Launching a startup isn’t for the anxious or easily deterred. There are myriad worries, from finding investors and customers to forgoing a regular pay-cheque and standard hours. The challenges are huge and in the UAE, entrepreneurs face an extra difficulty: the unavailability of popular voice over internet protocol (VoIP) apps such as Skype, Facetime and WhatsApp calls.

The de-facto ban on the likes of Skype increases costs, reduces productivity, deters investors and hurts the competitiveness of UAE-based startups versus their foreign rivals.

It is also at odds with the country’s huge investments to create a technological infrastructure on par with the world’s best, and entrepreneurs told Wamda of their frustrations.

“It’s a difficult restriction in the sense that it adds extra costs and bureaucracy to doing business here,” says Ian Dillon, co-founder of Dubai fintech firm NOW Money, which provides mobile, branchless, fee-free accounts in the Middle East. “Conference calls with international providers or direct calls with anyone outside the country would normally be done over Skype or another service for free. Whereas here it has to be done through a conventional landline or mobile call.”

Dillon makes on average five international calls a day, the cost of which can quickly mount up.  

“It’s a cost that small businesses face, but small businesses elsewhere in the world don’t, so it puts you at a disadvantage,” he says.

Philip Bahoshy, founder and chief executive officer of MAGNiTT, notes a growing trend of regional start-ups setting up their managerial headquarters in the UAE to benefit from the country’s strong corporate and consumer base. But many of these startups have their “boiler room” tech hubs offshore, with team members based in the likes of Egypt, Lebanon, Jordan, Pakistan and India, while their prospective clients and customers are often also located abroad.

“Communication therefore is essential for the cost-effective operation of many startups across the [Middle East and North Africa] region,” says Bahoshy. “Skype, Whatsapp and other VoIP mechanisms have been used as catalysts globally to support entrepreneurs, connecting (them) with investors, clients, employees and service providers.”

The VoIP ban causes unnecessary challenge for startups, which is especially acute during their early stages where founders are bootstrapping and have limited cash, warns Bahoshy.

“The restrictions on VoIP have created a barrier to growth in what is already a challenging world for startups globally and regionally,” he adds.

Technology advances at such a pace that resourceful entrepreneurs can often find temporary workarounds to the VoIP ban, but that time could be better spent on developing their businesses.

“It creates inefficiency,” says Amir Hegazi, co-founder and managing partner of intoMENA, author of Startup Arabia and former director of marketplace at Souq.com. “It makes the most basic need for business – easy communication – difficult to attain. In a global world, this becomes even more needed and if it’s needed today, it will be even more needed tomorrow. The VoIP ban puts UAE startups at a competitive disadvantage and almost sends a message that entrepreneurs should think small and stay local, when the opposite is true.”

SMART CITIES?

The reality of the ban contrasts with the ambitions of the UAE, and Dubai in particular, to be a tech innovator and leader.

Dubai’s Smart City initiative aims to use smart solutions to improve governance, the economy, environment and mobility so that Dubai is the happiest city on earth. Is this possible without easy VoIP access for residents and visitors?

“Another effect we observe is when we receive international investors, one of the first things they note to us is that they cannot make their normal calls,” says Louis Lebbos, founding partner of Dubai-based AstroLabs. “It registers in their mind as a negative signal on the ecosystem that a seemingly developed city doesn't have this very basic infrastructure you can find in much less developed markets.”

GRIM ALTERNATIVES

Historically, internet-to-internet calls were usually possible in the UAE even if unlicensed video calls were not permitted. But over the past 18 months, the Telecommunications Regulatory Authority (TRA) has blocked the likes of Skype more effectively.

The TRA, which did not respond to requests for comment, insists all VoIP applications must be licensed, and only telecom operators du and Etisalat are licensed to do so. The pair offer VoIP, but unlike their international rivals the duo charge for internet-to-internet calls. Mobile customers must pay Dh50 per month to use the BOTIM or C’Me apps.

Rated 4.2 on Google’s Play Store, BOTIM has attracted over 100,000 one-star reviews, with users complaining that adverts interrupt calls, calls are low quality and dropped calls are frequent. Calls also terminate when users receive notifications in other apps such as Gmail or WhatsApp, according to users.

“If I had a choice I would not use this app … In an open market this app simply would not survive,” wrote one disgruntled user on August 28.

Created by Etisalat Technology Services LLC, C’Me is rated 3.2 on Google Play but most of the reviews are damning, with 18 of the first 20 listed giving it one star. “Worst video call app ever,” wrote one user.

Botim’s FAQ also warns: “Try to avoid making international video call during peak hours, which is usually between 6pm and 9pm local time every day. Traffic jam happens for international calls.

“Due to the uncertainties of the network environment, especially for international calls, you may encounter random conditions that calls cannot be established. The network condition usually recovers within tens of minutes to several hours. Please wait and try again.”

FINANCIAL IMPERATIVE

With BOTIM and C’Me little loved by users, why are the UAE authorities content to provide residents with substandard services?

The answer may be financial. The federal government is the biggest shareholder in Etisalat and du. Both companies have suffered enormously from instant messaging apps that have effectively ended SMS as a revenue stream.

The UAE’s incredible internet infrastructure – ranked third globally - and excellent mobile networks mean that if VoIP calls were easily available, it would wreck the telecom duopoly’s international call revenue. In a country where expats make up more than 80 per cent of the population, phoning abroad is no doubt a huge money spinner for them.

Etisalat’s 2017 annual report lays bare the financial imperative behind the VoIP ban: “The presence of [over the top] OTT operators is a common threat across the telecommunications industry that is affecting mobile voice revenues in a number of Etisalat’s more mature mobile markets. The increase in the use of VoIP applications is cannibalising traditional telecom operators’ revenues.”

Although operating in 16 countries, Etisalat’s foreign operations add relatively little to its bottom line, with the UAE providing 64 per cent of its Q2 earnings before interest, tax, depreciation and amortisation (EBITDA) of Dh6.6 billion. Banning Skype and other VoIP services enables both operators to maintain revenues, of which 15 per cent is subject to royalties.