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2/3/2011
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Egypt Takes $90 Million Hit From Internet Blackout

The country is back online, but the government's shutdown of mass communications will likely have long-term economic repercussions, warns Organization for Economic Cooperation and Development.

On Wednesday, Egypt appeared to be back on the Internet. The country started going dark on Thursday -- after a week of protests and the blocking of some Web sites -- when President Hosni Mubarak's government ordered that all forms of mass communication, including Internet access, mobile networks, and SMS, be blocked. By Friday, even the country's stock exchange was offline.

But on Wednesday, the Internet blackout ended. Vodafone said that it had reinstated all of its data services in Egypt, enabling people to once again access the Internet, and that it was "actively lobbying to reactivate SMS services as quickly as possible for our customers."

The Egyptian blackout "represents a new Internet milestone," said Craig Labovitz, chief scientist at Arbor Networks. "We have never seen a country as connected as Egypt completely lose Internet connectivity for such an extended period."

He predicted that the blackout would have long-term repercussions for the country. "Today, the Internet is as an integral part of the Egyptian economy and society. Unlike periods as recent as a decade ago, governments of technically developed countries cannot disrupt telecommunication without incurring significant economic cost and social/political pressures."

Indeed, the Organization for Economic Cooperation and Development, a think-tank based in Paris, estimates that the blackout cost Egypt's economy about $90 million, or $18 million per day, comprising 3% to 4% of the country's economic output. Furthermore, the economic damage isn't over yet. According to the organization, Egypt will find it "much more difficult in the future to attract foreign companies and assure them that the networks will remain reliable."

The Egyptian government's ability to take the country off of the Internet reflects its strong control over local mobile network operators, said Labovitz. "While the Egyptian telecommunication market has enjoyed significant liberalization in the last decade, the Egyptian government Telecommunications Regulatory Authority continues to assert a strong level of regulatory control over the telecom licensees."

That control extends to using the mobile phone networks for propaganda purposes. While the government required the networks to block subscribers from using their mobile phones to send or receive calls or SMS messages, the government itself targeted subscribers with SMS messages. "Under the emergency powers provisions of the Telecoms Act, the Egyptian authorities can instruct the mobile networks of Mobinil, Etisalat, and Vodafone to send messages to the people of Egypt," according to a statement released by Vodafone on Thursday. "They have used this since the start of the protests."

Vodafone criticized the government for not owning up to its SMS message campaign. "We have made clear that all messages should be transparent and clearly attributable to the originator."

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