Spectrum Auctions – Merely for Making Money?   

It is like providing the Right of Way in the air – that is what allocation of frequency spectrum to a telecom service provider is! Just like the right of way on the ground is given for making highways or laying cables, the right of way in the air is given for electromagnetic waves carrying voice and data from one location to another (e.g. from towers to mobile phones, and back). That is why telecom sector should be rejoicing that following a Policy Directive from the Ministry of IT, the Pakistan Telecom Authority issued an “Information Memorandum” (IM) to conduct the auction for the award of spectrum to mobile broadband service providers. But are they rejoicing?

At the time of the previous auction in April 2014, only 57.38 MHz was put to auction (7.38MHz in 850 band + 20 MHz in 1800 band + 30MHz in 2100 band). Out of this, only 40 MHz could be sold – thanks to the rather strange conditions of reserving 850 band for some “newcomer” (which nobody outside the government saw coming), and of allowing bids of 1800 bands only by those who first bought from the 2100 band – all that with a rather high reserve price. As I wrote in the daily Business Recorder in December 2014 (Spectrum size does matter), no amount of spectrum is enough, only if it is not too expensive.

Last Spectrum Auction of April 2014

PTA’s IM declares that Government of Pakistan wishes to encourage maximum possible investment across Pakistan, to help drive improved economic and social conditions across the country. The timeline of the auction, given in IM, indicates that government aims to raise some funds before for the next fiscal year, giving credence to the perception that covering the fiscal deficit appears to be a higher priority, rather than “improved economic and social conditions”.

It may be pertinent to recall that in Pakistan ICT proved itself to be an engine of growth not too long ago. It is no coincidence that the years (2004 to 2007) when telecom sector was booming, were the same years when the GDP growth averaged 7%. Ironically, despite this enviable track record, most of the radio spectrum that are commonly employed for mobile communications across the world (700 MHz to 2600 MHz bands) is lying unallocated, and thus unused, in Pakistan. Check out the table:

Screen Shot 2016-05-14 at 09.24.20

(figures in 2x MHz)                                                                                    *10 MHz that is being auctioned now.

As can be seen, out of the total available spectrum of 315 MHz, only 118 MHz has been released so far – merely 37%! That is not to advocate that the entire 100% spectrum should be released to the private sector forthwith. Indeed, spectrum has to be saved/reserved for various uses, like defence, the new upcoming technologies of  the internet delivery (eg: Google’s project Loon does it via balloons) and 5G etc. But the fact that two-third of this precious resource is not contributing to the economy of our otherwise “poor” country, is not the best situation to be in. We also do not know when the 700 MHz band – which is supposed to be an extremely efficient band for data communication needs in rural areas – will be released for mobile broadband.

 

High spectrum prices

As stated above, not only more spectrum needs to be released, it has also to be at prices that are affordable. Some other countries, who have already been there, learned such lessons well. The Germans, after the devastating high-price experience of 3G spectrum auctions, no longer force very high prices. In their spectrum auction last year in June, the reserve price for 2×5 MHz, in the 1800 band, was only Euro 75 Million. Compare that with our 2014 reserve price for 2×10 MHz, in the same band: US$ 210 Million.

Indeed, there are still many examples of high prices in developed world, but we have to remember that wireless telecommunications are far more important for us in the developing world than in the developed world, simply because installed cable networks in developing countries cover only a very small part of our populations, and therefore our total reliance is on wireless. Growing demand for wireless broadband in Pakistan is making the telcos hungry for more spectrum. But as can be seen in government’s Policy Directive of 26th April 2016, even the previously unsold 1800 MHz is not up for sale. Strong perception is that it is because auctioning 1800 band at this stage is not expected to fetch the desired price.

Apparently Government’s “desired price” is far too high in the eyes of the telcos. Therefore, government’s intention seems to be to bring the minimum amount of spectrum in the market, till the time the telcos are ready to pay that higher price. Telcos appear to be unwilling (they say: unable) to pay the desired high price – particularly in view of high taxes on telecom services, coupled with some broken promises made before the last auction (e.g. Telecom sector would be given the status of Industry), and some unpleasant surprises after the last auction (e.g. 10% advance tax on spectrum price, increased customs duties on hardware required for 3G rollouts, the same on smartphones, etc.). Certainly not the best recipe to entice some of the world’s biggest investors in the ICT space.

Holding back the much-needed spectrum amounts to hoarding of the spectrum. This happens more in developing countries. Paradoxically the same governments that do not tire of advising private businesses not to hoard, start hoarding spectrum, in the hope of getting a better price at a later date. In the process, lack of spectrum degrades the quality of ICT (Information Communications Technology) networks. Never mind that ICTs, which now-a-days impact each and every segment of human life, get negatively impacted.

Probably this was the reason that the authors of Telecom Act 1996 (and its amendments) legislated that the proceeds of the Spectrum Auction would go to the Universal Service Fund (USF). Once it is clear that the proceeds would not be available for fiscal balancing, the government loses most of the incentive to force-raise the bid prices.

 

Economic Benefit of releasing spectrum

The spectrum seems to be treated as if it is a plot of land – which may be kept for the time being and sold later at a higher price, forgetting that spectrum is a resource which extinguishes with time. The economic benefit of the unused spectrum today is lost forever. A plot of land (or unused oil and gas reserves for that matter) would remain there if not used now, and contribute to the economy once put to use. On the other hand, spectrum’s economic value is in per unit of time. Additionally, utilising the spectrum today would not deplete it! As the spectrum is leased out typically for a period of 15 to 25 years, it can be “re-sold” again and again. Keeping the spectrum unsold even for one year (in the hope of getting a better price next year) amounts to colossal losses in terms of value addition to the economy. On top of that, there is no guarantee that a year later it will fetch a better price. Unsold spectrum does no one any good – not economy, not education, not health, not governance, not trade, not businesses, nothing. In fact, in today’s information world, not utilizing the available spectrum holds the country back.

In some countries, studies have been carried out as to what is the unrealised economic benefit of the un-deployed spectrum to the economy per year. For instance, a study by UK-based LeCG demonstrates that the lost GDP due to a two-year 3G investment delay in China amounted to US$ 20 Bln, and in India US$ 6 Bln. Unfortunately, no such study has been carried out in Pakistan.

It must be made clear that one is not advocating that spectrum auctions should not be conducted. It is the right – in fact, duty – of the government to discover the right price and allocate spectrum at the highest price that it can get from the market – for which an auction is the best option. The issue is with the employment of artificial means – like setting high reserve prices and spectrum hoarding – to “jack up” the auction prices that needs to be discouraged. It is the mere “money-making” nature of the exercise that seems to have become the only yardstick of success.

Some people question, whether the apparently rich telcos deserve any sympathies. Look at the millions they spend on advertisements! The perception of telcos being rich may, or may not, be correct (their balance sheets certainly do not show them making big profits) but the fact remains that ultimately it is the users like you and me who end up paying for the service. Some of us from less privileged backgrounds do not find ICTs affordable at all. Looking at the ubiquitous nature of ICTs in today’s life, and all the benefits that ICTs bring, shouldn’t one be bending backwards to make ICTs as affordable as possible?

 

Being fair to the government

It is easy to understand that it would be unfair to expect the government to set a reserve price lower than the one achieved in the previous auction. The media, the opposition, the courts, the investigating agencies (NAB, etc.) would not let such a thing go unchallenged. But certainly there are ways to address the issue, simply because the impetus to growth of 3G/4G is too big to be ignored. Perhaps the government could start by fulfilling some of the promises made the last time, and/or ease the payment conditions, and/or give a relief in taxation, and/or increase the spectrum lease period from 15 to 20, or even 25, years, etc. etc. But not keep the unsold spectrum hostage!

Are there other options to address the issue to release additional spectrum, so that the telcos invest more in their networks, provide better, more wide-spread, and even cheaper, broadband internet services to schools, hospitals, businesses, poly-techniques, farmers, students, professionals, skilled workers, federal/provincial/local governments, software programmers, app-developers, and so many others ……?

What do you think?

Rise in smuggling of Mobile Phones

According to a recent News item, a “secret FBR report” has seen the light of the day after some 8 months, according to which Pakistan losing $2.63b revenue a year due to smugglingMost of us must have seen this News, therefore, I would only like to comment on a couple of  aspects of it!

One single item, the smuggling of which is causing the biggest estimated loss, is reported to be the Mobile Phone – $1.1 billion out of $2.63 billion – a staggering 42% of the total estimated loss! All other items put together, from the infamous Diesel to Garments, account for rest of the 58%. 

In October 2015, in an article in Express Tribune, I lamented about Not learning anything from history, narrating real-life stories from the past. In the first one, upon urging of legal mobile phone importers, the government of that time slashed the 10% customs duties on mobile phones, which immediately resulted in stopping of smuggling and causing a quantum jump in the spread of mobile telephony, increasing the government revenues at the same time

I referred to another similar case which happened during the present tenure of the present government, when the government slashed the obligatory payments  on incoming international calls (akin to customs duties), which the Telecom Operators had to pay. This removal of these “duties” has so far resulted in the conversion of over 1.5 billion illegal (ie: smuggled) call-minutes into legal! Before the obligatory payments were dropped, only 367 million call-minutes were flowing in legally. Today the number is over 2 billion.

In the last federal budget, the government increased taxes on mobile phones. The negative results started showing within the very first quarter, as the number of phones being imported and sold legally – a number that had been on the rise – declined by over 8%. It was no rocket science that the gap was being filled by smuggled phones.

In the above-mentioned report of FBR, the age-old rusted argument to justify imposition of ill-advised import taxes is given again:

The study notes that reducing tariffs to curb smuggling has not worked thus far; it has rather had a detrimental effect on the domestic industry, which would have to compete with even cheaper imports.

Perhaps it is true for vehicles and other large items, but as far as mobile phones are concerned, a simple cursory glance at the not-so-distant history will reveal that when there were no taxes, there was still no domestic industry manufacturing locally and “competing with cheaper imports”. It is a well-known fact that mobile phones are made in only a couple of countries – overwhelmingly, China. Therefore, the only “detrimental effect” of reducing tariffs will be on the pockets of smugglers – or their facilitators

In any case, the avoided duties are pocketed by the smugglers, the consumers pay almost the same high prices, and the government ends up with the lemon!

Yet another myth, proven wrong a zillion times by history, is yet again brought forward in the FBR report

… “enforcement remains the biggest policy option Pakistan Customs needs to pursue” to curb the smuggling.

Time and again it is proven that  the smuggling of small items, like cellphones, has never been stopped through “enforcement”. In any case, we should be aware of our own weaknesses – and enforcement of rules has never been one of our strengths!

 If someone really wants to discourage smuggling, there is one well-tried way – by having the right taxation policies.

Not learning anything from history

The following article was first printed in The Daily Express Tribune, October 5, 2015.

Around a decade ago, when I was country head (telecom) of German multinational Siemens, who were the largest provider of telecom equipment in Pakistan at that time, mobile telephony was witnessing a boom.

Hundreds of thousands of new mobile phones were being imported every month. Each phone was subject to 10% import tax.

Driven by volume with very thin margins, each percentage point becomes extremely important. When Siemens also became an importer/seller of mobile phones, some strangers started approaching with “offers” that they could help us save half the import tax, provided we forget about “legalities”.

At first, we ignored such offers, but then the situation became serious when smuggled phones, ironically manufactured by our own company, started competing with our legally imported phones in the local market. These phones were brought in by smugglers from third countries (serial numbers distinguished them). We found that we were not alone in this. All legal importers of mobile phones were facing the same dilemma.

Legal importers therefore started knocking at various doors of the government. We tried to explain that smuggling of mobile phones was on the rise due to which not only legal importers were suffering, and the smugglers thriving, but the government too was losing revenues.

During these discussions, several “solutions” were discussed. The solution that we gave was that since all phones were being connected to mobile networks, any tax (if there had to be one) should not be charged at the import stage, rather it should be charged at the time of activation of the phone! We argued that this would kill the incentive to smuggle, while the government would continue to get its revenues in the form of activation charge. That was how the levy came into being. Like always, it took the government some time, but ultimately it was accepted and mobile phone smugglers had no business case anymore.

Fast forward to 2008

There is a thing called Account Settlement Rate (ASR) – a combination of charges on incoming international phone calls going to the government and the long distance international (LDI) operators. Under a well thought-out policy, till 2008, the ASR had been steadily sliding towards zero. Starting from 16.5 cents per minute, it had come down to 7 cents. In fact, competition was making LDI operators contribute a couple of cents out of their own profits thus, consumers were paying around 5 cents per minute as ASR. Suddenly the newly installed government jacked up the ASR to 10 cents, and then to 12.5 cents.

Same cause-and-effect ensued, since the smugglers do not pay such taxes/charges, smuggling of international call minutes became lucrative and calls from illegal – also called ‘grey’ – channels began to flourish.

Due to big outcry against “grey” traffic, the ASR had to be cut down to 7.75 cents in April 2011. But that was not liked by vested interests – it is alleged that some influential people were also involved – therefore, someone came up with another “innovative” solution. All licensed international operators were brought together under the umbrella of “International Clearing House” (ICH). Their profits were fixed and assured.

In this “safe” environment, the ASR was increased to 8.85 cents. This made the incoming international calls expensive but provided a handsome margin to smugglers.

Before creation of ICH, the incoming calls in September 2012 were not all coming through legal channels, but even then 1.946 billion minutes per month were coming in legally. By November 2014, only 19% (367 million minutes) remained legal. After showing an initial rise, the government revenues dwindled correspondingly.

Finally, the present government – belatedly but thankfully – decided to disband ICH and slash the ASR, which took effect, after the usual court cases, in February/March 2015. Result of slashing the ASR is that by August 2015 the legal international minutes have soared to 1.36 billion minutes.

The budget saga

In the national budget, the government increased tax on mobile phones. On a low-end smart phone with a price tag of Rs10,000, tax went up to Rs1,000.

As a result, within the first quarter, the number of phones being imported and sold legally – a number that had been on the rise – declined by over 8%. Needless to say, the gap is being filled by smuggled phones.

Consequences are the same hence, the lessons learnt are the same again. Amid such taxes, it is the legal business that gets hurt, smuggling thrives again and the sector suffers. The government itself suffers through lost revenue.

It is said that the only lesson we learn from history is that we don’t learn any lesson from history. But making an attempt at rectifying a decision that has backfired is something the policymakers can do.

The writer is former CEO of the Universal Service Fund and is providing ICT consultancy services in several countries of Africa and Asia.

Spectrum auction: Learning from past errors key for successful rollout

The following article was first printed in The Daily Express Tribune, September 21, 2015.

Last week, Finance Minister Ishaq Dar shared exciting news with the nation. He said the country would be welcoming more spectrum that would be auctioned within this fiscal year. Considering the response the last spectrum auction received and the large growth mobile broadband services have registered, this piece of news would be a boost to the rapidly expanding industry. 

UK-based Plum Consulting had forecasted in 2013 that if third generation (3G) services could start in Pakistan in 2013 then, in the best case scenario, there would be around 20 million broadband subscribers in 2015.

However, the auction was held in 2014, but subscribers in 2015 are still approaching 20 million.

In such a scenario, hoarding of spectrum in the hope that it will fetch a higher price later could not have been the best policy. Already the precious 850MHz spectrum vacated by Instaphone is lying unused for many years now.

Why more spectrum is required

More spectrum is also needed because at the time of the last auction in May 2014, the operators did not (or could not) buy enough spectrum. In that auction, at least two operators decided to grab the 5MHz 3G slots at the first available opportunity. They did not even try for a 10MHz slot – even when it was apparent that 10MHz slots were going at a price close to the base price. But they were not interested, probably because the base price was perceived to be too high.

Incidentally, this also shows that offering two 5MHz slots was a clever decision on part of the government. Had there been no 5MHz slots, at least one (may be two) operators may have refrained from bidding, with unforeseen consequences.

Even if all four had fought over three slots of 10MHz each (a highly unlikely scenario), it may have resulted in slightly better auction proceeds in terms of money, but it would not have helped in meeting objectives of the spectrum auction including making the new technology available to citizens at a fair and reasonable price – not to earn quick short-term money for the government.

This over-emphasis on earning quick money results in slower deployment of services, impacts quality negatively and makes the services costly for the consumers.

Coming back to the previous auction, one lucrative 1800MHz slot remained unsold mainly because the bidder had to buy the 10MHz slot of 3G first, in order to qualify. This was obviously expecting too much, in the eyes of professional experts, operators not showing great eagerness in buying more spectrum (despite a clean, open, transparent auction in which four top global players took part), is an indication of something needing improvement.

How to improve

One must try to examine the causes – not to blame anybody – but to learn lessons, so that the now-promised spectrum auction works even better.

Before the last auction, Islamabad based independent think tank ‘ICT Forum Pakistan’ had submitted comments on the Information Memorandum (IM) of the Spectrum Auction. The forum had proposed certain changes.

Some of those were accepted, but some were ignored. In hindsight, suggestions that were not accepted might make an interesting reading. For instance, it was suggested that if 850MHz spectrum had to be reserved for a new entrant, at least a provision should be kept, that in case no new entrant appeared, the 850 slot would become available to the existing players.

A new entrant was never really expected, because of issues with the two most obvious things that the potential investors look at – (a) the existing business climate and (b) the future outlook. There is room for improvement in both.

Pakistan, being one of highest taxed countries in the telecom, surely does not appear too lucrative. As for the future outlook, there was, and still is, a strong need of a spectrum road-map, since spectrum-investors do their calculations based on the timings of future spectrum auctions.

Yet another suggestion of the think tank was to ease the terms of payment. Bidders were given option of paying 50% of the spectrum fees in installments, but with libor + 3 % interest. In India, they ask for 33% upfront, then 2 years moratorium, then 10 annual installments based on the principle that NPV of the payment is protected.

The best thing about the last auction was that it actually happened, despite the PTA remaining practically dysfunctional for most of the earlier part of the year. This time in order to improve upon it, lessons learned should be employed so that the investors eagerly come forward to invest.

The writer is former CEO of the Universal Service Fund and is providing ICT consultancy services in several countries of Africa and Asia.

Role of public-private partnership

The following article was first printed in The Daily Express Tribune, August 24,  2015.

We are all rejoicing at the recent phenomenal rise in the number of broadband users in Pakistan after the launch of 3G and 4G mobile broadband. Mobile broadband users have risen from 1.9 million in June 2014 to 13.5 million in June 2015, according to the Pakistan Telecommunication Authority (PTA).

The rapid uptake also confirmed that once people get the taste of broadband internet they want even higher speed. That is already a big challenge.

Those of us who are in this field know that with such rapid increase, unless some issues are addressed, the quality is soon impacted. The biggest among those issues is the bottle-neck of the backhaul.

How the network works

The signal that you send or receive via the 3G/4G towers travels to/from the far-end to the towers over the backhaul network.

All the backhaul networks in Pakistan were designed to carry voice signals over microwave links. As the towers are being upgraded to deliver 3G/4G broadband signals, the low-capacity backhaul (also called middle-mile) networks of yesterday are only going to work well as long as the load of 3G/4G users remains relatively low.

With time, not only the number of users will increase but individual users will also start consuming more bandwidth, and that is when the quality would start deteriorating.

There would be capacity issues on the side of the last-mile too, but those can be addressed by the mobile operators through introduction of new mini cell-sites, and by off-loading the data-load on to WiFi hotspots.

It is to address capacity issues at the far side of the towers that things become a little bit more complicated, mainly because microwave links can only be expanded up to a limit.

Optic fibre cables

The possibility of transmitting enormous amount of bandwidth is now available only due to optic fibres. Today’s optic fibre cables are crisscrossing the oceans connecting continents and countries around the world.

Pakistan started with the deployment of optical fibres both in the long distance and metropolitan areas in order to connect exchanges with each other in the 1980s. Despite the fact that the country has three local optical fibre cable manufacturing plants, the overall penetration in the country has been lacking.

We have only 5% towers connected with optic fibre backhaul. For comparison, in Thailand the ratio is nearly 90%.

In metropolitan areas, optic fibre cables are laid in forms of rings called ‘metro fibre rings’. This is because the intelligent electronics makes it possible for data to flow unhindered from another direction if the fibre is cut at any one place.

These fibre rings connect the users with the national/international fibre backbones.

Local broadband service providers are particularly important; as they are actually small entrepreneurs who crop up if inexpensive bandwidth becomes available, for instance, from a fiber ring passing nearby. They use unlicensed WiFi spectrum to deliver inexpensive broadband to households and small businesses within their localities, because the marginal cost of rolling out WiFi services on top of a metro fiber network is rather low.

In short, optic fibre rings not only provide high bandwidth to 3G/4G towers, but also stimulate entrepreneurship in the last-mile, which, in turn creates employment opportunities.

Elsewhere

On the African continent this year, metro optic fiber services have been announced in Zambia, Zimbabwe, Rwanda, Kenya, South Africa and Nigeria. In Uganda, under the ‘Project Link’ Google has invested in laying 100 km metro fibre in Kampala, that is accessible to all last-mile service providers without discrimination.

Our Problem

We too, need similar fibre rings for the reasons explained above, despite the fact that we already have PTCL fibre buried in our cities.

PTCL fibre rings do not cover enough parts of our cities and the company itself is in the last-mile business.

A decade ago an umpteen number of privately owned last-mile DSL service providers tried to ride on the then newly “unbundled” copper cables, in competition to PTCL last-mile services. Since PTCL was also their wholesale metro bandwidth provider, gradually all of them went out of business.

I do not blame PTCL that its ownership of metro fibre actually acts as an entry barrier for smaller last-mile service providers. Unfortunately, PTCL cannot become that ‘carrier of carriers’ that we need today.

That is why a neutral entity is needed that owns and operates metro fibre through which access to broadband becomes available to all those who desire.

But to do something on these lines, is it within the resources of the government? Particularly when the government has many more pressing socio-economic needs to attend to?

The solution

This dilemma could perhaps be solved by employing the Public Private Partnership (PPP); a mechanism by which the government utilises the private sector efficiencies to deliver services which would otherwise have been provided by the public sector.

Instead of the public sector procuring a capital asset and providing a service, the private sector invests to create the asset through dedicated standalone business, and then delivers the service while charging the users of the service to recover the investment profitably.

The selection of the private sector service provider is done through competitive bidding. The bidders are required to give commitments regarding quality standards and the tariffs that they would charge the users. On its part, the government could chip in with free Right-of-Way, which is of great value in any such enterprise.

PPP Policies on the federal and provincial levels already exist. Federal, provincial, or city governments could take up such a venture. Public consultation process may be launched to elicit opinions of stakeholders and general public before the necessary detailed framework is created. Before going full scale for its implementation, the framework should be put to test in a small pilot city.

The writer is former CEO of the Universal Service Fund and is providing ICT consultancy services in several countries of Africa and Asia.

Good News – Govt. decides to release Rs 5 Bln for USF Telecenters

It is indeed great news (http://www.usf.org.pk/newsdescription.aspx?122 ) that the Government has approved release of Rupees Five billion (equal to US$ Fifty million) from Federal Consolidated Fund (FCF) to the Universal Service Fund (USF), to help bridge the ever-increasing digital divide.

Earlier this year on 13th January, in my blog (http://www.piftikhar.com/2015/01/utilization-of-universal-service-funds/ ) I had stated that according to a careful calculation, Pakistan USF has somewhere around US$ 730 million lying un-utilised/un-committed in its books. On top of that there is another approximate equivalent of US$ 70 million flowing in every year on account of USF contributions alone. Other sources that add to the USF in Pakistan include the recently-abolished APC and the Spectrum Auction Fees, etc. However even if it took the government two years in deciding to let USF use some of that amount, it is a good news, and one should say, “Something is better than nothing”. Or is it not?

According to the same news item, with the help of these funds USF would carry out its Telecenters program, in order to provide access to people in far flung areas of the country to e-communication and IT facilities. It is purported that in the next three years 500 such Telecenters, at a total cost of Rs 11.5 billion, will be set up.

Telecenters are typically meant for the marginalized rural populations, women, the disabled, and the youth. But there are divided views about these and in the opinion of some, the concept of Telecenters is now outdated. Their reasoning is embedded in history. Ever since the concept of Telecenters first emerged in Scandinavia in 1980’s, till recently, Telecenters were nothing more than glorified PCOs (Public Call Offices) where people could go and share the computers to access the internet for basic applications like receiving and sending emails, or rudimentary web-browsing. The detractors argue that now-a-days prices of access devices (like smartphones/tablets/PCs) are dropping rapidly therefore it is enough to provide internet coverage in rural areas. Those who want to access the internet, would easily do so using their own access devices. Their argument is reinforced by the fact that sustainability of Telecenters has always been a question mark. So why invest in Telecenters, they ask.

However most others (including myself) disagree with that notion. In our opinion the Telecenters of today do not merely act as public access points, rather the Telecenters are helping the governments in two very important additional manners.

  1. Enhancing basic digital literacy. This may seem as not entirely new. But whereas originally Telecenters also helped some rural citizens overcome their initial inhibitions and teach how to use the internet, in the modern Telecenters increasing digital literacy is the most important function. They go far beyond mere teaching, by hand-holding and showing how to access and acquire relevant information from the Net – like how to ask the right questions from the right experts, how to learn other relevant (non-ICT) skills from the Net, and even how to share their own experiences with others over the Net. As they become proficient in doing all of that, most of them would find it convenient to switch over to their own personal access devices – like smartphones – thus creating space for new learners, and adding to the millions of those willing to enhance their ICT-related skills. This also means that wherever there are Telecenters, there would be new demand for broadband coverage in the surrounding areas. Indeed the prerequisite for this is that parallel to setting up Telecenters, Content must be made available on the Net – Content that is in local languages and also otherwise easily understandable by rural citizens (ie explained visually with the help of videos and animations), and Content that is relevant to their daily lives (ie covering topics of health, governance, education, farming, livestock, fisheries, etc. etc.). Obviously only the Governments can do this.
  2. Delivering public services at the doorsteps of the citizens. Services like getting passports and renewing various licenses should not necessitate visits to nearby towns. The myriad of Government departments dealing with public services should all converge, virtually, into the Telecenter! Take another example, that of Agriculture sector, currently 21% of GDP, and 45% of employment of country’s labor force depends on Agriculture (http://www.finance.gov.pk/survey/chapter_12/02-Agriculture.pdf). Although there are service-delivery channels available to help the farmers (agricultural department with it’s vast network of extension workers) but with exploding population and new eServices being developed, these channels are becoming grossly inadequate – particularly for those with smaller land-holdings. Scarce Government resources do not seem to match. Therefore there is an enormous requirement of efficient and fast service delivery channels. Telecenters could be those channels.

If one goes a step further and train the farmers at the Telecenters to use their smartphones to get all the information, and ask all the questions, from the Agricultural department – and vice versa – each smartphone could become a “personal extension worker”. Yes, I know this is futuristic, and in the beginning it may work effectively only with the younger generation of farmers. But like it or not, that is where technology is taking us and that is only one of the ways it can be used to our advantage!

The benefits of rural Telecenters do not end here. There are two phenomena that help perpetuate overall broadband penetration.

First – when more people learn – and use – broadband, the data traffic volumes will increase, which will enhance the appetite of the Operators to invest more in broadband infrastructure.

Second – one of the obstacles in extending wireless broadband (3G/4G) in rural areas, is the current relatively low-capacity (microwave radio based)` “backhaul” network. Hardly 5% cellphone towers are connected with optic fibers (to put it in perspective, in Thailand nearly 90% of the cellphone towers are connected with optic fibers). But since modern Telecenters consume huge amounts of data, at fast speeds, these Telecenters are typically connected with optic fiber cables. The same optic fiber cables could then also connect many more cellphone towers on the way, thus resolving the above mentioned issue of “backhaul”. In fact, in my opinion, to give a boost to rural broadband, equal access should be available to the fiber capacity installed with USF subsidies for backhaul of wireless broadband, at special low rates.

So far it is not known if these planned Telecenters in Pakistan will indeed get fiber connectivity. But, as explained above, doing so would be immensely beneficial – not doing so would be a folly.

Summarizing, setting up Telecenters is an excellent step. Properly done, it could help bring a digital revolution in the country. But to get full benefits of broadband, its eco-system has to be addressed, which includes relevant local content, high speed/capacity connectivity, and professional training/coaching of rural users with hand-holding. However 500 Telecenters (that too till 2018) in a country of more than 187 Million people, where more than 110 Million live in villages, are definitely too less. Compare that with Malaysia where there are more than 2,000 Telecenters for a rural population of only around 8 million. With funds not being an issue here, the number of planned Telecenters in the next three years should be increased by at least a factor of ten.

 

Award winning Nigerian ICT-for-Girls programs

Just before my recent visit to Nigeria, I happened to come across our IT Minister, Ms. Anusha Rahman, who mentioned that she had recently met the Nigerian Minister for Communications Technology (CT) Dr. Ms. Omobola Johnson, at the 2014 ITU Plenipotentiary in South Korea, and asked her to share details of the Nigerian award-winning program of ICT-for-Girls. Nigeria had received ‘ITU Gender Empowerment Award’ in South Korea, for initiating policies and programs empowering women and girls via ICTs. I must mention here that I have always found Ms Rahman wanting to contribute, to do something positive, for benefit of the country (even if some people may have different opinions about the amount of success achieved so far).

Nigerian Minister of Communications Technology, Dr Ms Omobola Johnson, with other award-recipients, at ITU Plenipotentiary, in South Korea.

In any case, being father of three daughters, the subject of development of girls has always been close to my heart In particular when one reads reports such as the one by the Broadband Commission Working Group on Broadband and Gender entitled “Doubling Digital Opportunities: Enhancing the inclusion of women and girls in the information society” (http://www.broadbandcommission.org/documents/working-groups/bb-doubling-digital-2013.pdf). In this report the Commission lamented, that world-wide there are currently 200 million fewer women estimated to be online than men. We do not have any such statistics for Pakistan, but the situation is certainly worse.

A selfie with the Honorable Minister of Communication Technology, Dr Ms Omobola Johnson, last December.

In Nigeria, when I mentioned my interest to CT Minister Dr Ms Johnson, she replied that closing the digital divide has become a development priority in order to drive the economic and social inclusion of women in Nigeria. She fondly remembered meeting Ms Anusha Rahman, as “another woman ICT Minister” like her!

Thanks to the CT Minister’s office (particularly Ms Abi Jagun) and head of USPF (my friend Abdullahi Maikano) I could get detailed briefings about the program.

To my surprise I found out that there is not one but three big ICT-for-Girls programs in Nigeria, under the umbrella of ‘Growing Women and Girls in Nigeria’ (GWIN) initiative of President Goodluck Jonathan. Overall GWIN is being implemented through an MoU between the Ministries of Finance, CT, Agriculture, Water Resources, Health, Works and Women Affairs. Each Ministry receives extra-budgetary finance for GWIN! Actually the Federal Government requires all Ministries to make provision for gender-specific projects in their budgets, and to set up desks for management of such gender projects. It is felt that for any ground-breaking initiative to succeed, top level support, and financial commitment, are absolutely essential.

The first ICT-for-Girls program of the Ministry of CT is a series of projects of ICT training of one thousand girls per project, sharing costs and responsibilities with private sector sponsors. Participating girls are required to have cleared Polytechnique Diploma course first. The Ministry pays for bringing batches of girls to the training venues plus their boarding and lodging. The private sector partner (sponsor) takes care of training, including training aids and the training venue. But the target is not just any ICT training. The emphasis is on improving employability of the girls. The sponsor even commits to either employ, or get employment for, at least 20% of the girls completing their training. The first such program is run together with the Chinese telecom equipment manufacturer Huawei, and is, therefore, called “Huawei 1,000 girls for ICT”. It is expected that several such projects will follow involving other companies, for wxample “Cisco 1,000 girls for ICT”  and  “MTN 1,000 girls for ICT” etc.

A 1000 Girls for ICT class in Lagos.

The second program is called “Digital Girls Club”. Run on the lines of girl-guides program, it is a program to help girls develop an early interest in the field of ICTs. It is run in partnership with Universal Service Provision Fund (USFP)) of Nigeria. Girl students in those schools and colleges become members of the Digital Girls Club where USPF has provided internet and computer labs, under its “School Access Program” (SAP). Participation is voluntary and classes are held after school-hours a couple of times every week. The course has three terms, running over a full school year. It is implemented through one or two teachers of the school/college, who are specially trained for the purpose. The curriculum is prepared with the help of civil society, predominantly by women who are already working in ICT sector in the country.

Girls learning to disassemble PCs at a Digital Girls Club.

The third program “Smart Woman Nigeria”, is actually a platform, accessible to ordinary women who own mobile phones, but are unable to take advantage of opportunities offered by ICTs, due to lack of knowledge and difficulty in accessing relevant information. Smart-Woman offers learning, tips, advice and mentoring in communication skills, managing finances, health, and family work/life balance, parenting, etc, by developing and making available relevant content to meet the needs of women. The content is in the form of SMS, as well as Voice-SMS, so that those who cannot read, may also benefit. Smart-Woman project services are offered free to rural women – paid by subscriptions of higher income women in urban areas. The second phase of the program will also incorporate discussion and bulletin boards. The development of this program is said to have been the result of participation of many stakeholders, ministries, etc., including the eleven-year old “Women in Management, Business and Public Service” (WIMBIZ), a civil society organisation with a large network of professional women in Nigeria and “Change Corporation” USA. The development of the platform and mobile applications that deliver information are being developed locally, furthermore, the content being disseminated is hosted within the country.  All this also results in development of local content in Nigeria.

I am convinced that such programs could easily be modified according to local requirements, and replicated in countries like ours to help women and girls get ahead – provided commitment from the very top is forthcoming.

Utilization of Universal Service Funds

On 6th January 2015, Indian Regulator, TRAI, has finally recommended a reduction in Universal Service Obligation Fund (USOF) levy from 5% to 3% of the annual adjusted gross revenues. This has been done due to low level of utilization of collected funds. It notes that in ten years, out of the collected equivalent of US$ 10 Bln (approx), US$ 5.7 Bln remained unutilized, representing 57% of the USO levy collected.

It is a well-known fact that telecom operators, all over the world, resent this “contribution” as they see the money either going to other sectors or – in worst case – simply down the drain. Cellphone operators (who are the major contributors) also resent the money going to other branches of ICT sector. Although now-a-days the situation has changed for the better as a lot of these funds are going into rural optic fibers, which are needed by the Cellphone operators for backhaul of mobile broadband!

Several respected experts agree with the telecom operators, for a variety of reasons – admittedly they are not wrong. Like my good friend Rohan Samarajiva (lireneasia.net), says, “Where there is cheese, there will be rats”! And Ricardo Tavares (techpolis.com) thinks that over time the collection becomes an ordinary tax, not a fund, and does not return to the telecom sector.

In early 2013, GSMA published a well-researched Universal Service Funds Study, in which it tried to solidly establish that these universal service funds, due to various challenges and limitations, are not utilized for the purpose for which they are created. The study found that in every region of the world, majority of the collected funds were lying unutilized

The GSMA study, in it’s ‘Key Findings’, recommended that the governments should “consider” if USFs are appropriate and relevant. Personally, I had an issue with that recommendation. In my blog (I have a problem with GSMA) I argued that instead of implicitly advocating cancelling of universal service funds, GSMA should try to help the countries (who are all developing countries) so that they are able to utilize the funds effectively and efficiently.

In the GSMA Report, one of the largest ‘culprits’ mentioned was India with billions of dollars lying unused. During my own research for my blog I talked to the head of Indian USOF, Mr. Ravi Shankar, whom I met at a conference in Zanzibar. He explained to me various plans that they had for spending the accumulated funds – mainly their flagship project “National Optic Fiber Network”. But apparently the speed of disbursements has not been up to that level! On top of that the India is special in any case, because it has one of the highest USF levies in the world – Five percent!

Lets compare that with some examples from other countries:

 

Therefore it appears to be good step that they have recommended to bring it down to a more reasonable level.

Coming to home, the level of utilization of USF funds in Pakistan, at this time, is actually worse. According to a careful estimate, since 2006 an equivalent of US$ One Billion has been collected (including the interest earned on the collections) – excluding those millions that were collected by PTA in the initial years and deposited directly with the government. Out of this One Billion, US$ 160 Million has been disbursed to the telcos. Another US$ 110 Million is committed in signed contracts of on-going projects, and is lying with the Government of Pakistan. The balance, equivalent to US$ 730 Million, is also lying somewhere – unutilized, uncommitted.

This is not a small amount. It is equal to 0.3% of Pakistan’s 2013 GDP (which was US$ 232.3 Bln, as per World Bank data)! Since the USF collections are now being diverted to the Government (Federal Consolidated Fund), instead of helping the unserved areas, these are merely serving to fill the fiscal gap. Does that raise questions if the USF levy in Pakistan (a very reasonable 1.5%) should also be brought down further? Perhaps even discontinued for the time being?

In fact such a performance raises those same GSMA questions: Should there be any USFs at all? Should we not let the telcos deliver in the rural areas on their own? My personal experience says a big NO to this. Telcos are unwilling to go to most of those areas even with subsidies, leave alone without!

So we have to somehow accelerate USF development projects and deploy ICT connectivity and services (real ICT services) in rural areas at a much faster pace – as was/is demonstrated by USFs in some of the developing countries. There are several international organisations trying to work on this – among them ITU, World Bank, USAID/GBI, CTO, etc. I work with all of them at one place or the other, and almost every time the question pops up if there is a better way of achieving the objectives. So far an answer could not be found. Till such time as we try to find that illusive answer, I think it is obligatory upon all of us to do our best to improve utilization of these funds as this still gives us the best chance to bridge that ever increasing digital divide – at least to an extent, if not fully.

Spectrum size does matter

(This article was first published in Business Recorder “ICT Review 2014”, 16 Dec. 2014)

As part of my presentation at e-India 2008, in New Delhi, when I proudly presented the slide of regional telecom development showing Pakistan ahead of all,

little did I know that it was in fact the beginning of a long era of stagnation for Pakistan telecom. Thereafter, where the Sri Lanka teledensity soared from 51% to nearly 100%, Indian teledensity from 24% to 75%, Pakistan crawled from 57% to 75%.

There had been many reasons of the success story at that time, but the telecom policies (there were several – Cellular Mobile Policy, Broadband Policy, USF Policy, etc.) and reforms of 2004 were at the top. Those policies and reforms were probably the best things that could happen to a sector in a country. But these policies were supposed to have a lifespan of five years. Nothing happened for the next ten long years.

Therefore the biggest achievement of the present government in the field of ICT will not be the 3G/4G auction, nor winning the seat in the administrative council of ITU, it will rather be formulation of new ICT policies, in consultation with the stakeholders. We are not there yet, but work is underway to formulate a telecom policy, with the assistance of an international consultant, funded by the World Bank.

A couple of rounds of stakeholder consultations have been held and it appears likely that the new telecom policy will soon see the light of the day and set Pakistan’s telecom development on the right trajectory to re-gain lost glory. Some of the elements that are important in that context are discussed briefly below.

Spectrum

No amount of spectrum is enough, particularly for our last-mile needs. But spectrum should  not be too expensive for our consumers, as it is they who pay for it in the end. The last spectrum auction of 3G and 4G in April 2014, though successful in many ways, did leave much to be desired in that respect. How? For another few years wireless broadband would not be available to a majority of our people (more than 60% live in rural areas). Lax operator license roll-out obligations allow that to happen because government’s focus on getting upfront cash was too high on the agenda. Pakistanis’ hunger for broadband can be gauged from the claims of cellular operators, that 3G users in cities have crossed 3 million mark – effectively equaling the number of broadband subscriptions in the country  – in less than six months!

Spectrum policy needs other drastic improvements as well, like in spectrum trading and re-use, so that situations are avoided where precious spectrum is lying unused on one side and some operators are craving for it on the other.    

Fiber penetration

If spectrum is needed for the last-mile, Optic Fiber Cable OFC) connectivity is needed for the backhaul. It is impossible to provide inclusive development to our burgeoning population without the help of ICTs. Fortunately computing power of the devices is doubling every year and prices are tumbling. According to well-respected technology research firm IDC, Smartphones are already replacing PCs and Laptops. On the other hand videos, which are the most effective way to teach our villagers, are bandwidth-hungry. Therefore massive amount of bandwidths will be required in the backbone/backhaul networks, which is only possible through OFCs.

Thus any future rapid inclusive economic development depends on increasing the fiber penetration in the country. That is why it was expected that ‘Fiber to Tehsil’ program of USF would be followed by a program of ‘Fiber to Union Council’ – for all of the six-and-a-half thousand Union Councils!

Taxes

There are all kinds of indirect taxes in Pakistan but the usage tax on telecom is one of the worst. It directly impacts use of ICTs by the poorest sections of the population. A large proportion of this tax is adjustable in the annual income tax – exactly what the poor cannot do, ironically because they are supposed to have been exempted from taxes! These days phones (particularly smartphones) are considered to be productivity enhancing tools. To discourage their usage, by charging high usage tax, amounts to putting breaks on productivity enhancement, and thus detrimental to inclusive economic growth

USF and ICT R&D Funds

The story of USF has been the same as telecom. On 7th May 2010, Indian newspaper ‘Business Line’ (belonging to ‘The Hindu’ group) headlined: “Pak ahead of India in use of Universal Service Funds”  (http://www.indiapress.org/gen/news.php/Business_Line/). Among other things, Pakistan was among the first ones in the world to start using USF for optic fibers. Our neighbours followed us and today they are extending fibers to each of the 250,000 “Gram Panchayats”. Now its our turn to emulate. With nearly a billion dollars in the kitty of USF Pakistan, a little bit of will and some hard work is required. The government announced a program of 500 broadband telecenters half a year ago. Something is better than nothing if it is not so painfully slow in taking off. As for ICT R&D, little said the better. After all what can one say about an organisation where, in the last four years, there was a full-time CEO for only half a year? In both cases the industry representatives cannot be absolved of it’s responsibilities.

Content

Doing all that above is suggested would just be a big waste unless there is useful content that can educate and enhance the skills of the masses. Educate not just in the conventional sense but also teach modern techniques in agriculture, farming, livestock, commerce, fish-farming, growing fruits and preserving them for home and foreign markets, how to setup and run businesses, how to live hygienically, to name just a few of the endless possibilities.

Content is not the responsibility of IT ministry alone. Other ministries – both federal and provincial – have to play their part. To give an example – Agricultural ministries/departments have got substantial rural presence with thousands of field workers who help/guide/teach the farmers. Now with ICTs they can be made more effective by providing them with smartphones, pre-loaded with videos which demonstrate those new ways and methodologies that the farmers need to learn. In future, as smart phones and mobile broadband become more pervasive, farmers would be able to download such videos themselves whenever and wherever required. Such videos can only be prepared by our local specialists of agricultural with the help of public/private sector IT experts – not by IT experts alone.

Egovernance

The government’s role does not end here even. There is enough evidence available that ICT development comes when the governments themselves become

the biggest users of ICTs. Federal ministry of IT is working to spread use of eOffice in all federal ministries. But use of ICTs in the government has to take a quantum leap – from eOffice in a handful of ministries and mere downloading of some Forms by the citizens, to complete eGovernance. As many transactions between the citizens and the governments should start taking the broadband route.

Take the example of Branchless Banking: why cant we pay government dues, like annual vehicle tax or abiana, through mobile banking? Why must we spend our precious hours standing in queues (or pay someone to do so) to pay government dues?

 

It is not that no such content development work for egovernance is being done in Pakistan. Some provinces are doing better than others. But most of it appears to be carried out in piecemeal manner (look at vehicle number plates of different provinces, they appear to come from different countries), and none of the work is being shared among the center and/or provinces.

There seems to be no effort to learn from each other, replicate or avoid duplication, and thus waste. There is an on-going ITU/NIPA (South Korea) assisted initiative of an eGovernment Masterplan (of which I happen to be a part from the ITU side) but that deals only with the federal government. Comprehensive nation-wide medium/long term egovernment plans must be formulated and implemented by the center and the provinces jointly, which is only possible if the top leadership takes ownership and pushes for implementation.

Indeed all this would take years, but we need to hasten up so that we can again start proudly presenting Pakistan ahead of others!

 

Childhood and Universal Service

Back in the early sixties when I was a school-kid – long before our Bengali brethren were alienated by military-rulers and feudal politicians, and when the relations between the then East and West Pakistanis were sweet and friendly – my father, a young Signals officer in the army, posted in Dhaka for a couple of years, was given an assignment that was in addition to his normal duties.

As we all know the beautiful land of Bangladesh is unfortunately prone to terrific cyclones and floods, particularly along the coast of Bay of Bengal. These cyclones prove disastrous for the poor people of those areas. Thanks to cellular telephony and a flat terrain, now-a-days Bangladesh is one of the best cellular-covered countries in the world. But during those days, telecommunications had not developed so much and the entire burden fell on the wired Telegraph network which connected the administrative headquarters, breaking down more often than not. In the absence of reliable communications, it was not possible to provide any kind of early disaster warnings to the people of those “unserved” areas. Neither was it possible to get relevant timely information about developing cyclones from those areas. Similarly providing post-disaster relief always requires a working communications system to facilitate rescue, medical and aid workers.

Amateur Radio (also called “Ham” Radio) had been developing fast since the beginning of last century, used by hobbyists to get a thrill out of talking to strangers in far off places. A typical amateur radio “station” would be a small room cramped with short-wave radio transceiver equipment, with the operator crouching in front of a microphone, wearing headsets, scanning the ITU-allocated “short-wave” frequency band for any faint human voice (or Morse-code signals), coming from any direction. There were no satellite links employed for amateur radio, but “short-wave” frequency bands made it possible to be heard over considerable distances, albeit not always very clearly because of the constant crackling sounds from the ionosphere.

A typical Amateur Radio “Station” of the sixties, showing the operator so busy in his hobby that his wife is desperately trying to remind him of something (notice the walls decorated with call-sign post cards received from various parts of the world.

Every Amateur radio network (or “Club”) had a name, and every radio station had a “Call Sign” (consisting of alphanumeric characters following a convention). Whenever two amateur radio operators sitting in different parts of the world made contact with each other and could hear well enough to understand each other’s postal addresses, they would exchange post-cards via the postal service. Amateur operators had individual postcards specially printed, which carried the name of the Club and their individual Call Sign. All received cards were displayed on the walls of the “radio station” by the recipients as trophies.

With the passage of time, amateur radio operators started discovering other innovative and useful applications of this technology. They discovered that amateur radio could also be used for a myriad of services, among those: saving lives. By then the size and power requirements had come down, so it became possible to deploy radio in the field rather quickly. Seeing these advantages the government decided to deploy an amateur radio network across East Pakistan, to be used mainly for communications to/from the areas prone to cataclysmic natural disasters. In normal times it would be used to promote understanding among the people.To develop such an amateur radio network, was the task that my father was given

I remember during the time the network was being established, and also later during its 24/7 operation, he had to travel several times (by train and steamer boats) to places like Chittagong, Cox’s Bazar, Khulna and Jessore. “The Tiger Amateur Radio Club” (it was named after the famous Bengal tiger), was inaugurated by General Khwaja Wasiuddin, who presented a “Charter” to the club, in August 1963.

General Wasiuddin giving the Charter of “Tiger Amateur Radio Club” to my father’s boss (my father is holding the Charter from behind).

Being the eldest child I (and my younger brother Javed Iftikhar) had the privilege of occasionally accompanying him to the newly setup Dhaka amateur radio station, where he had to frequently go in the evenings. He would always try to explain to us how things worked.

We left Dhaka soon after that but up to the 1965 war one kept hearing how helpful the Tiger Amateur Radio Club was in providing relief efforts. I have no idea what happened subsequently, but my father did receive a “Commendation Certificate” from the government, for his “meritorious services” in setting up the network. The Certificate hung, framed, at our home for a long time.

My father explaining the working of the Amateur Radio to the Chief Guest at the time of it’s inauguration in August 1963

As a student of class-4 I can vividly recollect all these things (I even remember the call sign of Dhaka radio station, which was AP5CP) primarily because my father tried to ensure that we learned from his experiences. I remember that one day when I asked him about this ‘thing’ called radio frequency, he took a paper and a pencil and explained it all to me in terms so simple that I can never forget. In fact that was my first lesson in telecom engineering!

The first time two amateur radio enthusiasts talked to each other across the Atlantic, a watershed event in the history of Amateur Radio,  had been in the year 1923 – the year my father was born! Exactly forty years later he helped establish an amateur radio network for communications to/from unserved areas. Little did I know that after another forty-four years I would become the founding CEO of USF Pakistan – which would start my own love-affair with providing telecommunications in the unserved areas!