Wasted year for telecom sector

It becomes clear it is only telecom that can help in coping with pandemic

ISLAMABAD:

Year 2020 was a disaster not only because of the coronavirus but also because we failed once again to make the simple moves that could boost our economy and the technological standing among nations of our region – at least in the domain of telecommunications.

The coronavirus has made it amply clear that if there is anything that helps most in coping with a pandemic, it is telecom. Many countries facilitated and promoted their telecom sectors. Some granted short-term access to spectrum to increase broadband capacity, some granted free data to users to access education and information, and some gave tax relief.

Pakistan won accolades on its performance against the coronavirus. However, in the telecom space, whichever global index one chooses, we remain the country which lags behind all its neighbours (except Afghanistan).

For ordinary citizens, it means that broadband internet is not affordable enough, not accessible enough and not having the quality with which students could attend online classes anywhere in the country. In addition, it also points to the fact that freelancers/ knowledge workers in smaller cities could not work from home.

But why disaster? Let’s take a few examples. Our inability to resolve disputes over spectrum renewal during 2020 coupled with a few other court cases put brakes on new investment in the mobile sector.

Not all court cases are genuinely aimed at addressing the grievances. Some – normally the solo flyers – are also in the courts to gain competitive advantage. Whenever an important government decision gets delayed, it is often beneficial for one or the other party.

Going to court is an easy way to cause delay. This is why the creation of telecom tribunals, mandated by the Telecom Act, is still a great idea. Year 2020 was the 16th year that went by awaiting creation of those tribunals despite being obligated by an Act of parliament.

It was also yet another year that passed without any progress on the issue of Right of Way (RoW) for telecom infrastructure – particularly optic fibre cables – inhibiting investments. Despite best efforts of the Ministry of IT (MoIT) and the Prime Minister’s Task Force on IT and Telecom, no headway could be made.

Initially, the effort was to formulate RoW rules under the Telecom Act. But after banging heads against walls for a year, it was decided to be introduced with a “policy directive” from the MoIT, duly endorsed by the federal cabinet.

Over time, the draft of the policy directive has been watered down quite a bit, and the wait continues.

The good thing is that wherever the operational compulsions of telcos were too overwhelming, some small investments in optic fibres – although only in the top dozen or so big cities – kept trickling in.

While the Universal Service Fund (USF) is (rightly) busy connecting rural areas with optic fibres, a few hundred smaller cities in between wait patiently. They are all connected with the national fibre backbone network but within these cities it is too costly for the service providers to lay optic fibres – not even to most mobile towers.

Year 2020 saw the first-ever Spectrum Roadmap, which is a great step towards making it easier for the investors to make investment decisions.

On the other hand, it has been over six years when last fresh spectrum was brought out in the market (spectrum auctions in 2016 and 2017 were only to sell the unsold spectrum of 2014). In Azad Jammu and Kashmir/ Gilgit-Baltistan, the history is even worse.

During 2020, we also could not earmark even the tiny slice of unlicensed spectrum for Internet of Things (IoT).

Policy approval

June 2020 saw the federal cabinet approve a mobile device manufacturing policy – thanks to efforts of the Engineering Development Board, MoIT, Ministry of Commerce and Pakistan Telecommunication Authority’s (PTA) DIRBS.

Although the policy does not incentivise exports enough (3%, against India’s 4% and Bangladesh’s 10%), it is still a great policy. Believing that all was settled, the investors started investing. The number of plants in the country rose to 16.

However, shockingly, the tax relief promised in the policy did not come from the Federal Board of Revenue. Therefore, in December 2020, the Economic Coordination Committee and the cabinet had to be re-visited. The resulting ordinance/ notification is now awaited.

On top of that, the investors had to deal with yet another set of restrictive regulations including imposition of a fee to milk them more.

Year 2020 also became nearly the 17th year of the government’s decision to treat telecom as an industry and the refusal by the FBR to implement it. In today’s world of knowledge economy, the reason is laughable – that telecom does not produce anything tangible, therefore it cannot be an industry!

In 2020, the abnormally high telecom taxes in Pakistan showed no sign of relief. The tax on the use of internet is the biggest cut of them all. It is charged as advance income tax, payable even by those who are exempted from income tax.

The common view is that this regressive tax is there because the FBR is incapable of collecting taxes from many of those who are supposed to pay taxes.

Optimism

Despite everything, I look at 2021 with optimism – not because I am a chronic optimist (which I am) – but because so many pieces appear to be rightly aligned now. The current MoIT leadership deserves credit for that.

Matters of telecom tribunals and telecom industry status are again alive and under discussion; and the RoW policy directive (even if in a diluted form) is now expected to be approved by the cabinet during the current or next month.

In addition, the PTA has finally appointed an international spectrum consultant to help it release fresh spectrum, stakeholders’ consultations on spectrum for IoT are over and earmarking of spectrum is the next logical step, USF has accelerated the deployment of subsidised rural optic fibres and the ordinance/ notification providing the relief promised in the mobile device manufacturing policy is now expected in January 2021.

To improve fibre penetration in smaller cities, soft credit has been made available by the World Bank (thanks to Covid), and finally the exorbitant telecom taxes are expected to be rationalised by the FBR, latest by the next budget.

Finally, for any quick and tangible progress in 2021, there are two things that need to happen. First the mindset, that treats any wealth creation as a crime, has to change – even the prime minister recently spoke about it. And second, a sense of urgency in the government has to kick in – we are fast being left far behind.

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

 

 

Published in The Express Tribune, December 28^th, 2020.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.