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Pro-Pakistani: Parvez Iftikhar, CEO, Universal Service Fund

Mr. Parvez Iftikhar is CEO of Universal Service Fund since May 2007 (when USF actually started). He is a telecom professional with 30 years of experience.

Starting from scratch, Mr. Iftikhar made it happen for USF to assign contracts worth millions of dollars with Telecom Service Providers in the very first year. The achievement should be seen in the context of strict, open, transparent bidding process that is being followed and the fact that there have been no complaints so far. His particular role in USF Pakistan is getting global recognition!

Prior to USF, he headed Telecom Division of Siemens Pakistan and was responsible for taking it from a Euro 25 million enterprise to one with annual turnover of more than Euro 300 million.

He is an engineering graduate from University of Engineering and Technology, Lahore/Pakistan, who has also been on sabbaticals to Carnegie Mellon University, Pittsburg/USA and Oxford University, UK.

He was kind enough to give us the opportunity to know about USF and its operations.
Text of Interview:

ProPakistani.com: Many people do not understand the concept of Universal Services Fund. Please tell us about its functionality, aspects and goals?

Parvez Iftikhar: The idea of Universal Service fund was foreseen in 1996 with Telecom Act in order to facilitate every citizen of Pakistan with basic telecom services; for the purpose, it was concluded, like several other countries, to establish a fund which will assist operators setting up telecom infrastructure in those areas of the country where it is economically not viable for them to lay down their network. The concept was taken along and eventually USF policy was formulized in 2004 and then the rules in 2006.

Now given that, there is a fund the question arose of how to disburse it and it was decided that a corporate model in Public-Private-Partnership will be established to execute and monitor the fund. Hence a company was formed in early 2007 under the Companies’ Ordinance of 1984, which is called Universal Service Fund. This company is operating under the defined law and it has its own board of directors, evenly distributed between public and private sectors that includes Minister IT, secretary IT, Member Telecom and Chairman PTA representing the government sector; while from private sector there is a representative each from cellular industry, fixed line industry, internet service providers and consumer interest groups as board members plus the CEO as ninth board member.

About its functionality, USF has primarily three tracks to work on: 1 – Rural Telecommunication, 2 – Broadband Internet and 3 – Special projects. Under Rural Telecommunication tag, we are trying to extend telecom infrastructure to those areas where telecom Operators normally don’t go, due to low return or unviable economic conditions in such areas.

Another track is Broadband internet, under which we are encouraging ISPs to provide broadband to un-served urban areas and in future we will stretch this to rural areas as well.

Under special projects, we are going to fund laying of optic fiber cable to each and every Tehsil of Pakistan. It merits mentioning here that 30 percent of Pakistani Tehsils are not linked with Fiber Optic.
Other than this, a small project for ICT labs for disabled in all the four provinces is also being funded.

ProPakistani.com: Where do the funds come from?

Parvez Iftikhar: cellular operators contribute share 1.5 percent of adjusted revenues for USF. Other than this, spectrum auction fee, a portion of APC, government grants plus foreign assistance are permissible other funding sources for USF.

ProPakistani.com: What is the process of starting a new project, and how the funds are distributed to companies to roll out network?

Parvez Iftikhar: First thing, all these projects are deployed by licensed operators, meaning that they will setup the infrastructure, operate it, market it and lastly they will sell the services. USF actually subsidizes these projects by identifying the un-served parts of Pakistan. The level of subsidy is determined by bidding from operators for a specific and predefined area or region. Operators submit their technical solutions (on how they will roll out the infrastructure) as well as financial bids (meaning that the financial expense they would like USF to bear). Once, the technical ability of operator is satisfied, the bidder asking for lowest subsidy gets the project and starts rolling out its infrastructure.
It must be noted, that as per rules it is a must to maintain network quality as anywhere else in the country.

Furthermore, Operators are to bear operating expenses by themselves and they charge their customers as normal tariffs which obviously go into their pocket.

So the USF fund is to only subsidize the network rollout cost in order to take the telecom services to areas where companies don’t go in normal circumstances.

I must also point out that to avoid local monopolies, it is mandatory for project winner to share its infrastructure with at least one other operator. Also as per Rules, a single operator cannot be allotted more than 50% of the disbursed subsidy, to keep the process equitable, fair and competitive.

ProPakistani.com: What is the estimated amount of total fund generated each year and how it is allotted for projects?

Parvez Iftikhar: This year I suppose we are getting 4 Billion rupees in USF, most out of which are from 1.5 percent revenue share of operators.

By the way, this fund is not with us, the Government keeps it, IT ministry to be specific. We try to keep all the process transparent and keep it available on our website www.usf.org.pk, where we not only disclose project’s geographical details but financial details as well. Following the transparent process, we select the successful bidder through open bidding. Successful bidder gets approved from the board of directors to be allotted with the specific amount of fund, required for the project. USF Co. then gets the necessary amounts from the Fund and disburses it.

ProPakistani.com: After successful bidding, what measures and metrics do you have to monitor the quality and speed of network roll out by operators?

Parvez Iftikhar: We do technical audits for the purpose to check  the rollout process for this we have independent technical auditors appointed to monitor all the way from start to the completion of project.

Now for each project a technical audit company is there to periodically examine the work being done. Moreover, payments from USF are linked with the reports from technical audit company. We give 20 percent of total subsidized cost at the start of the project, while rest of the payment gets scheduled in 4 installments. These installments are released only after successful completion (of course after an okay signal from Audit Company) of the 25 percent milestone of project.

By the way, we hired these technical audit companies also by publicly advertising the opportunity and after a procedural way to assess their technical strengths and resources which include software and other tools, vehicles, technical staff etc.

ProPakistani.com: How USF foresees the challenge and prospect for broadband rollout in the country?

Parvez Iftikhar: I personally feel like whole of Pakistan is under-served when it comes to broadband internet. Initially, we thought of starting a broadband project throughout the country. But the idea didn’t get positive feedback from some important players in the industry, especially the currently operating ISPs. So after consultation with industry, we decided to go to un-served urban areas, where there is a potential but no broadband service.
To be factual, there are 500 towns of different sizes in Pakistan, out of which 20 or 22 towns have broadband, all others are waiting for broadband services.

We eventually got the whole Pakistan surveyed, and it was concluded that USF will start broadband projects from Faisalabad Telecom Regions (FTR). It would be interesting for you to know that there are 150,000 dial-up internet users in 56 towns of 7 districts of Faisalabad Region, minus the city of Faisalabad City.

The bidding for broadband was on achievement of targets, not the roll-out. Here target means, broadband users, and USF will pay on per broadband user basis – the amount per user decided by open bidding.

I want to mention that we have made it obligatory for successful bidders to setup a computer lab with free broadband connection for one year and training to 2 staff members in every high-school and college in the region. So this way, 285 high schools and colleges in FTR will get equipped with computer labs and the broadband internet connection. Furthermore, we have asked them to set up and run community broadband centers for those inhabitants of each town who cannot afford PCs etc. – though users will pay for services, but they will get fax, printer, scanner and broadband services there, for sure.

ProPakistani.com: What you consider important, voice services or the broadband Internet?

Parvez Iftikhar: Our first priority is of course the Rural Telecom – reason is that those areas don’t have any source of communication medium. So we want such regions on board where population density is so less, conditions are so harsh and accessibility is so difficult, that it is extremely difficult for the operators to go there.

ProPakistani.com: How do you tackle security concerns in Swat, Shangla, Chitral etc?

Parvez Iftikhar: Yes, we have an issue of security there. Project has been halted there because of two reasons, in some areas due to security and in others due to harsh weather conditions. So as soon as the weather will get normal, we will continue with our project in some of the areas, however, in other areas we will have to wait for the security issues to get settled.

ProPakistani.com: As I understand USF is grabbing opportunities to make telecom as not only service in rural areas, but as fiber optic to boom the technology. Can we expect USF to subsidize a mobile manufacturing plant in Pakistan in future to reap from handset industry?

Parvez Iftikhar: Currently, we don’t have such a project under consideration, neither anyone has approached us to work on this track. However, I don’t foreclose the possibility, under the heading of special projects at USF.
I believe, yes, it can be done as far as the country and telecom sector is benefited, I am sure board members will positively consider such an opportunity. It would be better if such a project comes to us via one or more operators, as primarily this is an operators’ fund.

ProPakistani.com: There is an perception in cellular industry, that they are paying huge license fee, and then taxes, then APC and what not – and after all this, they are made to pay 1.5 percent of their revenues, aren’t they over burdened due to USF?

Parvez Iftikhar: I would respond this question in another way; in fact cellular companies should be happy due to such a low amount of contribution for USF when compared to many other countries where cellular operators are charged higher percentage, to be true, mostly it is in the range of 5 to 6% of their revenues. So I find this 1.5% level of contribution very reasonable and necessary to cut down digital divide in the country.

ProPakistani.com: How do you see USF Pakistan when compared to regional and global scenario?

Parvez Iftikhar: I would not like to indulge in any self-praise but thank God; we are doing much better than most of the countries. For example in India, they have a couple of billion dollars accumulated fund – out of what they installed one radio telephone unit per village in 180,000 destinations. While we make sure that at least 60 percent of population in a village or town gets the possibility to get a telephone connection instead of one telephone set per town. Other than this they are installing thousands of Towers so that the operators come and offer service. One has to wait and see how successful that is. They also have intentions to go with broadband projects, while we are already there.

We are certainly ahead.

I was recently invited to speak on Pakistan’s USF model in Vietnam, Malaysia and India. GSM Association has also acknowledged Pakistan’s USF project as a model for others.

ProPakistani.com: What are the challenges ahead of us?

Parvez Iftikhar: Biggest challenge I see is to maintain transparency; then there is a challenge of building consensus between different operators because every operator has its own interests and perspective, so it is important that we take everybody along and work in hands for the betterment.

Technically, we see that different technologies, meaning that CDMA, GSM, Wired or Wireless sometimes conflicting with each other. As we are technology independent (meaning that we don’t ask for any specific technology to be deployed, instead we just want a specific area to be covered with whatever technology), so it gets hard to take in to account the pros or cons for different technologies.

Lastly, as we are a company, handling money of the people of Pakistan, so there are several things which have to be approved by the government, which sometimes slows downs the process – this is good in way, but it hinders the tempo at times.

ProPakistani.com: Let’s talk about Telecom industry in specific beyond USF, how do you see the market?

Parvez Iftikhar: At the moment, as we know all markets are under some kind of pressure mainly due to two reasons, 1 – global financial crisis 2 – war of terror (so-called). Because of these two things, we are for sure undergoing some hard time. But I am sure, before the end of this year, things will start settling down. I see things getting better, InshAllah.

So as soon as market will get to its normal level, telecom sector will be the first beneficiary, because of its nature and then due to emergence of new technologies, such as Broadband and 3G. I see lot of investment coming in. This will have to flourish…!

ProPakistani.com: Thank You very Much!

Parvez Iftikhar Gives an Update of USF’s Recent Achievement!

Parvez Iftikhar, CEO of the Universal Service Fund, gives CIO Pakistan an audio update about the organization’s recent achievements. USF signed two contracts on the 28th of July, 2009 – one with CMPak for a worth of Rs.1.5 billion for basic telecom in Nasirabad and Balochistan, and another with WorldCall for broadband in Southern Punjab MTR worth Rs.785 million. The USF CEO answered a few quick questions we had so we could bring our listeners an update on the work that USF is doing in Pakistan.

My first visit to Nigeria

The smart Nigerian lady Minister of Communications and IT, with a slight British accent, is a truly amazing person – something I witnessed during the 2-day “retreat” of Nigeria’s USPF (Universal Service Provisioning Fund). More about it after some backdrop.

USPF Nigeria was established under the National Communications Act 2003 and has not been doing really well, though still one of the best in Africa. In 5 years it has not achieved what it set to achieve – internet to 474 schools country-wide is the biggest achievement that one speaks about. And even here the target was far higher. Other than that they have set up some Community Communication Centers (CCCs) and installed 50 to 60 BTS towers. USPF Nigeria is a part of the Telecom Regulator NCC (Nigerian Communications Commission), which in turn is run by capable and experienced persons like Chairman (Peter Igoh) and Executive Vice-Chairman (Eugene Juwah).

The Minister, Ms Omobola Johnson, an Electronics Engineer from University of Manchester, was previously Country Managing Director of Accenture in Nigeria. She took over the newly formed Ministry 6 months ago and says that she is convinced that ICT infrastructure is as important as roads, rail and power networks and that Broadband network penetration in Nigeria should be doubled to 12% in 3 years. The draft of new ICT Policy, which also calls for a converged regulator, has been issued. And towards the end of 2011 USPF also got a new Head (they call it Secretary USPF) Abdullahi Maikano who was formerly head of projects at NCC.  Abdullahi Maikano (ably assisted by Kelechi Nwankwo) looks really excited in his new job and shows a great passion of wanting to make a difference.

One of the steps taken, under guidance of Ms Johnson, in order to revitalize USPF was to organize a two-day “retreat” – a gathering of all the Government-side players involved with USPF, like: Ministry, Regulator, Advisors, USPF Board Members, USPF Management, etc. together with the consultants (USAID/GBI’s David Townsend, myself and the KPMG team, who was also responsible for conducting and moderating the event, which they did marvelously) at Abuja. The objective of it all was to work out a Strategic Management Plan (SMP) for USPF. An SMP including redefining USPF’s Vision and Mission statements, its goals, KPIs and the way forward to achieve those.

A typical private sector-like exercise, the retreat started on Friday morning 9 am and continued right up to Saturday evening 9 pm – both days, 12-hours each! 24 hours of grueling work during the 2 days included presentations, discussions, debates, analyses and breakout workshop sessions. Thirty people and not one did I notice looking at his/her watch even after 6 pm. Since the setting was not very formal, the atmosphere remained pleasant, plus don’t forget the Nigerians are jovial people! The entire event proceeded smoothly in a very professional manner, proving all those negative stories about Nigerians as utter crap. Even otherwise, I found the Nigerians to be very friendly and helpful.

Some of the issues and apprehensions raised by the participants sounded very familiar, just as in almost all other countries one goes to. One of the main apprehensions being that the government will take away the money that has been collected so far and use it elsewhere! If you talk to the universal service responsible persons, they always complain that it is the government itself that delays utilization of the fund.

The most satisfying outcome was that now there is an SMP (which includes recommendation about capacity building within USPF) with direct contributions – and thus the ownership – of everyone, from the Minister to the junior officials of NCC/USPF and of course the consultants! With all on board, success is bound to come. This is a great example for all the USFs of the world that should be emulated globally. In fact it should be repeated every year to review the progress.

So what was it that I found so amazing about Minister Omobola Johnson?  Well, the amazing thing was that not only did she sit through the entire two twelve-hour sessions but was one of the most active participants throughout. I guess that is the advantage of having a dedicated Minister who also knows the subject – especially if it’s a technical one like ICT.

Is broadband important for us?

When my wife showed this picture of a dress on her cellphone to her tailor (a greying middle-aged, semi-literate person with an unkempt appearance) asking him to have a good look at it as she wanted him to make something similar, he turned around and asked, “Baji, aap ke paas bluetooth hai”? (Sister, do you have Bluetooth?). Time and again, one sees that once opportunity is provided to our “supposedly illiterate” people, no matter how sophisticated the technology, before you know they’ve learned to make use of it! It is an absolute myth that people of a developing country like ours are not able to make use of modern technology.

Examples like the one above from the cellphone world are numerous but wherever broadband is becoming available, similar examples are coming to light too. When former colleague Tahira Malik visited a ‘ladies only computer center’ in Balochistan (to which USF had provided broadband) the purdah-observing ladies were thrilled to find out that not only could they learn new embroidery-stitches and new recipes from YouTube, they could also learn how to make themselves up, like those gorgeously made-up ladies on television! Soon they were googling on their own! A remarkable comment was: “Yeh google tau ek jinn hai”! (This google is a genie). Simultaneously at some other telecenters, one could find boys thrilled at discovering that not only was it possible to see their houses on Google Earth, it was also actually possible to earn from the web.

The affluent ones go some steps further – like using broadband to involve their near and dear ones abroad in family events through broadband (notice the 2 laptops in top right corner of the accompanying pic!).

I keep coming across detractors who, somewhat skeptically, ask what will we do with broadband? Can broadband create jobs? Can broadband educate? What would be it’s impact on the GDP?

Let’s take the most important issue for us, Education. ‘Khan Academy’ in US (www.khanacademy.org), set up by Mr Salman Khan, whose family migrated from Bangladesh, has millions learning from it’s 3,000+ (and growing) educational videos – a shining example of how broadband can help educate masses. Today YouTube has over 100 million views of Khan Academy. MIT’s Opencourseware is another such website with 32 million views. The videos are being translated in many languages. Imagine the potential!

For those looking for higher levels, digitization is making more and more information available via broadband. E-newspapers, e-books, on-line scientific journals and digital libraries are changing the pattern of access to valuable content and modifying the way we read or do research

As Secretary Gen. ITU recently stated, two of the biggest universities in the world today specialize in distance learning – Indira Gandhi National Open University in New Delhi (3.5 million students) and Allama Iqbal Open University in Islamabad (1.8 million students). On the other hand ICTs and broadband have brought the death of distance. Imagine the potential when Broadband and Open Universities team-up!

It must be kept in mind that broadband is not an end in itself. It is an important means of meeting a wide variety of goals in highly diverse sectors – commerce, finance, government, healthcare, banking, scientific research, environmental sustainability, timely warning of natural disasters, climate change, smart electric grids, etc. etc. For those of us who have seen it work in some other countries, it is something as obvious as daylight. But for many perhaps one needs to refer to those hundreds of research reports and case studies on the economic effects of providing broadband access that are available for all to see. For example:

  • In China, every 10% increase in broadband penetration is seen as contributing additional 2.5% to GDP growth.
  • McKinsey & Company, “Mobile Broadband for the Masses” (2009), estimate that “10% increase in broadband penetration delivers a boost to a country’s GDP that ranges from 0.1 to 1.4 percent”.
  • An analysis of the European Commission that estimates broadband is creating more than two million jobs in Europe by 2015 and an increase in GDP of at least EUR 636 billion.
  • In Thailand, where in 2010 only 3% of households had broadband, it has been forecast that it could add 2.4% per cent to the country’s GDP growth rate.
  • A 2009 study by Booz & Company, “Digital Highways: The Role of Governments in 21st Century Infrastructures”, found that “10% higher broadband penetration in a specific year is correlated with 1.5% greater labour productivity growth over the following five years”. The report also suggests that “countries in the top tier of broadband penetration have exhibited 2% higher GDP growth than countries in the bottom tier”.
  • According to a study by the World Bank, it provides 1.38 additional percentage points to GDP growth for every 10-percentage-point increase in broadband penetration.
  • As per ITU’s “Confronting the crisis: ICT stimulus plans for economic growth” (2009), following the global financial crisis a couple of years back, many countries included expansion of broadband networks as part of their economic stimulus plan (USA: $7 Billion).
  • A study in Brazil reports that broadband added up to 1.4% to the employment growth rate.
  • According to a study of Gartner Research, in 2012, around 190 million consumers will be making electronic payments worldwide, mainly in emerging markets.

But unless broadband reaches the majority of a country’s population, it cannot realize it’s true potential. This is also the reason why now-a-days majority of the countries worldwide have established definitions of ‘Universal Service’ that includes broadband internet. At least 30 countries have explicitly mandated access to broadband, including Brazil, China, Ghana, Kazakhstan, Malaysia, Morocco, Nigeria, Peru, Spain, Sri Lanka, Switzerland and Uganda. Their number is growing. While some countries have gone even further, like Finland was the first nation to declare broadband a legal right.

It should therefore be our endeavor too, to introduce broadband to our people in every nook and corner at a rapid pace – and by the way, 3G can help us get there real quick!

NOTES FROM UKRAINE

FOR FOUR DAYS THAT I WAS IN UKRAINE THE MAXIMUM TEMP. WAS MINUS 2 C AND THANKS TO LANGUAGE ISSUE, “BREAKING THE ICE” WASN’T ALL THAT EASY EITHER! But two things I couldn’t help noticing. The first thing was that despite the huge differences between Ukraine and Pakistan, there are also striking similarities, especially in the telecom domain. Like Pakistan, Ukraine enjoyed strong economic growth in the early part of the century but then it got adversely impacted by local and global economic turmoil. And like Pakistan it had to seek (US$ 15 bn) assistance of IMF in late 2008. Like Pakistan again, the telecom sector has not fared as badly as other sectors, but since 2008 revenue growth hasn’t been all that great.
One of Eastern Europe’s largest countries (population 45 Mil) Ukraine has tradionally been very close to Russia (largest and closest partner during Soviet era with large investments in the country’s telcos). But now it is seeking an increasingly closer relationship with the European Union (EU).  This would have significant implications for Ukraine’s UAH 50 bn (US$ 6.5 bn) telecom sector, not only in terms of tighter regulation but also in its capacity to cope with competitive pressures and market forces within the EU.
Unlike Pakistan, where the regulatory regime is well established, Ukraine’s Telecom sector desperately needs regulatory clarity. Until recently, the lack of an independent regulator and transparent regulatory system had discouraged investment by major European telcos. The influence of EU, as well as the regulatory conditions which Ukraine would have to meet to become an EU member, are expected to promote that much-needed investment. Also the recent privatization of incumbent Ukrtelecom is expected to improve implementation of telecom regulation – just as it happened in Pakistan!
Fixed broadband (presently 3.9 Mil, nearly 10% penetration) is growing fast. Broadband based on Fiber to the Building (FttB) is significantly increasing. For instance, the fibre network of the operator Kyivstar now connects a large number of apartment houses in over 100 cities. Fixed-Wireless broadband is not so much to be seen probably due to large copper embedded base (12 Mil fixed lines). Only recently it is becoming more relevant as more and more operators are applying for CDMA-450 licenses. Incidentally this is a very appropriate technology/spectrum for starting rural coverage of broadband anywhere in the world. Unfortunately in Pakistan it is lying unused with the licensee ‘Dialog’.
With 56 Mil Mobile voice customers (125% penetration), it is the mobile broadband scenario that is of most interest now-a-days. Strangely there is only one 3G license – with the incumbent Ukrtelecom! Therefore, thus far major GSM operators have been hampered by lack of licences to offer 3G services. And yet the mobile unit of the Ukrtelecom is unprofitable! Consequently the mobile unit is being offloaded, with its spectrum being re-assigned. In the meantime government (both civil and military departments) agreed on a plan to make available a 100MHz block of spectrum in the 2.1GHz band. A third of it’s cost will come from the private sector mobile network operators and the rest two-thirds from the government itself. It shows the keenness of the government to fast-track mobile broadband availability. Come to think of it, our government does not even have to do that, they just have to issue mobile broadband licenses in the country against open bidding! As a consequence, demand for content is also expected to grow significantly in coming years.
Yet another similarity (which is actually true all over the world) is the reluctance of Operators to contribute to USF! But the Ukrainians’ case deserves a little more sympathy as they (on top of all the other usual taxes) already pay 7.5% of their revenues to the Pensions Fund!
A practice that Pakistan could follow is to reduce the number of towers in the country. In mid-2011 Kyivstar began selling excess base stations decommissioned as a result of its integration with Beeline Ukraine. Kyivstar plans to remove two-thirds of Beeline’s former base stations. Can’t our celcos do something similar in Pakistan – with or without integration?
As could be expected, women play a very significant role in all walks of life. Both the members of NCCIR (Telecom Regulator) who were there full time taking a very keen part in the discussions about USF for 2 days were women. So were both the translators. There were others among the 12 to 15 participants representing various stakeholders including Operators. And this brings me to the second thing that I couldnt help noticing – that on the average, Ukrainian women are probably the best dressed women in the world!

3G in Pakistan

AS A CONCERNED CITIZEN, I WOULD LIKE TO URGE ALL THOSE WHO HAVE ANYTHING TO DO WITH THE ICT SECTOR TO DO WHATEVER THEY CAN, TO PUSH AND EXPEDITE INTRODUCTION OF MOBILE BROADBAND (3G OR WHATEVER) . I say this because yet another delay (albeit short and for good reasons) has appeared.

New generation is keen to learn thru Internet!

Irrespective of the on-going, completely unnecessary, “controversy” surrounding auction of 3G in Pakistan, allotting 3G frequencies to telecom operators is extremely urgent and essential for Pakistan. We have already been left behind by others who used to be our followers in 2G. Mobile broadband – or 3G – should have been introduced here already four years ago. The delay has made us lose huge opportunities relating to job creation, international trade, economic growth and Foreign Direct Investment (Telecom FDI 2007: US$1,824 mil and 2011: US$ 79 mil). Not to mention letting the technology gap between the advanced countries and us widen even more, despite the fact that more than 70% of our population is below 35 – normally considered early adopters of modern technology.

According to ITU’s World Telecommunication/ICT Indicators Database, a total of 159 economies worldwide have launched 3G services commercially and the number of active mobile-broadband subscriptions has surpassed one billion. Countries from New Zealand to USA are allocating huge amounts of national resources to deploy infrastructure, like Optic Fiber Cables, to facilitate delivery of broadband to the citizens. Whereas we are taking ages even to allocate the God-given resource of frequency-spectrum which will facilitate provision of broadband.

Some skeptics ask what we will do with 3G? Mostly they are only thinking in terms of mobile phones – and not mobile broadband. Although a lot could be done with 3G smart phones too (present estimate 15 mil smart phones in Pakistan, expected to increase to 50 mil by 2016), it is 3G mobile broadband, mainly using USB dongles, complementing fixed broadband, that is of bigger value and main attraction for countries like ours. While people in developed countries usually use mobile-broadband in addition to the fixed, mobile-broadband is often the only access method available to people in developing countries.

Broadband has tremendous commercial usages but one of it’s main benefits lies in it’s capability as a deliverer of basic services to hundreds of millions of citizens, especially those living in the hinterlands of the country. Education, Health, Governance, Commerce, Agriculture, Women Empowerment,… all can find their way. Greater access to broadband services has been found to help accelerate achievement of development targets like the internationally-agreed Millennium Development Goals. It is only using broadband that we can serve our exploding population (CAGR: 2.5%) at their doorsteps, not only to bring prosperity to them but also prevent mass migration to urban centers and save our bursting mega-cities from crumbling under their own weight.

Right now in Pakistan broadband is available in less than 300, small and big, towns and cities. All the present two million connections being of fixed broadband category (50% wireless). But then there is only so much fixed technologies can do. Fortunately, thanks to the ubiquitous 2G GSM network, 3G can take broadband to every nook and corner of the country, becoming accessible to more than 90% population, with relatively small effort. I have deliberately used the word “effort” and not investment because investment will come from private sector telecom operators. Here is a sector where the government doesn’t need to bother about development budget allocations and resource constraints. Just like 2G was such an effective engine of growth for our economy, 3G too could contribute significantly. Admittedly the private sector operators would like to invest and deploy 3G mainly in large cities, but for the rest there is USF!

As for the controversy, firstly, on a per-megahertz-per-year basis, the announced base price is equal to the peak price achieved last time around. Secondly it is likely to go higher during bidding, despite worse political/economic/security situation than in 2004. And thirdly the licenses are going to be technology-neutral, therefore it is the operators who would decide whether they deploy 3G or something else (incidentally 4G – the so-called LTE Advanced — is not even there yet). Yes, the only thing that all of us need to be vigilant about and jealously guard is the process being followed. The process must be fair and transparent.

Broadband affordability

IT WAS QUITE A HORROR-STORY WHEN SOMEONE THOUGHT THAT JUST LOWERING BROADBAND TARIFFS WOULD MAKE THE PEOPLE FLOCK BUT FORGOT SOMETHING…

USF had just started the Broadband project where the criterion for getting subsidy was to prove to the Technical Auditors that the target number of broadband connections were actually working. The idea behind this criterion was that subsidies should not be given just for laying broadband infrastructure. Rather the broadband service providers should be made to ‘sell’ broadband connections – by creating necessary (but lacking) awareness among the people AND by making broadband affordable.

As the bidding allowed multiple winners (mainly to promote competition), one of the winning bidders was PTCL. Someone in PTCL, in his zeal to get the subsidy quickly, decided to acquire the necessary number of broadband connections just by lowering the tariff from Rs 1,199 to an incredible Rs 299 per month! But such a drastic reduction had to have a catch in it and the catch was that if the customer exceeded the download limit of 1 GB, he/she had to pay @ Rs 200 per GB extra. And somehow the reverse of this message got communicated!

Guess what happened when customers received their huge bills at the end of first month? Most of them ran away even before the Tech Auditors could start counting them. But hats off to PTCL because as soon as they realised what had happened they started damage control. They modified the low tariff, introduced a max limit, made it clear to everyone what the low tariff consisted of and compensated the effectees (it’s a different story that they had to form queues for that!). They also rationalised their overall tariffs. It took months to bring back the annoyed customers.

But whoever in PTCL thought of lowering tariff to attract broadband customers wasn’t actually wrong. Affordability is a big issue in Pakistan and continues to be one of the main impediments in growth of broadband. For a country where majority of the people scrape through their daily lives and 24%[1] people live under the poverty-line, it is pretty obvious. Although USF subsidies and overall market conditions have helped to lower broadband tariffs but most of the price-reductions got eaten up by inflation/devaluation and the rest has gone to increase broadband speeds. Consequently now for the same amount of Rupees one can get 4 times the speed of 2008.

Calculations given below show that on average a Pakistani household spends little more than 1% of it’s average spending on telephony. And if Broadband is added to an average household’s monthly spend (at the present rates that vary from Rs 300 to 1,200 per month), the percentage spent on ICT (Voice + Broadband) becomes 1.7% to 3.5% – not a big deal if you look at comparable countries.

That raises an interesting question: If 40% of Pakistani households are in cities and out of those only 30% can be considered to be “average-or-above” then 3.1 Million households fall into a category who can afford broadband. So there should be at least that many Broadband connections in the country! However there are about half of those! “Why” is a separate discussion, that involves multiple issues – availability (of broadband and PCs), awareness, content and necessity – yes, necessity!

Calculating Average household spend on ICT:

  • 2010-11[2] Population                                                                        177 Mil
  • Persons per Household[3]                                                                   6.8
  • 2010-11[4] GNP (not GDP)                                                                Rs  17,891 Mil
  • ‘Private Consumption’ part of GNP                                                   Rs  15,584 Mil
  • Total number of Cellphones[5] in 2010-11                                       109 Mil
  • Total Cellular Cos. Revenues[6] in 2010-11                                      Rs 262,761 Mil
  • This gives us an Average Revenue Per User (ARPU) per Month     Rs 201
  • No. of  Households – @ 6.8 persons                                                  26 Mil
  • ‘Private Consumption’ divided over 26 Mil HHs                              Rs 598,714
  • So the Private Consumption per Household per MONTH                Rs  49,893
  • Assuming 2/3rd  of 109 Mil Cellphones were actually in use            72.67 Mil
  • Thus the No. of Cellphones per Household                                       2.8
  • And therefore monthly spend per Household (2.8 x 201)                 Rs 561

This means that on an average, about 1.1% of overall spending of a household goes to telephony! Let’s now add broadband:

  • In Pakistan usual Broadband monthly charges vary between         Rs 300 to 1,200
  • Then total spend of a household on ICT (Voice + Broadband)      Rs 861 to 1,761
  • As a percentage of Average household spending would be            1.7% to 3.5%

(Indeed it is acknowledged that these represent average figures meant only to provide some indicators. Also in no case it is meant that tariffs should not be lowered further, to bring benefits of broadband to maximum number of citizens).

 

[1] http://en.wikipedia.org/wiki/Economy_of_Pakistan

[2] Printed version of “Pakistan Economic Survey 2010-11”, Statistical Appendix, Page 6/7

[3] http://www.census.gov.pk/PopulationSex.htm

[4] Printed version of “Pakistan Economic Survey 2010-11”, Statistical Appendix, Page 12, Table 1.6

[5] http://www.pta.gov.pk/index.php?option=com_content&task=view&id=269&Itemid=658

[6] http://www.pta.gov.pk/index.php?option=com_content&task=view&id=269&Itemid=658

As 2011 Comes to a Close…

AS 2011 COMES TO A CLOSE I THOUGHT I SHOULD HAVE A LAST LOOK AT MY TIME WITH USF (Universal Service Fund) Pakistan! Not that I will scratch it from my memory after this, but fact is that I won’t have much to say about it, except always wishing USF lots and lots of success.

It was an exciting and extremely fulfilling experience spread over four years and seven months. During the first weeks, it was almost weird, I was the only employee whose main concern was hiring a team and making the premises ready (which included getting worn-out carpets replaced with tiles). Very little help was available, exceptions being Mr. Baqai (to whom I am indebted for his invaluable advice and his help in selection of first team members), my former colleague from Siemens Mr. Masood Abassi (who helped me a lot with the logistics) and colleagues of MoIT, including its then Federal Secretary Mr. Farrukh Qayyum.

During those initial days (May 2007) a World Bank Mission came on a visit and since the USF model had been structured by World Bank consultants, the Mission was greatly interested with whatever was going on. I remember one member (Mr. Rajendra?) wanted my opinion as to by when USF would be able to carry out it’s first auction and sign the Subsidy Agreement for services in an unserved ‘Lot’. When I answered that I expected it to be within six months, he looked at me with the skeptic expression of, “He doesn’t know what he is talking about” and remarked that if that were to happen, I should get a Nobel Prize! We signed our first agreement on 4th October 2007 – in 5 months.

The secret of success was simply an awesome core team (for me, our first “team-building exercise” at Bhurban resort was significant). Thanks to the team, we started three programs one after the other, following extensive consultations and open forums with the stakeholders. We gained momentum with every passing month. Until May 2010, that is. That was when things went haywire and we hit a bad patch. There was nothing wrong within the USF (proven by several independent audits), it was all from outside, but very damaging. Thank God that by mid-2011, we came out of it, but the USF program suffered and as a consequence people of those unserved areas where we were steaming ahead, could not get services in time. But every cloud has a silver lining – the crisis convinced many that we had been doing our job cleanly and transparently.

There were several other challenges too, the biggest being the war-like situation in some of the remote USF areas and the (understandable) reluctance of Cellcos to bid in sparsely populated remote areas, where the operational costs are high and revenues are low. But at USF we were determined not to give up and to keep pressing ahead, wherever it was possible.

Now after four-and-half years I look back with satisfaction that, despite loss of more than a year, USF could make significant achievements. A total of Rs. 17 Billion (aprox US$ 200Mil) had been committed by USF as subsidy for ICT services in unserved areas that would surely help bring a silent ICT revolution in the hinterlands of Pakistan. The projects where bidding process was almost complete (but formal launching was to be done) amounted to an additional Rs. 6 Billion ($ 70 Mil). Among the provinces, largest share so far went to Balochistan – rightly so due to its large but neglected area. All this was done in an open, fair and transparent manner as duly acknowledged by all stakeholders.

So far USF provided basic voice telephony services to more than 3,500 villages; brought optic fiber connectivity (information motorways) to 58 unserved Tehsils (sub-districts) by laying nearly 4,000 kilometers of optic fiber cables in remote and difficult areas; sowed seeds of broadband in 256 smaller towns and cities (latest: 334,000 households and businesses had subscribed to broadband connections there) with providing free broadband to 943 Higher Secondary Schools (HSSs), Colleges and Libraries in those towns and cities, and establishing 291 Community Broadband Centers there.

And not to forget the about-to-be-launched program with anticipated most far-reaching impact, ie: an innovative program of broadband telecenters (with village-hotspots!) starting with a pilot project in 24 villages of all the four provinces. The pilot aims at discovering a self-sustaining model to provide education, training and eServices to the vast Pakistani population (above 60%) living in villages. Three to five hundred such telecenters are planned within this fiscal year alone.

There are several on-going projects where contracts are signed and work is under way. These include: 2,500 kms of optic fiber cables to connect another 44 unserved Tehsils in Balochistan, bringing broadband to another 230 HSSs/Colleges/Libraries plus 54 Community Broadband Centers.

Then there are projects where bidding process is complete but contracts are yet to be signed. These include voice telephony for 102 villages of Balochistan; optic fiber connectivity for 5 remote tehsils of Khyber-Pakhtunkhwa and broadband for 73 towns of Sindh, together with 93 Community Broadband Centers and 206 HSSs/Colleges/Libraries there.

In addition there are projects where pre-bid studies have been done and bids have been invited. These include broadband for 22 towns of Khyber Pakhtunkhwa province, along with the Broadband Community Centers and broadband for HSSs/Colleges/Libraries. Necessary pre-bid studies for several other projects were either complete or under way.

With such a vibrant and ambitious agenda and a core team of dedicated individuals who are fully capable of taking all kinds of challenges, USF is well on it’s way to make a mark to bridge the digital divide in Pakistan.

I sincerely wish USF Pakistan all the success in the world…

 

Broadband for unserved areas – innovative bidding by USF Pakistan

THE THING THAT INTERESTS OTHER COUNTRIES MOST IN USF PAKISTAN, IS OUR INNOVATIVE BROADBAND PROGRAM! Even this month (Oct. 2011) I will be conducting an ITU sponsored workshop on this topic in Thailand.

Designing the program was rather arduous. Initially we thought we would conduct standard auctions for Broadband too, just like the Rural Telecom Program, where one lowest bidder emerges as the winner and deploys the infrastructure. But ‘the devil lies in the details’. Soon we realized that in case of Broadband for unserved cities and towns, there were a host of other concerns that had to be addressed. We thought:

• If the sole bid-winner is a DSL Operator (likely scenario), how would Broadband get
deployed in areas with no copper cables?
• How would multiple technologies come in to spread Broadband fast?
• With one bidder winning, how would there be competition?
• What if the infrastructure was built but there were no takers in those towns?
• It would be necessary to create awareness among people of these areas. But how?
• What if Broadband tariffs (perceived high), prove to be an insurmountable
hindrance?
• How would those citizens, who cannot afford their own PCs, be served?
• Educated youth are the most important segment for broadband. What approach to adopt that Broadband is introduced in educational institutions of unserved towns?

In other words some innovations had to be brought into the standard bidding process. A lot of consultations with stakeholders and a lot of brain storming sessions of our team (mainly on weekends) resulted in the present Broadband bidding process.

I explain the major innovations – with the rationale of each – that differentiate the process.

First, bidders other than the lowest are also allowed to win (Multiple Winners), albeit only by matching the lowest bid. This makes it possible for multiple technologies (wired and wireless) to deliver Broadband while also generating competition!

Second, the higher one-third of the bidders get thrown out immediately – only the lower two-thirds remain in the race. This is because when you allow multiple winners there is less incentive to bid low in the first place. With this, you try to bid low to avoid getting thrown out!

Third innovation is the OBA (Output Based Assistance) nature of bidding. Even normally (except for 20% mobilisation advance) USF subsidy winners are not paid until they have deployed the infrastructure. But in case of Broadband, they are asked to actually bring Broadband subscribers on board before they get paid. This is to compel the subsidy winners to first deploy infrastructure and then make extra efforts to “sell” it to subscribers, for which obviously they have to create awareness and keep tariffs low!

Fourth – the “sold” subscribers, on the basis of which a subsidy winner claims payment, must have been on board for at least 90-days, so that only genuine subscribers are counted.

Fifth – a very comprehensive and robust Technical Audit is put in place that employs multiple measurements to confirm (or reject) the number of subscribers claimed by the subsidy winner.

Subsidy winners are required to set up “Community Broadband Centers” (CBCs), each with at least 5 PCs plus allied equipment to cater for those who cannot afford PCs.

Similarly for each and every Higher Secondary School, College and Library in the project areas, subsidy winners have to set up “Educational Broadband Centers” (EBCs) consisting of 5 PCs in a LAN, training of two teachers plus free Broadband for 12 months. In most educational institutions of small cities either there are no PCs to terminate Broadband on, or there are no budgets to pay the tariffs.

Other than that, all bidding terms are standard USF, ie: open transparent auctions, technology neutral and one-time subsidies.

Starting in April 2009, so far 256 small cities and towns have benefitted from USF funded Broadband, where 897 EBCs, 258 CBCs and nearly 310,000 subscribers are connected to Broadband and the numbers are growing each day.

Three more Broadband projects have been advertised that will add 122 towns, where 492 EBCs, 151 CBCs and 150,000 Broadband subscribers will be connected.

Through separate auctions, backbone for Broadband, ie: Optic Fiber Cables are being laid to connect all 115 yet un-served Tehsils (sub-districts).

So far USF’s Broadband bidding has been fairly successful – at least experts watching us from abroad tell us so, especially when they compare us with most Universal Service Programs in the developing world. But then, ‘one who rests on one’s laurels is obviously wearing those at the wrong place’! So we are not resting and are now working hard to take Broadband to villages also – through our Universal Telecenters program (described in my Blog “ USF Telecenters – The Simple Concept”).

It is our resolve to take Broadband to every corner of Pakistan.