State of Telecom Industry in Pakistan

Telecom companies in Pakistan are one of the major power consumers and in addition to the increasing cost of electricity, they also face the challenge of lack of access to the electricity grid in rural areas to supply power to base stations. A few pilot deployments of  solar powered base stations were luanched earlier.Now Telenor Pakistan and Nokia Siemens Networks (NSN) have signed an agreement that will provide NSN’s off-grid site solutions that use solar energy to power Telenor base station sites in rural and remote areas. This is expected to result in substantial cost savings for Telenor Pakistan along with the social benefits that come with using renewable and clean energy.

Nokia Siemens Networks will design the sites, taking into account local solar mapping, site landscape and other factors to maximize the use of an abundant, clean, and natural energy source. Nokia Siemens Networks’ Green Energy Control will help deliver a sustainable solution while optimizing operating costs.

The solar-powered sites will be implemented using Universal Services Fund (USF) that was awarded to Telenor Pakistan in 2009. USF-based contracts aim to provide access to mobile services for underserved and unserved areas of Pakistan. Telenor Pakistan, till now, has been awarded three USF contracts for Mirpurkhas, Malakand and Bahawalpur region.

“It’s important that we connect the world in such a way that not only maximizes benefits for consumers and businesses, but also ensures the welfare of our planet,” said Saad Waraich, the Pakistan country director for Nokia Siemens Networks. “Providing communications to rural areas will become increasingly important and we believe renewable energy will be the first choice for such installations. In fact, the majority of base station sites installed by us by 2011 will use this form of energy. We are especially proud to partner with Telenor – a definite trend setter for the use of environmental technologies in network expansion.”

The GSMA has estimated that more than 75,000 new off-grid sites will be built each year through 2012 in developing countries. About 80% of the energy in a typical mobile telecommunication network is consumed by base stations. Renewable energy sources such as wind and solar power offer a reliable alternative to sites with limited or non-existent electrical grid access. Nokia Siemens Networks has already deployed more than 360 sites that exploit renewable energy and has over 25 years of experience in implementing solar-powered sites.

Source: Nokia Siemens Press Release

Developing Telecom Watch blog has posted a roundup of telecom and broadband penetration in Pakistan and the digital divide across provinces about which I wrote a while ago. It references the USF work to serve remote and under-served areas. In particular, it mentions the PTCL-USF deal from earlier this month.

Pakistan’s Universal Service Fund (USF) and incumbent fixed line and broadband provider Pakistan Telecommunication Company Ltd (PTCL) have signed three broadband contracts, Trading Markets reports. Under the terms of the agreements PTCL will provide broadband services in the unserved urban regions of southern Punjab and Lower Sindh. It has also agreed to bring fibre-optic connectivity to all tehsils (administrative divisions) in southern Balochistan, and will install around 1,166km of fibre-optic cable in the region. As a result of the projects approximately 63,000 new broadband connections are expected to be established in southern Punjab, and PTCL will also set up educational broadband centres (EBCs) in 206 high schools, colleges and libraries, as well as 58 community broadband centres (CBCs). In Sindh around 23,500 new connections are expected, alongside 82 EBCs and 43 CBCs. The USF will give PTCL PKR1.16 billion (USD14.3 million) for the developments in Punjab, PKR550 million for Sindh and PKR1.2 billion for the fibre rollout in Balochistan.

During the many years of telecom industry’s growth, PTA has never been able to clearly define a reasonable VOIP policy. Recently PTA asked ISPs to detect and monitor traffic for voice over internet protocol and report any illegal usage. The Internet Services Providers of Pakistan (ISPAK) has taken a position against PTA directives asking them to set up expensive systems for the detection and monitoring of illegal voices traffic available unlimited on internet. Daily Times reports:

ISPAK Convener Wahaj us Siraj said PTA has invested a huge amount of operators’ contribution for installation of such a facility and this matter has to be tackled by PTA itself instead of passing on additional burden on ISPs. He said the ISPs could install the VoIP monitoring and mitigating facility if PTA provides funding for such a facility as the industry is already in debt due to selling below the costs and anti competitive practices. There are more than 50 ISPs operating across the country. As per policy, they contributed 0.5 percent of their revenue to Universal Service Fund (USF); 0.1 percent on the account of Research and Development and hundreds of thousands of fee charges for renewal of licences. ISPs cannot take any action against any customer doing illegal VoIP as they are lacking statutory powers to do so, he said and added that if PTA informs of illegal activity done by any customer to the concerned ISP, the ISPs’ action can only be limited to locking that customer’s account and providing customer details to PTA.

ISPs also termed PTA’s action of blocking the IP addresses on internet gateways without any prior notification and evidence as insufficient. They said they had been suffering badly, which has been brought to the notice many times in recent past to the regulator.

PTA has its automated blocking of IP addresses that carry illegal voice traffic that is termination and/or origination of voice packets in a bid to check grey traffic flowing into the country

On the other hand, Chairman PTA Dr Muhammad Yaseen told Daily Times that setting up of VoIP system is not a rocket science that could not be done by ISPs without the assistance of authority.

They only need to install software on their network to block illegal traffic of voices, which they are reluctant to do, he said adding that there are scores of culprits violating authority’s law under the very nose of ISPs. Dr Yaseen added that the authority has warned all the ISPs again and it has decided to conduct massive operation against all the illegal traffic users as per prescribed laws. He further said the ISPs should cooperate with the authority to stop illegal practices instead of supporting users’ violating watchdog’s laws.

PTA announced publicly that all (registered) call centres should provide their IP addresses to PSEB to make sure that their voice traffic is not blocked. Since the inception of technical facility in May 2008 at the PTA, the IP addresses found to be involved in illegal activities were being blocked manually and in the process, over 14 million minutes (worth around Rs 100 million) have been saved on monthly basis. Now these would be automatically blocked if any IP, not authorised to carry voice is found doing so. Under the current policy, only LDIs and international call centres are authorised to carry voice across national boundaries.

In continuation to various recommendations discussed during Broadband Open Dialogue session, Pakistan Telecommunication Authority (PTA) has formulated a Broadband Stakeholders Group (BSG). First meeting of said group was held at PTA Headquarters. The meeting was presided over by Dr. Mohammed Yaseen, Chairman PTA and attended by representatives from Ministry of Information Technology, Universal Service Fund, Pakistan Software Houses Association, PTA, Broadband Service Providers, Cellular Mobile Operators, Telecom Vendors and Academia.

In his opening remarks, Dr. Mohammed Yaseen, highlighted the vision behind establishing Broadband Stakeholders Group. He said that primary objective is to improve coordination among various industry players, provide them a common platform to share their ideas and draft recommendations for improving proliferation of Broadband services in the country.

The participants appreciated PTA’s initiatives for proliferation of Broadband services in the country. The BSG members were of the view that such harmonized efforts for escalation of Broadband would deliver substantial benefits to the Industry as well as the society. After discussion it was decided that 256 kbps would be considered as minimum Broadband functional definition and a broadband subscriber base of 5 Million would be the target for next three years.

BSG members were briefed on proposed working areas of BSG which included Broadband Infrastructure, Broadband Content and Applications Take-Up, Broadband Policy and Regulation Framework and Rural Broadband Connectivity. The participants were also briefed about the structure of BSG along with proposed timeline for key activities of the group.

Dr. Aamir Matin, Country Manager Cisco Pakistan was chosen as the Chairman of Broadband Stakeholders Group. It was decided that the BSG members would finalize their recommendations within six months time period.

Via PTA Press Release

This is the third and last part of the interview series with Universal Service Fund CEO. I hope that the three posts gave a good overview of the initiative. We will track and share the progress on this project. I would like to express my thanks to Mr. Parvez Iftikhar for his time and interest in sharing the details of USF.

How is USF different from Rabta Ghar scheme?

Rabta Ghar is an excellent programme started by PTA. But the nature and the size of the two programs are completely different. Rabta Ghar strives to establish “telecenters” in rural areas so that rural folks can come to the Rabta Ghar and make/receive voice and data calls. Whereas USF strives to “illuminate” entire areas in a manner that practically anyone in those areas can acquire his/her own connection. Telecenters will only be one sub-set of the USF projects – for those who cannot afford their own phones and data devices.

What plans and metrics do you have to monitor the performance and return on this investment?

Very simple. As per USF Policy we have specific laid down targets and we have to meet those targets. And with today’s technologies it is no problem to measure if those numbers have been reached or not. The measurements will be taken by professional technical auditors, who will mostly not belong to USF.

To elaborate with an example: In Mansehra Lot (consisting of the districts of Kohistan, Batagram, Abotabad, Haripur and Mansehra), there are a million people, living in 1,479 villages (spread over 11,366 Sq.Kms) who have no way of getting a phone connection. Therefore our targets are:

i. to give each one in these 1,479 villages, the possibility to get a phone connection
ii. to reach at least 5% teledensity overall, as a first step
iii. to have PCOs in villages/towns of the area that have a population above 2,000
iv. to have telecenters in towns with a population of above 10,000

The technical auditors will go to these villages and take measurements to verify that these parameters have been met, before the payments are made. The measurement work will be done in 4 phases in each Lot so that subsidies can be disbursed progressively against achievement of these 4 milestones.

Subsequently USF will hold a Bank Guarantee from each Operator worth 40% of the subsidy value and in case of any breach of contract USF will have the option of imposing penalties.

Here is part 2 of the 3-part series of interview with the Chief Executive Officer of Universal Service Fund, Pakistan. In this part Mr. Iftikhar explains about subsidies, financial allocations and the criteria/data used to select the region where USF will invest.

What is your budget and how do you apportion it for voice vs broadband?

The disbursement budget for the current year is more than 4 Billion Rupees but this is a misleading figure due to two reasons.

1. It shows the amount that will be disbursed and not the amount that will be committed by signing contracts with the operators. The committed amount is disbursed over more than one year as the projects take time to complete.
2. It must be understood that this kind of budget can only be indicative. The actual disbursement of funds depends on the subsidies determined through open competitive bidding. For instance last year we achieved our target of the number of Lots to be auctioned, however the subsidies demanded by the bidders turned out to be lower than our budget! For every 100 Rupees of investment, Operators asked 20 Rupees subsidy.

In a way this under “under-utilisation” of the budget was a good thing, in that the Operators’ stake was substantially higher. In the meanwhile this trend is undergoing change and the operators are increasingly asking for higher subsidies. As of now an investment of Rs. 5.3 Billion is taking place in those remote areas with only Rs.1.49 Billion USF subsidy.

As for its apportionment, let me answer your question by a pie char.

What criteria do you use to decide where to invest?

Our first priority is to go to unserved areas. We use data from different sources to determine which areas are really unserved. We take:
• topographic maps from Survey of Pakistan,
• satellite imagery from Suparco,
• village population data from Census Organization of Pakistan
• and finally telecom coverage from Telecom Operators

Based on this we gather the un-served areas into “Lots” and auction the Lots one by one.

In case of Broadband it was easier. We eliminated from our program, all those big cities where there is some broadband service available. Although we consider those cities to be under-served, we are not going into those large urban areas for the time being.

And in case of Optic Fiber again the decision was rather easy. We carried out a field survey to determine which Tehsils of the country do not have Optic fiber connectivity, which turned out to be 31% of the total Tehsils. That is where we have launched our programme.

The criteria as to which area to cover first, one tries to cover maximum unserved population in as short a time as possible. As in any endeavor we have are also learning as we are moving ahead. For example when we tried to auction the large Lot of Chaghi-Noshki in Baluchistan, no bidder turned up. So we broke up the very large Lots and also decided to first concentrate on Lots nearer to the served areas and then move outwards. Similarly in case of the project ‘Optic Fiber for all Tehsils’, we chose Sindh province first because that way we can cover maximum Tehsils with minimum KMs of Fiber cable – kind of low hanging fruits first.

It would be pertinent to mention here that all such proposals are discussed and debated in the Board where collective wisdom of Government as well as Private Industry is applied before such decisions are reached.

Let me add here that the level of support and help that we get from the Board Members is beyond what I ever expected – especially the Ministry and PTA. Without this we could not have moved ahead.

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 ….)