5G body – a chance to resolve issues

Most important problem is very small amount of spectrum available with telcos

ISLAMABAD:

The formation of a high-level committee for 5G spectrum auction is good news. The caretaker minister of IT, an accomplished IT professional of great repute, has already announced the intention to launch 5G in 2024.

I call the news good because, while paving the way for 5G, the committee will surely get to know about the lingering issues that have dragged Pakistan telecom down.

As I wrote in this space on February 13, 2023, even if we cannot immediately launch 5G, we should at least start preparing for it. “Preparing” essentially means addressing those issues, which I am hoping the committee will do.

Understandably, some telcos are pushing back – and they have their own sound logical reasons. We must not forget that the nation is dependent on privately held telcos to invest their billions and bring the latest technologies to the country. Therefore, we need to find a way where all are on board.

This consensus can be achieved if the committee addresses the outstanding issues of the industry. Given below are only a very few of the important ones.

Read Caretaker minister promises 5G auction within 10 months

Optic fibre penetration: It needs to be ramped up. There are two problems here. One is the right of way (ROW). An effort was made in October 2020 with a policy directive but its level of implementation fell short.

The other problem is that every optic fibre service provider has to lay its own fibres. It is a waste of the nation’s resources – like those five mobile towers together that we often see.

Instead, neutral infrastructure providers need to be incentivised. They rent out fibres to all the service providers to ride on them and deliver internet service. This way only one set of optic fibre cables can cater for all the internet service providers.

Smartphone: It is the most widely used device for accessing the internet. Our internet tariffs are low but the smartphone price is an entry barrier. Telcos could provide smartphones in instalments. But for that, PTA would have to develop a mechanism (like that very successful DIRBS) which would block the phones of defaulters.

Financial health of telcos: It took devastating hits in the previous few years due to unprecedented devaluation of PKR, massive inflation, and cut-throat competition among themselves.

Competition has been good for the users as our tariffs are among the lowest in the world. But excess of everything is bad as this has resulted in dissuading the investors. Bad financial health made one telco merge, and another one is weighing its options. Worrisome is that no big investments are being made.

The sector regulator also has a role to play here. Other than overseeing users’ interests, it must also “promote rapid modernisation of telecommunication systems and telecommunication services” (Telecom Act Section 4e).

The high-level committee may like to help because, for understandable reasons, people are scared to take decisions. Even the decisions taken by previous generations are questioned.

Read more Telecom sector for tackling ‘digital emergency’

Among the other outstanding issues, one is quite weird. In 2004, the government granted industrial status to the telcos. Industrial status means that the telcos pay the (lower) industrial electricity tariff instead of the (higher) commercial tariff.

But surprisingly, Nepra refuses to recognise telcos’ industrial status. In the meanwhile, special electricity tariffs have been given to poultry and dairy farming industries.

Spectrum

Perhaps the most important problem, also highlighted by the IT minister, is the very small amount of spectrum that is available with mobile telcos. It is the lowest in the region.

Not that the government does not have the spectrum. It’s quite the contrary. And letting the telcos make use of it does not cost anything to the government. Rather it brings something for it. In fact, keeping the spectrum unutilised means losing its economic value day after day.

Pakistan’s current 269.2 megahertz (MHz) of spectrum can easily be doubled with the available spectrum. But that may not be enough. Therefore, with some help from the high-level committee, another 151.6 MHz can be made available as explained below.

a) 2x11.6 MHz (in 1,800 and 2,100 bands) with CMPak has been under litigation for some years. CMPak was given this spectrum as temporary “compensation” because the spectrum bought by them was defective. Normally, a telco would keep either the compensation or the original. Not both.

b) Another 140 MHz (in 2,600 band) is held by the Pay TV operator, SNL, under a court’s stay order. Originally, in January 1996, Pay TV was granted a licence for a TV broadcast system in Karachi, Lahore and Islamabad, against a total measly sum of Rs28,740 (approximately $845 then).

Later Shaheen Foundation joined Pay TV. Subsequently, SNL took over. In 2003-04, SNL obtained multiple distribution system licences from Pemra. In 2003, SNL also obtained a 15-year non-voice value-add service licence from PTA.

However, Pemra cancelled its licences in 2014 due to violation of licence conditions, and PTA’s licence expired in 2018. But SNL had a stay order from the Sindh High Court, with which SNL is still holding back the 140 MHz spectrum that belongs to the state.

The high-level committee can surely help in getting both the stay orders vacated so that the scarce national resource, the spectrum, can be put to productive use for the national economy.

However, availability is one part of the problem. The mobile telcos must buy the available spectrum. The problem is that whenever the spectrum is auctioned in Pakistan, the floor prices are kept so high that the investors stay away from bidding.

It appears that the sole purpose of spectrum auction is to bring additional cash for the government, not to get its economic benefits.

On top of that, the spectrum prices are pegged to US dollars. As the Pakistani rupee devalues against the US dollar, the cost of spectrum rises automatically. Massive PKR devaluation in previous years had a devastating impact on spectrum prices.

While the telcos earn their revenues in PKR, they are supposed to calculate the cost of the spectrum (an indigenous product) in USD.

Only a high-level committee can order a drastic reduction in the spectrum price and also decouple it from USD. The committee could even consider changing the allocation model. For example, instead of taking 50% upfront and the rest in instalments, how about a nominal initial price, and then sharing the revenues?

Finally, after the high-level committee has taken steps to fix the above mentioned issues, the private sector telcos have to ramp up their 4G networks and gradually shift gears to 5G.

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, October 30^th, 2023.

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