State of Telecom Industry in Pakistan

In  a recent interview with the media, Zouhair Khaliq speaks about Mobilink’s future expansion and investment plans and recent standing of the company among mobile and data service providers. Excerpts are presented below, full story here. As I have written before, Mobilink has been successful in 2 strategic directions. It has maintained its top position in mobile market by adding wireless subscribers. Secondly it has diversified into the broadband and data services market by acquiring Internet Service Providers such as DanCom, WOL, DVCom etc . Overall Mobilink continues to be a strong player and a good profit source for Orascom, the parent company.

In fibre optics, Pakistan Telecommunication Limited (PTCL) had been the only company that owned an optic fibre backbone. Mobilink has successfully introduced competition through the introduction of a nationwide network. Mobilink’s optic fibre backbone provides the perfect platform to Mobilink for connecting its customers nationwide with highest level of voice and data quality with more reliability.

Deployment of the national backhaul stands completed with full protection, making Mobilink’ optic fibre backbone fully protected/redundant. By providing last mile connectivity Mobilink has positioned itself as a one-stop shop for meeting all communication requirements of enterprises and individuals. The optic fibre network currently covers 6,500 kilometres and will be increased to cover another 2000 kilometres very soon.

“We are envisaging sustainable growth in Pakistan. With mobile penetration still at around 43 percent, the room for growth is immense. The growth is not only limited to mobile telephony, as there are huge opportunities in other fields like broadband (optic fibre, DSL, WiMax), LDI etc. This coupled with the enabling environment being provided by the Pakistan Telecommunications Authority ensures an excellent future for this sector,” he said when asked to comment on the company’s future plans in Pakistan.

I am sharing a piece about WiMAX in Paksitan, which I wrote for All Things Pakistan. As this is an overview, some of the information here may already be in my previous WiMAX posts.

Pakistan’s telecommunication industry - mobile communication in particular - has made impressive strides in the last few years after deregulation. However broadband growth in the country has been very disappointing - there are less than 100,000 broadband users in Pakistan. The open competition observed in mobile industry has not been replicated to broadband. Reasons include high prices, control of PTCL over bandwidth resources, policy issues, lack of infrastructure and legal disputes.

Enter WiMAX. Simply stated, it’s a relatively new standards-based wireless technology which is intended for large coverage areas on the order of several kilometers (instead of a few hundred meters, as is the case with Wi-Fi).

With base stations transmitting signals and some equipment at customer location, it promises fast bandwidth for both fixed locations and mobile users. In this backdrop, Pakistan made headlines in 2006 when Wateen announced plans to work with Motorola to rollout Mobile WiMAX, the largest network of its kind in the world.

Is WiMAX (Worldwide Interoperability for Microwave Access) the right technology for developing countries? In other words, will this new technology deliver the promise of broadband at affordable prices?

WiMAX comes with many theoretical advantages but its potential is yet unproven. Without getting too technical, it is purpose-built for Internet (IP) communication and is based on standards (as opposed to other proprietary solutions) endorsed by a respected world standards body, the Institute of Electrical & Electronic Engineers (IEEE)*.

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In my last post I referred to an article about broadband prices in terms of average salaries. As readers pointed out the numbers there were not a good representation of broadband costs. In case of Pakistan the $106 figure for 100kbps was too high. The fine print mentioned that the data used in Wired illustration was from ITU. I am sure it outdated, and the broadband prices have fallen significantly in the last year in Pakistan. There are other considerations as well which were not taken into account in that comparison.

For one, broadband prices are not fixed in a country but vary. As shown in the chart below, based on the OECD data, the range can be significant. (Source)

Second, there are many other factors which should be taken into account when comparing the broadband prices for different countries. A recent report from the UK communicaitons regulator OFCOM writes about this with the title:

The complexities of quantifying broadband prices

A recent OECD report compared the lowest prices for broadband, on a cost per Mbit/s basis, across 30 countries, of which the UK ranked 16th. The UK data came from three ISPs (BT, HomeChoice and Telewest). As such it excluded pricing data from several leading LLU operators which are gaining market share as a result of their low-priced offerings. The report also looked at broadband prices in isolation, despite the fact that so many consumers now buy broadband as part of a bundle of services.

In the OECD’s analysis, Japan, which has implemented fibre to the home (FTTH) offering speeds of up to 100Mbit/s, had the lowest cost per Mbit/s. However, it is difficult to make a direct comparison of broadband packages between countries; differing topographies and population distributions mean that a service which is economically viable in one country may not be in another, due to the level of infrastructure investment required. UK
broadband providers have not yet seen a rationale for the rollout of FTTH, meaning it is unlikely that the UK will be able to challenge the cost per minute of those nations with FTTH in the near-to-mid term.

There are also problems with using cost per Mbit/s as it fails to take into account that many consumers have yet to see the need for broadband speeds in excess of those already available in the UK.

Although international comparisons of broadband offerings and prices, such as the OECD report, can be useful, more complex analysis, taking into account service bundling and other points of service differentiation (such as data caps) is required.

Sources:
OFCOM Report from UK (Part 3 of the pdf reports)
OECD Report - Over 100 pages PDF

FTTH (Fiber To The Home/Premise/Business) is the new emerging technology for voice, data and media to which home users or commercial institutions in Pakistan can now look forward to. The idea is to replace the existing copper media in order to remove maximum dependency from PTCL network in general and to meet the demand for higher bandwidth with minimal disconnections, latency and security issues in specific. A related benefit is providing “one window solution” for data, voice, media & entertainment at affordable prices.

Some players have taken initiatives in this regard. Key players who have started or laid Optical Fiber Cable (OFC) are Multinet, Wateen Telecom, Mobilink, TWA, Nayatel and Brain Tel. TWA is focused on international connectivity through IPLC (International Private Leased Circuit) over SMW-3 & SMW-4, however they have also laid backbone fiber for Mobilink for domestic connectivity. As a result consumers are and will be enjoying advantages of low LDI tariffs. Nayatel is also offering data, voice and media services over FTTH but they are geographically focused in Islamabad market till yet. Multinet is one major infrastructure player laying 4500Kms Optical Fiber Backbone across Pakistan and also enjoys international connectivity with massive 40% share in SMW-4 through its investment arm Telecom Malaysia. Besides this Multinet has also laid fiber optic redundant rings in Karachi and Lahore. These OFC rings are also called Metronet. Multinet is serving corporate segment on Metronet since last two years.

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This post is first in a series in which IPTV services in Pakistan will be discussed.  First an introduction to IPTV: in simple terms IPTV is television content that, instead of being delivered through traditional formats and cabling, is received by the viewer through the technologies (IP) used for computer networks. IPTV provides multimedia services via a broadband connection with the help of a set-top box (STB) which resembles a traditional cable box. A single connection (fiber optic, copper or cable) coming to your premise can serve phone, TV and Internet service - terms such as FTTH or FTTP are used when fiber optic cable is being used for higher bandwidth transmission.

Why IPTV? IPTV is an imporant piece of the Triple Play puzzle. Many telecom companies are using it to create a sticky bundle for customers, the idea is that if a customer gets all services from a provider he or she can be offered a better deal and therefore is less likely to switch providers. I, for one, use bundles at home and find it convenient to have one bill and one phone number for customer service.

Triple play is also great for offering enhanced and converged services (not all are feasible, though) such as :

• TV and video services such as video-on-demand (VoD), subscription, live TV channel lineup packaging and scheduling, and network-based digital video recorder capabilities
• Additional “blended” communications applications such as get an alert of phone call on your TV, text chat, live traffic information (even using your cell phone as a remote - seriously!)
• Personal media applications such as uploading of photographs and video clips and sharing of music and video content across multiple in-home devices

What is the situation of IPTV in Pakistan’s market today? It is all about broadband availability and affordability and till now Pakistan has miserably lagged behind on this. I am hopeful that things will change for better in the next 2-4 years. The policy and regulatory framework is set by PTA. Pakistan Electronic Media Regulatory Authority (PEMRA) monitors and regulates the electronic media and it issues IPTV licneces as well.  I know about the following companies which can/will offer IPTV: PTCL, Wateen and Nayatel. There is little information available about PTCL plans (see some discussion here) but it is likely that they will offer IPTV over DSL using technologies from various foreign vendors (see below); for Wateen I’ve previously written here. Recently Brain has also advertised limited launch of IPTV service.

According to some resources PTCL may launch IPTV service on 23rd March 2007 to pilot users -with a broader launch to 20,000 subscribers in the first half of this year. In terms of its strategy IPTV must be a top priority for PTCL. It all comes to execution and creating a value package. PTCL launch is supported by Chinese telecom equipment giant Huawei and Irdeto, the Netherlands-based content security company. Huawei will provide the servers and set-top boxes (see Hua wei’s IPTV architecture below) and Irdeto will provide content security solution.

The Irdeto IPTV security solution integrated into the Huawei IPTV system provides for a full video product and service offering, including broadcast TV, video on demand, PVR and Time Shift TV. Within the Irdeto IPTV security framework, content is securely stored and distributed across any broadband IP network and the corresponding content rights can be managed on an individual subscriber and/or device basis.

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Triple play made its way to Pakistan. Triple Play service is a marketing term for the 3 services: high-speed Internet, Video (TV, Video on Demand) and telephone service - all over a single broadband connection. Wateen, PTCL and Nayatel are a few examples for which services are already or soon to be available in some parts of Lahore and Islamabad. The important question is if these services will be affordable and reliable?

Wateen’s triple play offering was recently unveiled with its services for DHA Lahore, scheduled for commercial launch in January 2007. With all the digging work going on in DHA, it will be a relief for the public. According to the press release by Wateen:

This project will provide DHA residents access to a breadth and depth of 21st century telecommunication and media services through fiber optic and wireless WiMAX networks. Services provided will include innovative telephony calling plans for local, nationwide and international routes, video conferencing/video telephony, true broadband internet (both fixed and wireless), DVD quality TV viewing and Value Added Services such as security & surveillance and interactive gaming.

Pakistan Telecommunication Company Limited (PTCL) was awarded the country’s first IPTV operating licence in November 2006 and will be an major competitor. PTCL has yet to announce a timetable for rollout of the service. “We have some exciting plans that we will be announcing soon,” was all PTCL CEO Mohammad Bamakhrama would tell local press. According to discussion forums, PTCL will use Alcatel IPTV solution which is based on partnership with Microsoft.

Alcatel (NYSE:ALA) also helped NayaTel  of Pakistan to supply the region’s first fiber-to-the-home (FTTH) solution to deliver a high bandwidth triple play (voice, video and data) services to over 30,000 subscribers in the capital city of Islamabad. More on this here. Sample rates for Nayatel’s Internet service are:

Now that we have these services available to select few, let’s monitor their success rate in 2007. Price is the main factor here and the one-time cost of the equipment (i.e. ONT) is likely to be the hurdle. If companies can asborb the equipment price in exchange for a contract, it can speed up adoption.