Information + Communication Technology E1:R1
◢ The state-owned Telecommunications Infrastructure Company (TIC) is working to expand access and lower costs for high-speed internet
◢ Venture Capital is maturing in Iran, helping to boost the prospects of an entrepreneurial tech ecosystem
Iran’s information and communication technology (ICT) industry has witnessed notable growth in recent years despite the imposition of international sanctions. Iran boasts a mobile phone penetration rate of 94.39%, 45.9% computer adoption, and 21 million internet users. This strong consumer base is serviced by a network comprised of 6,616 km of fiber optic cables, and a 2670 Gbps transmission network, supporting over 700,000 Iran-registered domains and 55,000 active apps. These figures, as well as the rise of digital habits made possible by smart phones, all indicate immense potential growth. Iran's ICT sector is currently worth about USD 7 billion, accounting for just under 3% of the economy.
Iran's ICT industry is uniquely positioned for domestic growth. The country's large proportion of science and technology graduates, as well as government support through developments plans such as the National Information Network have enabled Iran to build native capacity in ICT hardware and software. However, the recent push to support more research and development and entrepreneurship in Iran has also opened the door to greater collaboration with international firms that can bring unique technologies or expertise to the country to keep up with the rate of global innovation.
At the same time, Iranian authorities are keen to ensure Persian language retains its 9% share of the world wide web and that "cyberspace" does not become a place that undercuts official social-cultural values. As such, a degree of government oversight on the range of openly accessible content will remain in place.
Venture Capital Drives ICT Growth
One of the early success stories of the post-sanctions economic environment has been the rise of venture capital in Iran. Investors are for the first time seeking early-stage opportunities particularly in the tech sector.
The rise of VC funds has caught the attention of Iran's financial regulators. The Securities and Exchange Organization has aimed to formalize a platform by which VC funds can list on Iran's capital markets to attract investment. Sarava Venture Capital Fund, Armani Development Fund, Parsian Venture Capital Fund, Royan Persian Health Fund, and Yekom Arman Fund recieved licenses to support the creation of exchange traded funds on Iran's Fara Bourse over-the-counter securities market. In creating these new funds, regulators hope to encourage Iranians active in the capital markets to support the growth of Iran's knowledge-based industries, particularly in ICT, by leveraging the management capacity of venture capitalists. Importantly, ICT applications cross over to other sectors such as digital healthcare and financial technology.
In the past month, Iran's Minister of Communications and Information Technology, Mahmoud Vaezi, presented a comprehensive plan to parliament that highlighted ICTs role in the governments plan for economic development. Already, total investments in the ICT sector had risen from USD 500 billion to USD 6.4 billion just three years later. Overall, private telecommunications operators generated Rial 200 trillion in profit each year at current levels. Vaezi believes that could triple by the end of the next five-year development plan.
But there is a long road ahead. The International Telecommunications Union (ITU) of the United Nations ranks Iran 91 in the world for the strength of its ICT network. This is an improvement from a ranking of 99 in 2010.
A New Route for Global Internet Traffic
At a recent press conference, Azari Jahromi, Chairman and Managing Director of Iran's Telecommunication Infrastructure Company (TIC), said that the TIC’s latest prices have been reduced by 84% and 42% in transit and internet charges, respectively. This was achieved by negotiators lower end-user prices with ISPs such as Asiatech, Rightel, and Shuttle. Which in turn welcomes a move by TIC to reduce fees of traffic moving through datacenters, a step welcomed by web platforms such as Arparat, Iran's version of YouTube.
Unlike many state-owned enterprises, TIC is profitable. Jahromi reported estimated revenue for the year of Rial 18 trillion with about Rial 3 trillion in profit. TIC is laying the groundwork for a government-sponsored program to expand Iran's fiber optic network.
The challenge is to ensure that these investments are getting ample return for TIC and for the internet service providers. A complex agreement overseen by the Communication Regulatory Authority enables Iranian ISPs to keep the number of subscribers confidential, treating it as a trade-secret. The consequence is that some ISPs are taking on more subscribers than their share of the network capacity can adequately service, impacting speeds and customer experience. This also makes it difficult to ascertain precisely how much capacity the new fiber optics investments need to provide.
To address these transparency issues, TIC is planning to launch a new online portal that will display network performance for each ISP across the network and make this information availible to consumers.