Mobile cellular service policy: from dusk to dawn
The News,By Tayyaba Khan.

The cellular telephony sector is one of the fastest growing high-tech areas of our times. Right now in Pakistan the investment in this industry is around a billion dollars with more than 3 million subscribers. With the existing operators planning further investments to expand their infrastructure and subscriber base, it is safely assumed that by the end of the year 2004, the cellular subscriber base in number terms would leave fixed telephony line subscriber base way behind.

Recently, a draft of the Cellular Mobile Policy has been circulated amongst stakeholders and also placed for public comments. The stated objective of the policy is to streamline the cellular industry.

The ministry of information technology and telecommunication is hoping to finalise the policy by the end of January. The draft policy has many positive aspects, but leaves many ambiguities and also includes some clauses that can draw a string of reactions from the stakeholders. There are abundant loopholes in the policy. The policy, drafted by an independent private consultant, seems heavily tilted in favour of the new licenses that the government intends to issue in March this year. To facilitate new operators, the existing operators are being forced to share their infrastructure.

The policy seems to have drawn heavily from the telecom sector of the West without taking into consideration the local realities.

In the West there are independent companies that build and provide infrastructure for the telecom sector only and then those companies lend their infrastructure on a commercial basis to the telecom operators. But the local scenario is somewhat different from that in the West - in our country everything is to be done by the operators themselves.

It is quite unfathomable to ask the existing operators who have developed their sites, invested millions of dollars, taken pains to obtain NoCs from different government departments and agencies, to share the same jointly and collectively with the new entrants.

Clearly, sharing is tempting for the new entrants because it offers significant cost savings and little infrastructure expenditure. Since cellular telecommunication is a technologically advanced industry where staying ahead is the name of the game, this all seems a bit unfair.

Network sharing must not reduce the volume of infrastructure in the long term as technology giant Nokia pointed out in a white paper recently. This will be dictated by the demand for capacity. It is, therefore, important to plan for a future situation that will benefit all parties involved. Infrastructure sharing has its own environmental hazards, although shared sites reduce visual pollution they increase radio pollution. Therefore the existing set-up is safer than the suggested new one.

The policy further stipulates national roaming, which goes against the principle of fair-competition. It seeks to benefit the new operators with least investment. For example, under the disguise of level playing field to encourage competition, should Petroleum Regulatory Authority mandate Shell to sell the products of a new entrant in the petroleum business at all its outlets across the country? Logically, the proposed steps of the government do not encourage investment to build out and expand the cellular infrastructure in the country.

A few years ago the addition of Ufone as the fourth entrant in the industry was hailed as a good move. However, the decision of issuing two more licenses on the basis of the projected figure of 25 million potential subscribers by the year 2018 is debatable.

Even if the figures are accepted, one can always argue that in China where already the customer base is very large compared to Pakistan, there are only four operators who expand according to the dictates of the market.

The policy also makes a case for increased licenses and spectrum fees. No doubt that the existing operators are now profitable and the Exchequer should accordingly be adequately compensated. This can be utilised as an opportunity for the growth of the industry by cutting oppressive taxes and maximising sales volume. The Exchequer will automatically receive its due share out of increased profits of the cellular companies.

The draft policy expounds to provide a ‘level playing field’ to the new entrants, whereas the commitments made to the existing operators are not being honoured. Pakistan has suffered in the past because of the perception that the successive governments do not honour commitments; the HUBCO fiasco is still fresh in the minds of the investors. The incident had devastating consequences to the goodwill and credibility of Pakistan. To ensure that history does not repeat itself, such steps should not be taken by the authorities that would disrupt the smooth functioning of the private sector business operations.

The draft policy, as a whole, is riddled with highly controversial issues that need serious re-consideration as far as the existing operators and the foreign investors in general are concerned. This is definitely undesirable in a developing country like Pakistan.

There are many other issues touched upon in the draft that are of a highly technical nature. The major impact of these issues can be evaluated by the professionals of the cellular industry. They should all be given the chance to come forward and comment on this draft, as that would ensure the transparency of the policy being enforced. This would also ensure that no unfair deals are made to over facilitate the new companies.

To quote Franklin, "It is easier to suppress the first desire than to satisfy all that follows it."
- posted @ Monday, January 19, 2004