Gulalai Khan, an internet governance policy expert who teaches at the University of Lahore, writes here about the problems posed by Pakistan’s upcoming 5G auction.
Pakistan’s digital ecosystem is once again buzzing with excitement and anticipation as the caretaker government announced ambitious plans to complete the 5G auction within the next 10 months. The announcement came after an earlier attempt in 2021 failed due to high prices and strict policy conditions under the then government’s Digital Pakistan initiative.
While the Pakistani government sees the 5G auction as an economic and technological growth driver, experts believe the push is inevitable for Pakistan’s digital transformation. But the complexities surrounding his 5G auction, with its attendant industry and financial concerns, are not easy to ignore. The government’s ambition to introduce cutting-edge technology is laudable, but needs to be weighed against the country’s economic realities and the costs of adoption and adaptation. We need to seriously evaluate the untapped potential of his 4G, which could be more easily accessible to people, including those who currently cannot connect.
First auction failure and financial constraints
South Asia as a whole is considered a key region to drive the global 5G revolution due to its large population and many young users. However, clear economic disparities between and within countries, including deep economic disparities in Pakistan, complicate matters.
In 2021, Pakistan attempted to auction 5G spectrum licenses, but the attempt was marred by multiple issues. The main problem was that mobile operators (CMOs) were not willing to accept his 5G auctions at such a high price because they thought that the telecommunications environment was not yet ready and the business case for such a deployment was unfeasible. It was a reluctance to participate. The Pakistani government probably misjudged the country’s preparedness at the time after witnessing successful spectrum auctions in the region’s two major economies, India and Bangladesh.
The past two years in particular have been economically challenging for Pakistan, particularly with regard to foreign exchange reserves and, by extension, corporate letters of credit (LC) issues. The value of the 5G auction is estimated to be around $330 million or more, but carriers are unsure whether they will be able to pay it as it is subject to the highest taxes in the region. Additionally, 5G phones imported from the notorious Pakistan Telecommunications Authority (PTA) are subject to high taxes. PTA tax, 5G affordability and adoption are also considered the main reasons why this is an issue. Currently, the proportion of 5G-compatible devices in the country is less than 1%.
As a capital-intensive sector, the telecommunications industry is highly dependent on imported technology and equipment. Rapid deployment of 5G will require significant investment in infrastructure and equipment, which may be difficult at this time, and only deep-pocketed companies can ensure the necessary work is done. is.
A lukewarm welcome from big-name players
At the turn of the new millennium, Pakistan’s telecommunications market began to take small steps towards transitioning from a regulated state-owned monopoly to a deregulated competitive structure. This transition and the development of the telecommunications sector as a whole has led to an influx of foreign investment, with many international telecommunications companies setting up shop in the country and demonstrating a willingness to embrace new technology. All of the country’s major telecommunications companies are foreign-owned, and one of them has military operations in his two remote regions. Almost every carrier has been criticized for having slow or patchy internet service depending on geography and location. The landline market, dominated by Pakistan Telecommunications Limited (PTCL), is seeing a decline in the number of fixed lines. On the other hand, the mobile market has experienced modest growth over the past decade due to the huge upsurge of the youth, who constitute about 54 percent of the total population.
The government is hoping for 5G growth in the telecommunications sector. Jazz, one of the leading telecom operators in Pakistan with 38% market share, conducted 5G tests in 2019 and also showcased 5G capacity with 5G compatible devices. However, the company has been an outspoken critic of the rapid transition to 5G. Their priority is to improve his 4G access throughout the country, where 4G rollout is not yet underway. completion. Note that Jazz, which grew out of the merger of Mobilink and Warid Pakistan, remains competitive by selling large amounts of cheap data to consumers with low-bandwidth devices. Jazz also commands a large share of the mobile financial services market through its subsidiary JazzCash, which provides lines of credit and microloans to subscribers and scratch cards. Another player, Telenor, is also in the running, but funding is a major hurdle.
The government hopes that new as well as old investors may show interest when the auction takes place. The government views the bid as a huge injection of money into the struggling economy, and has already set up an advisory committee under the finance minister. There is also speculation in the market that more cash and access could ultimately allow the Chinese-owned Zhong to submit the highest bid. The company has already partnered with Beijing Mobile to conduct 5G tests in Pakistan, establishing itself as a 5G-ready company.Insiders tell us zon grating Instead of congratulating them as the auction takes place, Zhong said, however, with the recent approval of the country’s first telecommunications infrastructure sharing framework, new entrants cannot be excluded.
4G vs. 5G: The path to better connectivity?
While the promise of auction revenue remains very attractive, many in the telecommunications industry have doubts and speculate that 4G may be a better path forward.
They believe 4G technology will be more affordable than 5G and therefore accessible to a wider range of people. In countries with large income disparities, ensuring affordable and widespread internet access should be a priority. This also has to do with the cost of his 5G devices, which are still out of reach for the majority of people. 90% of mobile devices assembled in the country are 2G and 3G compatible.
Critics have also raised concerns about the major infrastructure upgrades required for 5G, including installing new towers and equipment. In contrast, strengthening 4G infrastructure is less capital-intensive and more feasible, especially in remote and underserved areas where the majority are still unconnected. In addition to this, the preferred fiber option for 5G would mean a significant investment in infrastructure, which may not be an option for existing organizations today.
Finally, many people find that 4G has minimal latency compared to 5G. Improved 4G access will instantly boost internet connectivity, benefiting education, healthcare, and business. 5G requires deep funding and will take time to build. There were suggestions regarding policies related to this. 5G for some, 4G for all But there are real concerns that this will deepen an already wide digital divide in terms of opportunity.
Politics and policy angle
The recent announcement has sparked another debate, less technical and more political, about the caretaker government’s mandate to take over the work of the elected government. However, analysts believe the custodianship could last longer than the stipulated 90 days due to post-census delimitation work. The auction issue has already been resolved through the interim cabinet’s approval of the auction and approval of the Telecom Infrastructure Sharing Framework, which allows carriers to pool resources and infrastructure to reduce operational costs. Many believe this is also being done with an ambition to make the telecommunications sector more attractive for foreign direct investment and increase competition when bidding begins. We look forward to the industry’s response to this. Although many believe that Pakistan’s military establishment is the main decision-maker on investments, especially since the newly established Special Investment Facilitation Council, there is a firm presence behind this decision and the process It is believed to lead effectively to
The debate surrounding Pakistan’s move towards 5G is multifaceted, including economic, technological, adaptability, and even political considerations. The government’s goal is to make life and work easier for the country’s thousands of freelancers and IT companies, who contribute significantly to the export economy, but it is not just about the digital divide between urban and rural areas, it is also a challenge to the broader economy. It is essential to keep reality in mind. It will be interesting to see this play out, especially in a world where 5G is still in its infancy but discussions and experimentation towards 5.5 and 6G have already begun.
This post represents the views of the author and does not represent the position of the Media@LSE Blog or the London School of Economics and Political Science.
Featured image: Photo by Alina Grubnyak on Unsplash
