Policy challenges to empower the market
The information and communication technology (ICT) infrastructure is no longer limited to a single network like telephone, or internet service. The convergence of diverse networks forming the nervous system of the nation is opening the door to new development opportunities. Leveraging ICT infrastructure is no longer a matter of choice but rather an essential requirement, to meet Vision 2021— to achieve high middle-income country status. To develop this vital infrastructure, smart policies to empower the market appear to be much more effective than channeling public fund. This whole network was once a vertically integrated state monopoly, and the public fund used to be the sole resource of finance. To pursue a market led reform, this network has been divided into seven main segments, starting from international connectivity to cloud facility. The development and operation of each of these segments is crucial for the functioning of essential activities, starting from financial services to healthcare and commerce. For effective and efficient development and operation of this infrastructure, opting for smart policies to empower the market has been a growing challenge.
The international connectivity (IC) is the conduit linking Bangladesh with the rest of the world. The IC segment comprises of three major links: (i) submarine cable connectivity; (ii) international terrestrial cables (ITCs); and (iii) satellites. The submarine cable segment is still a state monopoly—Bangladesh Submarine Cable Company Limited (BSCCL). The lone cable of BSCCL, SEA-ME-WE-4, which landed on the shores of Cox's Bazar in 2006, is being complemented with SEA-ME-WE-5 at the cost of USD 70 million, addressing the redundancy as well as capacity issue. Once the SEA-ME-WE-5 connection gets up and running, it will add bandwidth capacity of more than 1,300 gigabits per second (Gbps) in addition to 200 Gbps bandwidth of the existing SEA-ME-WE-4 link. Moreover, regional connectivity projects like South Asia Subregional Economic Cooperation (SASEC) Program are also expected to address the international connectivity issue further. The monopoly of BSCCL has been partially addressed through the entry of six ITCs, connecting Bangladesh through terrestrial cables to submarine cables landed in Chennai, India. The advent of ITCs has introduced competition in international connectivity, reducing the bandwidth price from BDT 28,000 to BDT 625 per Mbps over a span of five years, while grabbing more than two-thirds of the market share. The satellite connection is mainly used as backup to submarine cable connections. At a cost of BDT 30 billion, the maiden satellite project of Bangladesh is progressing with the launch target of December 2017—to replace existing satellite connectivity, provided by foreign satellites through VSATs (very small aperture terminals).
The second building block of the ICT infrastructure is international gateways. Two types of gateways are in operation— internet gateway (IGW) for handling voice calls and international internet gateway (IIG) for internet connectivity. The gateway segment appears to be highly competitive having 25 IGW and 37 IIG license holders. The interconnection exchanges (ICXs) comprising of 26 operators form the third segment of the infrastructure provide interconnection among voice service providers, including all mobile and landline network operators. This building block reduces the entry and expansion barrier for new entrants.
The fourth segment is the nationwide telecommunication transmission network (NTTN). Although NTTN license was issued by BTRC in 2008 to address the dangling cable issues of Dhaka city, this segment has grown to be the vital block of the nation's ICT infrastructure. This segment comprises of two private operators and a state-owned one—Bangladesh Telecommunication Company Ltd (BTCL). NTTN operators provide fibre optics based nationwide transmission facility connecting all other building blocks such as ITCs, submarine cables, IIG, IGW, ICX and access networks. On one hand, NTTN has the potential to reduce the entry and expansion barrier of access network, and on the other hand, inadequate development of NTTN limits the expansion of the ICT services, particularly at the rural level. It has been reported that so far 54,228 km of fibre optic cable has been laid in Bangladesh, by private NTTN operators, BTCL, mobile companies, Power Grid Company of Bangladesh and Bangladesh Railway. Despite expansion of the NTTN network, most of the unions are yet to be connected to provide wire line broadband services in rural areas. The government has been increasing the supply of funds to address the issue of connecting all union parishads (UPs) with fibre optic cables. Once all the planned government financed projects are completed, all 4,600 UPs will be connected to the nationwide fibre optics network, likely by 2020.
The most visible building block of the nation's ICT infrastructure is the fifth segment: the access network operators. There are four major categories of access network operators: (i) mobile network operators (MNOs); (ii) internet service providers (ISPs); (iii) landline telephone service providers, known as PSTN (public switched telecom network) operators; and (iv) broadband wireless access (BWA) network service providers. With the recent merger of two MNOs, Bangladesh now has five operators providing mobile voice and data services. Among the five operators, lone CDMA (code division multiple access) technology based operator has been struggling to stay afloat. In the PSTN segment, although a large number of licenses were issued to private operators, BTCL appears to be the lone functional operator. In the wire line internet service segment, there are more than 50 ISPs. Although internet subscriber base in Bangladesh has jumped over 60 million, the wire line internet subscription has been hovering at around one million for a long time. The BWA segment, commonly known as Wimax, comprises of mainly two operators, with shrinking customer base reaching less than 500,000.
There are two emerging segments in the ICT infrastructure of the nation: the cloud (the sixth segment) and the disaster recovery (the seventh segment) facilities. Despite the growing demand among both individual and corporate customers, cloud infrastructure growth within the nation is virtually absent. As a result, for all categories of customers, accessing cloud service from foreign providers over the internet has become a norm—increasing the data vulnerability of the nation. Although there have been both private and public initiatives acceptance of these is either inadequate, or non-attractive. For disaster recovery, there have been initiatives, but developing the market of disaster recovery so as to benefit from both the scale and scope is yet to take place. The government has been also working in developing two facilities, one in the high-tech park at Kaliakoir (in Gazipur) and another at Jessore, to address the deficiency of these two vital segments.
Over the last 20 years, Bangladesh has made progress in developing her ICT infrastructure. Telephone penetration has increased from less than one percent to above 70 percent. The internet subscription has grown above 60 million, with the rapid jump of internet bandwidth consumption from 200 Gbps to around 400 Gbps, in just over a year. Despite such progress, Bangladesh's position in the global ranking is not encouraging. In the recently released ICT development index 2016, prepared by International Telecommunication Union, Bangladesh has been placed at 145, among 175 nations. It's quite disappointing to observe that Bangladesh has moved down in the index by two positions. Moreover, the disruption of internet services over 25 days in 2016, as reported by the Brookings Institution, is also a cause for concern. This emerging infrastructure is going to be as important as the physical infrastructure. In many situations, this infrastructure is going to open new opportunities, as well as work as a substitute to physical infrastructure—reducing pressure and pollution. Relevant observations and policy issues are to be taken seriously to make intelligent use of private and public investments.
The global technology progression and Bangladesh's policy decision in favour of market led reform of the telecom sector have been the primary reasons of recent success. There are more than 200 private operators in the sector as opposed to just a single state-owned operator 30 years ago. Despite the rapid growth of private operators, there are concerns about the state of health of the competition of the sector and the role of governance. The shrinking operators' base in the mobile space is a cause for concern. Finding ways to create possibilities of competition to enable smaller operators to be profitable through offering higher quality products at lower costs should be a priority for policymakers. Is the dominant operator in a position to set the price to make healthy profits, while forcing other operators to take lower prices and incur loss? It's time for the government to look into these matters and take necessary steps to strengthen the competition force.
The role of state-owned operators in market led reform of the sector should be an issue for careful consideration. It may be wise to clarify the role of public fund and state-owned operators to encourage the competition of private investment. If private operators are in a position to offer better quality service at lower costs in an inclusive manner, what should be the role of state-owned operators? Due to the weakening of competition, if the market ends up in private monopoly, what could be its implications?
The NTTN segment is vital for the growth of competition and lowering per unit cost—in both the upstream and downstream segments. Demand aggregation is vital to benefit from scale advantage to minimise the unit cost. Instead of laying multiple pair of fibres, it would be much more prudent to deploy single pair, as that is good enough to carry the traffic of the whole nation. But the deployment of nationwide fibre for a single company does not appear to be financially viable. Ways to engage multiple operators, certainly more than two or three, to deploy fibre optics network connecting every village, without causing unnecessary redundancy, has been an issue for the sector. How will the network, deployed by public fund, be maintained and operated? This is a concern as the operational performance of the state-owned operator/s has been an issue.
Despite the rapid reduction of wholesale bandwidth price from BDT 2800 to BDT 625 for each Mbps, the reduction of bandwidth price for mobile users is insignificant. Necessary policy options should be evaluated to have proportionate reduction of bandwidth price at the consumer end. Although internet subscription and bandwidth consumption have increased the use of internet for productive purposes should get due focus. It has been found that to make internet a productive tool for farmers to learn improved farming techniques to increase productivity in a profitable manner, bandwidth price should be reduced to less than BDT 10/Mbps. Inclusive delivery of bandwidth at less than BDT 10/Mbps is essential to meet Vision 2021 in diverse areas like education, e-governance, health, and employment generation. Instead of being content with the growth of mobile internet penetration, policymakers should look into issues to intensify the competition in the wire line segment to offer bandwidth at a suitable price to unlock economic growth potential at the bottom of the pyramid.
It has also been observed that infrastructure operators, particularly mobile operators, have the tendency to penetrate in segments other than those they have been licensed to. Despite the technical and financial capability of these operators, the policymakers should take into consideration optimum market structure and boundary of operators to maximise the benefit from competition and functional specialisation.
Although the primary reason of opening the telecom sector to market forces was to attract private capital or foreign direct investment, the market led growth of the ICT infrastructure has multi-dimensional benefits. With the given financial situation, there might be temptation for the government to increase the public fund flow, crowding out the competition, to address development mandate. Although market makes better usage of resources, developing healthy competition force in the ICT infrastructure market is quite challenging, as the sector has a natural tendency of monopoly. On one hand, policy should pay attention to demand aggregation to benefit from scale and scope; on the other, the market power accumulation for having price setting capability should be seriously addressed. Instead of regulation, focus should be on creating suitable market structure and defining boundary of firms to benefit from competition. The convergence of technology and services should also be taken care of. In the absence of the voice revenue, the viability of profitable competition of access network operators is also a challenge.
Instead of regulation, the focus should be on nurturing possibilities of profitable competition to offer better quality products at lower cost, by taking the advantage of scale, scope and innovation. Instead of increasing the supply of public fund to address inclusiveness and low cost connectivity issue, the strategy should be to opt for smart policies to strengthen competition of private investment to benefit from scale, scope and innovation. Although capital and regulation are vital in developing and operating physical infrastructure the major challenge in building and operating ICT infrastructure is to opt for smart policy options to offer better quality service at a lower cost—to maximise the leverage of ICT as a development tool to meet Vision 2021.
The writer is Professor, Department of Electrical and Computer Engineering, North South University.