ISPs Reluctant to Expand Despite Funding

Telecom operators in Pakistan are reluctant to explore new regions/cities to stretch their coverage and services, despite funding option available through Universal Service Fund.

This is partially true for both telephony (mainly wireless) and broadband service providers, however, broadband operators need to give this issue the greater attention.

Cellular coverage in country is reasonable, though there is room available but most parts of the country are covered with one cellular operator at least. But when it comes to broadband services, it is apparent that there is lot to be done – there is a whole rural uncovered in terms of broadband.

After several off the record interviews with various industry tops, I can confidently say that operators want to capitalize their current infrastructure by focusing on current customers instead of expanding their coverage to new potential consumers, especially in less inhabitant areas.

Due to economic down turn and limited resources this attitude seems very natural. There is a clear reason for not expanding: cost involved for the infrastructure and then the running expanses are too frightening for them to get into new cities.

However, it becomes incomprehensible when these broadband operators back off even when there is an option of funding available to them through USF.

Just in case if you don’t know, USF provides subsidy to telecom operators for lying down their network in far-flung, un-served or underserved regions of the country.

This funding includes initial cost for equipment and then declining OPEX (operating expense) for a certain period (three years usually) until these operators become sustainable.

But as I said above, all cellular operators (except Telenor) and broadband operators don’t want to get involved in such projects, which is causing them the potential revenue loss plus a huge population of country remains deprived of the telecom services.

Let’s take an example of this broadband operator; it’s CEO told me that they find only few cities viable for doing business. He said that their decision for expanding coverage is based on various factors, most important of which is return on investment. He was clueless when I asked him the reason for not going with USF’s funding for expansion.

With increasing saturation level, broadband operators (especially the wireless broadband operators) must consider this option of getting funds from USF to penetrate in new areas. And just as a warning: this funding option won’t last for ever. So they need to hurry.

In fact we do have an example of PTCL, which has won around 50 percent of broadband projects launched by USF. Stats show that USF has brought 300,000 broadband subscribers (so far) out of 1.4 million total broadband subscribers in the country.

So according to estimates and the fact that PTCL has 50 percent of USF’s broadband projects, one can predict that PTCL has got 150,000 subscribers out of it’s total 600,000 subscribers through USF. that’s 25% of total base.

Another interesting fact that this 300,000 broadband customer number is higher than the total subscriber count of all broadband operators, except PTCL.

So it’s time for broadband operators to get going beyond the major cities – and it’s only matter of time that their efforts will bring the return they are looking for. This will not only make a business sense at the end but will help gapping the digital divide with better national broadband access.