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Lack of preparedness of information ministry cause for delay, Original ’07 3G launch delayed by incumbent operators, Average revenue per user down from $3 to $1 per user


ISLAMABAD - Lack of preparedness of the ministry of information technology (MoIT) and apprehensions by incumbent telecom companies on harnessing the true potential of third generation or 3G telecom service is likely to hamper its introduction in the country.
Paradigm shift needed
An official source said the Frequency Allocation Board that works under telecom regulator Pakistan Telecommunication Authority (PTA) has made available frequency spectrum of 35 MHz for 3G service. However, he said that the lack of preparedness at the MoIT for issuing guidelines for 3G licencing was resulting in an inordinate delay. PTA, the source said, had proposed that two spectrums of 10 MHz be allotted to incumbent cellular operators, while the third frequency of 15 MHz should be given to international operator having expertise in Long Term Evolution (LTE), a standard for wireless communication of high-speed data. However, the government still has to decide on whether the bidding would be open or limited only to incumbent operators. The government has recently directed the MoIT for policy guidelines, but the ministry is completely in the dark on how to move forward as it had so far not even hired any consultant to prepare the information memorandum on 3G. The source said the ministry was not even aware of the potential value of license, which is why Rs60 billion proceeds were targeted in the federal budget for the current fiscal year. “A paradigm shift is needed for the new policy but so far there no one is aware who will draft the new policy.”
High-speed connectivity
Pakistan had planned launch of 3G licenses in 2007 but was delayed on the insistence of incumbent operators who wanted to recover their investment cost for 2G networks before investing in new infrastructure. After four years of status quo, the average revenue per user (ARPU) has declined from $3 per user to $1 per user. Due to the decline in ARPU, the investment in infrastructure has also declined. Telcos are of the opinion that their customer-base was not likely to increase with 3G, as already witnessed in India. Pakistan has low penetration of broadband, with only 1.4 million subscribers as compared to 109 million cellular subscribers out of 180 million population. Chairman PTA Dr Muhammad Yasin recently proposed that the government should declare the whole country under-served in broadband service to give impetus to high speed data connectivity through the under utilised Universal Service Fund (USF). The telcos are bound to contribute a specific amount from their profits o the Fund which is to be utilised for developing telecom infrastructure in under served areas. USF has Rs80 billion funds and to-date only Rs17 billion have been utilised.
Business model shift
PTA believes there is immense potential for high speed data services in the country, provided operators shift their business models from tapping customers through low calling rates to value added content and applications, like rest of the world. Unofficial estimates project the immediate demand for data connectivity more than 30 million users. Most new subscribers would be devices which are required by every company to improve their efficiency and productivity that is possible only through 3G. MoIT, the source said, was primarily responsible for this situation. They have no estimate of potential market. Even Google has better figures with an estimated 22 million internet users in Pakistan. Affordable hand held devices for internet connectivity are expected to flood the market from next year, suddenly pushing demand for wireless connectivity to a new height. The Musharraf government, he said, was smarter as it carried out proper study and provided information update on the potential of Pakistani market, which resulted in attracting investment of $582 million, $291 million each by two operators in 2004. Due to ignorance, MoIT is estimating license fee of 3G at $300 million each for three licenses in 2011.


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