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.

Wateen Competition in Catchup Frenzy

The recent launch of Wateen‘s Wimax in Pakistan has put its wireless competition in a catchup frenzy. Reports coming from a number of vendors indicate extensive, short notice meetings that are taking place between providers and vendors and very mature decisions levels. Vendors, who had been chasing the providers for their Wimax platforms but faced an undecided response for quite some time now, are finding the new found sense-of-urgency pleasantly surprising. For them, Wateen’s advances on the Wimax front that attracted both local and international applause appears to have shook the sleeping providers from their deep slumber and procrastination.

Wateen’s Wireless Service

Shakeel Ahmed, friend and a regular contributor at TGP, has the following clip and quick information to share about Wateen’s wireless service in Lahore. The video clip shows a sneak peek by way of the synchronization process of the Motorolla CPE.

CPE was installed in DHA Lahore and has one ethernet + voice port on it. Download speed is around 120-130KBps with next hop latency around 15-20ms.

You can find some previous discussion on the wireless service by Wateen at TGP archives.

Mobilink embraces data

The long on-going, almost over-due project was declared signed and closed with Alcatel-Lucent. Daily time has the full story here. This is going to be the second major countrywide Wimax project, the earlier one being deployed by Wateen and uses Motorola’s gear. The project, whose financial size or commercial availability dates has not yet been publicly disclosed, reportedly makes extensive use of the strong channel sales partners that Mobilink has developed in the rewarding cellular market of Pakistan over the past many years.

The next similarly sized announcement should come from PTCL which is still talking to a number of solution vendors in this domain. Apart from these three large scale projects, a number of other entities, some of which are in the security infrastructure of the country, are deploying Wimax technology for their respective requirements.

There are till a number of players like Telecard and Cybernet who won the 3.5 Ghz frequency in the open auctions during deregulation but are not moving ahead with their Wimax adventures for want of some business case precedence and internal priorities.

Worldcall Wireless in Karachi

Worldcall has banners up in various parts of the city announcing the availability of their wireless local loop service which was anticipated since May 2007. The advertisements say free local call, free nationwide calls (presumably on their own network), 85 paisa per minute to US/UK and 10 paisa/min for WLL based Internet. The service is running off Huawei’s equipment.

CDMA based WLL services have already seen earlier players like Telecard and PTCL and have drawn a mixed response in terms of service standard quality. The ‘free on-net’ calling phenomenon which was triggered by Telecard (and is now being followed by Worldcall too) has found some loyal subscribers. I regularly spot shop owners in various localities of the city keeping a ‘Go CDMA’ phone as part of their communication arsenal and most of the time, the end user is doing the ‘least cost routing’ – finding the service that provides the cheapest service to reach the particular end number.

However, with a very high/healthy tele-density that is regularly being cited in anything good is to be said about Pakistan and a stiff competition and friction between DSL providers, it looks like that Worldcall as a late entrant in this digital communication race in Karachi would be having a tough time at best.

Performance of the reported availability of EvDO services on this network would be worth observing. If you have a review of the service, please post it in the comments.

VSAT Hubs Mushroom

Pak Datacom is announcing that they are installing an iDirect VSAT hub.

Insufficient fiber and other wired infrastructure, limited range of existing terrestrial wireless technologies and a boom in ICT industry in Pakistan is causing an upsurge in the satellite services.

Banks and other financial institutions are one of the major drivers for remote area data connectivity market. New initiatives by the Government to introduce electronic management in its working is the often considered as the second largest factor driving the satellite services consumption in Pakistan.

Modern VSAT hubs are intelligent entities that make better use of the expensive and scarce satellite bandwidth resources by intelligently distributing the same to a large number of customers that are equipped with smart satellite terminals – costs of which is coming down as third-party CPEs made to a number of standards are getting cheaper. Installation cost and complexity for the remote sites is also coming down allowing better confidence towards the service by the end customer.

Lately, a number of network service providers have installed VSAT Hubs to service the growing data services sector. Supernet (iDirect), Comstar, Pak Datacom (wing of PTCL) and Multinet all have either installed or are in the process of installing VSAT hubs to complement their existing wired and wireless services.

The explosive growth of cellular services in Pakistan has resulted in the companies’ new quest to reach the untapped rural markets and in the absence of optical fiber backhaul, VSAT backhaul have picked up big times. Mobilink, Ufone and Telenor all have placed huge orders of VSAT backhuals for their base stations in far flung areas such as FATA and Azad Jammu Kashmir. The volume of the business has taken the otherwise go-slow network service providers by surprise and in certain cases, single orders placed by the cellular giants have been comparable with the annual volume of business done by the network service provider.

The Last Train

Most of the articles that appear about Pakistan’s Telecommunications market are sketchy in nature and leave a lot to be desired in terms of details and perspective. Comnews recent article aptly titled ‘ The Last Train‘ is an exception to this generalization. The 5,000 words article nicely covers all aspects of Pakistan’s Telecoms from Cellular to WLL to Wimax.

In the ‘Manna for Investors’ section, the report describes the current appetite for more fundings by the existing operators:

 For investors there are some opportunities to enter the Pakistan telecom market. Apart from buying shares of DIALLOG Company, which is looking for financing sources for expansion throughout the country, other companies like Worldcall and Instaphone also are looking for partnerships.

“Worldcall needs about USD 16 million just for implementation of its WiMax project. And for implementation of all its development plans, including WLL network expansion, HFC and Metro Fiber network construction, we need around USD 50 million,” says Sardar Ali Wattoo.

“We are capable of borrowing this amount, but if Worldcall is of interest to some well-known partner, then the majority shareholders of the company, Lahore businessman Salman Tassir and Sheikh Suleiman Hokani from Oman, are ready to share its shares in the charter capital.”

Instaphone is looking for partners for construction of its digital mobile network. “We are in the process of searching for an investor, as the first phase requires USD 300 million in investment capital. However, we are not taking a passive stance, and already have prepared 700 fields for installation of new base stations,” says head of the company Javaid Firoz.

The Pakistan telecom market is on the radar screen of major industry players. A source in Warid Telecom said that its shareholders, led by Sheikh Mubarak Al Nahaiyan, are in the process of negotiations with Vodafone for selling their share in Warid.

The gradual process of change in ownership of Pakistan telecom assets began last year, and no one is ready to evaluate the effectiveness of these investments.

Recommended reading for outsiders who want to get a good summary of local market as of 2007.