Aminul Haq, federal minister for IT in the PTI government, has been sworn in as the minister for IT in the new government as well. Before any political supporter, or opponent, pounces on me, let me clarify that this article is not about politics. As a telecom professional, my submissions are absolutely non-political.
Having the same minister continue with the job (even for a short period) after the rest of the government has changed, opens a window of opportunity for the sector. Amin (whose recent performance in the ministry is considered good) does not need time to learn about the past and can hit the ground running.
The IT ministry has two domains – IT and telecom. In IT, some very positive results were achieved during his time, for example the announcement of some much-demanded IT reforms in February 2022 by the former prime minister. His major challenge now is that those initiatives and concessions do not get reversed.
IT is entirely dependent on high-speed broadband internet connectivity provided by telecom.
Today e-commerce, knowledge work, freelancing, tech start-ups, online studies, e-agriculture, e-health, and all kinds of old and new businesses, etc, do not work without high-speed internet connectivity. Hence, for the country to develop economically, broadband internet proliferation and usage have to be improved.
We must not get complacent by the figure of 113 million 3G/4G SIMs out there because every user has more than one SIM, which significantly lowers the number of actual broadband users. Plus, the quality and speed of broadband are rather poor, particularly outside the affluent areas of large cities.
Therefore, I would like to propose a short telecom-related to-do list for the coming weeks/ months, aimed at improving the broadband internet.
Improve internet affordability
Given that this is the time of budget preparation, the first issue to address is that of excessive telecom taxes. The respite in taxes that the telecom sector got in the last budget proved short-lived.
In particular, the withholding tax on internet use rose to a whopping 15%. This tax is regressive because it discourages internet use. Plus, this tax is unfair to the poor because those with taxable incomes adjust this tax against their final tax liabilities, which the poorer individuals cannot, as they have no liability to pay income tax.
All the telecom equipment is imported, and it attracts all kinds of customs duties, additional customs duties, and regulatory duties. These duties make costly items, eg optic fibre cables, even more expensive.
These duties need to be rationalised. A long-term solution could be accession to WTO’s IT Agreement, which obligates abolishing tariffs on IT goods. It also brings the much-desired predictability to the tax regime.
Improve internet proliferation, quality
Here two components need to be addressed – spectrum in the last-mile wireless part, and optic fibres in the wired backbone/ backhaul part. Let’s take them one by one.
Pakistan has the dubious distinction of being among the most spectrum deprived countries globally because the government has not released enough spectrum at reasonable terms.
After the failure of the last spectrum auction in September 2021 (where three out of four mobile telcos stayed away), the next spectrum auction – hopefully with lower floor prices and better commercial terms – is foreseen for January 2023.
This plan must not get pushed further down the calendar on the pretext that some of the time has been lost. The success of this spectrum auction will be vital for the future of Digital Pakistan.
On the topic of spectrum, its trading and sharing must also be enabled immediately so that this limited natural resource can be used in the most optimised manner.
Similarly, the framework for infrastructure sharing must be expedited to avoid the wastage of precious national wealth.
The penetration of optic fibre cables in Pakistan is also among the lowest in the region (except Afghanistan). Right-of-Way obstacles continue to hamper investments in optic fibres. Dispute resolution with authorities takes too long – if at all.
The situation in smaller cities needs even more help because the business case for the private sector over there is not persuasive enough. This help can be either through USF or through public funding.
Also, the government has to create demand (eg, by connecting schools with optic fibre broadband).
Universal Service Fund (USF) is doing a great job of funding fibre connectivity to remote locations. However, USF funds should go more to telecom infrastructure providers (TIPs) and not just to the service providers (SPs).
This is because SPs have to compete against each other, so they do not like to share their high-value fibres with their competitors. On the other hand, the TIPs thrive when many SPs share their infrastructure.
Improve ease of doing business
Many government and regulator decisions and directives get stuck in court cases. Since the issues are technical in nature, the solution lies in having specialised telecom tribunals, as also alluded to in the Telecom Act.
Critics say that the unscrupulous elements would still undermine/ delay the implementation of decisions by challenging the tribunal findings in the higher courts. But then the improvement will be that the findings of tribunals will help the higher courts decide quickly.
Several other issues can facilitate ease of doing business, eg, the complexity of withholding taxes collected against electricity bills of thousands of mobile base stations can be eased through bulk billing, as is done for bank branches. Likewise, some uniformity could be brought in the complex provincial taxes, etc.
For the future
We were late by about a decade in bringing 3G to the country. Later, when 3G was launched together with 4G, countless new businesses started sprouting up in the country, generating employment and contributing massively to the economy.
Let’s not be too late in 5G now. Recently, a comprehensive 5G strategy was worked out in the IT ministry with the help of the World Bank. One hopes it will continue to be pursued expeditiously during the coming weeks.
As part of the 5G strategy, a large amount of spectrum has to be released/ auctioned by the government (as also mentioned above). Telcos should be free to use the spectrum to expand/ improve 4G, followed by 5G, perhaps in the selected hotspots at first.
Local handset manufacturers also need to be incentivised to produce more smartphones and taper off 2G phones.
In the end, I must repeat that the above to-do list only touches upon some of the most urgent and essential issues that can be undertaken in a relatively short time.
The writer is the former CEO of the Universal Service Fund and is providing telecom (policy and regulation) consultancy services in several countries in Africa and Asia
Published in The Express Tribune, April 25th, 2022.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ