Licensed Internet service providers in the countries of North Africa and the Levant collected less than US$89 million of a total Internet access services market valued at $182 million in 2002. Over 51 percent of end-user spending on Internet access services in North Africa and the Levant actually went to the incumbent telecommunications operator, illegal service providers, or the data connectivity providers.

According to a recent study and forecast 2002-2007 by IDC the total number of Internet access connections in Egypt, Jordan, Lebanon, Morocco, Syria and Tunisia reached over one million. Egypt holds the largest number of connections.

"Unfortunately for licensed ISPs, however, less than 43 percent of the average spending per connection goes to the ISPs in the form of subscription fees. The remaining 57 percent of end-user spending in Lebanon goes to unlicensed providers of Internet access services over illegal private copper cables, and to the incumbent operator in the form of leased line rental fees and PSTN call charges."

IDC research indicates that a similar trend exists across the region. ISPs in Egypt collected only 68 percent of total end-user spending in that country in 2002, while the corresponding figure for Morocco was 48 percent, followed by Lebanon at 43 percent, and Jordan at 42 percent. Tunisia came last, with ISPs collecting a mere 33 percent of the 2002 end-user spending on Internet access services in that country.

"ISPs need to look at the actual spending by end user on Internet access services, instead of simply the revenue they generate from their customers. This will allow them to assess what share of the total end-user spending is ISP revenue, and to quantify the amount of end-user spending they are losing to other market players, such the fixed-line operators," says Malaki.

"The region’s ISPs have even more to worry about," asserts Malaki. "Not only are they being squeezed from the revenue side, there is tremendous pressure on their profits from the cost side of the equation as well. Depending on the regulations specific to each country, ISPs can also incur such operating costs as dial-in port rental fees, connectivity to the national IP backbone, wholesale fees for leased lines, co-location fees for ADSL equipment, as well as the very costly international bandwidth fees."

The study has also identified several payment models being used for dial-up Internet access services in the region. These include the traditional subscription-based models employed since the early years of the Internet in the region, as well as several innovative new models. These new models include the subscription-free model being used in Egypt, subscription-free premium-rate model used in Egypt, Syria, and Algeria, the Internet prepaid card model used in several countries in the region, and the flat-rate, unmetered access model currently introduced only in Morocco.

Looking ahead, these new dial-up models will play a key role in the further growth of Internet access connections in the region. IDC expects the overall Internet access market to exhibit a CAGR of 24 percent for connections and 19 percent for end-user spending between 2002 and 2007. The market will reach close to three million connections, which are expected to generate end-user spending of US$437 million in 2007.

The largest driver of connection growth will be dial-up during the forecast period. Broadband connections should see the highest growth rate, however, up from a very small base in 2002. Internet leased line connections will increase at a 16 percent CAGR in the same period.