State of Telecom Industry in Pakistan

Universal Service Fund is a relatively new organization which has been established by the Ministry of IT to overcome digital divide in Pakistan. I have previously written about USF and find this work to be very interesting and transparent. There is detailed information posted on the USF website. This is a great opportunity for well-deserved but under-served areas of Pakistan to get their fair share of progress in technology. As the CEO of USF Pakistan, Mr. Parvez Iftikhar leads this large scale effort which spans multiple organizations and sectors. Mr. Iftikhar was kind enough to explain his views and answer my questions about USF. Here is part one of this exclusive interview. I encourage all of you to post comments and share your thoughts.

Babar: Many people do not understand the concept of Universal Services Fund. How would you like to convey what USF does?

Parvez Iftikhar: In order to spread telecom services to all corners of the country – universally – Pakistan Telecom Act 1996/2000 envisaged establishment of Universal Service Fund. All licensed telecom operators contribute 1.5% of their adjusted revenues to this Fund as part of their license obligations. Then, in order to utilize/disburse this fund for providing universal access, Government of Pakistan opted to follow Private Public Partnership Model. This led to establishment of USF Company under Section 42 of Companies Ordinance 1984. The Company is a private public partnership as it has an independent Board of Directors consisting of four members from the government and four from private sector industry/consumers. CEO happens to be the ninth Board member.

Utilizing the above mentioned Fund, USF Co finances spread of telecom services to previously un-served or under-served areas and makes it possible for the licensed operators to service those areas, on normal commercial (read: competitive) terms. Telecom services include basic telecom, broadband internet, Telecenters (for those who cannot afford the necessary instruments/devices)and so on. Challenge for the Company is to achieve these targets through a fair, transparent and efficient process. Therefore all fund disbursements are done by open and transparent competitive bidding, encouraging competition among telecom licensees.

The Company was established in early 2007 and the first employee (myself as CEO) was hired in May 2007. In less than a year-and-half, USF Co. is not only up and running as a company, it has already started basic telecom services projects in 7 different areas (“Lots”), for which contracts have been signed with Telenor (Malakand and Bahawalpur), Mobilink (Sukkar), Warid (DG Khan) and PTC.

(Pishin, Mansehra and Dadu). Bids for the 8th Lot (Kalat-Mastung) have been received and are under evaluation. Bids for another 3 Lots (Mirpurkhas, D I Khan and Sibbi) are under preparation by the operators. Bidding documents of another dozen such Lots are being prepared for auction.
Other than that, a project “Broadband for unserved urban areas” has been launched aimed at improving Broadband penetration in the country – especially in smaller cities and towns that are yet unserved. The first phase of this has been advertised, pre-proposal meeting with the bidders held and bids will be received in mid-November.

Reaching the far flung areas is normally expensive because either the Operators have to reach there by long strings of Microwave hops or via Satellite. Both expensive and unaffordable especially considering that these areas are low revenue areas. Therefore to address this problem USF has launched a project aimed to extend the reach of Optic Fiber Cable to all ‘Tehsils’ of the country (presently more than 30% Tehsils are deprived of any fiber connectivity). This will help telecom operators in extending all kinds of telecom services to all corners of the country.

In the very near future USF will also be launching Telecenter Projects aimed at introducing and promoting e-services in the rural areas of the country.

Babar: Please tell us about consumer representation on USF board?

Parvez Iftikhar: One of the 8 Board members represents consumers’ interests. For comparison – one Board member represents cellular segment of the industry, one LL segment and one ISP’s.

In addition consumers’ interests are protected in two ways:
a) The subsidy winner is obligated to follow all the tariff (and other) guidelines of PTA just as in the rest of the country
b) Subsidy winner is also obligated to share the new infrastructure with at least one other licensed operator so that USF funding is not used to create local monopolies that lead to exploitation of consumers.

Incidentally it is also ensured that no Operator collects more than 50% of subsidy that is disbursed. This keeps the interest of all operators in the process and no one operator gets away with major piece of the subsidy cake.

It might be appropriate to mention here that this subsidy is not the classical subsidy that normally comes out of tax-payers revenue of the government. This subsidy stems out of contributions of telecom sector and is spent within the telecom sector.

(To Be Continued ….)