ISPS: UNETHICAL COMPETITION

The uneconomical rates would push additional ISPs out of the business the ultimate victim of which will be the users

By Syed M. Aslam
Jan
 06 - 12, 2003

Some three dozens ISPs (Internet Service Providers) have went out of business during last four years, half of them alone in 2002. In addition, as many as 18 others are feared to wrap up their operations during the current calendar year. The President of Internet Service Providers Association of Pakistan (ISPAK) Ansar-ul-Haque has told PAGE.

Blaming the closures to cut-throat and unethical competition in a market which is loosely regulated Ansar added that the most prominent victim last year was Digicom, the first ISP of the country. The presence of large number of ISPs, some 50 still remains in the business today, vying for the piece of a market, which despite registering a tremendous growth still reels from low connection/population ratio, and the quest for survival have resulted in rock bottom retail prices. Ansar said that internet service is available for as low as Rs 5 per hour in Karachi while in Lahore, the second biggest city of the country, the situation is even worse- many ISPs are offering as low a price as Rs 2 per hour.

Ansar said that the price war has resulted in rates which are uneconomic and would allow many ISPs to get only a breathing space in short term with negative long term impact. "Many of them would just not be able to survive 2003 despite their best efforts to lure the customers by offering such low prices which are unecomical."

In the long term, he warned, the uneconomical rates would push additional ISPs out of the business the ultimate victim of which will be the users. "The failure to monitor the quality of the internet service in a market dictated alone by unethical price war offers no protection whatever to the internet users. In addition, the uneconomic competition undermines the growth of the ISPs on sound professional lines the repercussions of which will be felt by the industry and the users in the years to come."

Does that mean that Pakistan Telecommunication Company Limited, the internet service provider of the internet service providers, is not playing its due role to monitor and ensure the quality of service offered by the ISPs in general at uneconomic prices? Yes, said Ansar-ul-Haq adding that PTCL also fails to honour its promises despite spending millions in advertisement. A case in point is the PTCL's failure to issue a notification to slash the bandwidth rates for the ISPs announced by the former minister for Science and Technology, Dr. Atta-ur-Rahman, in September 2002. "The former minister announced to reduce the bandwidth tariff from $ 6,000 per 2 mb per month to $ 3,800 per 2 mb per month but the PTCL has not yet issued the relevant notification."

Ansar was also critical of the deferring of the decision pertaining to voice mail which was banned by the PTCL a few months ago. "The PTCL has decided to defer the decision till end March this year despite realizing that banning the service is hurting the ISPs financial. This is so as internet users feel that the ban on voice mail infringes one of their basic consumer rights.

"The planned deregulation of the PTCL which was due on December 31, 2002, itself has been deferred for three additional months. On the other hand, India which planned deregulation of its telecom sector by the same date, deregulated it 8 months earlier. In addition, it allowed the private sector investment in data by allowing it to establish international gateway which was liberalized in 2000, a full two years prior to December 31, 2002 deadline. The deregulation and liberalization has brought $ 16 billion investment in the Indian telecom sector already and an additional investment of $ 37 million is expected to follow in next two years."

Ansar stressed the deregulation and liberalisation of the telecom sector in India provides a good example to help induct private sector investment here in Pakistan as well. "Here in Pakistan privatization may not be the answer but the liberalization definitely is. The telecom sector should be liberalized so as to allow private sector to invest in international voice and international data segments of the business. Like India, the liberalization of international voice and data operations would help induct substantial investment in the telecom sector."

Ansar said that the closures of a large number of ISPs in last four year, particularly the last year, pose a serious threat to the telecom sector. "The Securities and Exchange Commission of Pakistan (SECP) should encourage mergers and acquisitions of the ISPs to help encourage healthy competition for the overall growth of the industry and long-term benefits of quality service and price to the users.

"The uneconomic price war among the remaining 50 ISPs, of whom just half a dozen offer services on a national level, is feared to result in many more closures this year and the mergers and acquisitions would allow the industry to retain the substantial investment made in this vital segment of the telecom sector. It would also help the PTCL avoid millions of dues owned by the ISPs and help retain jobs of hundreds of professionals working in the ISPs nationwide."