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TELECOMMUNICATIONS
— MUCH REMAINS TO BE DONE
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It is time to revamp the state-owned Pakistan Telecommunication
Company Limited
By SYED M. ASLAM
Feb 26 - Mar 04, 2001
If internet is the lifeblood of information technology,
telecommunications is the very heart which pumps that lifeblood into its veins.
Attempts to develop IT in the absence of a fast, efficient and reliable
infrastructure would be as futile as trying to farm fish without having a pond.
But this is somewhat the case with Pakistan Telecommunication
Company Limited (PTCL), the sole supplier of related services, manufacturer of
telecommunication related equipment which also enjoys the authority to decide
which equipment can be used by the customers.
The PTCL infrastructure comprises 3.8 million telephone lines
of which some 3.03 million are connected to customers; 2,663 telephone
exchanges; 1,362 Nationwide Dialing (NWD) exchanges. According to official
figures about 21,000 PTCL customers were connected through the internet till
last March whereas the total number of internet users during the same period
were 120,000. Though the number of internet connections has almost doubled from
11,041 in 1997-98 the same still remains much to negligible in a country which
has a population of over 135 million. This means that less than 2.5 per cent
population of the country has a telephone connection while a negligible 0.016
per cent has internet connection.
Talking to PAGE, the general manager of Cybernet, the
leading internet service provider, Ansar-ul-Haque said that PTCL is not meeting
the expectations of the internet users trailing far behind the accepted
international standards both in terms of connectivity and the surfing speed.
PTCL's inter and intracity as well as international infrastructure is acutely
suffering from availability of telephone lines as well as lacks acceptable
connectivity.
Putting number of internet connections at less than 200,000
he said that the actual connections are even less than 150,000 due primarily to
25 cross subscribers who use more than one ISP service for reasons of
convenience. Claiming to have the biggest subscriber base of 45,000 internet
users, Ansar said that it is atleast 5-time bigger than any other ISP in the
country. Cybernet, he added, has 4,500 operation telephone lines offering the
fastest service of 16 megabit bandwidth compared to 2 megabit used by the rest
of its competitors.
He said that PTCL's infrastructure lacks modern technology-
it absolutely lacks hi-speed and high-capacity digital lines such as Chamellin
DS3. Secondly, and as important, services and tariffs for only 2 megabit are
available which results in increased costs. For instance, he added, Cybernet has
to use eight separate services to provide the 16 megabit service each of which
is proving expensive to maintain due to individual maintenance, works and rental
costs. The failure of the PTCL to invest in induction of latest technology is
taking a huge financial cost as well as resulting in unreliable and inefficient
service to the subscribers.
Moreover, he said, PTCL does not only takes months to
implement a decision taken by the government but also does not honour what it
says. For instance, PTCL ceremoniously advertised on September 3 last year that
it is cutting the internet tariff by 25 per cent from $ 20,000 to $ 15,000 per 2
megabit half circuit. PTCL took six months to reduce the said tariff and that
too not at the advertised 25 per cent but by only 20 per cent last week.
This is what Dr. Altamash Kamal, a Director of PTCL Board,
has to say when informed that PTCL was still sending advance invoices at the old
rates till last week and that it reduced the internet tariff by 20 per cent and
not 25 per cent as instructed by the relevant federal minister: "Had I not
been on the PTCL Board, I would have suggested that all of you made payments as
per new rates. Then if PTCL were to try something silly you could have gone in
for some 'industrial action' and made sure the press got to know about it. But
alas, since I am in that state of dubious honor, I stand constrained from making
any such subversive suggestions. God save PTCL . . . . Perhaps now only He
can."
He further said that "The minister was quite categorical
about this being fixed. It would appear that his instructions have not found
their way to the relevant people in the behemoth," adding that "We
will take up this matter in the BoD meeting and hopefully get this resolved
ASAP." Perhaps nothing else could better highlight the attitude of decision
makers in the PTCL.
Ansar was also very critical of the fact that ISPs are not
only required to make investment in the PTCL infrastructure at its exchanges and
yet have to pay a rental charge to the PTCL. Ansar said Cybernet which has
invested $ 5 million in infrastructure alone and another $ 5 million in setting
up offices and workforce have top of the line equipments which it is not able to
use to its fullest capacity primarily due to inferior technology available at
the PTCL. What is even worse is that PTCL seem least inclined to invest in
upgrading its infrastructure to meet the needs of latest IT requirements.
Thus, he added, private operators are forced to pay for the
inefficiency of the PTCL by investing in infrastructure the use of which is
subjected to rental charge. In addition, PTCL allows the buying of the needed
equipment only from two companies, Siemens and Alcatel, denying any choice of
price and equipment to the operators. This, Ansar lamented, has given a PTCL
draconian monopoly to let an operator buy only a particular product at its own
terms and price.
In addition, he added, it takes months for the PTCL to do a
job despite paying 100 per cent of the price in advance. For instance, he said,
that Cybernet paid Rs 10 million in advance to the PTCL for lying optic fibre
infrastructure which took an exorbitant 10 months to be commissioned destroying
the entire business and marketing plans.
While internet tariff still varies from ISP to ISP the
reduction in internet rates by the government during last one year has resulted
in lowering the overall retail prices from Rs 45 to 25 per hour barring few
which are still charging the maximum rate.
Putting the PC population sales in the country at 750,000
Ansar said that some 200,000 PCs are sold in the country annually of which only
half are new. The rest of the annual PC sales comprise used machines which show
that unaffordable prices shy half the potential buyers away from buying new
machines.
The problems of the telecom sector and the directly related IT
industry thus can be summed as a small PC population which is increasing by just
100,000 new machines every year, small number of operational telephone lines and
even smaller number of internet connections, the reluctance of the PTCL to
invest in latest technology and its overall bureaucratic setup which is
reluctant to follow the instructions eminating from the highest levels.
Financial performance
PTCL's revenues and profits have registered a substantial
increase over the years- Revenue increased by 26 per cent from Rs 46.4 billion
in 1997-98 to Rs 58.6 billion in 1999-2000; operating profit by 30 per cent from
Rs 19.5 billion to Rs 25.3 billion. However, it is to be noted that
international revenue — revenue from for foreign network operators for calls
that originate outside the country — has increased by nine per cent revenue
from domestic services has depicted a sharp increase of 41 per cent from Rs 27
billion to Rs 38 billion during 1997-98 and 1999-2000. The tremendous increase
in domestic revenue was made possible by incessant increase in monthly line rent
of subscribers which has witnessed a five-fold increase during last few years.
PTCL's revenues have been increasing in terms of rupees but
they have remained stagnant in terms of dollars during last half decade. Sources
also expressed concerns that only a negligible 2 per cent of PTCL's revenue
comes from the value-added service such as 800 and 900 toll free numbers,
internet, CLI, etc., which is much low than its counterparts overseas the 20-40
per cent revenue of whom come from value-added services. In certain cases, the
sources added, the voice and value-added services of many of these foreign
operators each contribute half and half to the total revenue.
It is thus imperative for the PTCL to increase the share of
its value added service to the revenue, expand its lines and improve its
recovery. The catch is until the share of the value added services is increased
and recovery is bettered the Company would not be able to improve its
infrastructure and increase the lines both of which require considerable
investment. This is a catch-twenty-two situation indeed.
As is the PTCL's debts are on the rise- Total trade debts
have increased by 40 per cent from Rs 22.5 billion in 1997-98 to Rs 31.39
billion in 1999-2000. In 1999-2000 of the total trade debts of Rs 31.39 billion,
Rs 13.3 billion were considered as 'doubtful' or in plain language 'bad or
unrecoverable.' Of the Rs 13.3 billion 'doubtful debts' Rs 10.7 billion were
domestic, Rs 2.4 billion were international and Rs 164.6 million telex and
telegraph. This depicts a drastic increase in bad debts during last three years.
Despite registering envious profits, primarily led by domestic revenue helped in
no small part by incessant increase in monthly line rent, the increasing volume
of trade debts in addition to stagnating international revenue and negligible
revenue from value added services poses many questions.
Internet
The priority accorded to the IT by the present
government has resulted in substantial decrease in the internet tariff. The
internet tariff were reduced by 53 per cent last July followed by another 50 per
cent cut in December. Though the ISPs chose to pass only a portion of the tariff
reduction to the users, Ansar said that this has resulted in an overall
reduction of 50 per cent at the retail level. Sources said that the ISPs were
able to pass only a portion of the tariff reduction to the users as the tariff
applied to PTCL's bandwidth access and not over the entire backbone which
comprises Foreign Half Circuit (the company which actually provides the
bandwidth) and symmetric provider which gives one way direct link to the ISPs.
The cost of internet bandwidth has the three above mentioned components 33 per
cent of which goes to the PTCL for providing access to an ISP; 30 per cent goes
to Foreign Half Circuit, and the rest of 37 per cent goes to the symmetric
provider. Thus while the PTCL announced to cut its internet tariff by 53 per
cent the real discount came to a mere 17 per cent as the reduction did not apply
to the overall backbone. The number of cities with international internet access
has increased ten-fold from just 29 cities in August to almost 300 in November
last year.
A number of operators have established telecom systems and
operate services through interconnect arrangements with the PTCL under license
from the Pakistan Telecommunication Authority. There were some 325,000 mobile
connections in the country till last year which were provided by three cellular
phone operators in the private sector.
Wake Up Call
There is an unanimous concensus at all levels among the IT
industry — be it software houses, education institutions, ISPs, corporate or
individual users — that is time to revamp the state-owned Pakistan
Telecommunication Company Limited. It is time for the PTCL to invest in data
services system which thus far remains primarily voice-based to be better in
tune with the changing demands and too for its own good. Global trends indicate
that while revenues of the telecommunications operators from voice service is on
a decline the revenues from data service is on the rise. Telecom operators
worldwide have created a separate entity to better meet the growing demand for
data services in addition to the traditional voice-base business, the PTCL too
should no more remain indifferent to the growing demand for data service and the
immense revenue potential that it offers.
Trends also show that national telecommunication carriers, or
their subsidiaries, are collaborating with experienced carriers to share the
knowledge to facilitate technology transfer to improve the existing
infrastructure and to better the quality services. PTCL can also benefit from
these global experiences.
Access to a reliable, efficient and speedy internet
connectivity is a pre-requisite of developing IT culture and PC penetration is
the ultimate barometer of it. Internet access and PC penetration are the two
basic pre-requisites which compliment each other.
Much has been done to encourage the software firms to
increase the volume of software exports vide numerous incentives including
retaining a substantial portion of their foreign exchange earnings in the
foreign markets, reduction in import duty on computer accessories as well as
reduction in taxes applicable at the export stage.
Much, however, still remains to be done to encourage the PC
penetration in the seventh — or sixth, depending upon who you choose to
believe — most populated country on the earth. Except for the abolishment of
customs duty of PC, computer hardware and accessories in the Budget 1999-2000
not much has been done to encourage the PC penetration in the country. It must
also be said that most of the computer hardware accorded the duty-free status in
the Budget was already enjoying the exemption previously.
The time has come to look beyond internet tariff reduction
and duty free PC and hardware import. Despite the abolishment of the duty the PC
prices still remain much prohibitive to encourage the PC penetration in the
country. While the importance of branded PCs, hardware and accessories can
hardly be undermined, the provision of inexpensive counterparts in a country
having a low per capita income should also not be overlooked.
Unless the prices of PCs come down to an affordable level in
Pakistan which has a low per capita income and even lower purchasing power the
real growth in the PC population is not going to take place despite the
sincerest of government efforts. Without the increase in the numbers of PCs, and
its strong annual growth, the internet connections would remain stagnant at
acutely low levels denying PTCL to offer better value added services such as the
internet.
True that the internet tariff has been slashed drastically,
international internet access in more cities across the country, a 15-year tax
exemption has been announced recently for the software houses, banks are
instructed to provide soft loans to promising individual IT entrepreneurs as
well as companies , and a national IT testing service and accreditation
agency is established.
However, increased PC penetration, growth in the number of
internet users, substantial increase in the volume of software exports remain
the only true barometer of the success of all the IT related policies.
The real test of the success of the policies will be the ultimate growth trends
in all of the above spheres.B
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