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End in sight to Lebanon's crippling Internet problem

By Oliver Holmes

BEIRUT (Reuters) - For Sara Darwiche, it has been more than problematic running her fast-paced Internet company out of Lebanon, a country with Internet access that is among the worst in the world.

The "invite only" website ChouChic.com gives its members the opportunity to buy surplus stocks of fashionable clothes at discounted prices. It works on the idea that the scarcity of the clothes coupled with the time limit on sales -- 48 hours to a week -- will nurture impulse buying and push up sales. The strategy is called flash selling.

But for ChouChic's main customers, who are Lebanese, there is nothing flashy about buying online here.

"Sometimes the website cuts and people think the sale is over. It really affects the quality," she told Reuters. "We open our sales everyday at noon and for some reason the Internet usually cuts out then for five minutes."

For a company aiming to sell the majority of stock in the first ten minutes of a sale opening, connectivity issues can be devastating.

"We needed a lot of modifications to compensate for the slow Internet," she said, adding that the website was now hosted in the United States. "For luxury fashion, it needs to look like the goods are in front of you so the resolution of the photos needs to be high. But we had to lower the resolution as upload speeds were too slow."

Lebanon is regarded as a fortress of Arab entrepreneurship, with a vibrant services sector and a business community that is famed for its unyielding tenacity even during the depths of war. But sluggish and expensive Internet has been an embarrassing blot on the economy, and Internet-based companies such as ChouChic are rare.

On Saturday, the Ministry of Telecommunications introduced a new, high-speed and cheaper Internet plan for private Internet Service Providers (ISP) to sell on to customers. The plan aims to reduce end-user prices for digital subscriber lines (DSL) by 80 percent, while raising speeds up to eight times.

If it is implemented smoothly, the plan will provide relief to hundreds of thousands of Lebanese Internet users and could boost economic growth. But for years to come, the economy may bear the scars of the political bickering, vested financial interests and negligence that kept Lebanon in the slow lanes of the information superhighway.

MISSED OPPORTUNITIES

"While other countries in the region have capitalized on (the Internet), we have missed it," said Nassib Ghobril, chief economist of the Byblos Bank Group.

"They have moved ahead of us and now have a comparative advantage. A lot of companies that rely on the Internet look elsewhere to base themselves."

Ookla, a company that tests Internet speeds around the world, has often ranked Lebanon last on its global Net Index, and the country has generally been lower down than many less developed nations such as Afghanistan and Burkina Faso.

"Lebanon is a services economy and society. Not having Internet is like not having foreign languages," Khaldoun Farhat, CEO of private ISP provider Terranet, said at his offices opposite Beirut's port.

Farhat has repeatedly tried to bypass what he calls a "narrow view" of the Internet by the Ministry of Telecommunications. He bought Internet capacity from satellites, made failed requests to buy bandwidth from nearby Cyprus, and tried to import his own Internet equipment which got stuck at customs, he says, for over a year.

"When I wake up, the first thing I think about is, will we get increased capacity today?" he said.

Businessman Mark Daou spent the last few months campaigning for faster internet through a Facebook group titled "Lebanese Want Fast Internet," which has almost 50,000 supporters.

"Slow speeds affect me in the advertising business as all our resources are on the Internet. Especially now as many of our clients are asking for a lot of online advertising," he said.

"I have to wait for Saturday night, when Internet usage is low, to upload files to Saudi and Dubai."

Lebanon has long had the physical capacity to supply cheap, high-speed Internet; in December 2010 a 13,000 km (8,000 mile) submarine fiber optic cable linking the country to India, the Middle East and Western Europe began operating. But access to the cable was delayed until July by bickering between the Ministry of Telecommunications and Ogero, the government's land-line provider, over usage rights.

The dispute was considered politically motivated as the ministry and Ogero are controlled by opposing sides of Lebanon's political spectrum, which is deeply divided by religion, sect and economic ideology.

CASH COW

"In the telecoms sector, everyone wants a piece of the pie. It's a cash cow," Daou said. "The sector is almost completely controlled by the government. It has 80 percent of the market and the private sector cannot buy fixed licenses. Private companies have to renew their Internet license every year."

A lack of revenue sources in other economic sectors, Daou said, has made the government see the Internet as an important source of funds. "The government was the only supplier. They needed the money to finance the treasury. It was generating money and nobody was complaining," he said.

Lebanese Minister of Telecommunications Nicolas Sehnawi told Reuters that successive governments were unable to push through laws to cheapen and speed up connectivity.

"Other (fiber optic) cables in the region were connected before. In those countries, the internal governments have more maneuverability. We have had big periods of paralysis."

Last week, a 1 megabit per second (Mbps) connection, the second-fastest option at the time, cost around $76 per month. Under the new pricing plan, a 1 Mbps connection will be the slowest option available and cost around $16.

Economists and business leaders say the economic benefits could be considerable. They quote a 2008 report commissioned by the Ministry of Finance which estimated 10 percent growth in broadband penetration would increase gross domestic product by as much as 1.5 percent.

ChouChic's Darwiche said she was looking forward to upgrading her website. "We are going to add many functions and the images are going to be a lot clearer."

Two major ISPs which rely on Ogero for bandwidth supply, Terranet and IDM, have already upgraded their Internet services to comply with the new plan.

CONCERN

Even now, however, there is still concern among some private ISPs that Ogero, which controls around 80 percent of Lebanon's Internet cables, will delay further in providing the upgraded service.

"There is not a single person in the country that can obstruct the decision. It will be implemented in a matter of hours and days," Sehnawi said on Saturday in response to such allegations.

But a poll conducted by the "Lebanese Want Fast Internet" Facebook group found only 11 percent of the 1,631 people who replied said they had their DSL packages upgraded to higher speeds over the weekend.

(Edited by Andrew Torchia)

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