As one of the region's would-be internet protocol television (IPTV) pioneers, Jordan Telecom Group (JTG) is finding its ambitions hamstrung by a lack of locally produced content.
The rapid development of mobile content delivery technologies is transforming the Middle East telecommunications sector, with some of the region's heaviest hitters lining-up to take advantage of the commercial opportunities provided by the implementation of new platforms such as IPTV.
JTG is one such telecommunications service provider. The company is currently developing its own IPTV offering which is slated for launch later this year.
As a result, Philippe Vogeleer, chief strategy officer and secretary general of JTG, is in the market for digitised content for distribution across the company's full range of platforms.
A major component of the company's IPTV strategy is to provide low-income households in Jordan with access to email and internet services through an IPTV-enabled set-top-box, which presents a considerably cheaper option than a PC.
"Internet penetration is a major issue in Jordan for three reasons," explains Vogeleer. "Many people cannot afford to buy PCs, connectivity itself is expensive and thirdly, consumers are crying out for locally produced Arabic-language content. There's a huge gap in the market. The next dot.com millionaire in this region is going to be the person who produces Arabic-language content purely for the internet."
Vogeleer is well-versed on the commercial challenges associated with implementing IPTV services. In Europe, JTG parent company France Telecom has developed its own rights management house to acquire content. Orange, part of the France Telecom group, has also applied for two licenses to stream its own DVB-H (handheld)-standard broadcast channels.
Vogeleer concedes that the European market presents a very different commercial proposition to the Middle East at present.
"The IPTV business model is a very complex one to manage and most companies that have tried have 'broken their teeth' on it," he says.
"Streaming live multimedia programming presents very different technical and commercial challenges to video-on-demand applications where users download content in its entirety from a central server. We're planning on trialling both types of services to gauge which offers the greater commercial potential long-term."
Vogeleer claims that in wealthy, developed markets, high broadband penetration and PC ownership bring the real possibility of the internet usurping traditional satellite and cable delivery platforms in terms of delivering entertainment programming to end-users. However, he claims the success or otherwise of any extended IPTV service, beyond basic email provision, will hinge on the availability of high-quality content.
"The greatest issue we face remains the lack of Arabic-language content," Vogeleer says. "It's simply not available and at present we don't have the financial resources to produce it in-house."
"We've launched a number of initiatives in a bid to improve the situation; we've made contact with local production companies and at every conference we plead with local producers to create more Arabic-language content. I'm not referring to Arabised versions of US or European programming."
"We are committed to fostering relationships with local content providers but it is difficult. Vertically integrated companies dominate the broadcast and telco sectors in the Middle East so the idea of companies co-operating in this way is previously unheard of."
Vogeleer cannily suggests forced market consolidation could prove one avenue for shaking up the sector. He notes that the market capitalisation of telco giants AT&T and China Mobile run into several hundred billion dollars, compared to the US$6-10 billion fortunes held by some of the Middle East's heaviest hitters.
Vogeleer says this makes a future round of merger and acquisition activity in the Middle East likely, along with an increase in alliances between regional telcos and potentially, partners from other industries also.
"If someone comes along who specialises in a service our customers want and a deal is beneficial for both parties, why wouldn't we pursue it?" he asks.
Another potential hurdle for the development of additional IPTV services would be pricing, he says.
"Our research shows that customers will only access content on a pay-per-view basis," says Vogeleer. "They don't want to pay a fixed subscription charge. That's why we introduced services that you don't pay for when you don't use them. I would like to see more pricing models based on this principle but sometimes our hands are tied by the regulators, though I appreciate that they have their job to do too."
JTG, now re-branded as Orange for all of its commercial operations, scrapped its connection fees for similar reasons. Given the reluctance of many Middle East-based subscribers to pay regular subscription fees for cellular services, question marks remain over the most suitable pricing model for IPTV services.
It could depend very much on the value those services offer at any given price, such as the quality of and content supplied on each platform, as Vogeleer stresses.
The message from JTG is clear: the telecoms sector is ready to provide another viable market for the delivery of content to end-users. Production houses, broadcasters and regional content rights holders can cash in on their assets.
The recent creation of MoBC, MBC's specialised mobile programming unit in partnership with UAE mobile operator du, is just one initiative which signals a potential end to the impasse between the two industries and a potentially brighter era of cooperation that could provide extensive commercial benefits to both sectors.
Perhaps the root of the stand-off lies in the division of revenues. The telecoms industry is used to collecting subscription charges and billing for service usage. The content producers have long depended on selling content rights and of course, advertising. The more dependable (and lucrative) telecoms revenues must look very attractive next to the brutal competition for ad spend and the haggling of one-off content deals.
As Vogeleer notes, perhaps the key to a successful partnership between the two sectors lies in their willingness to share revenues as well.