Backstreet internet call shops threaten UAE telcos

Thursday, 10 November 2011 9:02 AM

Stores use internet-to-phone calls to undercut rates offered by local telcos

In the gritty streets of Deira, the old commercial heart of Dubai, lurks a threat to some of the region's biggest telecommunications firms.

It is here on the northern bank of Dubai creek, among the grocery stores and barbers, the discount tailors and food stalls, where low-wage workers come after a day's toil to phone their family and friends overseas.

Instead of using their pre-paid mobile phones, they cram into the sweaty booths of dilapidated backstreet internet shops to call home at prices a fraction of those charged by telecom operators Etisalat, the United Arab Emirates' most valuable listed company, and rival du.

These shops dodge government inspectors to offer unlicenced Voice over Internet Protocol (VoIP) services - free Internet-to-Internet calls and cheap Internet-to-phone calls. The UAE's regulator says only licenced companies can provide VoIP.

"It's less than a tenth of the cost of Etisalat, that's why I come here," said Mansour, 21. The Afghan works in a Deira clothes shop and calls his family in Kabul three times a week from a 14-booth VoIP shop run by managers Mamun and Shajib, both 22.

The Bangladeshi pair have been offering VoIP services for more than a year and spoke on condition that their full names and company details were not disclosed.

"For internet we can only charge AED3 ($0.82) an hour and that's not enough to pay two salaries, shop rent, licences and broadband costs," said Shajib. "We would have shut if it wasn't for VoIP, but this is very popular and more and more people are telling their friends.

"Most people's salaries are not even AED1,400 per month and they can't spend much on the telephone, so that's why they come here. If Etisalat or du offered the same rates as us, we would close down tomorrow."

Internet-to-phone calls via Skype, the global leader for consumer VoIP, are intermittently blocked in the UAE, but the Deira shops also use other programmes such as Calls Telecom and Call World for internet-to-phone calls, and these seem to work without hindrance.

Rates start at AED0.1 per minute to phone a landline in India, with Pakistan, Bangladesh and Sri Lanka the other top destinations, Shajib said. Prices to these countries are about AED0.25 per minute on average.

To call India, Etisalat and du charge AED1.89 per minute for off-peak calls between 9 pm and 7am and AED2.40 at other times.

The regulator sets their tariffs, so the two operators cannot directly compete on price and instead tout various call packages. Etisalat offers subscribers a 60 percent discount on late-night calls to the subcontinent, but its fees are still much higher than the rates offered by Shajib and rival shops.

Etisalat operates across 18 countries but three-quarters of its revenue comes from the UAE, while du is a single-country carrier, and international calls are among their biggest income streams. So VoIP is potentially disastrous for them.

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Posted by: QabIdWxrpLnTdqjRA Monday, 14 November 2011 3:25 PM[UAE] - vbLRRayJbpPeDdP

Thanks alot - your answer sovled all my problems after several days struggling

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Posted by: MM Thursday, 10 November 2011 6:27 PM[UAE] - UAE

I used to rely on Skype and similar a lot to make international calls. But I don't use them anymore. Since I switched to Du's Elite plan, I get 200 minutes of international calls free along with 100 text international. Thats perfect for me. Whenever I need, I just call from mobile.

So the moral of the story is, make the prices affordable and people will start using it. Du seems to be doing it somewhat right. Etisalat needs to come out of flintstones era and be real.

Posted by: Matt Saturday, 12 November 2011 1:01 PM[UAE] - UK

@MM

Why do you bother using Du?

Skype is FREE and its BETTER quality than Du.

Have you tried using the Du customer service..? SHOCKING....

Posted by: Mike DeLonghi Friday, 11 November 2011 1:29 PM[UAE] - Saudi Arabia

Haha MM, did Du give you a free phone card to make this posting? Fact of the matter is that banning Skype etc. is so 'last year' protectionism.

Banning stuff goes miles to explain why UAE is going to find it hard to truly reform their economy to low-growth, high competition environment. UAE need to improvise and move fast or their role as 'middle man' will be jeopardized!

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Posted by: kr Thursday, 10 November 2011 6:25 PM[UAE] - germany

I feel handicapped doing international business here, not because of the cost of the phone calls only, but because of not being able to use international business tools such as webex, gotomeeting, etc. easily. Stopping thes tools is a very short time strategy and will harm all other businesses, including Telcos since they don't stay competitive.

Posted by: telcoguy Friday, 11 November 2011 1:29 PM[UAE] - UAE

True. and the fact that by setting up a VPN to connect to a server I am technically breaking the law, does not help either.
It is a big mess here in terms of legal requirements, and it will not get any easier with all the concerns about security.

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Posted by: Bassam Thursday, 10 November 2011 6:24 PM[UAE] - India

It's no longer about individual profits or market shares, it's a technology shift... 15 years ago, post went through the same technology shift when email came about - nobody felt the need to spend on postage stamps to exchange letters. The internet has made VoIP and voice chatting nearly free. It's because they rely on data exchange. It's clear that voice, specifically international calls, will no longer generate profits. Instead, Data will be the new profitability-driver.
Internet capable smartphones and tablet computers are again changing internet consumption - iPhones, iPads and Androids are doing exactly that and more conveniently so. Time will be when you access VoIP or voice chatting (Gmail, facebook etc) on your smartphones while you're on the move, and you could be chatting UNLIMITED with family and friends thousands of miles away.. for free! There IS opportunity, only if Etisalat and du are willing to recognize it.

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Posted by: Red Snappa Thursday, 10 November 2011 6:23 PM[UAE] - Ireland

All sophisticated, countries permit VOIP, even on home computers and you can even buy VOIP foreign call services Sim cards in newspaper shops.

The present VOIP regulation sets telecoms back to the Stone Age, with the brunt of the cost borne by expatriate workers phoning home and foreign businesses, another added cost of operation.

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