ICT Forum Pakistan Recommends Changes in 3G / 4G IM

ICT Forum Pakistan

ICT Forum Pakistan, a newly established Forum (a think-tank on matters related to ICTs), has shared its input on Draft Information Memorandum for 3G/4G spectrum auction.

Backed by veterans like Pervez Iftikhar, Mr. Baqai, Prof. Dr. Ayub Alvi and others, ICT Forum said that their suggestions/comments are unbiased, independent and based on benchmarking and analysis carried out by individuals who have served Pakistan’s ICT sector at all levels.

The comments and their corresponding suggestions are as follows:

Timeline:

The time available between the information session for prospective bidders (March 19, 2014) and the deadline to submit Application form and related-bid offers (March 25, 2014) appears to be short. This is because all the potential bidders have their Principals abroad and they normally need multiple Board-level approvals. This requires time.

On the other hand, grant of Licenses within 30 days of receipt of 50% advance payment is difficult to understand. Surely this can be done much quicker by PTA.

Suggestion: The prospective bidders should be given at least 4 (four) weeks to finalize their sealed-bid offers, ie the date of March 25 (and the subsequent dates) should be shifted by at least 3 weeks (to give them a total of 4 weeks here).

At the same time the maximum time lapse from receipt of advance payment to grant of Licenses should be capped at 5 working days.

 

Coverage Obligations:

Although we have heard some hype against the given roll-out obligations, we feel that 2100 MHz (3G) roll-out (coverage) obligations are challenging (especially because of security situation in the country) but not too stringent.

However the 1800 (4G/LTE) roll-out obligations seem to be tough. LTE is a data-only technology (although Voice Over LTE is fast coming), therefore in remote/rural areas there may not be a great demand for LTE for another few years. However if the demand is there, the competition will force the licensees to expedite deployment anyway. As given in the IM, the 4G operator would also be holding the 3G license, therefore in the initial years, he should concentrate more on increasing the penetration of 3G.

It is in the cities that LTE is going to thrive, where its main application will be for broadband access (with the help of 4G dongles with Laptops and Desktops). In countries like ours, who lack the extensive copper-cable/fiber infrastructure in the cities, LTE quickly fills that Access gap. Even in several advanced countries, LTE is used more for wireless broadband access than handsets etc.

Suggestion: 1800 MHz (4G/LTE) roll-out obligations may be relaxed.

One possible scenario of relaxed 1800 MHz (4G/LTE) coverage obligations:

ICT_Forum

 

Limitations on use – technology neutrality:

It can be expected that there will not be very strong enough competition in the auction of 1800 MHz segment, particularly when the bidder must purchase 2100 MHz slot first. On the other hand we opine that making it even partly technology neutral (ie allowing the spectrum to be used for 2G as well), will make the operators come scrambling for it!

In addition, once the roll-out obligations of 4G/LTE are relaxed (which is important, as explained above) a substantial part of extremely valuable 1800 MHz spectrum will remain unused during the initial months/years. In the interest of sector growth this is something that Pakistan cannot afford.

Suggestion: Initially, during the time allowed for 4G coverage, winners of 1800 MHz spectrum may be given a moratorium for that limited period, to use a part of the 1800 MHz band for any technology that they choose (eg: 2G)..

850 MHz (old Instaphone) Spectrum:

This particular part oddly sticks out in the whole scheme, particularly because this part of spectrum has been restricted for only a new entrant. Through our own contacts we have tried to determine the possibility of a new entrant for this spectrum and our finding is that a serious new buyer is not expected to come. Therefore there is a risk that this valuable piece of spectrum may remain unsold and thus unused for another few years (till the next auction). This is yet another luxury that Pakistan can ill-afford

Suggestion: Through the IM a commitment should be given that this particular piece of spectrum, in the 850 MHz band, could also be purchased by the existing Licensees, provided there is no new bidder for it. Therefore at the stage of initial sealed bids, all bidders may bid for it. In case there is a new bidder, the bids of the existing licensees may be returned unopened.

Quality of Service/KPI’s:

A minimum user data-rate of 512 Kbps in case of 2100 MHz (3G) and 2 Mbps in case of 1800 MHz (4G) seem to be reasonable parameters (although here too one has heard noises against these).

Fees:

a) It is understandable that the auction scheme tries to encourage those successful bidders who opt to pay 100% upfront. But for the others an interest payment of Libor + 3% appears to be high. If there is some rationale, it is not given.

b) Similarly a rationale for the condition of payment in US Dollars is difficult to understand. As per information available with us, foreign owners of existing operators are unwilling to make capital injections from abroad that lead to capital restructuring. The requirement of US dollars also discourages any domestic investors from investing.

c) Another payment (although not new), which does not appear to be based on any logic, is the Annual Spectrum Administration Fee (ASAF) of FAB, where Licensees are supposed to cover 75% of FAB’s total “budgeted expenditure”. It gives FAB total freedom to budget whatever it likes. In fact it works as a disincentive for FAB to control any waste in their expenditures.

d) And lastly the most surprising requirement is that of Bank Guarantees, which the operators are supposed to deposit in advance of all their scheduled payments. The cellular operators have investments of billions of Rupees, and have good track record of payments. They deserve to be trusted with their scheduled payments.

Suggestions:

  • For those who opt to pay in installments, interest rate should be reduced to nominally above Libor (perhaps to Libor + 0.5%).
  • As for the currency of the bid, the bidders should have the option of paying in Pak. Rupees – at least 50% ( if not fully).
  • ASAF should be eliminated, or rationalized at a lower level by fixing it (rather than linking to FAB’s budget).
  • Requirement of Bank Guarantees should also be abolished.

Base Prices:

We do not have any comment on the base prices, as these seem to be well-balanced. It would have helped infuse more confidence among the prospective investors, and also made it more transparent, if some rationale of each base price was also given.

Electronic Auction:

PTA has done well to go for electronic auction rather than the outdated outcry method. However it makes the process very sensitive Even a small leak can ruin the much delayed auction.

Suggestion: Special care must be taken to ensure that all necessary security procedures and firewalls are in place and being kept under constant surveillance.

Future Road-map:

The investors always consider Government’s Policies & future Spectrum Roadmaps while calculating and making their investment decisions. For example if another auction is planned by the Government in a year’s time, some investor/s may decide to wait. Conversely if it is known that the next spectrum release would be in some years, it may be a do-or-die situation for an operator at this point in time. In the present unclear scenario, in which the new Policy is under preparation and a Spectrum Roadmap is missing, the investors are compelled to take the worst-case scenarios in their calculations.

Suggestion: Government should commit in the IM a date for at least the next spectrum auction (eg: April 2017). It is also important to commit important outlines of the under-preparation Policy and that next spectrum auction commitment will not change..

 

Auction of Spectrum or License:

The existing Licensees have Technology Neutral Licenses and it was a commitment given to them at the time of award of existing Licenses that for the future they will only have to acquire fresh spectrum. Therefore it is unfair to ask them at this stage to acquire new licenses. We can understand that there may be several new conditions now, but for those some other innovative mechanisms, based on proper rationale, have to be found – like making some of those conditions part of “Spectrum License”.

Suggestion: Existing License holders should not have to acquire any fresh licenses. In fact they should be given assurance of renewal of their Licenses up to the end of 15 years from grant of spectrum at this point in time.

USF and ICT R&D Funds

It would help in attracting investors if Government could give firm commitments regarding its development plans using Universal Service and ICT R&D Funds, during the next 3 to 5 years.

For instance, a committed rapid increase in rural optic-fiber penetration would give the investors the confidence that while meeting coverage obligations, they would not have to make huge investments in the backhaul.

Similarly use of USF and ICT R&DF for the purpose of pushing wireless broadband in rural areas – both from the demand as well as the supply sides – will give needed impetus to growth and in furtherance of comfort to the investors regarding recovery of their investments.

Taxation:

Though it is not an IM issue, it is one item which can play a big role in ensuring success of the spectrum auction. Our study and analysis shows that if the Government moves to address this long-standing demand of the telecom industry and announces a tax reduction during the next two weeks. It will have a very positive impact on the investment decisions and therefore on the bid offer itself.

 

Miscellaneous:

We feel that there are some relatively minor items in the IM that should be improved/modified.

  • The statement in the IM is absolutely untrue that: “Most of the tehsil headquarters of the country are not connected with Optical Fiber”. On the contrary, almost 90% of tehsil headquarters are connected with Optical Fibers. We feel that this piece of information is extremely important since the final roll-out obligations are based on coverage of tehsil headquarters.
  • It is also not quite true to say that the telecom sector in Pakistan has “grown rapidly” in the last 10 years. Or that the “telecommunication sector in Pakistan has shown significant growth in recent years”. Such contrary-to-the-facts statements, dent the credibility of the IM.
  • It is correctly stated that, compared with several similar countries, the Pakistan telecom regulatory framework provides conducive environment. Mention of awards received by Pakistan from independent international organizations, like ITU, GSMA, etc., may be made to underscore this point.
  • We opine that it is important to stress in the IM that almost 50% of the population in Pakistan is less than 18 years old (the segment of population who are the largest users of Broadband in the world). The Government has a separate Policy of promoting businesses by the youth, something that works for demand generation.
  • Foreign remittances of year 2012-2013 as given as US$ 14 Billion (meaning: US$ 1.17 Billion per month). But it may also be added that during the first 6 months of the on-going fiscal year, the remittances jumped to US$ 1.3 Billion per month, and this has been a consistent trend over the last decade.

Tech reporter with over 10 years of experience, founder of ProPakistani.PK


  • String

    Pehly so rahay thy kya ye dhakan saray.. jb dates nazdeik aati hain to delay ki request.. pehly inka rona tha k operators ready hain bs hukumat ki deyr hai..

    • Parvez Iftikhar

      String aisa nhi hai. Yeh suggestions bohat pehlay PTA ko di gayien thee. propakistani mein ab aayi hain. Aur in mein license delay karne ko nhi kaha gya.

  • Stone

    These are some excellent suggestions, especially the one regarding the payments and the Instaphone spectrum. I can assure you, this is what the operators have been discussing internally with the MoIT and PTA as well. Lets see how we go……….I see further delays for sure.

    • Parvez Iftikhar

      Stone thanks for positive comments. Inshallah there will be no further delays. I suggest we should remain positive.

  • Eli Ehsan

    Whoa!! that’s a LONG READ alright..

  • Desi

    “newly established Forum” wonder who is funding this so called “think-tank” seems like there’s a lobby against 3G/4G in PK. :(

    • Khurram ShahzAd

      Yeah the lobby certainly is there, because with roll out of 3g people will get broadband, fast internet on phones, they will prefer services like skype and viber other than conventional calling, so cell phone companies would really want to delay the process for their current profits they are getting by charging people per minute over their pathetic old networks.

      • Kashif

        You are mistaken. Cellular companies will immensely benefit from 3G/4G but the top beneficiary will be Pakistan’s economy. Enemies of Pakistan do not want Pakistan to strengthen economically and unfortunately they are using our own people against us (bribery). Think about the bigger picture (not the one shown in so called BS media)

  • Desi

    More you read it and more it sounds fishy… when Telcos are OK with the Timeline and coverage why this “think-tank” wants to change it?

    • Parvez Iftikhar

      Desi obviously you are not fully informed. Anyway these are old suggestions (initially given to PTA, appearing later in propakistani) and in the meantime PTA has changed the IM. If Telcos had been OK, PTA wouldn’t have changed the IM. As for “fishiness”, well I dont blame you. This nation has been hoodwinked so much that we dont believe even good things. My advice as an elder brother: try to think – and be – positive:)

  • Danish

    it means another delay is coming………..

    • Parvez Iftikhar

      Danish, Allah na karay!!!

  • umer farooq

    phly saraaay toon hoy way thay abi jag ae ha virse na ho tu

    • Parvez Iftikhar

      Umer aisa nhi hai. Yeh suggestions bohat pehlay PTA ko di gayien thee. propakistani mein ab aayi hain.

  • Alamdar Raza

    Well…i just hope God Gives this government enough courage to go through with the process. Countries like South Korea and the UK are already forming partnerships with India and others to launch 5G by 2020, so we, if not by then, need to be at a steady level with 4G LTE by the time everybody shifts to the next big thing…and for Warid…guys, well played, good overall haul, it’s not like u didn’t make any money in this country…but do something like what Singtel did with you…sell yourself to Turkcell or any other telecom, and have a 7.5 % stake in any future sale of the company.

  • Bilal Iqbal

    I am confused about the statement of “Unbiased”…
    some points are good but important to mention that telco’s have already discussed with PTA and they agreed partially… no more entertainment should be done for such late suggessions…

    • Parvez Iftikhar

      Bilal Iqbal thanks for saying that some points are good!
      “Unbiased” means that we people, who have formed this group, do not favour any side – neither the operators nor the government.
      I know even good things seem “fishy” to us as we have become cynical about everything around us. I dont blame you for this.
      And these are no “late suggestions”, only they have appeared in propakistani now.

  • Khurram ShahzAd

    Why the heck every one seems to work towards delaying the roll in of next generation telecom technologies. 6 to 7 years for 90% roll in for 3G/4G seems insane. It would be too late and these techs would already be obsolete by then. Developed countries are in process of shifting to fifth gen technologies right now.

    • Bilal Iqbal

      as i already said.. confusion about “Unbiased” is there.. telco’s want to deploy these technologies in urban areas to earn maximum revenue while spending less.. because Average Revenue per Uer is under developed aread is less and telco’s don’t want to spend there…

      • Khurram ShahzAd

        Well caught, yes in rural or less populated areas they wouldn’t have much BroadBand users so they would like to stay on old technologies depriving anyone who wants to use broadband connection from next gen techs. PTA must carefully restrict them to quickly cover most of areas, but I don’t believe it would be the case.

      • Parvez Iftikhar

        Btw how about meeting us – or one of us – to remove the confusion! We are very proud of being completely unbiased.

        • Bilal Iqbal

          thanks and feeling happy to see u people concious about our thoughts….
          I have worked in telecom sector and understand their thinking… max ARPU is the main goal… 3G can help them by enhancing non voice revenue… however in rural or under developed areas.. there will be almost similar situation about non voice or broadband usage. that wuld be a problem for both the telco and users there… we are concious about delaying in 3G in such areas.. this could be done by strategic decission of investors or the govt to invest heavily..
          main idea is to see developement in all over Pakistan….

          • I am happy to note that most of us are “like-minded” – that we all want development of Pakistan. We will fight together Inshallah, against any delays in 3G/4G, I have been one of those who have been personally involved in bringing it to the stage where it is today. As far back as Feb. 2012, I wrote a blog: http://www.piftikhar.com/2012/02/3g-in-pakistan/
            and circulated it to all concerned. Ever since that time I have been writing blogs and Newspaper Articles and lobbying with those who matter. And I have NOTHING to gain from it personally.

    • Parvez Iftikhar

      Khurram at least we, this group of people, are not working to delay. If you read carefully, although we asked for 3 more weeks for the bid-preparation, but we also asked to cut down the time required by the Govt. (after the auction) to issue licenses – by 3 weeks!

      • Khurram ShahzAd

        Yup it may be, but the other aspect 7 years for 90% roll in is too much. Rest of world would be on far far better technology by then.

        • Parvez Iftikhar

          Oh, I thought you were referring to delay in the auction. But you are talking about roll-out obligations.
          Well the licenses say that this is the minimum that the licensees will have to do (btw in the revised IM it is relaxed even more than we suggested, but that’s another story). Some may do it faster (as it happened in 2G).
          For the rural and other such areas, the licensees contribute to USF. The Govt. has almost Rs 70 Billion in that fund, with which it can deploy as much and as fast as it wants – thru competitive bidding among licensees!

          • Khurram ShahzAd

            yeah one thing I agree is that operators will compete each other to provide better coverage faster than others. But on same time i think they will truly try to delay the transition in rural areas where their profits are not much.

            • Parvez Iftikhar

              I am sure they will avoid going to rural areas for as long as they can. But then that is why USF was created and that is what Rs 70 Billion is lying in USF for!

              • Khurram ShahzAd

                Ok after reading all that optimistic thoughts and analysis on 3G and 4G, I am hoping for best outcomes and lets hope its not delayed further.

  • Companies like Telenor are doing choo chaan this way

  • pk-bro

    there is no chance to delay again and no lobby against 3g/4g , 3g service are in 120countries and 4g in 15countries..auction will 23april , no one can stop it again it,s full and final 3g/4g technecion said me..

    • pk-bro we, the members of ICT Forum Pakistan, are against any delay. In fact we have been advocating quick auction for years now. I have personally written newspaper articles and blogs against all delays during the past 3 years. Can be seen at: http://www.piftikhar.com
      If you read our suggestions carefully, we have asked 3 weeks more for the bid-preparations but also 3 weeks less for issuance of licenses at the end of the auction.

  • pk-bro

    yi pardh lo bhaio

    • Bilal Iqbal

      Khushi sy mar na jaty agar aitbar hota… :p

      • Parvez Iftikhar

        Bilal any suggestions on how the nation (particularly the younger lot) could be brought out from this negativity? I know persistent dhoke-bazi has made us all cynical.

        • Bilal Iqbal

          Well.I wuld like to thank you for giving attention to this whole discussion.. secondly we all are frustrated due to the delay tactics and want to see some thing good in this country… if some thing comes into reality… this negative thinking would be finished…

          • Parvez Iftikhar

            You are right Bilal. Once some good news starts coming the negativity will decrease. Personally I do not see any delaying tactics anymore. The delays in the past 5 years were due to sheer incompetence of the then government.
            And it is me who must thank you. All you guys are trying to contribute to the good of the nation – each in his own ways. That is great!

  • Alamdar Raza

    I believe it is a little a similar…i suppose great minds think alike. Cheerio

  • Bilal Iqbal

    me and my other fellows have a lot learn from you and your fellows and this is really good to see your efforts regarding improvement in our country.. i hope we all will play our role for this..

  • naveed

    a big change will be introduce in the telecom sector and people will fully enjoy 3/4g facilities…

  • Umar Afzaal

    Very good step by PTA .This is a time for 3g and 4g to enter in country like PAKISTAN.Some non state actors are sabotaging this auction towards failure.We are with you PTA.Puppet Media and Government should take responsibility

  • Jawad

    The reports from reuters is totally baseless.. even on base price, 3/4G will fetch more than 1.3B US$.. This will be a productive auction

  • Jawad

    GodSpeed PTA

  • naveed

    the need of pakistan…..