Parvez Iftikhar is a telecom industry veteran based in Islamabad. He served as the founding CEO of Pakistan’s Universal Service Fund (2007-2011), a public-private telecom development organisation. Previously, he also served as the country head of Siemens Telecom, Pakistan. After leaving USF, Parvez has been active in ICT policy advisory. He has been consulting for organisations like the International Telecommunication Union, USAID, CTO and the World Bank. Touching upon a wide array of ICT issues, selected excerpts from BR Research’s recent interview with the ICT expert are produced below:
BR Research: Three years after the rollout of 3G/4G networks commenced, latest data put mobile broadband subscriptions over 40 million. How do you see the growth trend in the last few years?
Parvez Iftikhar: Given that we were late starters, mobile broadband growth could have been steeper if the operators invested more – and faster. As of now, they do not appear to be doing too well financially. Their voice revenues are disappearing – thanks to OTTs like WhatsApp – and their data revenues are not compensating because competition is constantly driving the data tariffs down. In addition, they are taxed heavily.
BRR: Currently, about 30 percent of total cellular subscriptions are on 3G and 4G networks. What can the operators do to on-board most of the remaining roughly 100 million 2G subscriptions onto mobile broadband networks?
PI: To on-board another 100 million, the operators need to revisit their business models. They need to cast themselves from being just connectivity providers, to digital solution providers. Some of them are doing some serious work in this regard. It is not so much about expanding just the connectivity anymore.
BRR: You may have noticed that 3G subscriptions’ growth seen in early years has come down in recent months. Is it because the 3G rollouts have been confined mostly to urban areas, with little or no focus on rural areas?
PI: Slowdown in growth is only partly due to concentration of 3G/4G roll-outs in densely-populated areas. I say ‘partly’ because slowdown is visible in dense locations as well. The main reasons are too little effort on the demand-side by the federal and provincial governments, and failure of the operators (so far) in offering digital solutions – as against mere digital connectivity.
BRR: What are the impediments to taking broadband to rural areas? How can the government and operators play their part in expanding connectivity there?
PI: In order to take broadband to rural areas, one needs the help of both the government and the regulator. Government is always the biggest provider and user of digital services, but in Pakistan we see only sporadic attempts by federal and provincial governments. There is no holistic approach.
The other issue relates to optic fiber cables, which are essential for broadband backhaul. Since there is no ‘carrier of carriers’ – which PTCL could have become, but did not – almost every mobile operator is competing to get separate optic fibers laid to the towers. This avoidable duplication of investment proves to be a big impediment.
BRR: Lately, growth in 4G subscriptions has outdone growth in 3G subscriptions. Do you think that 4G will remain a niche market?
PI: It has to be kept in mind that 4G is the only true end-to-end digital network. That’s where the future belongs. 4G is picking up slowly but surely, despite the hindrances related to spectrum, taxation and lack of demand-side incentives. Now that three operators have 4G spectrum, the growth in 4G will pick up because at least a part of the problem is solved.
BRR: You mentioned the role of the government. A revised Telecom Policy Framework was issued in 2015 after a long delay. Do you see any positive changes happening in the sector following its release?
PI: The new Telecom Policy left out an unusual amount of details to be filled in subsequently. Most of these are yet to be addressed. For instance, very important reforms in the regulatory regime, which were promised in the new policy, are overdue. PTA is appointing international consultants for these, but the process needs to be expedited.
BRR: We have seen regular spectrum auctions happening in recent years. To keep up with market needs, does PTA possess ample spectrum for regular sale? At what point does the element of scarcity come in, if it hasn’t already?
PI: There have been three spectrum auctions, but those could be termed “regular” only if they were following a publicly-available Spectrum Roadmap, with which the investors could also plan their investments. Spectrum Roadmap is another unfilled detail of the new policy. Its absence allows creation of artificial scarcity of spectrum. The recent auctions appear to have been driven solely by the need of generating quick cash, hence the apparent scarcity. Otherwise, ample spectrum is available.
BRR: You earlier mentioned a high tax incidence in the sector. There are mixed signals as to tax rationalization. The federal government brought down the WHT and FED rates in this budget, albeit marginally. And most of the provinces are taxing broadband services. How much of an impediment do you think these taxes are for mass broadband uptake?
PI: Heavy taxation is a massive impediment. The government did bring down some ICT-related taxes in the budget, but the reductions are too miniscule. For example: WHT on mobile calls, which is “paid” mainly by those whose incomes are below the taxable limit, was reduced from 14 percent to 12.5 percent; import tax on smartphones was lowered from Rs1,000 to Rs650; and FED was reduced from 18.5 percent to 17 percent. Ironically, import tax on cheaper mobile phones has been increased – from Rs350 to Rs650 per handset. There are multiple other taxes, which all add up.
On top of all, the ICT taxation is totally unpredictable. It not only varies with time, it also varies with space (provinces). Unpredictability in taxation proves to be yet another impediment for the investors, who happen to be all foreign.
BRR: Let’s turn to competition. It’s a four-player market now, after Mobilink’s acquisition of Warid. Do you see room for more consolidation in the sector?
PI: There appear to be fair chances of further consolidation, particularly because of the outdated Competition Rules, Interconnect Regime and Significant Market Player (SMP) criteria. All these favour the bigger players. On top of that, one of the players is Chinese, who are well known for aggressive pricing.
As of now, the consumers are not too unhappy, but if things continue, and consolidation goes further, it could eventually start hurting the consumers.
BRR: Protecting consumers is another area that needs attention. PTA was made an administrative part of the Ministry of IT & Telecom (MoIT) late last year. CCP seems to have lost its earlier influence. In that context, how do you see the situation in terms of consumer protection?
PI: Bringing PTA under MoIT is extremely unwise. Don’t forget, MoIT also owns PTCL. How can the Regulated and the Regulator be the same?
A comprehensive study leading to an overhaul of competition rules and regulations should be carried out. Both the PTA and the CCP have to play their roles together. It is not something that can be handled by either one of them alone.
BRR: Consumer protection is of increasing importance, now that the on-demand economy – from online stores and delivery services to ground transportation and handyman services – is making its presence felt. What are your thoughts on the contours of a regulatory framework for these new segments in the interest of both their growth and consumer protection?
PI: The on-demand or sharing economy is the shining star on the horizon that promises colossal benefits to both the businesses as well as individual consumers. This needs reforms, not just in ICT, but also in all the impacted domains.
In the ICT domain, we need to remove impediments to ICT-adoption (spectrum, cyber security, taxes on ICT devices, etc). In other business domains, the current rules and regulations need to be reformed as these are totally inadequate to deal with the new on-demand/sharing businesses made possible by digitization. For instance, in the case of app-based Taxi services like Uber and Careem, we need reforms in the rules and regulations governing Taxis.
This need for reforms is a global phenomenon, so we should not be overwhelmed by it. We are not alone; people across the world are feverishly working to find solutions to the issues of the new economy.
BRR: We had heard that the federal government was working on some regulatory mechanisms to spur E-Commerce. But it hasn’t been released so far.
PI: Yes, the ‘E-Commerce Framework’, and the ‘Data Protection Act’, ostensibly both in the works, are anxiously awaited. The government’s allocation of Rs200 million in the budget for an e-payment gateway – although the details are yet to come out – is also expected to contribute positively to encouraging digital economy.
BRR: The federal government has also been deliberating on the country’s accession to the global Information Technology Agreement (ITA), which eliminates import tariffs on ICT hardware. What are your thoughts on Pakistan joining ITA?
PI: That the government has been deliberating to accede to the ITA is not known to me. I wish that it is true! Even if there was no ITA (which we are committed to join), eliminating import tariffs on ICT tools and devices is in our own interest. It is of immense importance to take our country ahead – irrespective of which domain we are talking about. We should accede to ITA as soon as possible.
Comments
Comments are closed.