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    Volume 9 Issue 28| July 9, 2010|

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Cover Story

A Fatal Missed Call?

Syed Zain Al-mahmood
Photos: Zahedul I Khan

Bangladesh is talking like never before. The phenomenal growth of the telecom industry over the last two decades has considerably changed the way people interact. Although fixed line is still the most penetrated telecom segment, wireless or mobile segment has been the key contributor over the last decade, offering a wide range of opportunities to providers and services to customers. Currently there are more than 58 million mobile subscribers out of a population of around 150 million. Apart from its social and cultural impact on modern society, the ubiquitous handheld device is now seen as a key tool for the alleviation of poverty.

The mobile phone is considered an important weapon in the fight against poverty.

But today mobile phone operators are under pressure on multiple fronts: the levelling off of new and high-usage customers, falling revenue per user, the spectrum squeeze, and a fierce competition that is bound to hurt revenues. Concern has been raised over some tough provisions in the upcoming telecom law: Bangladesh Telecommunication (Amendment) Act 2010, which telecom operators call “unfair” and “contrary to the constitution”. Industry watchers say the harsh new law will discourage investment in the telecom sector and is inconsistent with the government's stated goal of a Digital Bangladesh.

Precious little would seem to connect the tiny village of Ujandhol to the 21st century. The dirt roads become impassable during the monsoon and the surrounding low lands turn into a lake that stretches into the horizon. Boats are the sole medium of transportation. Only a few homes have electricity, indoor toilets, or even a floor other than earth packed by bare feet. The villagers survive on rice and vegetables, and get a few calories of protein from the fish they catch.

But a couple of years ago, a red and white tower appeared on a nearby hill. The structure is a mobile phone base station, and its arrival has changed life in Ujandhol as much as any development in the past century. "I'm saving time, I'm saving money," says Asaddar Ali, a rice farmer. “Before the mobile phone came, I had to go by boat to the Upazilla headquarters in Derai to talk to the agriculture development officer. Now, I can get information with a phone call. I can easily find out which aratdaar (rice merchant) is giving a good price.”

His daughter Sharmin is equally enthusiastic. “I can call my teacher or classmates and get information on class work even when I can't go to school during bad weather or floods.”

Only a few years ago, places like Ujandhol didn't even register in the plans of telecom service providers. What would a farmer in Sunamganj want with a mobile phone? But now, penetration of mobile telecommunication in the rural areas is seen as the next phase in the growth of the telecom industry.

It is also vital to the socioeconomic development of the country. The cell phone is the single most transformative technology for development, according to Columbia University economist and emerging markets expert Jeffrey Sachs. A recent World Bank study has found that access to affordable mobile and internet services creates youth employment, increases productivity and exports and promotes social inclusion. The study says that for every 10 percent increase in mobile phone and high speed Internet connections, there is a 1.3 percent increase in economic growth.

According to the World Bank, for every 10 percent increase in mobile phone and high speed Internet connections, there is a 1.3 percent increase in economic growth.

The government of Bangladesh has been quick to seize on the potential of the telecom sector as a development enabler. In its Digital Bangladesh Concept Note, the present government recognises telecommunications as a central plank of its plans for a “Digital Bangladesh by 2021”.

But in spite of the limelight, the telecom sector in Bangladesh is facing a testing time. Telecom penetration is just over 34 percent in Bangladesh -- meaning two out of three Bangladeshis still do not own a mobile phone. Although the number of mobile subscribers rose from 32 million in 2007 to 58 million in 2010, the rate of growth has been slowing. Profits have also shrunk.

Industry watchers say the new subscribers are from the "bottom of the pyramid" and contribute relatively little to revenues. Secondly, there is an increasing trend of consumers buying two or more SIM cards to take advantage of schemes offered by competing operators. As a result, the average revenue per user has been dropping.

Even so, the largely untapped rural population means there is still tremendous scope for growth. Analysts predict the number of subscribers could top 70 million by 2012, nearly half the country's population if the mobile phone infrastructure can be rolled out to the remote rural areas. But this would require massive investment.

“Telecommunication is a resource intensive business, where investment in infrastructure has to be made with an eye to the future,” says Ananya Raihan, executive director of D.Net (Development Research Network), a non-profit organisation that promotes the use of information and communication technology (ICT) for economic development. “Investor confidence is a key factor.”

The Association of Mobile Telephone Operators, Bangladesh (Amtob) has said unfavourable tax regimes are hampering the expansion of the sector. It is particularly critical of a Tk 800 Sim tax imposed on every connection sold by telecom operators.

Mobile phones are now used to deliver high speed internet and multimedia, apart from voice.

“We are afraid that with the Sim tax in place, future investment in the sector will suffer,” says Ashraful Haq Chowdhury, secretary general of Amtob. “We had hoped that it would be withdrawn in the new budget, but there was no such move.”

Chowdhury says the industry has been subsidising the sale of Sim cards, but claims it is unsustainable. He points out that telecom growth in India is the highest in South Asia, but taxes there are the lowest. Although the finance minister forecast increased revenue from the Sim tax in his budget speech, Amtob claims the government's revenue from Sim tax has actually declined as sales have slowed.

Concern has been heightened by the latest government move to introduce a tough new law to regulate the telecom sector. The Bangladesh Telecommunication (Amendment) Act 2010 was tabled in parliament on June 13. It envisages arrest without warrant of telecom executives for violation of telecom regulations, no scope for appeal and a maximum fine of Taka three billion for “abuse” of telecom services. The law requires the Bangladesh Telecom Regulatory Commission -- an autonomous body -- to take prior approval from the government for issuing licences and setting tariff rates. The proposed amendments will also allow the regulator to unilaterally alter the conditions of a license without consulting the licensee.

Investors, market analysts and legal experts have said the proposed law is heavy-handed, too restrictive and will damage the interests of businesses and consumers.

“Under the law, there is a possibility that the regulator may claim the operator is involved in wrongdoing and hand out punishment,” Oddvar Hesjedal, CEO of Grameenphone the leading mobile operator, told the Daily Star. “We cannot go for appeal against any decision taken by BTRC. This seems unconstitutional.”

According to Hesjedal, many operators are hesitating to go for 3G (third generation) technology because of the proposed amendment. “We have to pay for licences and rollout. Under these circumstances, the law could be a fear factor for future investments.”

The penetration of the mobile phone to the villages will improve service delivery.

“The proposed huge fines up to BDT three billion and enhanced punishments are disproportionate to the degree and nature of offences,” says Mohiuddin Babar, Head of Communications at Robi, the second largest mobile operator with nearly 11 million subscribers. “No other Saarc country has such heavy fines, and no other regulated sector in Bangladesh has such a high pecuniary punishment.”

Barrister Tanjib-ul Alam, a telecom law expert, says the legislation is “fundamentally flawed” since it violates articles 27, 31, 40 and 42 of the constitution which guarantee that citizens are equal before law and are entitled to equal protection of the law.

“The proposed law deviates from the Code of Criminal Procedure (CrPC),” says Barrister Tanjib. “It makes every telecom related offence cognizable, which means the regulator can order the arrest of a CEO without warrant, if it thinks the company has violated a telecom rule. It can seize equipment if it wants, even if it means shutting down the telecom operator.”

Barrister Tanjib adds that the mammoth fines can be applied for vague offences such as “providing telecom services without licence”. What about the services provided by small phone shops (PCO) that provide telephone and recharge services all over the country, he asks.

The proposed fines and enhanced punishments could affect small telecom businesses.

“The law allows punishment to be meted out by magistrates instead of sessions courts, so we may see mobile courts going around fining people hundreds of millions of Taka. It is a draconian law,” asserts the lawyer.

Ananya Raihan, executive director of D.Net, believes the new legislation, if passed, may deal a fatal blow to the dream of a Digital Bangladesh.

“There are short term and long term implications,” says Raihan. “The short term worry is the immediate impact on ICT. The law makes the use of VSATs (Very small aperture terminals) illegal on the grounds it may be used for illegal VOIP. But VSATs are legitimately used for connecting to the internet, and if the submarine cable link snaps, VSATs allows an alternative route to the internet. Many ISPs use it.”

The long term implication, according to Raihan, is the threat to the penetration of mobile services to the rural population, a key requirement of ICT-led development. “Section 39 gives the regulator unilateral powers to alter the conditions of a telecom licence, and this introduces an element of uncertainty into any investment.”

According to Ashraful Haq Chowdhury of Amtob, the new law will stifle not only investment, but also innovation. “The telecom sector has attracted many bright young minds who have studied abroad and come here to work,” he says. “What message are we sending to them?”

To many experts, the most troubling aspect of the new law is that it undermines the independence of the Bangladesh Telecom Regulatory Commission by forcing it to take prior approval from the government to issue licences and to set tariff rates.

The above provision would appear to run counter to the Telecom Policy of 1998, under which the BTRC

The teledensity in Bangladesh is 34 percent, meaning two in three Bangladeshis don't have access to telecom service.

was set up. Section 4.2.2 of the Policy envisages the BTRC as an autonomous body that will “retain its independence” and ensure equity and fair play by “ensuring a level playing field for all operators”. Experts say a level playing field will not exist if the Ministry of Post and Telecommunications controls licensing, since the Ministry itself owns three operators -- BTCL, BSCCL and Teletalk.

“The whole purpose of an independent regulator is to ensure an investor-friendly environment, and to protect the private sector and consumers,” says Syed Margub Murshed, who was Chairman of BTRC from 2002 to 2005. “It is better to abolish the BTRC than to retain it as an emasculated entity.”

Rezaul Quader, Director (Systems & Services) of BTRC admits that the regulator will be required to seek permission from the Ministry of Telecoms in licensing and financial matters. He refused to comment on whether that would reduce the BTRC to a rubber stamp commission.

Defending the proposed changes, Post and Telecommunications Minister Raziuddin Ahmed Razu said the amendments were required to curb 'illegal use of telecom technology and increase revenue income'.

But experts say draconian laws are no panacea for the illegal use of technology such as VOIP. “If licenses for call termination and origination are readily handed out, that would remove the need for illegal VOIP, and stiff punishment would not be needed,” says Syed Margub Murshed.

Meanwhile, the World Bank has weighed into the debate by voicing concern about the amendments. In a letter to the government, the WB Bangladesh chief said the law could “undermine international standards of best practice and create a high degree of legal and regulatory uncertainty.”

Telecom operators fear that the tough new powers could be, and in light of recent history, will be, used to intimidate and punish telecom businesses. In May, BTRC decided to cancel licenses of five landline operators it accused of illegal VOIP. There was no judicial process, and the PSTN companies accused the BTRC of acting as judge, jury and executioner.

The parliamentary standing committee on telecoms, led by Hasanul Haque Inu, has proposed some changes to the law, including the provision for appeal. But experts say that unless the independence of the appellate body can be ensured, the changes will remain cosmetic.

Many analysts are convinced that the new legislation will open a Pandora's box of corruption. “This will mean big business for so-called consultants close to the corridors of power,” says Barrister Tanjib-ul Alam. “They will line their pockets, while Digital Bangladesh goes down the drain.”



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