RoW policy directive – a right step
Over the last couple of months, the telecom sector got two pieces of good news from the government.
Both are expected to promote investment in the telecom sector – including foreign investment – as now investors will be able to better plan network expansion for wireless and wired telecom services in Pakistan.
The first news was the announcement of Rolling Spectrum Strategy 2020-23 which provides future roadmap for spectrum allocation as well as spectrum-related policy reviews which are anticipated to take place between 2020 and 2023. The second news was the federal cabinet’s approval of a policy directive governing the Right of Way (RoW) for installation of telecom infrastructure.
Read: Telecom firms in trouble due to illegal use of GSM boosters
What does it mean?
The case of spectrum is simpler because it just needs to be allocated to mobile operators (normally through auction) which they then use for a pre-determined number of years to deliver mobile broadband.
Hopefully, 2021 will also see the release of new spectrum, so that we are at least equal to Myanmar and Bangladesh.
However, RoW is more complex. Although all the cities in Pakistan are connected with optic fibres, but within the cities the penetration is not always great and RoW has a big role in that. For those who are not aware of the RoW problem, allow me first to briefly explain.
Telecom installations are located practically all over the place. Towers, exchange buildings, roadside cable cabinets, etc can be found everywhere. Then there are cables that are either buried under the streets or are strung from pole to pole, etc.
In order to install all these, the telecom companies need permissions, called RoW, from whoever owns that particular place (normally government organisations). RoW owners see their ownership as an easy way to make some extra money.
One could argue that electricity, water, gas, railways and roads are also in the same situation. But the difference is that, unlike telecom, all others are state-owned.
The state can muscle its way through the RoW quagmire. But the privately held telecom licensees have sometimes to beg, and then pay, for RoW.
RoW owners have their own point of view. They contend that private telcos are commercial enterprises, therefore they should pay their way. But whereas telcos have to compete fiercely, RoW owners dictate in a purely rent-seeking manner.
The Telecom Act of 1996 (that is how old the RoW problem is), which started the process of privatisation of telecom, sought to address the issue by stipulating that the private telecom licensees would have the right to share any public RoW. But that was easier said than done.
It turned out that almost all RoW owners have their own parliamentary Acts, which allow them to promote their own interests.
As telecom started attracting more investment, the RoW problem started growing. In some locations, RoW fee alone costs over one-third of the total cost of telecom infrastructure and its associated civil works.
The problem is not entirely unique to Pakistan, but its gravity became much more severe and slowly Pakistan started falling behind its peers. Today our optic fibre penetration is among the lowest in the region.
Initially, the PM’s Task Force on IT and Telecom, which has worked on the two good news, tried to carry forward previous government’s efforts to formulate RoW rules. But it was realised that none of the important players could be made to agree on the idea and without a consensus it would be a no-win.
After trying for almost a year, the idea of rules was dropped in favour of a simple policy directive – one which does not go into too many details but lays down basic principles. It took several more months to arrive at a draft which every stakeholder could live with.
Here, one must not forget to give full credit to the current minister and federal secretary of IT, who have been listening to, and pushing at the right fora, the professionals’ advice.
Other barriers
To a great extent, the policy directive will resolve the issue of fibre penetration in big cities where investors find a business case and are ready to invest. But in smaller cities, where RoW is already relatively cheaper and easier to get, other barriers assume greater significance.
The biggest barrier is that optic fibre infrastructure is highly capital-intensive with very slow rate of return. Operational costs are also high – thanks to frequent cable cuts.
Besides, there is no government policy that empty cable ducts are laid beneath the streets during road construction or renovation.
Among local governments, there is no awareness of benefits of digitalisation and, not to forget, taxes on ICT services and equipment are one of the highest in the world.
In the prevalent model of fibre infrastructure deployment in Pakistan, each individual fixed/ mobile broadband service provider (SP) installs his own infrastructure and bears all the costs alone.
The model is, therefore, not equipped to overcome the above mentioned barriers, particularly in low-business locations. Due to fierce competition, sharing fibre capacity among SPs is also not a realistic option. The result is that the less lucrative smaller cities end up receiving no investment in optic fibre infrastructure.
Read: Wasted year for telecom sector
Solution
What if, instead of each SP installing his own fibre infrastructure, a neutral infrastructure provider were to install it and instead of serving the end-customers, it would let all the SPs to take on rent fibres from him?
In this particular model, the SPs do not need to make high investment because then they only rent fibres. Thus, the entry barrier to any newly emerging SP is also lowered.
More SPs are able to enter the market and compete to serve the end-users. Competition leads to better quality and lower tariffs.
In the coming years – owing to ever-growing necessity of broadband and things like Safe City, Smart City and 5G – the smaller cities are going to need thousands of kilometres of optic fibres. This would only be feasible if these fibres are laid by one entity per city, ie one of those infrastructure providers.
This model is not really new for Pakistan. The category of Telecom Infrastructure Provider (TIP) licence already exists. Over the last decade, the PTA issued 19 TIP licences, without much success.
Apparently, the government needs to enable and facilitate so that information highways of tomorrow (read: optic fibres) penetrate deep into our towns and cities.
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, February 1st, 2021.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.