TELECOM IT CONVERGENCE
PAKISTAN HAS BEEN LEFT BEHIND BECAUSE OF DELAY IN MAKING SOME KEY DECISIONS
SHABBIR H. KAZMI
July 23 - 29, 2012
Pakistan has registered significant progress in IT-telecom convergence, mainly because of excellent growth of telecom sector over the years. Two of the most supporting elements have been growing population of computers and rising tele-density. To give the impetus to the telecom growth in the country, Pakistan Telecommunication Authority (PTA) has reduced royalties being collected from the operators. The Authority has also issued a number of determinations to address challenges being faced by the telecom sector.
Pakistan is not alone; the world has been experiencing convergence of regulation, technology and services. Convergence in technology has already started without any formal introduction due to the advantages being offered. These include economies of scale, bundled services, better infrastructure planning and one-stop-shop scenario whereby it becomes easy for the investor, regulator and the public at large to benefit.
Due to this transformation regulators around the world are working on the regulatory reforms to cater to convergence on telecommunications and broadcasting markets. They want to support provision of converged services with the objective of promoting innovation, reducing tariffs and improving quality of services. It is been fully supported by rapid development of wireless and mobile radio communications and their convergence with both fixed telephone and broadcasting services.
In Pakistan the boom started with deregulation and privatization. However, the procedure and processes need further streamlining which would happen automatically provided complete convergence is offered through legislative reforms. The prevailing situation is an impediment to a smooth flow of fresh investment in telecom and broadcasting sectors which otherwise enjoys enormous growth potential. On such thorn is delay in introduction of 3G spectrum in Pakistan.
Dr. Mohammed Yaseen , Chairman, PTA while adding a conference in Karachi had said. "Pakistan is facing regulatory, technology and economic challenges in the introduction of 3G technology." Chairman said, "Our market driving factors are high speed integrated and interactive services for which the cellular network is merging towards the 3G and Core and access networks towards IP and NGN Platforms. Therefore, convergence can bring more revenue up to Rs5 billion to the country and more over better quality of services and cost effective services for the consumers", he added
Experts are of the opinion that if Pakistan wants to focus on newer applications, broadband enhancing policy comes first that will have multiplier effect on the economy. Introduction of public-private partnership will have social and economic impacts e.g. health, education, transport, smart grid power line and mobile banking. Increase in growth of mobile internet also shows increase in mobile broadband services which shows potential investment for mobile banking.
During Shaukat-Musharraf era telecom industry contributed the highest share in Foreign Direct Investment (FDI). However, failure of the incumbent government to usher new investment and paltry spending on infrastructure and technology has kept telecom operators reluctant. They don't wish to invest in the country where their returns are constantly squeezing against their increasing operational expenses.
According to data available with Pakistan's central bank FDI in the telecom sector has been on the decline, it declined by nearly 80% during FY11.
The telecom sector including LDI, cellular, broadband and various class value-added service providers brought merely US$79.1 million FDI during FY11 as compared to $374 million in FY10. The share of telecom sector in overall FDI has contracted to merely 5% as compared to 17% recorded earlier. The FDI level was the lowest since year FY04 in the telecom sector as FDI continued to increase till FY10. The sector was considered highly potential as million dollar investment was made, also boosting overall economic activities. During FY06, the telecom sector had attracted record investment of over $1.9 billion in the country, contributing 54% share in the overall FDI.
While one can attribute this un-ceremonial fall to a number of factors the key factors is said to declining revenue of the cellular operator, owing to stiff competition, which made investors reluctant to make fresh investment in Pakistan. The cellular operators' have adopted extremely cautious approach to invest money on technology and trying to adjust their growing expenses with cost-cutting strategies.
The telecom operators have curtailed to send revenues to their headquarter countries whatever they earned in Pakistan and re-investing their earnings on their operations and businesses. However, inordinate delay in the auction of 3G/4G licenses is hindering growth in the telecom sector. This has also delayed creation of new job opportunities for youth and losses to the national economy..
Discussing the subject at the 57th meeting of Sustainable Development Policy Institute's (SDPI) study group on internet and communication technologies in Islamabad, the experts had urged the government to focus on setting obligatory performance benchmarks instead of merely focusing on the revenue generated from the licenses' auction.
According to experts growth in fixed line broadband is shrinking whereas share of wireless broadband is persistently on the rise. There is confusion and lack of clarity in Pakistan over adopting 3G technology or leapfrogging directly to 4G technologies. Some experts believes the best solution for Pakistan is a hybrid approach, with 3G mobile broadband to optimize current assets before moving towards new and further advanced systems, network radio interfaces and spectrum. There is also a consensus that National IT & Telecom Policy 2005 has gone obsolete and there is a need to come up with a coherent national action plan. Apprehensions are also being expressed that that without proper homework, any desperate moves to switch to 4G may lead to some failures.