be affected. These include factors such as the organization of functions and lines of
 reporting, training for new methods, workspace design, travel patterns, branch office
 location, home vs. office work, hours of work, employee morale, and job classifications.

 Advances in chip technology and the introduction of wireless communication protocols
 will take office automation to new levels. Multiple levels of synergism will be at work
 here. Online working will be the norm. Teleconferencing will increase and work related
 materials will be shared and available on line. This will add value by collaborative
 communication capabilities to integrate the capabilities of individuals into teams and
 communities. The working methods of individuals will shift markedly as they settle into
 use of integrated tools at the workplace. Evolution of the service system, evolution of
 the individual's working life, and evolution of the organization's working mode -- all must
 be provided for if an organization wants to capitalize significantly upon the potential of
 the technology that is arriving or will be available.

 2.4.3         Teleducation
 Education is regarded as an important contributor towards the development of nations.
 Research in the field of economics has shown that the development of human capital
 has a positive and statistically significant effect on economic growth.2 Furthermore, the
 quality of schooling, many researchers argue, is considered more important than the
 quantity of education with respect to its effect on economic development3.

 Annual Growth Rates of General Education
 1415/16 - 1419/20 (1995 - 1999)

 2
   See for example Robert Barro: “Education and Economic Growth” ; February 2000. Also see Barro & Sala-Martin
 (1997).
 3
   See R. Barro and Jong-Wha Lee “International Measures of Schooling Years and Schooling Quality”, AER,
 86,218-223

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                              Elementary              Intermediate            Secondary
         Variables         Boys % Girls %          Boys %     Girls %      Boys % Girls %
         New Entrants        0.98   (-0.74)*        6.09        4.73         12.03    7.46
         Graduates           2.50     5.31          6.07        6.19         17.08  13.53
         Schools             1.88     3.14          6.06        5.87         12.87    8.91
         Teachers            2.49     3.90          5.69        8.13         12.10  12.60
     *    Declining rate of growth is due to confining admission to elementary level to age six only
          and not to admit anyone under six years old.

 The total number of students in general education grew from about 3.8 million in
 1415/16 (1995) (studying in more than 22,000 schools, with 170,000 classrooms and
 286,000 teachers) to about 4.4 million in 1419/20 (1999) (studying in more than 26,000
 schools, with 194,000 classrooms and 357,000 teachers).

 Therefore, any factors that contribute to the quality of education should be encouraged
 and supported. To this end, ICT can be regarded as one of these factors since it
 contributes to not only the sharing of information and ideas, but also to the attainment of
 knowledge and higher education thousands of miles away in the comfort of one’s own
 home or library. The potential impact of such a revolution on the growth of the Saudi
 economy can be tremendous. Such an impact is more likely in countries like Saudi
 Arabia because a large percentage of its population is young.4

 The effect of ICT on development can be further aided by the declining illiteracy rate,
 the increase in the number of public and private universities as well as the various
 technical colleges around the kingdom, the rise in number of students majoring in
 science and technology fields, and the increase in the government’s expenditure on
 education.

 2.4.4         Telemedicine

 Conceptually, a country’s human capital would include health and dimensions of social
 capital, as well as education. The two basic measures of health capital used by
 economists are birth and infant mortality. In both respects, the kingdom has come a
 long way and its health indicators are at developed economy levels.

 Hospitals, Beds and Health Care Centers
 1414/15 - 1418/19 (1994 - 1998)

                                         1414/1415         1418/1419          Increase
                                           1994              1998


 4




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                                       (Number)        (Number)        Number        Percent
  Hospitals:
  Ministry of Health                      173             182               9            5.2
  Other government agencies                34              39               5           14.7
  Private sector                           72              87              15           20.8
             Total                        279             308              29           10.4
  Hospital beds:
  Ministry of Health                    26878           27428             550            2
  Other government agencies              8357            9119             762            9.1
  Private sector                         6592            8485            1893           28.7
             Total                      41827           45032            3205            7.7
  Primary Health Care Centers*           1719            1751              32            1.9
          * MOH only



  ICT can help contribute to development of health services through:

         Allow rural health care providers to electronically link with major medical centers
          and specialists. Only one or two general practice doctors serve many Saudi
          Arabia rural areas. With telemedicine, a medical specialist located hundreds of
          miles away can use video and other monitoring devices to examine a patient
          living in a remote area.

         The sharing of knowledge in the field of medicine with the developed world can
          be accomplished. Doctors of various hospitals can, through information
          technology and communications with other doctors around the world, attend
          various seminars on the most recent healthcare advances at a much cheaper
          price and without having to travel thousands of miles away. The result is a more
          knowledgeable and more educated health care community and better health care
          services for the citizens of Saudi Arabia. In turn, such advancements in health
          will result in higher economic growth and further economic development.


 2.4.5         Telecommute
 The integration of computer and telecommunication technologies permits work outside
 the office, i.e., "telework." Work has become portable and may be done on the road,
 from the home, a customer's office, and a field office or at a "telecenter" (satellite office).
 Telecommuting is working from home or a telecenter. Telecommute provides access to
 jobs for the mobility disadvantaged, whether it is a result of physical impairments,
 inadequate transportation, or other factors.


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 2.4.6         Teleshopping
 Teleshopping is the use of telecommunications and computers to shop for and
 purchase goods and services. Teleshopping has existed since the first order for goods
 or services was placed via telegraph. Modern mail-order catalogs, with 800-number
 service and sophisticated computerized order-tracking and inventory systems, are a
 recent step in the evolution of teleshopping. Because of the many benefits gained from
 adopting this technique, total volume of teleshopping is becoming very popular
 technique and it has been increasingly steadily, at the expense of traditional retail
 shopping (Schuler, 1992). A part from being very easy technique and requires little
 efforts to do shopping, teleshopping provide some type of privacy which can suite and
 comply with our cultural, environmental circumstances.

 2.4.7         Tourism and Transportation
 As a result of the importance of tourism on the national economy, the Supreme
 Commission for Tourism (SCT) has been established by the Council of Ministers
 Resolution No (9) dated 12/1/1421H. The STC’s major task is to develop the planning
 basis for revising the existing structures and system to stimulate the development of
 tourism in a controlled and sustainable manner. The high ambition program set by the
 Saudi government (SCT) to develop the tourism sector in the kingdom has considered
 very much the ICT contribution in the development process.

 One of the strong emphases of the SCT is to find ways to encourage more Saudi
 nationals and expatriate to take holidays within the country and attract visitors from
 neighboring countries to do special interest activities.

 The kingdom’s five-year development plans, since their inception, have managed to
 develop a strong infrastructure in transportation. Saudi Arabia boasts three
 international airports, six major seaports, one hundred fifty thousand kilometers of roads
 and nine hundred kilometers of railways. Such transportation infrastructure is essential
 for any country’s economic development. ICT’s impact can enhance such infra-
 structural development of the kingdom in various ways. For example, it can increase
 the demand for quicker transportation requiring automation of the transport industry
 (websites, online reservations etc.); it can increase the demand for an integrated
 transportation service combining seaports, airports, railways and roads which require
 the automation of all transport mechanisms; it can increase the demand for a cheaper
 transportation by lowering its cost through automation and it can increase the demand
 for and e-enabled transportation industry allowing buyers to purchase services online,
 bid for services and track results.




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 2.4.8         Media/ News/ Information/ Entertainment
 Technological change in these industries is proceeding at a dizzy pace, such that the
 previous lines between publishing, printing, broadcasting and entertainment have
 become increasingly blurred. At the same time, these knowledge-based industries are
 linking with the computer and telecommunications industries in the process of
 multimedia convergence. The globalization of TV as seen by the plethora of satellite
 channels and the flow of information/news across virtual borders will lead to
 empowerment of individuals/ organizations, but may lead to problems in control and
 governance. We are seeing the effects of Robert Murdoch’s News Corporation having
 control over FOX, Star, BSKYB, thus allowing coverage of most of the globe. The
 challenge to governments will be in trying to control information, which may be
 detrimental to the local culture and traditions. With open bandwidth and connectivity,
 video on demand, data streaming and similar innovations will become the norm.



 The above factors are certainly not exhaustive. The impact of ICT on the Saudi
 economy will be felt on all levels. As a result, consumer welfare will increase, business
 activity will strengthen and the overall effect on economic growth will be positive.
 However, it is important to note that for all the above to have any serious impact, the
 institutional factors that tie all aspects of society and business together must be healthy.
 For example, the administrative system must be efficient, the business laws and
 regulations have to be amended to accommodate the expected changes, and a security
 system must be implemented to ensure safe usage of all the above-mentioned services.




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 3.            ICT Requirements and Imperatives


 Telecommunications technology is continuously changing the means through which
 networks and services are structured. With quite remarkable pace change during the
 past decade, the change in the coming years will even become more remarkable and
 surprisingly radical. Future networks will have to satisfy the growing demands for large
 amounts of data transfer, multimedia services, Internet applications, global mobility, and
 personalized services. Furthermore, they will have to interoperate and integrate with
 existing technologies, and to offer acceptable Quality of Service at affordable and
 flexible charging schemes in a highly competitive environment. Telecommunications is
 becoming part of every person’s daily business and living.

 In this chapter, we provide an overview of the evolution and trends in
 telecommunication infrastructure and services. The latest trends in the most important
 areas are highlighted, and we also attempt to depict a vision of the shape
 telecommunications networks and services will take in the coming 20 years.



 3.1           Telecommunication Technology Trends

 Since the inception of Telecommunications in the late 19th century and up to the 1950’s,
 the focus was on connecting two fixed points together rapidly, efficiently and with high
 “voice” quality over larger distances. During the 1960’s, Computers joined the scene to
 support telecommunications. Convergence of the two technologies facilitated many
 ideas of networking and services, which continue to shape the present and future
 networks.
 In order to depict possible future scenarios of visions, it is imperative to take a quick tour
 into the milestones of the past evolution stages of the network underlying technologies
 as outlined below.


1850      - Telegraph was introduced.
1878      - The first manual switch was introduced.
1892      - The automatic Strowger step-by-step switch was introduced.
1938      - The Electro-mechanical common control Crossbar switch was introduced.



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1950’s - Analog transmission systems with Frequency Division Multiplex (FDM) on Co-axial
       or Microwave.
       - Some form of in-band signaling tones (single and dual) were used.
1960’s
       - The first Stored Program Controlled Switch (No.1ESS of AT&T) was introduced.
       - Computers to support telecommunications.
       - Satellite communication began as Frequency Division Multiple Access (FDMA).
       - PCM digital transmission was introduced with speeds of T1 / E1.based on TDM
       over copper pairs, coaxial

              cables, microwave and satellite.
           - Some form of data transmission, to connect terminals to remote computers, at 150
           b/s.
1970’s

           - Wavelength Division Multiplexing (WDM) (16 x 10 = 160 Gb/s) for commercial
           deployment.

           - Public TDM digital switching was introduced.

           - Emergence of the concept of Integrated Services Digital Network (ISDN).

           - Multi-Frequency-Compelled inter- exchange signaling (MFC-R2) was deployed.

           - Dual Tone-Multi-Frequency was used as access signaling.
           - Modems were used to achieve 2400 b/s and possibly 4800 b/s. Facsimile started
           also to appear.
           - A large number of Public and Private data networks emerged (Leased, Circuit
           Switched and Packet
             Switched).
1980’s

           - Satellite communication uses TDMA carrying up to 1.4 Gb/s (24 transponders of
           67.0 Mb/s each).
           - Fiber Optics transmission with SDH was introduced provided up to STM-256.
           - Released ISDN standards.
           - ISDN Field trials were conducted in a number of networks.
           - Common Channel Signaling System #7 was deployed in many parts of the world.
           - Dedicated data networks at 2 Mb/s and beyond provide Teletex and Electronic
           Mail services.
           - Local Area Networks (LAN's).
           - The first commercial cellular system.

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           - Paging based on the POCSAG system (speeds: 512, 1200 b/s).
           - ISDN technology offered up to 128 kb/s.

           - 2 Mb/s repeatered twisted pair PCM was provided at a small scale.

           - Optical Fibers provided speeds have 1.5, 2, 6.3 and 44.7 Mb/s.

1990’s
           - Measurable ISDN was deployed in the mid 1990’s.
           - Dedicated data networks grew to offer bit rates of several Mb/s. The use of
           satellite for data
             Communication increased (VSAT).
           - Global System for Mobile GSM was deployed.
           - High-bit-rate Digital Subscriber Line (HDSL) was deployed in the subscriber loop.
           - New types of Interface standardized by ITU (V.5.1 and V 5.2).
           - Wireless Local Loop (WLL) supports ISDN.
           - Very Small Aperture Terminal (VSAT) supports ISDN and speeds up to 2 Mb/s.
           - Asymmetric Digital Subscriber Line (ADSL), 6 Mb/s and 1.5 Mb/s, was
           standardized by ITU-T.
           - MMDS / LMDS
           - Wireless Optics.
           - FTTH



  3.1.1         Network Trends

                                                    st
         As the 20th Century ended and the 21 Century begin, the digital communication
  revolution is nearly completed, leaving us with several extremely important results:
                    Communications are becoming more and more distance independent.
                     This implies that the revenue from long distance services is becoming less
                     important.
                    Perfect communications can be achieved by software approaches. In fact,
                     the performance of a communication system is getting more determined
                     by software rather than hardware, as traditionally was.
                    All forms of information can be digitized, packetized, switched and routed
                     over a common platform. This leads to more dominance of packet
                     switched technology.




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                   Communication is getting close to hundred percent secure, regardless of
                    whether the transmission medium is wire or wireless. The wireless
                    service, therefore, is becoming a predominant access choice.
 Therefore, the network traffic has shifted from predominantly traditional voice, to data;
 the network design philosophy has changed from centralized to distributed systems;
 and most of all,



 3.1.2         Applications

 The astonishing rate at which applications emerge provides a glimpse of their trends.
 Emerging applications aim to ease modern life pressure and increase productivity for
 businesses and individuals.

 Though future applications cannot be described accurately, they share a number of
 common characteristics. They grow fast, are hungry for bandwidth, and place stringent
 demands on the underlying network to provide QoS (i.e. reliability, accessibility, speed,
 and security). Powerful service creation environment capability will allow administrators
 and customers alike to design, configure, provision, and activate services along with
 associated Service Level Agreements SLA placing more demands on Operation
 Support Systems OSS.


 Emerging applications includes:

                    -      Intelligent highways / road systems,
                    -      Remote sensing / control / monitor,
                    -      Safety & security of objects and people,
                    -      Machine-to-Machine communication,
                    -      Telecommuting,
                    -      Virtual reality,
                    -      Telemedicine,
                    -      E-business, E-Commerce, E-Government, …and
                    -      Media streaming.


 While those applications represent but a small sample of the anticipated future
 applications, they are still in their infancy. They are expected to grow in sophistication,
 expand and merge to yield yet new applications.




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 Speed of provisioning, QoS and appropriate charging rate will minimize churn rate.
 While the main challenge of the past was malicious calls, virus attacks constitutes
 significant challenges for future network / services. Control of the network resources will
 be turned into the hands of highly sophisticated legitimate and illegitimate customers
 who can intentionally or inadvertently introduce detrimental effects on network and
 services.



 3.2           IT Technology Trends


 In accordance with Moore’s law, the number of transistors per chip doubles every 18-24
 months. This means that processor performance follows a similar exponential growth
 trajectory. Current microprocessors can operate at over 1 Gigahertz, and provide
 something like 1000 MIPS. In the year 2011, we expect 10 Gigahertz and 100,000
 MIPS.

 In 1988, the Cray Y-MP8/4128 Supercomputer had one Gbyte of RAM, peak Mflops of
 1333, weighed more than 5000 lbs and cost approx. $14M. Today, that same
 performance is expected of a Dell Notebook running a Pentium III, which will weigh less
 than 5 lbs and cost under $4000.

 Existing handheld devices such as the Palm VII or the RIM BlackBerry provide wireless
 e-mail, two-way paging, and web access for under $500. These services will be
 enhanced in the medium term to provide increasingly rich data access through such
 technologies as the Bluetooth protocol. At the same time, mobile phones and pagers
 will add features to become increasingly “smart”. Eventually all these products will
 converge to create a (possibly modular) product whose overall characteristics and
 features cannot be fully anticipated. In addition, the possible implications for user
 behavior are presently boundless!


                   A large fraction of the world population will become connected in one form
                    or another (for numbers of Internet penetration, global comparison and
                    ISP subscribers in Middle East please have a look at5).


                   Digital personas. These personalized databases or “agent” programs
                    accumulate a history of the location, movement, actions, and environment




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                    of an individual. Much of this data is being collected now, e.g., in computer
                    browser “cookie” files, in geographic tracking information generated by cell
                    phones, and so on. “digital personas” will encourage their spread, subject
                    to some modest limitations.

                   Ubiquitous, smart sensors and wireless connectivity. The area with the
                    greatest possible impact in about 20 years. Mass production will lower the
                    cost of sensors to one dollar or less per unit. They will become ubiquitous
                    on devices, artifacts, clothing, and perhaps as embedded sensor/monitors.
                    Their viability would be improved if the sensors could extract power for
                    their operation from their environment. The largest impact may be in
                    medical applications, but initially applications may focus more on: smart
                    materials, construction uses, wide area networks for environmental
                    sensing, and so on.

                   Ubiquitous digital access to the net. Widespread accessibility of “the net”
                    from a rich variety of devices and locations is a common prediction.

                   Trusted mobile code. Mobile code is software that migrates over networks
                    to various client machines, for local execution. An example is an e-mail
                    attachment that executes in some manner when accessed – for example a
                    Word document with embedded macros that launch when the document is
                    opened.

                   Major advances in computer mediated human interactions, particularly
                    asynchronous ones. Electronic mail (e-mail) is the most widely used
                    application on the Internet. Video conferencing will become commonplace,
                    but it is deemed a less important revolution than advances in
                    asynchronous interaction, due to the major advantages of asynchronicity
                    in human communication.)

                   Optical communication Systems. The biggest technical development is
                    likely to be in optical systems. We expect to see commercially available
                    optical switches within the next 4-5 years, implying that end-to-end pure
                    optical systems will be a reality within the timeframe being considered by
                    this conference.


 In 20 years, mass production will lower the cost of sensors to one dollar or less per unit.
 They will become ubiquitous on devices, artifacts, clothing, and perhaps as embedded
 sensor/monitors. Their viability would be improved if the sensors could extract power for
 their operation from their environment. The largest impact may be in medical



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 applications, but initially applications may focus more on: smart materials, construction
 uses, wide area networks for environmental sensing, and so on.

 Wireless technologies and immense miniaturization will drive the Internet from being
 available at very limited locations (mostly desktops) to being virtually everywhere. This,
 has the potential to change basic modes of behavior (e.g., information delivery,
 payment, communication, authentication, entertainment), and brings up many entirely
 new business opportunities, ranging from online advisory services and real-time
 advertisements.

 The convergence of computer technology with telecommunications and broadcast
 media has brought about changes, which have deep significance for virtually all aspects
 of our lives. Computer technology has become increasingly powerful, capable and easy
 to use. Its cost has continued to fall at an increasing rate. Digital networks are making
 very fast, very reliable and cheap. Businesses are seeing the benefits of utilizing the
 web for growth and reach. This is leading to an increase in interactive services. E.g.
 Interactive TV from BSKYB.

 The distinction that once could be drawn between computers, televisions and
 telephones is no longer valid: they have come together to make a new technology, and
 that technology will transform all aspects of our lives - including, and especially,
 economic.

 3.3           Technological Requirements
 The telecommunications network comprises core, access and CPE, along with network
 management and signaling system. Network is migrating from service specific network
 platforms to multi-service master network known as Next Generation Network “NGN”.
 NGN supports voice, data, and video with narrowband / broadband requirements. NGN
 is a network concept that aims to put puzzles of advanced technologies together to
 achieve optimum network architecture.

 While NGN is known at present to certain degree, it is in a state of rapid evolution
 awaiting major breakthroughs. In the coming 20 years, it is anticipated that the present
 NGN concept will traverse several NGN generations. Today we are sitting on the tip of
 an explosive telecommunication / information technology revolution.

 3.3.1         Core Technologies

 To meet the above challenges, the next generation networks are required to have the
 most flexible platforms available. They can be characterized by:
         Large throughput


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         Smallest granularity
         Extreme Scalability
         Powerful Service Creation Environment (SCE)
         Remote Management and Diagnostics
         Highest Reliability and Availability
         Packet switching (mainly IP based) capability
         IN-based

 Switching elements will take several forms ranging from ATM to IP routers to powerful
 Ethernet LANs to optical switches. A basic concern is the huge throughput capability
 along with smallest granularity of the switching element. In optical switches, throughput
 is extremely huge reaching practically infinity, while the lowest switching granularity is 
 carrying more than 40 GHz. While on the other hand, PSTN voice switches are
 characterized by low throughput and switching (64 Kbps). Core transmission will rely on
 fiber optics technology where light will be utilized all the way in the fiber and cross
 connect equipment.

 The most important technology trend is the commercial introduction of Dense Wave
 Division Multiplexing (DWDM) systems. DWDM provides a new dimension for
 expanding the installed optical infrastructure. The trend is towards multi Tb/s by the year
 2005. ATM switches and DWDM networking, through optical Add/Drop and cross-
 connect, will change the traditional SDH structure of establishing the demanded
 connectivity among the existing network nodes.


 3.3.2         Access Technologies

 Nowadays, emerging broadband access systems explore different media (air, wire), use
 different carriers (electric signal, EM wave, optical signal, and acoustic) and employ
 advanced technologies (coding, modulation). Emerging broadband access
 technologies include:
                    -      xDSL
                    -      Fixed Broadband Wireless Accesses (FBWA)
                    -      FTTH
                    -      Wireless Optics
                    -      3GM
                    -      Satellite
                    -      Cable modem



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 3.4           Imperatives for ICT Services

 In coping with the above requirements and technical challenges, businesses need new
 types of mobile applications to reduce cost, and to satisfy the need for "anywhere,
 anytime" customer services, and to bridge supply chain gaps. Technological
 developments and the decreasing price of mobile equipments are making new types of
 applications technically and economically feasible. Mobile phone ownership will
 approach 100-percent penetration of economically active customers.

 Specific areas of Saudi Arabia will have to assume a leadership role to permit our
 businesses to take advantage of the future technologies. These will be discussed in the
 summary and recommendations section.




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 4.            ICT Role in Developing National Economy

 When we see the STC mission, who indicates that STC business is main source of
 people’s cultural and economical values, it clearly explains the major and important role
 of STC (mainly ICT) to the national economy.

 During the Future financing Seminar held March 29-30th, 2001 at Riyadh, Telecom
 participation in the economy and growth was the highest sector in the kingdom of Saudi
 Arabia where the growth was estimated 30% for last four years and expected to
 continue 20% through the coming five rears. In addition, it was mentioned that the
 investment in the telecom sector would approach forty billion Saudi Rials during coming
 five years.


 4.1           ICT Historical Investment


 From the past MoPPT had shared revenue during 30 years of its services prior
 privatization. MoPtt used to endorse Billions of Saudi Riyal yearly to the Ministry of
 Finance and National Economy where it was considered as one of the major GDP
 contributors after the OIL Revenue, During the fiscal year 2000/2001 the total STC
 Revenue is expected to reach SR 20 Billions.

 ICT contribution through its TEPs Project such as:

  August 1994 Lucent Technologies (Formally AT&T) has awarded the TEP6 Project
 modernizing telecommunications in KSA; Lucent is broadly and deeply involved in
 providing the complete spectrum of telecommunications products, services, and
 technologies in the Kingdom through its participation in the following projects:

         TEP6/GSM: 1.5 million digital telephone lines, 500K GSM lines and network
          expansion.
         WLL: 171K Wireless Local Loop lines provided by Lucent's Air loop products.
         TEP7: Replacement of 334,244 PRX exchange line replacement and 311K
          telephone line expansion of the switching network.
         GSM 500K: Installation of additional 500,000 GSM subscriber line capacity.
         Y2K: Replacement of 812K switching lines to meet Year 2000 compliance and
          switching growth.



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         Internet: Implementation of ATM and Postmaster 4 systems to provide 50,000
          subscribers with dial-up Internet access (contract in preparation).

 Currently Thousands of locals employed by ICT Sector. As an example STC hired more
 than 23000 employees all over its departments in the country, this is considered a great
 job provider for the Saudi generations, in addition to that if we consider number of data
 centers in both general / private sectors will add extra thousands of jobs in the field of IT
 also.

 4.2           Business Model

 STC provides most of its telecommunication services through out its subscription offices
 established all over the country. A number of services are provided by the private
 sector such as:

 4.2.1         Telephone Call Cabinets
 Over 3200 Call cabinets (kingdom-wide) Managed by the private sector through
 opening of telephone call cabinets. These cabinets spread throughout the Kingdom.
 Provides suitable conditions for making calls such as air conditioning, appropriate
 lighting and a relaxing environment. Also provides special rooms for families.
 This type of service permits local, national and international telephone calls.


 4.2.2         Internet Service Providers (ISPs)
 The Kingdom is the largest market in the region for Information Technology, E-
 Commerce, and Office Automation systems Computerization at the work place and at
 home is rapidly spreading in the Kingdom.

 Saudi Arabia accounts for 40% the region's IT market and the demand for related
 peripherals is continually rising. Another 116,000 new Internet subscribers and a
 phenomenal growth rate estimated at 8% per month are further fueling the demand for
 communications hardware and system expansion.

 The Kingdom's telecommunications market is receiving a further significant boost now
 that the Internet is becoming operational in the Kingdom. There is a high level of
 demand from businesses that are keen to take advantage of the commercial
 opportunities the Internet has to offer. Saudi Communications will showcase business
 and professional Internet and Intranet products and related communications equipment.
 The evolving technology seminars will also offer special opportunities to deliver
 information on the latest technologies.


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 4.2.3         Pre-Paid Cards
 It’s a service that allows the beneficiary to contact a free number (800) form any normal
 telephone with or without an international zero (access) where the costs are paid by the
 number contacted and not by the number used for executing the call. These types of
 services enable national and international contacts from any fixed telephone, even if it
 has no zero for these calls.

 4.2.3.1       Outsourcing Projects


 With a Huge Expansion projects STC can not by itself executes all parts of the projects
 by its crews, the normal way is to outsource most of its expansion activities and there
 where the STC most contribution of steering the economy of the country. STC through
 its TEP6 Project has a partnership with its main vendor (Lucent Technologies)
 establishing Telecommunication Factory, which produced central office switching and
 transmission systems equipment. In addition to the technology transfer, training, and
 support.

 A huge company like STC has offices through out Saudi Arabia. Naturally, it consumes
 a large quantity of office supplies at the same time it provides a number of business
 opportunities in this sector which leads to enrich the economy of the country.


 4.2.3.2       Construction Projects


 Hundreds of local firms had business opportunities with STC for the past and future. As
 Part of contribution the local businesses, the Telecom projects has enabled many
 opportunities for the Saudi Companies, In addition to that the creation of some Offset
 companies has benefited from the projects such as the Advanced Electronic Company
 (AEC) and International Network Engineering (INE), plus hundred of vendors. The
 largest market in the Middle East, just got larger...

 The Kingdom enters the next phase with one of the world's largest telecommunications
 network expansion projects, offering unmatched opportunities for suppliers, The latest
 phase of one of the Middle East’s most ambitious telecommunications expansion
 project's is under way. Saudi Arabia’s TEP-8 is a 4 billion US$ project that entails the
 installation of an additional 2 million fixed lines, 500,000 line expansion of the GSM
 network, wireless local loop systems, microwave systems, and long-haul fiber-optic
 connections. This work is to start as soon as the current 4 billion US$ TEP6 and TEP7
 are completed. These projects coupled with the announced privatization of the

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 telecommunications services, and opening of Internet access, have created unmatched
 demand and opportunities for the suppliers of the full range of telecommunications
 products and services.


 4.3           ICT as an Industry
 Traditionally ICT has been viewed as a service to the Kingdom economic activities. The
 oil, government, banking, agriculture, etc. sectors depend on ICT infrastructure to
 conduct their business. It must be noted that ICT not only provides a service to the
 economy, it also generates manufacturing, construction and technology oriented
 employment.
 The following section highlights industries enabled either directly (manufacturing) or
 indirectly (telemedicine) by ICT.


 4.3.1         Directly Enabled
 ICT with its dynamic development required creation of products and industries directly
 connect to both Telecommunication and Information, these products either
 manufactured inside the country or imported for ICT needs.

 4.3.1.1       Communication Products
 Cabling Products
 Satellite Communications
 Telephone Equipment
 GSM Accessories & Batteries
 Mobile Networks and Equipment
 Transmission Equipment
 Microwave Systems
 Video Conferencing
 E-mail & Voice Mail Systems
 Multimedia Communications


 4.3.1.2       Internet Products


 Internet Products & Technology
 Internet/Intranet Services
 Internet Service Providers (ISP’s)
 Local Area Networks (LAN)


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 Wide Area Networks (WAN)
 Communications Hardware/Software
 Test and Measurement Equipment

 4.3.2         Indirectly Enabled
         E-Government

 The internet and e-business will assume an increasingly larger role in many aspects
 worldwide, in the kingdom of Saudi Arabia such initiative are taking an aggressive steps
 toward regulations and implementation of this type of new trend in business. STC is well
 aware of building the needed infrastructure, which enables the success of E-
 Government initiatives.

 ICT will enable the kingdom of Saudi Arabia to effective participant to the e-market
 place created by the so called digital economy, such new market will have a better
 return on the business in the country and increase the trade volume, in addition to this
 the trade balance will be higher.

         Telemedicine

 Ministry of Health provides health care to the people of Saudi Arabia through its health
 centers; furthermore, it went a further step implementing the telemedicine by contacting
 the famous health center worldwide, with the aggressive development of ICT in the
 country the health care and medicine will increase in both quality and services.

         FDI

 Foreign Direct Investment (FDI) not meant only finance or liquid money to the country
 but including the technology transfer, market access for goods and services, also it will
 raise the country total productivity and link local market with others.

 According to the FDI Authority, FDI successful factor are:

 Saudi liberal economic environment
 Political stability
 Stable economic environment
 Saudi market size is the second large in the region
 Saudi geographical location as a major route linkage between Asia, Europe and Africa.
 Having cheap, competitive natural resources.

         Software



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 Software development can become a key component of the Saudi economy.

 Web services - software components that can be accessed over public networks using
 generally available protocols and transports will be the next big step in Internet software
 development. The future of XML and JAVA is bright in the short to medium term. Long-
 term new protocols/ models may prevail.

 Adaptive Systems - hardware or software systems that can dynamically manage their
 own resource allocation to respond in real time to changing requirements, using
 techniques such as genetic algorithms, fuzzy logic and neural networks will come to the
 fore.

 Write once, run anywhere applications– with cross-platform capability will let
 programmers maintain only one body of code. This will free the enterprise to develop
 applications without having to legislate the technology used by those running the
 application and without having to absorb the costs associated with building multiple
 instances of the applications.

 Automatic platform adjustment will become the norm. This means that "user" logic runs
 on a client or a server device, depending on the server's decision as to whether or not
 the client has the resources to run it. If the client can run the application, it is
 downloaded; if not, it runs on the server and the results are broadcast to the client.

         Opportunities (Teleworking & Women)

 ICT will enable women to do their business from home by Teleworking (estimate more
 than 20 types of business activities). The Saudi population will be around 40 millions by
 2020, half of them being women (Aljazeera 1417-32). According to the country sixth
 plan 465,139 women are expected to enter the workforce. However, the market will
 only absorb 78,700 where 386,439 will be unable to find employment. Women’s
 participation in the economy will grow as a direct result of the expansion of both
 telecommunication and IT facilities in the home.

         Education E-Learning

 ICT as a major contributor to the economy not directly but rather through the ‘skilled
 minds’. Knowledge has now become a major factor of production; education and
 training will be increased by ICT development, not only the size but by quality too.


 4.4           Future Investment



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 The Kingdom of Saudi Arabia, under the leadership of Custodian of the Holy Mosques,
 King Fahad Ibn Abdulaziz al Saud and the leadership of the Ministry Of MoPtt at that
 time has played an extremely role in turning the development vision of the country into a
 concrete reality through the construction of modern highly advanced public Telephone,
 Telex and networks including the Intra-Kingdom Coaxial Cable Networks and the
 satellite earth Stations, which provide communication services to most of parts of the
 country.


 4.4.1         Telco Infrastructure.

 Saudi Arabia is not only one of the fastest growing infrastructure equipment markets,
 but also the world's fastest growing market for mobile phones. A nationwide installation
 of an additional 250,000 GSM line network is currently in progress to cater to the high
 level of demand. The Fiber Optic Link around the Globe (FLAG) project to which Saudi
 Arabia will be connected will also create a strong market for high-speed data
 communications equipment.


 The Kingdom is currently in a period of massive expansion of the telecommunications
 infrastructure. The current expansion plans. The work involves fiber optic networks,
 thousands of miles of fixed telephone lines, hundreds of exchanges, undersea cable
 links, earth station and satellite services. Private sector demand is also high for the full
 range of fixed, mobile telephone equipment, and PBX systems.


 4.4.2         Digital Economy

 ICT becoming a self-sustained source of income, it has a bright future in contributing to
 the economy of Saudi Arabia. In some literature it is expected to be the third or even the
 second source of national income in the kingdom after the oil revenue, Banks and
 Financial Institutions definitely will increase their transactions and activity through the so
 called Digital Economy.




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 5.            Recommendations and Summary

 The major requirement to meet the above-mentioned scenarios is ubiquitous network
 accessibility via wire line or wireless (Saudi Arabian wireless penetration by 2005 at
 30%). The amount of necessary resources depends very much on the success of the
 upcoming access/connected technologies and their market penetration.

  There are currently more than 2.04 million Internet users (Saudi Arabia: 190 000
 subscribers, 570 000 users, 2.59% penetration rate; (UAE 12.5%, Egypt 1%, USA 50%)
 in the eight Middle East countries.

 Gulf Business magazine states6 that ‘even with no net immigration, if current rates of
 fertility, mortality and Saudi migration are maintained, by 2020 Riyadh with a population
 of between 9.8 and 11.1 million people will account for between 33 and 36 per cent of
 the total population of Saudi Arabia’ and ‘would result in Riyadh becoming the first
 mega-city in the Arabian Gulf’.

 The expected move to packet-switched technology will require extensive installation of
 new technology. Providers as well as governments have to find a solution for the urban
 vs. rural divide (rural access).

 On the side of technology, leaders each society has to take care for an extremely
 focused and frequently updated educational system. As mentioned at other places in
 this document lifelong learning will be the standard due to the pressure of constantly
 changing and improving technological options. Each member of the society will be
 exposed to the new learning requirements of the ever-changing technological
 environment.


 5.1           Recommendations


 In order to achieve sustained growth of our economy, the government, our educators
 and the private sector will have to take a leadership role.




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 5.1.1         Role of Government
 In coming years Role of Government will be very import. The new applications, like E-
 Commerce, Telemedicine, etc, need rules and regulations to protect subscribers,
 telecom operators, business service providers and ISPs.

 The Government has to take the responsibility of the following:

 5.1.1.1       Leadership

                   Set the Strategic direction for the country in the rollout of ICT

                   Provide funding to Schools, Universities and Hospitals and other
                    government departments for the installation of fiber optics infrastructure

                   Provide funding to government departments to implement electronic office
                    space projects

                   Offer a favorable business environment (e.g. accepted principles of
                    fairness, speed and dependability of execution, effective enforcement and
                    compliance with international norms) that will increase foreign direct
                    investment and trade

                   Provide a non-distorting tax regime that will not discourage investment
                    and entrepreneurial efforts

                   Be the role-model in adopting ICT products and services in the public
                    sector

                   Should encourage ICT deployment by enterprises to make them more
                    competitive and efficient

 5.1.1.2       Regulatory Framework


                   Develop a comprehensive regulatory framework to avoid slowing the
                    development of competition in the sector, expansion of ICT use, and
                    enterprise growth

                   Deregulation can have a positive influence on the development of
                    infrastructure. The benefits of competition will not only improve the
                    infrastructure but will increase foreign investment
                                             Regulatory Framework



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                   Provide transparent and inclusive government processes, which are useful
                    for the expansion of ICT

                   Processes can be facilitated by the use of ICT (e.g. internet can be used to
                    access legislation, taxation codes and government services)


 Government bodies have to streamline their internal processes and not only adapt but
 also utilize to new technologies and options developing.

 Government should review its legal procedures, make new rules and laws, which can
 help and make the telecom attractive for the domestic and foreign investors to invest.

 One outgrowth of the information revolution is increased availability of information:

          More information flowing with less obstruction
          Information flowing independent of distance
          Increasing opportunities for economic cooperation across borders
          People being inundated with vast quantities of information
          The democratization of information
          The empowerment of the individual through access to increased information

 The government will have to lead us through the issues that will impact our society and
 culture.


 5.1.2         Role of Private Sector

 The private sector will be the main enabler and user of ICT.


 The Private Sector has to take the responsibility of the following:


 5.1.2.1       Infrastructure

                   Focus on developing network infrastructure capacity for key sectors to
                    take advantage of leading edge technologies

                   Include a reasonable level of global connectivity to take advantage of
                    worldwide opportunities



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                   Complement focused capacity by interventions to promote ubiquitous
                    access through:

                           –Universal access funds
                           –Support of community networks
                           –Public access points

                   Ubiquity and the move toward universal access become more and more
                    feasible with the declining costs for networking and telecommunication
                    technologies


 5.1.2.2       Entrepreneurship

                   Excessive need for motivated entrepreneurs and people with business
                    expertise to leverage new opportunities

                   Adopt a supportive policy environment and provide opportunities for
                    development on top of entrepreneurial skills and financing

                   Provide access to credit and financing to have a smooth functioning of the
                    development dynamic. Hence the development of the two key financial
                    sectors, banking and venture capital, is crucial



 5.1.3         Role of Education
 Technology is changing the way our teachers teach and students learn. As
 technological advances are introduced into the educational system, campuses are more
 and more attracted by the promise and potential of technology for enhancing access
 and learning. Faculty, staff and administrators need to understand what technology can
 and what it cannot do. Technology is seen by some as the panacea for budgets cuts:
 some see visions of hundreds of students sitting in front of monitors, with talking heads
 providing cheap, mass education. Others see technology as a critical complement to the
 educational experience, opening more opportunities for the learner than can be
 encompassed by one campus. To reap benefits in the area of education and learning,
 there needs to be an increased concentration on supporting the development of new
 and IT based ways of learning. We must teach our children about technology and
 introduce ICT concepts in our schools.

 The Ministry of Education has to take the responsibility of the following:



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                   Define the current and proposed role of information technology in the
                    classroom.

                   Educate government on the telecommunication requirements to enable
                    telemedicine, Teleducation, etc.

                   Promote the concept of learning technology and involve all members of
                    society. This includes: government, professional societies, faculty,
                    teachers, librarians, students, publishers, and designers/manufacturers of
                    learning technology products.

                   Focus on educating and retaining a core of professionals with the
                    technical capabilities to provide and maintain ICT infrastructure and
                    related ICT services

                   Encourage teaching staff to take computer and technology related
                    courses.

                   Encourage the deployment of computers and related tools in the
                    classroom at all levels.

                   Consider and be willing to adapt or revise current teaching and learning
                    techniques to utilize the benefits of using technology in the classroom.


 Experts should be brought in to the classroom to explain the benefits of technology to
 our teachers and students. Our educators must insist on computers in the classroom
 and connectivity to the Internet.

 5.1.3.1       Corporate Education
 The corporate sector will drive innovations in the areas of professional education and
 life-long learning. The adult education market is growing, as evidenced by the rise of
 corporate universities. Although universities have not been as innovative or as flexible
 as the corporate sector in their course offerings for adult learners, in the past they had
 the advantage of being able to offer certification.

 Open locally basic digital communications courses, seminars, and workshops on weekly
 or at least bi-weekly bases, and encourage technical staff members to attend regularly.
 If required, the qualification of each staff member may have to be reviewed with respect
 to his or her job. If this action is taken seriously, the attendance of some staff members
 may become compulsory. The contents of these courses, seminars, and workshops



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 must be planned with clear objectives. The fundamentals of digital communications
 systems should be covered:

         Review Modulation Techniques
         Source encode
         Encryption
         Channel encode
         Multiplexing and Multiple access
         Frequency Spread Spectrum

 Use in-house experts to teach these subjects, and use the existing products for hands
 on the practice. If necessary, the company decision makers should be involved in
 selecting highly qualified instructors for these subjects. This will be the most effective
 approach toward improving employee's skill and a good way of transferring
 technologies.


 5.2           STC Summary

 Telecommunications is moving towards data, mobility, higher transmission speeds, the
 Internet, multimedia, wireless, optics, new services, customized applications,
 personalization, globalization, distance independence, liberalization, standardization,
 and lower charging.
 Fortunately, we are now at a point of time where juice of the research and development
 over the last 30 years is just being materialized for us. Almost all factors of success are
 met: the Internet with its massive and global applications, low cost LANs and
 multimedia PC’s, reduced cost of high capacity transmission and switching, higher rates
 on the copper, access choices, optics, mobile and wireless. These will compete and
 complement one another for different applications.
 Almost all old exchanges will disappear in few years. New combined PSTN/ISDN
 exchanges will survive for more than 5-10 years.
 Existing ATM backbone networks and ATM Service Nodes will provide far better service
 and will more economically carry long distance IP voice, video and data traffic. It is the
 choice of today. Tomorrow, we may implement a more sound technology for “backbone
 cloud” that integrates with existing systems (e.g. IP over DWDM). We have to increase
 our DWDM capacities, even before we decide how to fill it with chargeable traffic.
 We deploy Access Nodes with the varieties of UNI’s for ADSL, LANs and other high bit
 rates as soon as standards and cost become reasonable. ISDN, ADSL, LAN and VSAT
 more complement each other than compete. Each has its applications, cost and



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 customers. We expand mobile and paging with enhanced data services and
 interworking with the Internet.
 We compete with other ISPs attached to the “backbone cloud” and search for and/or
 develop applications that satisfy the different sectors of the society such as: E-
 commerce, Telemedicine, Banking, Industries, Education, Government, Business,
 children, teenagers, women, students, etc. They need value and practicality at
 affordable cost. Our mission is to make them happy, comfortable and productive, while
 filling our transmission with chargeable traffic.
 To enable our network to meet the requirements of our customers, STC will deploy
 various technologies and services over the next few years in anticipation of new
 business needs.

 These technologies include:

                1) DSL, FTTB, FTTH and FTTC in urban areas
                2) MMDS, LMDS and WLL in rural areas
                3) OADM in the fiber network
                4) OXC in the transport layer
                5) MPLS enabled routers

 The future STC network will run Fiber Optics, depending on the requirement, to the
 building, to the home, or to the cabinet. To service our customer in the rural areas of
 the Kingdom, we will utilize various wireless technologies (Multichannel and Local
 Multipoint Distribution Services and Wireless Local Loops). We will also deploy Optical
 facilities to enable the new services.


 These services include:

               1)   VOIP
               2)   Broadband wireless
               3)   WAP enabled applications
               4)   Intelligent Network Services
               5)   Public radio services
               6)   Satellite Services
               7)   Applications to support e-business and commerce

             Large Business              Small Bus, Large             Residential
                                         Residential




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             Free Phone              Multi Location Ringing      Switched Services
             VPN & Centrex                                       Voice Mail
 Voice



             Premium Rate                                        Calling Card
             Customized Services                                 Multiple Lines
             Dedicated IP            Digital Subscriber Line     Dial Up IP Access
             x.25                    Frame Relay                 Broadband IP
             ATM                     Leased Line
 Data




             Wave Length Services    E-commerce
             Data VPN
             VoP PBX                 Continuing Education        Internet Call
 Converged




             Telemedicine            Customer Self Service       Waiting
             Customized Services     Multimedia Conferencing     Integrated Access
                                     Distance Learning for       Distance Learning
                                     Schools


 However, there will be many challenges. We have to cope with the Internet traffic,
 which have been growing at a 1000% per year with calls Mean Holding Time increased
 from 2 min to 30 min. Security, signaling complexity, learning, training, frauds, and
 billing are among the major challenges.
 Equipment suppliers and network operators will have to boost their research and
 development and marketing efforts to meet the demands of fast changing technology
 evolution in order to stay competitive.
 Regulators are expected to be always on top of all the issues in this volatile
 environment of technology and services without impeding its progress. Frequency
 management is definitely a major issue. They will face considerable challenges to
 maintain a fair competitive market. They will need to continuously acquaint themselves
 with all emerging services and applications to make sure they are fairly charged. We
 need some blessing, but no one should wait to miss the opportunity.




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