CONSTRICTED GROWTH IN TELECOMS
SHABBIR H. KAZMI
Nov 22 - 28, 2010
The ability to communicate has enabled human beings to progress faster by benefiting from the experience of others rather than trying to reinvent the wheel. Over the last one decade, there has been tremendous growth of ICT's (Information and Communication Technologies) involving broadcasting, satellite communication, public telephony and IP networking. The telecommunications enjoyed exceptional growth. While comparing various means of communications, telecommunications emerge the 'pioneer technology' giving birth to variety of communication means like mobile telephony, broadband networks, the internet and the list continues.
In Pakistan, telecommunication industry, fully supported by government policies, has registered phenomenal growth. Mobile phones are now within the reach of every segment of the society and it is believed to be a basic communication tool. The key stage of change was endorsement of the Deregulation Policy in 2003, followed by sector liberalisation in the subsequent years through an efficient and transparent process. The process provided a foundation stone towards an amazing inclination of telecommunication sector with award of 2 Mobile Telephony (Cellular), 14 Long Distance and International (LDI), 38 Fixed Local Loop (FLL) and 17 Wireless Local Loop (WLL) licenses.
The benefits of market liberalisation were manifold; it brought cheap and reliable communication channels for the masses, contributed heavily in the economic development and opened plenty of job opportunities for Pakistan. The country's mobile market today is 10th largest in the world having the highest penetration in South Asia. The telecommunication sector is contributing approximately two percent to GDP and is viewed as a major growth engine for the country. Telecom sector is also a major contributor to national exchequer. It contributed US$1.3 billion during fiscal year 2008-09 and US$500 million during first half of fiscal year 2009-10. According to a report by United Nations Conference on Trade and Development (UNCTAD) on Information Economy, Pakistan is among the five dynamic economies of developing Asia in terms of increased penetration of mobile phones, internet, and broadband.
If we analyse the trend of teledensity growth in the country, wireless segments have shown a steady adoption whereas the fixed local loop is losing its charm with current penetration rate of two percent. Some of the reasons for the prevailing situation are low investment trends for local loop infrastructure since competitive rates are offered for similar services through wireless media, technological shift because of difficult deployment patterns for FLL as compared to wireless, very minimal competition, and ease of mobility in wireless networks. Nevertheless, the prospects of wireless segments have provided an exceptional communication option to the people of Pakistan.
The mobile subscribers are likely to cross 100 million during 2010. The fierce competition has lowered the profit margins of the mobile companies. However, the telecom sector revenues have registered a steady and positive growth during the last few years.
The telecommunication industry of the country presently faces various challenges hampering its growth. The key impediment since couple of years had been the global economic downturn, which has affected almost all the businesses across the globe and Pakistan could not be an exception. Persistent increase in cost of doing business, rising risk profile and declining return on investment, digital divide, and Rupee depreciation are the critical factors affecting the economy.
Unabated load shedding of electricity has also emerged as a major challenge to the telecom operators, who compelled to use alternative power sources for provisioning of uninterrupted and trouble free services. Increased investment on alternate power resources levies add to the cost of doing business and the result is low profit margins. Poor law and order situation of the country prohibits the investors to invest in the businesses and think twice before making any investment decision. High tax rate applicable on the telecommunication industry is another major factor affecting profitability of the telecom players. It has raised barrier for a barrier.
Modern applications require high-speed networks and offer opportunities for the telecom operators despite fierce competition to improve revenue. High-speed internet has become a necessity for business and personal use. Mobile e-mail is no longer used just for business; location base applications are becoming popular; mobile social networking has become part of mobile landscape; mobile multimedia is providing cheaper mobile access; and mobile devices lead to more use of data traffic.
A variety of applications needs high speed and excessive bandwidth available under 3G. With the growing demand for mobile to mobile (M2M) communications in the country the arrival of 3G mobile technology is considered to be most promising telecommunication expansion. It is expected that 3G will not only provide revenue benefits to telecom operators but will bring added valued addition to mobile subscribers in the country.
The concept of anywhere anytime computing and easy and quick access to information provides yet another prospect of exploring the landscape of wireless broadband services in the country, which has experienced exceptional growth. The future of broadband in the country is associated with wireless technologies expected to assist broadband access to un-served rural areas of the country. The e-commerce and m-commerce are fueling broadband growth in the developing and emerging markets. Content generation is also an important segment, which can act as catalyst of broadband growth in the country.
Development of data applications like Group Collaboration, Enterprise Resource Planning, and Customer Relationship Management necessitate use of broadband. The Next Generation Networking (NGN) not only brings convergence of technologies and services but also lowers the operating cost, which ultimately benefit the end users to get converged services at a low cost. Various telecommunication operators have already deployed IP-based NGN infrastructure at the core end with anticipation of experiencing NGN services at the access side in next few years. Furthermore, deployment of GPON (Gigabit Passive Optical Network) is also considered to be on rise during the next few years. The most important proposition to continue this telecom escalation is a continuous coordination among stakeholders from industry, government, academia, and the end-users.