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This column had recently highlighted that the additional revenue from the government’s act of increasing the taxes and duties on mobile phone users and mobile device imports (through the so-called mini-budget) was not worth the costs it might exact on development of digital ecosystem. (For more on that, read “Mini budget and Telecoms,” published January 6, 2022). Now, telecoms regulator (PTA) has also reportedly warned the government of negative consequences for 5G rollout, e-commerce, digital payments, etc. (Read the full Business Recorder story here).

One agrees with PTA’s argument that mid-range to high-range smartphones getting much expensive due to higher taxes/duties will directly impact affordability of individual users and businesses reliant on digital economy. Mind you, it is mobile broadband (3G & 4G) that has led Internet proliferation in Pakistan (as opposed to fixed broadband that has driven broadband uptake in many other markets). (For more on mobile broadband trends in Pakistan, read “Mobile broadband in 2021,” published January 27, 2022).

Therefore, smartphones are key to expanding digital access, and consequently, opportunity and mobility in this age. A fiscally-driven policy decision that makes smartphones costlier doesn’t make sense for market development. Reportedly, the regulator has also pointed out (rightly) the adverse impact on auction of 5G-related spectrum. Unless there is widespread availability and usage of 5G-enabled devices in the future, a 5G auction (whenever it happens) would fail spectacularly.

In all likelihood, by the time it is go-time for a 5G auction, the country will still have to import 5G phones. If high-end smartphones continued to receive steep import-duty treatment, there will be a huge question mark on mobile network operators finding incentives strong enough to invest in pricey spectrum at a 5G auction. Already, what complicates things is recent history, where the government’s last mega spectrum auction – held in September 2021 – failed to garner interest from the top-three mobile network operators.

Some argue that higher taxes/duties will push local assemblers to up their smartphone game, besides nudging users to buy locally-assembled smartphones. The jury is out on that, as assembly is dominated by low-end 2G phones. Smartphone share in locally-assembled devices has improved – from 15 percent in 2020 to 40 percent in 2021 (data source: PTA). However, those are mostly low-end smartphones – and there is little likelihood of local players getting into assembling 5G-enabled phones in the medium term.

At this stage, with the government not looking to take a U-turn from the revenue-centric course, a critical question arises. Aside from issuing such a missive every now and then, what more can the PTA do in order to assert its mandate for market development? As in the past, there is little to suggest that this government (much like the ones before it) will become more responsive to ominous warnings by telecoms watchdog, or the operators. Consumers, meanwhile, are far too fragmented to find a voice of their own.


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Digital economy: start listening!

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