State of Telecom Industry in Pakistan

The purpose of this post is to present a simple explanation about CDMA for ordinary consumers. The post will touch upon CDMA flavors (CDMA2000, W-CDMA), explain 3G technologies for mobile phones, and CDMA-based fixed or mobile Internet and phone service using wireless local loop.

For users and consumers the important thing is that CDMA is the prevailing mobile communication technology of the next generation: it enables 3G (short for third-generation technology, for mobile phones) and wireless internet access at high speeds. CDMA and 3G allow you to check your email from a smart phone, browse the web on the go on your laptop, send multimedia messages or watch streaming videos on your mobile.

At the risk of over-simplification, here’s a brief overview of CDMA flavors:

W-CDMA is the 3G technology (mobile phone protocol) for GSM mobile phone (wireless) networks, as in Pakistan and Europe. It is also referred to as 3GSM (3G and GSM). Wireless Intelligence reports that there are 83 million W-CDMA customers in 49 countries.

CDMA2000 is a whole family the 3G telecommunications standards for non-GSM networks, such as most of the mobile phone companies in US and some companies in Japan and South Korea. There are about 275 million users of CDMA2000 in 75 countries (estimated by CDMA Development Group). As explained below Pakistan is using CDMA2000 for Wireless phone and Internet.

The key point:

W-CDMA and CDMA2000 are competing standards and are incompatible!

And if that was not enough China has its own 3G standard, TD-SCDMA! Below is a view of CDMA subscribers over the years.

Above I have described CDMA for mobile telecommunication. CDMA is enabler of Wireless Local Loop (WLL) as well. That is, the use of a wireless communications link as the “last mile / first mile” connection for delivering plain old telephone service and broadband Internet to telecommunications customers. WLL can be fixed or mobile (with limitations). A number of Pakistani companies (listed as “operators” here) are providing wireless phone and Internet service using CDMA2000 technology. The state-of-the-art CDMA2000 1xEV-DO is provides a peak data rate of 2.4 Mbps.

There is a wealth of information about CDMA in Pakistan at PakCDMA Website.

As a disclaimer I admit there are lots of technical details which I’ve chosen to ignore here for the purpose of keeping this post simple. For those who would like to dig deeper, I’d suggest these Wikipedia resources:
CDMA2000
W-CDMA

Number portability allows consumers to switch phone providers and still keep their phone number. It started with local number portability and even that took a long time in many developed countries and it was not a very smooth experience for the consumers as they tried to switch companies.

Mobile number portability (MNP) is the big thing now which is changing 
the nature of the competition for mobile industry.

In U.S. only a couple of years ago the mobile phone companies started providing portability of mobile numbers. It takes significant resources to set up the rules and systems to take care of local or mobile number portability. Usually the regulatory agencies mandate number portability by a certain date and the phone companies try to extend these dates. Till now Japan did not have MNP. But this week mobile phone carries in Japan are engaging in fierce competition to take advanatage of the start of the mobile number portability.

Below is an interesting survey result from ACNielsen.
It shows that price is the main factor for switching service.

Pakistan is also about to experience MNP. PTA has been studying MNP and supposedly has asked the providers to provide MNP by 2007. There is a study / paper on PTA website which gives details of their program. The interesting thing about Pakistan is that the area codes of the mobile phones are separate by the provider i.e. 0321 is Warid, 0300 is Mobilink. But how will it work after MNP?

The mobile companies have formed a MNP Consortium which will work through the details of MNP under PTA guidance. For sure MNP will change the market share. Recently Pakistan passed the 40 Million subsriber line. The growth may continue but mobile service providers will have to work hard to retain their customers!

This is good news. INTEL Corporation has teamed up with Wateen Telecom and IT ministry of Pakistan to establish six tele-centres to provide low-cost connectivity for voice and data, ICT training and basic tele-medicine. This is part of INTEL’s “World Ahead Program”.

Intel would initially establish six tele-centres at Attock, Multan, DG Khan, Sukkur and Gwadar. Intel Corporation vice president, John Davies said that the telecentres would be a key step in bridging the digital divide and making technology more easily accessible to citizens in Pakistan.

ICT stands for Information and Communication Technology.  ICT is seen as an enabler for the developing economies. It is part of the UN’s Millenium Development Goals (MDGs). The question that arises is if ICT is just a good to have or is it really cost-effective? The International Telecommunication Union (ITU) has performed studies on the impact of ICT and came out with promising conclusions. Included below is an excerpt from their 2006 ICT development report.

I am glad that INTEL has taken this initiative and from the news brief it seems to be a good plan.  Of course, technology companies understand the need and advantages of spreading interest in technology to less privileged areas of the world. For Wateen it is a good opportunity to showcase their cutting-edge Wimax technology implementation. And for the citizens of the above-mentioned cities it is a great opportunity. To use a cliche, it is a win-win situation.

Here are some statements about this - taken from GovTech website:

The Intel World Ahead program does more than just provide affordable PCs,”VP Davies said, calling it “a holistic program to help build everything from the right systems tailored to local needs, and critical connectivity, to sustainable local capabilities through quality education that makes a meaningful difference in people’s lives.” Chief Executive Officer (CEO) of Wateen Telecom said, “We are proud to work with Intel and the Federal Ministry of Information Technology and Telecommunications to bring the first ever WiMAX broadband deployment to Pakistan.We also expect to make available cutting-edge wireless broadband connectivity in selected urban and rural areas,” he added.

Huawei is a Chinese telecommunication (wireless, networking) equipment maker with presence in 41 countries. Huawei defines itself as the leader in next generation telecommunication networks. Recently Huawei has signed two mega deals worth over a billion US$ with Pakistani telecommunication companies Worldcall and Ufone. The Ufone deal is worth US$ 550 Million and involves GSM expansion. The WorldCALL deal is estimated to be US$ 720 Million and its for setting up Wireless Local Loop service in South Pakistan.

In this post I’ll provide some background on Huawei and its standing in the world. Next posts will discuss the impact of the new deals on Pakistan’s economy and telecommunication sector.

The tremendous growth of Huawei in the last few years is impressive, given that it competes with established international giants such as Alcatel, Cisco and Lucent. As experts have noticed Huawei’s advantage goes beyond lower prices. Huawei is positioning itself as an innovator and leader of cutting edge technology products. See this Business Week article about Huawei’s R&D focus.

An important feature of the Chinese policy is the empahsis on developing its own technical standards. For instance Chinese are pushing for IPV6 in an effort to catch up with the US. Another example is the TDS-CDMA standard which was developed in China.

This company is respected, feared and criticized in the western world. See this MSNBC article on why some people think that Chinese government is too close behind Huawei’s success and the related security concerns raised. A few decades ago Japan’s trade ministry was also very active in promoting their electronics and auto industry. Now the focus is on China. I share a few lines from the article:

The combination of a strong work ethic and modern business practices is helping Huawei to alter customer perceptions of China Inc. in overseas markets. When Huawei salesmen first approached British data-services company Fibernet three years ago, the firm had been using merchandise built by Cisco, Ciena and Marconi, according to Fibernet marketing director Nigel Pitcher. When Pitcher visited Huawei headquarters, he expected “to be underwhelmed by a Third World sweatshop operation.” Instead, he says, he was “bowled over” by “the most modern manufacturing facility that I have ever seen.”

Huawei is certainly moving up on the technology and leadership chain. I think it has a bright future ahead.

Huawei’s official site huawei.com has good information about their products and services. By the way in US they are known as “Future Wei”. Find more at their US site.

Recently the issue of digital divide in Pakistan has been getting attention in the press, courts and the government. Let us review the availability and affordability of broadband services in Pakistan.

Definitions of broadband vary – I’ll use the official definition from Pakistan Government’s broadband policy document: Always on Internet connection with a download speed of at least 128kbps connectivity.

There are two main problems with broadband in Pakistan:

a)The cost of broadband is prohibitively high in Pakistan (compared with developed and most developing countries) with the result that in 2004 there were more Internet users in London than in the whole of Pakistan (details here)
b) Within the country there’s sharp difference in the availability and prices of broadband. This is a problem faced not just by Pakistan but by most countries of the world: urban areas have better and cheaper broadband infrastructure than rural and remote areas.

Well how expensive is broadband in Pakistan? For instance in the US one can get the fiber-optic based broadband (5 Mbps) for $35 (about Rs. 2100) per month. In Lahore/Islamad/Karchi one would pay Rs.1000-2000 for a much slower connection with upper limits on usage volume. Who sets the broadband price and what are the criteria? Actually this is a topic of bitter dispute between PTA, the telecommunications regulatory body and PTCL, which till recently was the only service provider in Pakistan. PTCL is also referred to as the ‘Signifciant Market Player’ because of its incumbent status. See my previous post on battle of bandwidth rates.

These are the main controlling factors for broadband:

1. The role of government for deciding international bandwidth rates, oversight of service providers, and deregulation.
2. Role of private sector in making the necessary investments and providing acceptable service;
3. Market conditions (demand for bandwidth)

On a positive note, there is the recent announcement that World Bank has offered 125 Million USD to Pakistan to promote rural telephony. Excerpts below:

Minister for Information Technology Awais Ahmad Khan Leghari said rural tele-density in Pakistan stood at a dismal 1 per cent of the population and he was keen to take it to at least 5 per cent by 2010. The rural-urban divide is constantly widening as the mobile phone revolution is largely forced in the urban areas …

The minister said the government had identified four key areas, including basic rural telephony, broadband, e-services and content development, to focus on during the roll-out of the Universal Service Fund.

“Our aim is to provide at least 250,000 broadband connections and offer three major e-services within the next 12 to 18 months,” he said.

Read the full news item here. One of the first thing which comes to mind is the Grameen Phone in Bangladesh. I hope Pakistan will learn the lessons from them.

I plan to monitor this situation and post updates.