Regulatory hurdles: The story of a start-up and a regulator

Mismanagement of country’s IT sector is creating obstacles in the way of innovative start-ups

Dr Parvez Iftikhar December 25, 2017

ISLAMABAD: Let me share a short story of a couple of young bright persons in Islamabad who left their promising careers in the corporate world and decided to do something of their own. They had a wonderful idea – something belonging to the genre of ‘Internet of Things’ (IoT) – and a dream!

They had read so much about how the tech giants of today - Google, Facebook, Amazon and Microsoft, had all started with bright ideas in the minds of young persons, beginning small and growing into what they are today, and they felt encouraged by the latest telecom policy’s proclamation that there will be facilitation for ICT start-ups.

They designed a product, wrote its software and got the hardware part (a small device) made in China. There were, as always, lots of obstacles and hiccups in getting everything right, which included changing the manufacturer in China midway because the first one could not provide the documents needed for type approval in Pakistan.

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But in the end the 10 samples which they ordered and received worked nicely with their software app. So they decided to order the first lot of 100 devices. They had learned that before they import the devices they must get a ‘Type Approval’ and a No Objection Certificate (NOC) from Pakistan Telecommunication Authority (PTA), which they applied for along with all the necessary documents.

PTA officials were helpful and sympathetic, but the youngsters were informed that even though their service will be riding on top of one of the existing licensed mobile services, according to the rules they cannot get the Type Approval/NOC unless they acquire a value added service (VAS) licence of their own.

The licence would cost them over Rs300,000, they were told, which came as a rude shock. By then, they had spent all their savings and exhausted all their loaning options in development and manufacture of the product.

There was no way they could afford anything more. And they still had to import and get the devices out of the hands of customs authorities. This looked like the end of the road for them.

During this time, thanks to TIC NUST, I had started mentoring this start-up. I do some mentoring for several start-ups. So I too went to PTA to plead the case. I thought that this was alarming because the same rule would be coming in the way of many other start-ups which develop IT products.

In fact, a little later I came to know that because of this problem at least two start-ups had already given up their developed products. Predictably, I met the same polite refusal from PTA - although they had their sympathies with the youngsters, the rules did not allow them.

We discussed various options of how we could help the start-ups while remaining within the rules, like putting the VAS licence fee on hold for the first year, or asking the Ministry of IT (MoIT) to amend the policy in such a way that the start-ups can get a respite.

Both options required the intervention of “The Authority”, which comprises the chairman and two other members of PTA.

As luck would have it, on November 11, the tenure of the PTA chairman (who was also member technical) expired. The tenure of member (finance) had already expired almost two months ago.

The kingpin

As we all know, in a market economy the sector regulator is the kingpin. The regulator’s is a fixed tenure post so as to project stability and continuity and independence to the market. That is also why sector regulators do not report to the line ministries, but to the Cabinet Division.

Otherwise, the regulator becomes a Pemra (Pakistan Electronic Media Regulatory Authority! Incidentally, even against this provision of the law, an attempt was made to change, but it failed, thanks to the Lahore High Court.

Anyway, the government had already started the process of hiring/re-hiring the two members (technical and finance) and the high-level committee formed under Federal Minister Ahsan Iqbal soon recommended to the Prime Minister’s Office that the two outgoing members should be given second tenures.

So we said, let’s wait for a few days more. Days turned into weeks when finally, on November 21, 2017, the PM decided that both the positions should be re-advertised fresh, where present nominees may also compete.

Here, I must clarify my own position. I happen to know the outgoing chairman very well, but I want to make it absolutely clear that I am not advocating for him. To advertise the post and give an equal chance to all those who qualify on merit, is definitely the best way to go about the matter.

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But what one fails to understand is why so much time was wasted? This process could have been started three, or even six, months earlier. What was the need of forming the high-level committee then?

Once the three members are in place (the third member is already working), one of the three will be nominated as the chairman. If all goes smooth, the regulator will be in place in a month or two - meaning that by then, at least for three months, the country would have been without a telecom regulator.

Knowledge economy

In this age of a fourth Industrial Revolution, when the knowledge economy is taking over everything, when our neighbour is taking giant strides in the information communication technology (ICT), when broadband internet is becoming the enabler and engine of growth in all sectors of the economy, in this very day and age - just because a small decision was not taken in time - the country has to do without a telecom regulator for months.

In the meantime, the poor start-up waits…

I don’t know which one is more tragic - discouraging promising start-ups or being without the most important regulator of a country in today’s world.

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

Published in The Express Tribune, December 25th, 2017.

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ProBacha | 5 years ago | Reply Excellent article and it truly outlines the broad problems the startups feel about Regulatory. Those who think that startups didnt do homework or whatever, they are absolutely wrong. No one leaves his/her promising career without researching good enough. When the world is literally pacing towards new tech with more than speed of light; whats the point of limiting young and eager minds with Regulatory barriers. Ofcourse, scrutiny should be in place; but it shouldnt let young bright minds to limit their opinions, plans, ideas and startups. All Regulatory bodies instead of creating hurdles should help encourage the startups with much ease in processes and procedures.
People | 5 years ago | Reply @Awaami: I don't think so your point is valid here. Had there been no homework; no idea or product can be launched without it. Its very easy to type such comments and advocate authorities using keyboard :) We have experienced a similar experience of importing GSM based products. First, all import functions of Customs and FIA only inform about NOC and even on PTA sites the NOC requirements are detailed out. However even if you furnish all those requirements; PTA still keeps you on pedal to bring X, then y and then Z. Thats ridiculous. They do not clear out the requirements even on first instance. Secondly, to address your question on waiver that 'even if it is waived off; what precedent it would be?' Let me clarify you; it would be great to set out such precedents. It would be encouraging and would allow other startups to be more risk takers, productive and intuitive to work on ideas. Chill.
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