Internet-based LL Services

Fellow blogger and friend Babar Bhatti has complained about the problems he is facing in using Braintel’s local loop services (probably from out there in US). A reader has commented on this citing a PTA ban on such operations by the local loop operators in Pakistan.

The main issue here is the ability of the LL operator to replace the traditional copper for its end user or the expensive 1900 Mhz WLL frequencies for its end user with the ‘Internet cloud’. It is technically possible but the use of Internet for voice problem had its own fair share of cloudiness. At the center of this debate is the use of the word ‘long distance’ – whether it is to be taken physically or network-wise.

When last LDI/LL licenses were issued, the LL license itself was a cheap affair – though the spectrum (both for 1900 Mhz and 3.5 Ghz) was auctioned at high prices. At that time, a number of Internet savvy people – Brain included – took the LL license only banking on new VoIP technologies to come to their rescue later.

A few VoIP technology companies (a cross between operators and technology vendors if you will) had been constantly chasing the smaller LL operators (as described above) evangelizing the use of VoIP in local loop operations where the ‘affinity to local numbers’ is the actual ‘good sold’ and the profit comes in from volumes of such ‘numbers’ beings sold worldwide at fixed monthly rates (but not actually always being used).

These VoIP technology companies met some success during the past couple of years with a number of LL operators signing up them either as partners or just technology vendors. At that time, cellular industry was priming and people, operators and the regulator somehow had little time to attend to this possibly controversial issue.

Now that the market is nearing a tele-density of over 50% and market consolidation has started, these by-issues will get more attention (and probably get more debated).

PTA’s clarification on use of VoIP (available from PTA’s website and discussed on some related online forums) is of little help as it leaves room for guessing by the readers.

My personal position here is that given the non-deterministic nature of public Internet (specially when the bandwidth is not directly coming from a T1 operator) as a transport mechanism for real time traffic, such ‘Internet-glued’ LL services should be allowed – they will always be placed at number 2 in terms of voice quality and deterministic performance. Such services could be declared a new class of service with clear requirement of informing end consumers about emergency services not working on them as well as possible degraded voice performance due to third party packet networks that happen to lie between the end networks. Given a considerable population of expatriate Pakistanis around the world, these services stand a fairly good chance of catching on in popularity and can earn some part of the much needed forex for country by the local companies offering such services worldwide.

Broadband Penetration – MoITT, USF @ Work

Universal Service Fund (USF) is the company formed to make use of the USF money that PTA has been generating out of the booming telecoms market of Pakistan. So far, USF has worked towards using its funds for the spread of voice services in the under-served markets of Pakistan. Of late, Ministry of Information Technology & Telecommunication has intended to guide USF to do the same towards increasing broadband penetration too.

USF, after some initial work, has concluded that there are no particular areas that could be defined as ‘under-served’ in terms of Pakistan and rather the entire Pakistan is under-served. USF has now asked MoITT to pass a ‘determination’ towards the same fact allowing USF to utilize the funds anywhere and everywhere in Pakistan.

MoITT has published a 39 page study document on the web which seeks to establish this fact (that the entire Pakistan is under-served in broadband services). A consultation session was held in Islamabad yesterday to discuss this matter with the industry. The proceedings and details of the session are still to come out but here are my initial takes on the document and its contents:

The  major conclusion points of the documents are:

• Pakistan’s broadband penetration is very low
• Currently there are around 100K Broadband subscribers which need to be taken to 1.6 million by 2010 (1% of population)
• This low penetration is earning bad scores for us under the WSIS measuring criteria & there is a strong need to improve the same
• Three approaches have been suggested for the GoP’s intervention in this ‘dismal’ state of broadband affairs:
  • No intervention – leave it to market; slow broadband growth expected
  • Bundle with Basic Services – only rural areas will benefit; existing broadband provides will loose
  • Tackle issue with a new format – dedicated efforts are expected to yield better results; divided in various phases

The document assumes or maintains that fixed broadband is a dwindling trend and wireless broadband will finally prevail (page 23). While this is true for the last mile domain, the infrastructure is ALWAYS wired (read fiber). The guys at the MoITT need to be pointed to this omission in consideration. Pakistan need to have a good wired infrastructure before we can decide which of the two last miles options (wired or wireless) is good for us.

The study also repeatedly mentions the similarity between low tele-density and low broadband penetration. However, the applications/demand side difference between the two (voice and data) is repeatedly ignored. While it is true that the gap between 2.7% tele-density (from where our telecoms boom started off) and current 50% tele-density was one of the reasons for the boom, it was the application (voice) that was ready to exploit this gap. In the case of broadband, a similar gap exists and this gap is what the study is considering as an opportunity. However, as obvious, the difference between our last success (in cellular voice) and current challenge is that of application – do we have compelling applications that will drive the growth that can ride this gap?

The document also does not considers demand creation at all. While supply end enhancements (by way of USF subsidies towards network deployments etc) are more than welcome, a significant portion of the efforts must go towards demand creation activities. Mandatory use of electronic facilities in the business circles, tax cuts for ISPs interconnecting with each other, financial benefits to private TV channels to host streaming servers inside Pakistan, creation of public/open Internet Exchanges etc are all example of such efforts.

PakistanTelecom & Economy Indicators

Amir Rajput has posted an interesting analysis of the ‘Telecommunication Indicators’ recently published by PTA. The figures (economic_growth.pdf) in the analysis conclude that most of the economic growth being recorded in Pakistan is attributed to the Telecom sector.

CMPak’s Investements – Insomania for Mobilink?

AFP is carrying a report that mentions CMPak’s resolve to invest another $500 million in its Pakistan operations. Rural penetration is being cited as one of the main components of the expansion thrust:

World’s biggest telecom operator China mobile having 320 million subscribers in China plans to invest another $ 500 million next year as the investment atmosphere is very conducive here. Executive Director China Mobile Pakistan Sikandar Naqvi Thursday told CNBC channel that a sum of $ 1.2 billion has already been invested in Pakistan.

This, read along with the statement from the China Mobile Chairman that China Mobile sees their Pakistan operations as a valuable experience for its subsequent international ventures, will surely put the existing big boys of cellular services in Pakistan like Mobilink and Ufone on high-alert and may be give them sleepless nights.

Pakistan Post Plans Paper Email Service

Pakistan Post is reportedly facing a 20% volume decrease every year. This could directly be attributed to the penetration of modern communication means such as cellular telephony and Internet.  The state owned organization is now planning a new service that would allow users to send messages to their loved ones in remote areas using a website of Pakistan Post. The message will than be sent via Pakistan Post’s traditional network of paper mail to these areas.

India launched this service (called ePost) 4 years ago.  So much for innovative thinking.

CMPak – South Goes to Ericsson

Ericsson is announcing that CMPak (formerly Paktel) has awarded its expansion project in the south of Pakistan to the company. Ericsson will provide GSM and microwave transmission network equipment to CMPak for its expansion project that will cover 312 cities of Sindh and Baluchistan that form the southern part of Pakistan.

CMPak has awarded the expansion project of northern wing of its network  to Alcatel-Lucent that we covered here. 

The news bodes well for the industry in terms of more jobs in the sector particularly in the outsourced contract projects segment. The news also mean that increased network capacity will drive down the cost for the consumer due to increased competition and force the cellular operators to focus more on value added services on their network beyond just voice.

Let us hope Mr Leghari can lure in cellular manufacturers to start making terminals in Pakistan so that the import bill for these terminals can be minimized. 

Weird Stats

A news item in Daily Times says that Pakistan imported cellular phones worth around $728,000 in the last nine month which according to the news article is 28% more than what we imported last year during the same period.

Umm..sounds strange. The reported figures are not even close to a million dollars. Either the report used the figures of just one vendor or it really got confused with the facts. With an average cost of $100 (Rs 6,000), this figure means that we imported just around 7,280 mobiles? Quite unlikely.

With the average joe Teefa on the street buying a new cellular phone worth $60 ~ $100, no local production of cellular terminals, PTA complaining about insufficient record keeping of SIM issuance and millions of users being added to the networks month by month, even with tax and paperwork evasion, the figures must at least be in tens of millions of dollars.

PTA issues MVNO Framework

PTA has issued a terse (three page) MVNO Framework. While the provisioning of MVNO operations was provided in the Cellular Mobile Policy 2004, the brevity of the subject matter left a lot of guessing work for those who wanted to offer the service.

The framework calls for, among other things, separate number series for MVNO operators and the QoS liability has been tied with the MVNO and not the parent MNO.  The framework also offers some pro-MVNO clauses such as the one that does not allow a parent MNO to discontinue the services of an MVNO without the permission of PTA. This clause can open doors to conflicts between the MVNO and MNOs.

Telecard was probably the first operator to offer MVNO-type services on its limited mobility Wireless Local Loop operations in Pakistan. A number of such (wll)-MVNOs had been operating in Telecard’s network in the PCO business where the business is driven by the command of a commercial entity on the customers of a given region.

With constant capacity buildup by  Mobilink, Ufone and now Paktel, excess infrastructure capacity will soon become a reality and selling out that capacity will soon become a big business challenge. The MVNO framework will allow a formal way to these cellular operators to sell of their network capacities to newer marketing outfits that better understand their own customer niches and can probably provider some extra value added services to their crowds.

MNP Needs Marketing

When MNP was introduced a few weeks ago, everyone had their own idea of the elephant they were feeling in a dark night.

Some said the stuff is not picking up, later to be corrected later by PTA that the number is running in thousands in the first month of the service introduction. Cellular-News say:

Speaking at a conference last week, the Chairman of the Pakistan Telecommunication Authority, Maj. Gen (R) Shahzada Alam Malik said that since the introduction of mobile number portability in the country, more than 10 thousand subscribers have availed the MNP facility while 20 thousand have already posted their requests for shifting their cellphone numbers along with the code from one operator to another. ..

Yet, MNP remains a technical jargon for most of the cell users in Pakistan. Ask the average joe teefa on the street and he’d draw a blank on this possibility. MNP needs neutral marketing from PTA – jargon free, crisp and right in the local lingo.

True, everyone (Mobilink, Telenor, Ufone, Warid, Paktel, Instaphone) is flashing the MNP badge on their websites but this is not the right marketing MNP needs right now.

The mission of MNP – forcing operators to deliver better service to keep the MNP-enabled churn low – is best served if PTA or Pakistan MNP Database – the co-funded company at the center of portability service – advertises the MNP possibilities to the general public. Am I am not talking about ‘instruction sounding’ announcements that most of the target audience will overlook thinking it relates to a technical domain. I am talking about taking the publicity of MNP to the level of engaging a media partner, making the information and the message get across in the masses.

I am sure the sponsors of PMD , especially the bigger ones, would not like the idea. Even the small ones who at first would like to see MNP helping them will appear supportive might not want to let the chaos loose. So the best entity for MNP promotion might be PTA. I am not sure if the USF could be used for such an activity (which does not come specifically under rural telecommunication infrastructure enhancement) but if financing this campaign is an issue, the money could be put to good use.

With right marketing and awareness, the PMD could soon be in need for more hardware and a license upgrade for the Telecordia MNP solution.

Worldcall Nears Homerun

Worldcall, one of the three nationwide CDMA operator (besides PTCL and Telecard), is launching its CDMA based voice services in Hyderabad, Sindh in the next couple of days.

Earlier, Worldcall services, that started from central Pakistan had reached till Sukkar. The Hyderabad network leg is based on hardware from Huawei Technologies. Hyderabad launch will help the company brace itself for a subsequent Karachi launch which is considered a very mature market with already high cellular, fixed and WLL penetration.

Cellulars Spends over $15m on Satellite Capacities

Telenor & Mobilink will collectively spend over 15 million dollars on satellite based capacities to reach the juiciest of the cellular markets in Pakistan. These markets are FATA (Federally Administered Tribal Areas) and AJK (Azad Jammu Kashmir)

There are many factors that make these markets irresistible for the cellular business. These places have remained under-served for various reasons. Political reasons, difficult terrain, extreme weather. The market remains a popular telecommunication service destination because of the people from these areas have been ‘going out for work’ to every part of the country and every country of of the world. This special nature of ‘half-migration’ which is particular to the population of FATA and AJK people paints a unique equation in term of calling patterns.

Calls are made from all over Pakistan to FATA areas by the hard-working Pathan population. AJK receives majority of its call from United Kingdom where a huge number of people with Kashmiri origins reside.

The AJK area has been served for telecommunication needs by an autonomous (but with a military background) organization called ‘Special Communication Organization – SCO’. The sector was opened up for other cellular and local loop operators under the current Telecommunication De-Regularization and Liberalization policies of the Government of Pakistan.

Telenor has been the first one to penetrate in these markets. With no traces of fiber going out from any of the major cities of Pakistan to these areas, the only option available to the cellular operators is to use satellite capacities to connect their networks in FATA and AJK back to their national network in the rest of Pakistan. Telenor is reported to have obtained satellite capacity and services from Wateen Telecom.

Enjoying an absolute majority in terms of number of subscribers, Mobilink is eager to catch up with Telenor by going the satellite route for its network expansion in these areas.

Volumes that are expected on these two routes warrants multiple transponder capacities on Satellite. Capital expenditures are high by the local industry standards and in some cases warrant establishment of dedicated service organization out of the requirements.

Until fiber makes it way into these far flanged areas, a good two to five years of Satellite operations are expected. Utilization should then start dwindling down to the role of backup and critical applications. Space segment sellers and Satellite Service industry in Pakistan can play happy till then.