. .

Government is pushing the small ISPs to pay unaffordable prices

By Syed M. Aslam
Jan-21 - 27, 2002

The Pakistan Telecommunication Company Limited (PTCL) slashed its internet bandwidth tariff effective January 1 for the ISPs, educational institutions and software developers. While in theory the full-circuit tariff has been slashed by an otherwise commendable 60 per cent, from $ 15,000 to $ 6,000 per month, in theory, players in the IT industry call it an attempt to hard-sell a service to the above mentioned customers, particularly the ISPs, whether they need it or not.

The president of Internet Services Providers Association of Pakistan (ISPAK) Ansar-ul-Haq, told PAGE that the costly PTCL's advertisement appearing with a fanfare in the national press about the reduction in the bandwidth tariff is misleading. It's an evasive attempt by the PTCL to increase its revenue at the cost of the ISPs, small and medium in particular, whether they can afford it or not. In the prevalent situation when the government is encouraging the small and medium enterprises to play a greater role in the national economy, the 'reduced bandwidth tariff' would result in closure of many small and medium ISPs, he warned.

Ansar said that the impression given by the PTCL of slashing the bandwidth tariff is absolutely not true. "There has been no reduction in bandwidth rate which stays unchanged at $ 15,000 per month. However, what has really happened is that the bandwidth price now includes 5 megabits per second of data communication instead of 2 mbps previously. The PTCL has conveniently chosen to use the enhancing of data communication from 2mbps to 5mbsc as the basis of its 'drastic reduction' in the bandwidth rate remaining evasively silent about the fact that the ISPs, and for that matter educational institutions and software houses, would be forced to buy a minimum of 5mbps full circuit at $ 15,000 per month even if they don't need it."

And the majority of some 62 ISPs operational in the country, out of over 150 they were granted the license, would now have to buy the bandwidth from the PTCL irrespective whether they can afford it or not and if their user-base justifies it or not. In short, the ISPs are now forced to buy a 5mbps bandwidth at $ 15,000 per month even if they don't have a big enough customer base to absorb the cost or not. By 'reducing the bandwidth rate' the PTCL has in fact has fixed the price at $ 15,000 per month minimum to the chagrin of the ISPs.

Ansar said that while about a dozen big ISPs would be able to benefit from the PTCL-calculated 'decrease' in the bandwidth tariff, over four dozen remaining ISPs operating in the country would not be able to absorb the 'decrease' and many of them may be forced out of the business. Putting the total number of internet connections in the country, majority of them commercial and few individual, he said that dozen big ISPs enjoy 70 per cent share of the market. On the other hand, over 4 dozen small and medium ISPs collectively competing for the remaining 30 per cent share of the business would find it extremely hard to absorb the new bandwidth tariff of minimum $ 15,000 per month. The fact that these small and medium ISPs enjoy a very small customer base would make the adjustment even more hard.

In addition, Ansar added, unlike the dozen big ISPs which share 70 per cent of the business among themselves the small and medium ISPs enjoy an extremely disloyal customer swayed away easily by prices. This poses an additional challenge for the cash- and customer-starve small and medium ISPs for whom 'reduction' hardly makes any business sense. Ansar said that the small ISP players are on the verge of collapse and many of them may be forced their operations for good.

Ansar said that PTCL's move negates and undermines the very concept of the free market as instead of letting the customers choose what ISP service to use in this case PTCL has taken it upon itself to force the ISPs buy 15mbps aimed at improving the quality of data transfer. "By implementing this policy the government is pushing the small ISPs to either pay unaffordable prices or to close their operations altogether. The situation can be compared to a green grocer is selling potatoes at half the going price provided the buyer is ready to buy in bulk whether he needs the vegetable or not."

He also expressed concerns about the lack of quality of the internet services in the small cities and towns due to PTCL's inability to match it with a similar effort to strengthen its domestic backbone. "It's like constructing best roads in towns and villages without building new highways and improving those already existing. While the universal internet access has been expanded to over 500 cities, towns and villages PTCL's domestic backbone still remains weak to accommodate the increasing internet traffic. The result is that a huge 30 per cent of the entire internet traffic in the country, particularly that emanating in the small cities and towns, is being duped.