Sitting at a session in TPRC40 listening to LIRNEasia Research Fellow Faheem Hussain presenting his paper. Impressed that this kind of study, analyzing an issue that is not of great relevance to US telecom policy scholars, is accommodated at TPRC. The challenge, of course, is to pull back from the temptation to give too much detail on the exotica of a particular developing country and to present the abstract high level findings that may be of interest to a broader audience.
The above is a paraphrase of a eye-catching title of a paper being read at TPRC 2012, on September 22, 2012, by LIRNEasia Research Fellow Faheem Hussain. Congratulations to Faheem on getting his paper accepted at the oldest ICT policy research conference.
The government has not backed off on the discriminatory and anti-poor “market competition factor” that was subject to a detailed critique when announced. Per Mhz spectrum charge has been set on the basis of their market share or ‘market contribution factor’ (MCF) which was previously known as ‘utilisation factor’ in the draft licensing guideline of the BTRC. According to the policy of the MCF prescribed by the telecom ministry, if an operator has more than 20 percent market share, it will have to pay additionally, while an operator with less than 20 percent share will pay at a reduced rate. The MCF for Grameenphone now stands at 1.48, Banglalink 1.
When I wrote the op ed that was published in Daily Star yesterday, I did not know the anti-competitive “Market Competition Factor” had been decided. Today’s Daily Star gives the numbers. Looks unusually good for Citycell that not only pays 1/5th the price per MHz that Grameenphone pays but can also make do with less frequencies because it is a CDMA operator. According to the definition of the MCF prescribed by the telecom ministry, if an operator has more than 20 percent market share, it will have to pay additionally, while an operator with less than 20 percent share will pay at a reduced rate. The MCF for Grameenphone now stands at 1.
Building on the previous blog post, I wrote up an op-ed on the latest developments of the Bangladesh license renewal drama that has been published in the Sunday Daily Star. What mistakes are made when incentives are not properly analyzed. More proof that the Bangladesh Ministry of Post and Telecom has a serious problem of capacity. The “market competition factor,” as presented, penalises operators with more customers. It creates a disincentive to add low-revenue customers and, indeed, an incentive to shed marginal customers.
The long dragged-out drama of license renewal in Bangladesh has taken one step toward closure, according to the Daily Star. The government yesterday finalised the process of how it will charge four mobile operators — Grameen-phone, Banglalink, Robi and Citycell — for renewing their licences for the next 15 years. A high-profile meeting presided over by Prime Minister Sheikh Hasina decided that the operators will pay at the rate of Tk 150 crore for per megahertz of airwave, which will be multiplied by the total allocated spectrum and a ‘market competition factor’. The meeting held at the Prime Minister’s Office also decided to give 3G (third generation) technology licences through auction. The per-MHz amount has been set arbitrarily.
An op-ed written by Harsha de Silva, LIRNEasia’s consultant lead economist, has been published in the Daily Star in Bangladesh. Harsha emphasizes the need to ensure that an environment is created to encourage investment by the private sector to build on the success of delivering voice connectivity on wireless to take broadband to the people of Bangladesh. Digital Bangladesh is the centerpiece of the government’s ICT policy. Therefore, the government must consider the evidence, in both Bangladesh and in fast-developing Asia, on what infrastructure is likely to make Digital Bangladesh possible. Will Digital Bangladesh become a reality on wireless network platforms operated by well capitalised and managed mobile operators, or on some government-managed wireguide-based platform?
In what appears to be an affirmation of the value of consultation, it appears that the government of Bangladesh is rethinking the confusing and counter-productive license renewal draft issued late last year. Telecoms Minister Rajiuddin Ahmed Raju told reporters that the guideline drafted by the Bangladesh Telecommunication Regulatory Commission would be revised. “The radio spectrum price as well as other charges would be determined after another meeting with the finance ministry,” he said. “Fees will be reconsidered and kept at rational level.” Telecoms Secretary Sunil Kanti Bose, chief executives of the four mobile operators and BTRC representatives were present at the meeting.
I was asked about charging different amounts for spectrum when I was in Dhaka recently and I said it was like pricing jet fuel differently for competing airlines; it did not make any sense. Now we have the full argument laid out. It’s very peculiar. On what basis was this utilization factor calculated? I asked Dr Harsha de Silva who prepared the comments on the consultation paper; he said it was fully opaque.
Cynics among us decry the endless seminars and workshops and conferences that seem to be unavoidable feature of business and political life. But if the Bangladesh Daily Star has reported it accurately, the recent seminar on the Bangladesh telecom sector has actually achieved significant results. One of the major problems in Bangladesh is the lack of certainty about whether or how the licenses of four leading mobiles operators, which expire in 2011, will be renewed. Economic theory and common sense say that unless an investor knows how long he has an asset, he will not invest in it. Thus, theory would predict a steep decline in investment in each of the networks as they approached 2011.
Payal Malik, LIRNEasia’s Senior Research Fellow resident in India, has written an op-ed analyzing the spectrum mess in India and proposing that it be cleaned up in tandem with license renewals that are coming up. Pakistan used the opportunities afforded by license renewals to clean up some policy mistakes made prior to 2004. We hope to feature a piece by a person involved in that process shortly, in an Indian newspaper and/or here. However, there is one window of possibility of cleaning this pricing conundrum. Very soon, many licences will be coming up for renewal.