The Future of ICT in Pakistan
The elections are finally over and Pakistan has voted. There has been one outright winner for me, and those are the people of Pakistan. Powered through telecoms, people have had their voices heard and seen throughout Pakistan. Over 50m voters verified their polling stations through their mobile phones. They captured all they saw and shared them instantaneously on social media, where political parties were rallying for support by engaging people who had never voted in their life, to leave the comfort of their homes and to go out and vote. These kinds of peer pressures were unprecedented and have resulted in one of the largest turnouts in the electoral history of the country. This is a major victory for the country and its telecom companies.
All of this would not have been possible without telecom companies operating in Pakistan. 90% of Pakistan’s population now has access to mobile coverage. 122m of them use mobile phones and the price point is at a level where it is easily affordable by the common man. Pakistani’s are also amongst the top SMS users in the country and it is estimated that on an average a Pakistani sends 178 SMS’s in a month. On top of this, the last few years have seen phenomenal growth in the take-up of smart phones. With smart phone adoption, the data industry is well and truly on its way to proliferation and along with it the benefits of information, communication, entertainment and education. Although data is currently being used primarily for entertainment and games, the gradual evolution will take place as more local content and websites are developed to help the people in the education, commerce, healthcare and others.
As seen in the west, data has become the primary medium for carrying communication. Many analysts in Pakistan fear that with data proliferation, people will move onto free applications such as Skype and Viber for use of voice and SMS, hence decreasing the revenues and hence the tax collection for the Government since the telecom sector is one of the highest sources of tax collection for the country. These fears are however, unfounded. Chatting services such as MSN chat existed even when the mobile phone uptake was low. It still did not deter people from making calls to their loved ones. Also, what the detractors are not seeing is the benefits data services bring with them in terms of communication, commerce and education which can help in the much needed societal transformation of the country. These were seen as major electoral issues and the new government will surely step up their efforts to bring this change in the country.
Information Communication Technology (ICT) has witnessed a prolific boom in the last few years, thanks to large organizations such as the incumbent PTCL and Wateen Telecom, driving ample growth with ready access to comprehensive infrastructure through deployment of fiber optic network across the country. Over 250 towns and cities across the country are now connected through this extensive network. One of the most prolific success because of this enablement is the provisioning of Mobile Financial Services, which has seen transactions worth Rs.3.76 billion via online banking. The future of ICT however, is determinant on sound policies for deregulation and consistency by the Government in providing a new vision for foreign investors to bring new investment in the country.
The next 5 years will be determinant on how this industry moves forward. The last Government was heavily criticized by some sections for not stimulating enough investment in this sector and falling in rakings published recently by the World Economic Forum. This may be attributed to a telecom policy by the Pakistan Telecommunication Authority (PTA), which expired in 2009 and a new one is yet to be provisioned for inspiring fresh opportunities in this sector. The Government needs to keep in mind key factors for provisioning of spectrum to telecom operators for not only the roll-out for 3G, for which some companies have made investments in earnest, but the overall evolution for 4G/LTE networks in the future. Private sector is also hampered through a cohesive application of such policies at all levels, especially with regards to right of ways for installation of BTS, laying optic fiber networks, local loop cables etc, due to lack of standardization procedures amongst the civic bodies like CDA, LDA, Cantonments, DHA & others since they asks for exorbitant amounts to be paid for approvals of the same. There needs to be a proper policy or procedures to carry out such roll-outs in the interest of the operators and both the public and private sector would need to develop a policy framework in concurrence for resolving these. On average, around 30% to 40% of a major city is governed by the DHA and Cantonment Boards. The situation has resultantly escalated to such an extent that the CMOs feared not only a reduction in Quality of Service which cannot be compromised on, but also a significant loss of revenue as well as difficulties for consumers in Pakistan to avail mobile telecommunications services.
The telecom sector has also been hampered, as the other sectors, due to the power crisis in the country. The Cellular Industry was declared as an “Industry” in 2004 by the Ministry of Industries and Production meaning by the Cellular Industry stands equally justified for the provision of Industrial Power Tariff as the other Industries in Pakistan are. The prevailing power crisis throughout the country is another very important factor affecting the smooth operations of the Cellular Operators not only in the rural/hard areas but in the urban areas as well. Thousands of cell sites have to remain functional (24×7 basis) in order to keep the network alive and maintain the quality of service as well. The use of Gen-sets as an alternate power source to operate these sites has gone up to more than 5 times than what it used to be few years ago when the power shortage was not so frequent. Similarly, the percentage increase in the price of diesel used to run the Gen sets installed at these sites is almost 125% since 2007. The overall percentage increase in electricity charges since 2007 is almost in the range of 100%. Hence, all of the preceding mentioned factors have resulted in a huge increase in operating expenditure and have further added to the miseries of the Cellular Operators. In light of these facts the provision of Industrial Power Tariff to the Cellular Industry is strongly recommended.
The PML-N’s and other political parties’ manifesto on ICT and its related services is a positive sign of things to come for Pakistan. “It is our belief that in today’s global economic and technological dynamics, ICT plays a vital role in national development, good governance, and public services. The world is evolving rapidly into a knowledge-based economy. Hence the ICT sector must become a primary sector at the national level.” As per PML-N’s manifesto, the main areas of focus for the next Government for creating a knowledge based economy would be for: a) Governance; b) Public Services; c) Local Software Economy; and d) Technology. For Governance, the new Government intends to “introduce and integrate ICT at the working and operational levels of all major ministries and departments.” In addition to this, the Government intends to “establish an e-Government portal at federal and provincial levels and convert manual approval processes to automated processes thus reducing the ‘file culture’. Use of ICT and automation will be a priority in law enforcement, judiciary, health, education, manufacturing, taxation and transportation sectors.” The new Government also intends to “automate all citizens’ databases, including land and property records in an integrated manner to create a master database of citizens at the national level that contains all relevant information such as NADRA data, FBR data, land records, property data, vehicle ownership, and arms data. This will facilitate transition towards a documented economy and will significantly expand the tax net.” These investments would mean propagation of computers, laptops, servers and data storage as well as FTTx for provisioning of these services. The public and private sector should see this as a great opportunity for bringing in the much needed Foreign Direct Investment (FDI) provided the political and security situation in the country remain stable.
3G has been a sore point in the last Government’s tenure. The auction of the 3G license were plagued by the protocols and regulatory requirements, hence the delay. We hope that the Government has had its learning’s and the new one will smoothly handle this proposition. A recent survey clearly depicts that the spread of 3G mobile networks in a country is linked with an increase in GDP and productivity.
In a report ‘What Is the Impact of Mobile Telephony on Economic Growth?’ from a survey of 14 countries by GSMA/Deloitte using Cisco data, a 10 per cent rise from 2G to 3G penetration was found to increase GDP per capita growth by 0.15 percentage points and a doubling of mobile data use led to an increase of 0.5 percentage points in the GDP per capita growth rate, on average. These are encouraging signs for any country contemplating whether they want to move into the next phase of data evolution. The auction of the license itself will give an impetus to the economy and provide the Government with FDI to conduct its business. However, the regulatory body should note that it cannot solely rely on consumer uptake for investors to expand their coverage and need to formulate policies for uptake through solutions for vertical industries such as solutions for smart grids. The new Government will however contemplate whether they want to leapfrog from 2.5G to 4G as written in the PML-N manifesto. “The window of opportunity to deploy 5 year old 3G has passed” but we will wait and see what is in store for the future on this front as the Government will have to evaluate the price of the chipset (modem) for these technologies to make them more affordable for the common man and increase their uptake. LTE, despite the hype, has yet to rolled out on mass scale globally and therefore affordability of the chipsets may be a concern for investors in the short-term of the next 5 years. What also needs to be reviewed is that the 3G/4G deployment will be first done in the metro cities because of the data centric customers in these cities adopting the new technology for higher data speeds and within these major cities a large portion of such potential customers live in geographic areas under DHAs/ Cantonment Boards. The operators will have to deploy capacity sites in these areas in order to cater the high-potential customers with the new 3G/4G technology. As discussed above, the operators are already in litigation with these DHAs/Cantonment Boards all over the country on account of roll out issues. This problem will further extend when the next generation mobile technology related roll out will be required. The delays caused by these bodies in granting cell sites approvals will severely impact the roll out obligation on the operators which might end up in the form of a financial penalty by the Regulator on the operators for not fulfilling the roll out obligations in the prescribed time frame.
Smart Grids should also be a top priority for the Government since the electricity issue led to the downfall of the PPPP in these elections. Currently, the pilot projects are underway using cellular technology, however, the main issue under debate has been the selection of technology itself. As per industry leaders, cellular solutions for smart grids are not scalable. In addition to this, utilities require constant data streams on their networks for telemetry, oscillography, usage and meta-data. Data and its usage is rapidly increasing in Pakistan and the telecom operators, on whom the electricity distribution companies are currently reliant upon, will be in a challenging position in the next few years as demand on their networks grows for ambient video. Three fundamental trends are gaining momentum with every new smartphone and netbook sold, with every app downloaded and with every sign-up to an “unlimited data plan”:
Broadband Everywhere: Consumers need constant wireless connectivity and will demand wireless broadband everywhere.
Prime Time to My Time: There is an increased expectation of mobile content, applications and preference to do ‘things’ on one’s own terms.
Video Explosion: Demand for video content will be extremely high, limiting the telecom networks capabilities to dedicate capacity for managing bandwidth.
In these scenarios and with the lack of a dedicated throughput available for data on telecom operators network, the utilities have no control over managing their networks. For instance, metering data may receive lower priority than emergency communications or, in most cases surveillance data. In shared best efforts-networks, utilities are unable to secure priority over the network customers – or even to have a guaranteed bandwidth – and end up competing for bandwidth with subscribers calling their friends and families. The utility companies also face a daunting challenge when the Government bans cellular services due to security concern, affecting the utility company’s network as well. WiMAX seems to be a viable alternative in this scenario. In Japan, UQ Communications is leading the WiMAX effort with Tokyo Electric Power Company (TEPCO) and are piloting a smart grid project through the WiMAX Forum. If this is a successful implementation, the price of the chipset would drastically reduce and make the uptake of WiMAX more viable, also providing much needed support to the WiMAX industry for providing ubiquitous coverage, at least in the metro’s.
The Government also intends to use approximately $700m available with the Universal Services Fund to further build on the infrastructure which has now been put into place. The USF has done extremely well under Pervez Iftikhar and now under Basit Riaz and will be a key player in bridging the urban-rural divide. The manifesto to “improve the working of the Universal Services Fund (USF) and utilize its resources to bridge rural-urban digital divide and establish Wi-Fi hotspots” is certainly a welcome one. E-Chaupal in India has been a resounding success in establishing rural markets and the USF would be reviewing these case studies and developing new centers in the rural market. This would be ideal opportunity for the Government to build customer centric and scalable solutions that will develop the local economy and nurture local entrepreneurs. These steps would also require development of localized software and applications, which will help provide opportunities for the IT professionals in the country.
As for the industry itself, there are few major challenges ahead, especially with regards to human capital. Pakistan is ranked 92 out of 133 countries in university-industry linkages index, much lower than China and India. Due to the weak industry-university nexus in Pakistan, the youth is not able to acquire the skills sought by employers. Thus, the enterprises are not able to compete effectively in the global markets and the Government is unable to deliver services, efficiently. Due to the economic slowdown in the last couple of years, service-providers in Pakistan have taken several cost cutting measures including optimization of human resources, cut in employees’ perks and freezing employment. Recent floods had also damaged the existing infrastructure which forced the operators to divert their funds away from network expansion towards repair and maintenance.
However, all said and done, most of the above points toward a healthy growth in the economy in the days ahead, especially for the telecom market. The data revolution is well and truly on its way in Pakistan and the real winner will be its people.
The author has been working with leading cellular companies since the last 12 years. He is currently the Head of Marketing at Wateen Telecom.