State of IT Governance in Pakistan

CHAPTER 1 The State of IT Governance in Pakistan

About Bolo Bhi Bolo Bhi means ‘Speak up’ in Urdu. We are a not-for-profit registered under the Societies Act XXI of 1860. Bolo Bhi is geared towards gender rights, government transparency, internet access, digital security and privacy. We are a team of individuals with diverse backgrounds who are passionate about the same causes and believe it is crucial to bridge the gap between rights advocates, policy makers, media and citizens. It is by bridging this gap that one can move ahead to chart a way forward and resolve issues through consensus.

About the Writer Imtiaz Noor is a marketing and technology professional with over 10 years of experience in multiple roles. His passion includes digital enablement, digital access and optimizing businesses to use technology for market access and process optimization.

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C O N T E N T S

Introduction...........................................................................................................6

Chapter 1: Growth of Internet in Pakistan: Landscape & Main Players Background & Introduction to PTA................................................................9 Formation of PTCL............................................................................................. 12 Entry of Mobile Operators.............................................................................. 12 Data Network Operators & ISPs.................................................................... 12

The Early Days: Dial up Internet........................................................... 14

The Second Growth Phase: DSL .......................................................... 15

The Death of 3rd Party DSL.................................................................... 16

The Wireless Internet Sector.................................................................. 18

No one left to compete with................................................................. 19

Wholesale Internet............................................................................................ 20

Optimization of Internet Bandwidth.................................................. 21

Current Peering Infrastructure............................................................. 23

Industry Issues and Concerns....................................................................... 25

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CHAPTER 1 The State of IT Governance in Pakistan

Chapter 2 Industry Impacts – Potential and Concerns

E-Commerce, Internet and the legal framework........................... 29

Cellular Phone Services users and operators.................................. 33

Small Businesses / MicroPayments /

Consumer Financial Services................................................................ 39

Industry Concerns on IP Blocking....................................................... 41

Industry Concerns on VPN Blocking & Secure Browsing............ 41

Grey Market Telephony and ICH Issues............................................. 43

Industry Concerns on Use of Industry Contributions.................. 44

Industry Issues and Concerns....................................................................... 45

Chapter 3 The Cause for Concern A State of Confusion......................................................................................... 49 Leadership Crisis at MOITT............................................................................. 50 Leadership Crisis at PTA.................................................................................. 51 Closing Summary.............................................................................................. 53

Appendix Interviewee Profiles.......................................................................................... 54 Glossary................................................................................................................ 57

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Note on the Paper “Over the last two years we at Bolo Bhi have engaged with government and non-government stakeholders on the issue of censorship in Pakistan, to find a way to minimize and end it.

While much effort is spent on blocking and censoring content on the Internet in Pakistan, and conversation around it, we wanted to begin a parallel conversation on the potential the Internet and ICT space in Pakistan hold, and how much energy and effort is spent on improving aspects that can foster growth, invite investment and create opportunities.

We decided to interview various industry professionals (whose views are included in the following pages) to gain perspective on how this sector has evolved, what is working and what needs to be fixed. These interviews were conducted during January 2014. At the end of each section in this report are recommendations by industry experts. We intend for this report to be a conversation starter, not the final word.�

Farieha Aziz Director, Bolo Bhi

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CHAPTER 1 The State of IT Governance in Pakistan

Introduction

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The use and export of Information Technology (IT) and IT Enabled Services (ITES) has contributed to the growth of many countries around the world. Nations have moved from manufacturing economies to knowledge economies.

The subject has created a unique league of precedents, both legally, and in the space of human interaction and communications.

As a developing country with a fast growing youth population, Pakistan is one of the countries that have resorted to a knowledge base and technology infrastructure available, to build and manage IT and IT enabled systems including telecommunications systems, spanning from Mobile Phone Networks (Cellcos), Internet Service Providers (ISPs), Financial Institutions (FIs), citizen information systems like NADRA and governance systems to serve its people better.

While many efforts have been made by our country and its successive leaders to keep improving governance that leads to positive developments in the IT related sectors, not all have been very fruitful. This report aims to point out areas where our businesses in specific and the economy in general, has been impacted by such instances of misgovernance. The intent of this report is not to ignore the good that has been done, but to point out flaws that currently exist, and the resolution of which will (hopefully) open doors to greater benefit for the population, businesses and the exchequer.

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Growth of Internet in Pakistan: Landscape & Main Players

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Background: All technology and telecommunications activities fall under the purview of the Ministry of Information Technology and Telecommunications (MOITT). Supervising all affairs related to these sectors, including drafting amendments to legal frameworks, creating positive investor environment and managing performance of the sector itself, fall within the ambit of the MOITT. This also includes overall policy directives in collaboration with various ministries if required.

The MOITT regulates the sector through regulatory bodies, including the Pakistan Telecommunications Authority (PTA) and the Frequency Allocation Board.

Technology-driven businesses in Pakistan are regulated and relevant laws must be complied with not only by service providers, but also end consumer companies that may use certain IT-related services offered by these service providers.

The primary regulator for Internet, telephony, mobile telephony, and wireless frequencies and spectrums is the PTA, which was formed after the Pakistan Telecommunications Ordinance was passed in 1994 and set the primary regulatory framework, including permission to establish an authority.

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The Pakistan Telecommunications (Re-organization) Act of 1996 laid down the foundations to officially establish the following: • Pakistan Telecommunications Authority • Pakistan Telecommunication Company Limited • National Telecommunications Corporation Limited • Frequency Allocation Board Section 3 of the 1996 Act provides for the establishment of the PTA, which is composed of three members, each appointed by the Federal Government, having a term of four years. One of the members serves as the Chairman of the Authority, and is entrusted with all administrative powers, enabling the Authority to operate independently.

Core Functions: PTA is entrusted with the promotion of availability of fast, effective, high quality and competitively priced telecommunications services. It is also responsible for protecting the interests of users of telecommunications services, performing investigative and adjudicative functions in the case of complaints by consumers and by other licence holders. PTA also makes recommendations to the federal government on matters relating to international telecommunications.

Powers of the PTA: The powers of the PTA are defined under Section 5 of the 1996 Act which include issuing and renewal of licenses, monitoring and enforcement of licence terms, tariff regulation, standards definitions for services and terminal equipment, and issuing regulations in order to exercise its powers in order to perform its functions.

The PTA is also entrusted with the role of safeguarding the interests of consumers and promoting fair competition in the telecommunications sector. An official excep-

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tion to the “fair competition” clause was allowing PTCL to operate exclusively in the domain of basic telephony for seven years, starting on January 1, 1996. This exclusive term came to an end in 2003 and since then, new companies were licensed to provide fixed local loop services in Pakistan.

It is, however, pertinent to note that the scale of other Fixed Local Loop service providers is very small, and accounts for under 1% of the total Fixed Local Loop subscriber base in Pakistan (excluding the National Telecommunications Corporation). NTC has been excluded from this count because it specifically caters to the Government of Pakistan only and is not available as a service provider to ordinary citizens.

Other entities regulated by the PTA: The PTA also regulates the operations of companies that have a direct relationship with the technology infrastructure from a telecommunications perspective.

These include: • Satellite uplink and downlink services • Vehicle Tracking services • Telecom Value Added services (SMS Marketing, Mobile Ringtones, Mobile Shortcodes, Premium Rate numbers etc) • Issuance of Universal Access Numbers and Toll free numbers • Call centres • Internet Service Providers and Data Network Operators • Private sector entities operating a VPN (Virtual Private Network)

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Formation of PTCL: Section 34 of the Pakistan Telecommunications (Reorganization) Act, 1996, permits the establishment of the Pakistan Telecommunication Company Limited as a company, under the Companies Ordinance of 1984, bringing it at par with all other companies in the country. This served as the initial step towards PTCL being managed like an independent company, as opposed to being a state-owned corporation in the past. The Government of Pakistan, via an Act of Parliament, approved the sale of 26% of PTCL’s shares to Etisalat, along with management control in 2006.

According to reports up until June 2014, Etisalat has yet to pay USD 800 million as part of its payment obligation to the Government of Pakistan.

Entry of Mobile Operators: Mobile operators launched in Pakistan in 1994, before the PTA was formally established. However, with the establishment of the PTA, grounds were laid down to permit other operators to launch in Pakistan as well.

Paktel launched in November 1990, followed by Instaphone in 1991, Mobilink in 1994, followed by Ufone in 2001, then Telenor and Warid in 2004.  

Data Network Operators (DNOPs) & Internet Service Providers (ISPs) ISPs started their operations in Pakistan in 1991, with the launch of a dial-up email service called ImranNet, followed by the launch of a dial-up ISP. This ushered in a new era of communication that only became simpler and simpler with computer sales pushing up throughout the country and dial up internet becoming essentially a commodity

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item, with ISP cards almost as common as prepaid mobile cards.

With the introduction of the Pakistan Telecommunications (Re-Organization) Act in 1996, all ISPs automatically became centrally regulated, which also helped the industry grow to the extent that it could, owing to a determination by the Government to expand internet reach and promote digital access. This coincided with a drive by the Ministry of Commerce to eliminate all duties on import of computers and computer equipment and a drive by the Federal Board of Revenue (FBR) to rule that IT services and IT related exports are to be exempt from taxes, if the required documentation is in place.

Consumer and corporate internet penetration led to a consistent increase in speeds and investment in the internet infrastructure by ISPs. The consumers initially had access to low speed dial-up internet, followed by improvements in speed over dial-up, and then, DSL services were launched by many ISPs across most parts of the country.

This growth in ISPs led to faster speed and easy access to the internet, along with a price war, which led to cheaper and easier access to the internet. Cheaper internet and faster speeds enabled students to conduct their researches in a faster, easier and standards complaint manner, in addition to being able to access educational content from multiple sources around the world. Pakistani entrepreneurs have harnessed the internet to sell their goods and services internationally and within Pakistan, to a larger base of consumers. News has taken a new meaning.

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The Early Days: Dial up internet: Dial-up internet works via a normal phone line on both ends, between the ISP and consumer. The consumer, using a device called a modem, dials up the ISP. The modem at the ISP end receives the call and connects the user to the internet service. Since the phone line itself was the primary connection mechanism, any caller would hear a “busy” tone when calling someone who was connected to the internet.

Speeds were limited to 56kbps (kilo bits per second) and the connection was dialed over the phone line when required. This also meant that the customer was free to shift between ISPs at their own discretion, which may or may not include service quality, speed, pricing factors etc.

In terms of service, since the phone line was the prime con-

nection factor, disconnections would tend to take place if anyone picked up a handset that was connected to the line being used for the internet connection. Service was also significantly affected by noise/distortion in the telephone line due to faulty connections, equipment or even moisture in the telephone junctions and joints.

While the dial-up internet market was on a growth path, launch of multi-metering for phone lines – meaning each call would be billed based on the number of minutes it consumed, caused a concern amongst users who were al-

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ready paying ISPs by the number of hours they accessed the internet. The PTA then stepped forward and rescued the industry by exempting dial-up internet from multi-metered calling regimes.

The Second Growth Phase: Digital Subscriber Line (DSL): The introduction of DSL technology allowed for faster internet access to consumers without tying down their phone lines. This meant that an “always-on” connection was possible, while being able to share the connection with others using WiFi or any other Routers.

The speed offered by DSL service providers was faster by multiple magnitudes and also required an additional

investment by ISPs to place their equipment at the telephone exchange of the customer (DSLAM, short for DSL Access Multiplexer). The customer’s phone line pair was directly connected with the ISPs’ equipment via a physical wire for the duration of the subscription.

Service Vulnerabilities: The internet connection was dependent on the quality of the connection at the consumer end. Most often, the pair extending from a nearby pole, reaching into the consum-

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er’s premises, had connection faults, resulting in bad internet service. However, there were instances in many areas where the cables from the telephone exchange leading up to the phone poles would also be of poor quality and users experienced poor quality of service.

During 2005-2006, a large number of dial-up internet operators had also started offering DSL services and the customer numbers were continuously on the rise. Being an exchange dependent technology, ISPs had limited options in terms of which areas they were able service via DSL. PTCL also, like all ISPs, started offering DSL services using its own equipment and premises.

The Death of 3rd Party DSL: In terms of user options to DSL, the consumer has been restricted with access to only one DSL service provider.

Other providers do exist, however, they may not be able to serve many customers, even in large cities.

These DSL service providers started disappearing in 2007, owing mainly to a lack of equal pricing tiers between other ISPs and PTCL, and the second reason being infrastructural change on PTCL’s part, which put the final nail in the coffin for most DSL operators.

In terms of being a DSL service player, PTCL had two unfair advantages. a. All ISPs were, at that time, buying bandwidth from PTCL and selling it to customers b. All ISPs were, required to pay a fixed fee for accessing the customer line via DSL. This fee amounted to Rs. 150 per month, per line (The access fee was Rs. 217 prior to August 3, 2007) PTCL itself, didn’t have to pay this “fee” While it was completely fair for PTCL to charge an access fee, most independent analysts contend that the Rs. 200

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rate per line per month was unfairly high. According to industry sources, the access fee was the same for low bandwidth and high bandwidth connections. However, since most home consumers were low bandwidth users, the access fee ranged between 15% and 30% of the subscription fee charged to consumers. The prices offered to customers also had to be competitive, otherwise customers would not sign up in the first place. This pressure between access fee, bandwidth price and subscription charges turned DSL into a very low profit play.

Coupled with loadshedding and poor line infrastructure, ISPs had to deploy staff in the field to help PTCL teams address line fault issues and subscription collection teams.

This caused a significant drain on ISP revenues.  

Technology Upgrades: PTCL, in 2006, initiated a technology upgrade plan that involved an upgradation of line infrastructure at all exchanges. The upgrade plan involved the inclusion of an Optic Fibre Junction Access Network (also known as OFJAN or OFAN).

OFAN upgrades meant that DSL from normal service providers could no longer be connected to the phone lines inside the exchange (for the upgraded lines). The upgrade gave PTCL a great advantage at offering faster, more reliable connectivity to its customers in OFAN enabled up-

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graded areas, while making it cost prohibitive for other operators to do so.

Most urban centres, are already converted and it is considered difficult to be able to access a non-OFAN enabled line in the main urban centres. Since most ISPs had already invested heavily in DSL Equipment that needed to be placed at the exchanges, the commercial viability of re-investing large sums of money in additional OFAN complaint equipment and rolling it out geographically, while scrapping the previously acquired DSLAM units became commercially prohibitive and subsequently led to the phasing out of DSL service providers.

The Wireless Internet Sector: Under the 2004 policy, the PTA was authorized to give licences to Wireless Local Loop (WLL) service providers.

These were phones with limited mobility capability aimed at replicating the mobile phone model. However, these did not have a unique number prefix and looked just like normal phones, handset, base unit etc. PTCL launched these under the “Vfone� brand name and so did other players in the market. There were several Public Call Offices (PCOs) as well, that took advantage of WLL devices to allow people to make calls from public places. This provided additional revenue opportunities to many small businesses.

In 2011, PTCL Vfone launched a new promotion that allowed consumers to be able to call from Vfone to any PTCL subscriber for the same price as an on-net call. This move made PTCL Vfone the most sought after product in its category because it offered customers a distinct advantage that no other WLL provider could afford or provide.

The WLL Operators had a distinct unrealized advantage though. All of them operated on the CDMA network architecture and that allowed them to also offer data services across their networks.

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PTCL Vfone, however, seemed to be the only one that saw the commercial opportunity in providing an internet access service billing bundled into its Vfone service (primarily, again, because PTCL was the nation’s largest bandwidth buyer and supplier, while others had to buy bandwidth).

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“All SMPs need to be regulated,

PTCL saw a massive opportunity in the WLL linked internet segment and decided to upgrade its network to CDMA2000, which is essentially, by all standards, a 3G compliant technology. Subsequently, PTCL launched a wireless internet service branded as the “EVO,” which was significantly disruptive. This was, and is, the only EV-DO (Evolution – Data Optimized) internet service.

from landline to

An EVO connection means that anyone across the country can carry a potentially high speed internet connection in their pocket. Naturally these could be paired with WiFi enabled smartphones and computers to provide truly mobile broadband.

PTA doesn’t bat

mobile to data services. PTCL does everything unilaterally and an eyelid” – Salman Ansari

No one left to compete with: With the consumer internet sector predominantly resting with PTCL through its EVO and DSL packages, PTCL effectively covers over 75% of the internet segment, competing only with the WiMax, FTTH (Fibre to the Home) and HFC (Hybrid Fibre CoAxial).

It would be safe to assume that since PTCL does not operate in these areas, these segments continue to exist as relatively viable commercial sectors.

The WiMax industry itself, is also facing significant competition from PTCL, which provides true mobility across many parts of the country, which WiMax operators cannot, under the terms of their licence. In addition, PTCL also sells bandwidth to these WiMax operators, hence is in a position to secure minimal pricing for its own services.

Another impeding competition front was 3G/4G. In August 2013, the number of PTCL EVO subscribers exceed-

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“When the choice is limited for the user, they end up being squeezed and fleeced” – Wahaj us Siraj

ed the total number of DSL users across the country. This meant that the market was ready and already had access to a true mobility based mobile broadband service. While CellCos would have to pay high licence fees (the reference license fee is USD 291 million), PTCL was already providing the same service without being subjected to the same terms. This also gave PTCL an unfair cost advantage in terms of commercialization of its service offering, which was brought to an end by a PTA directive before the 3G/4G auction.

Wholesale Internet Pakistan is physically connected to the rest of the world via four Fibre Optic cables. These cables, connect Pakistan directly to many other countries and are the primary connection sources for: • IPLC Connections / Point to Point Connections • Voice Traffic (for international phone calls, both inbound and outbound) • Internet Traffic

These cables have various capacities and connect Pakistan to various parts of the world, some directly and some indirectly.

• • • •

The cables are: SeaMeWe – 3 (meaning South East Asia, Middle East, Western Europe 3 or SMW3) SeaMeWe – 4 (meaning South East Asia, Middle East, Western Europe 4 or SMW4) IMeWe – meaning India, Middle East, Western Europe TW1 – meaning TransWorld 1

SMW3, SMW4 and IMEWE land in Pakistan and are connected to the Pakistan Internet Exchange (PIE) which is owned and operated by PTCL

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TW1 lands at Transworld Internet Exchange (TWIX), which is owned by Transworld Associates.

Reports emerged in November 2013, indicating that PTCL had submitted a bid to acquire TransWorld Associates.

While nothing came of it, had it been acquired, it would have meant that all of Pakistan’s digital links internationally would be controlled solely by PTCL. PTCL would have gone on to become the sole bulk bandwidth provider in the country and gain unprecedented powers to impact all business depending on internet bandwidth.

While many subscribers use their mobile phones more often that their fixed landline phones, customers would have no choice left for internet service otherwise. PTCL would gain complete control of the internet sector and the room for abuse of monopoly would swing wide open.

Such an acquisition would, however, need to be cleared by the PTA and prima facie, seems to violate of the Competition Act of 2010 and would also contravene the Telecom Deregulation Policy approved by the Federal Cabinet in 2003.

Optimization of Internet Bandwidth: The Fibre Optic Cables landing in Karachi have a fixed set of purposes which are: •

Carrying Voice Traffic for International Calls

•

Providing international direct point to point data connection (IPLC – International Private Leased Circuit)

•

Carrying VOIP traffic for international call centres

•

Providing high volume internet connections, which are further re-sold to ISPs

Pakistan, currently, is extremely dependent on Interna-

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tional Servers to host content, this has the following consequences: a. Loss of foreign exchange due to acquisition of International content hosting services b. Loss of foreign exchange due to bandwidth costs

paid to bring Pakistani content back to Pakistan c. Poor content performance in Pakistan (it takes between 200 to 400 milliseconds to access a US-based content hosting service) Diagram on PC – ISP – Hosting Service The reasons for using International Hosting, identified in meetings with ISPs were cited as follows: a. Lack of a policy/directive on the part of the regulator mandating ISPs to maintain peering links between each other (similar to interconnect agreements mandated by the PTA for mobile operators) b. Lack of policy/guidelines on establishing and maintaining local data centres, setting the quality of service benchmarks for data centres and network uptime benchmarks

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The factor cited in (b) above has led to the formation of a few small data centres across Pakistan, however their quality and scale of service is cited to be unsatisfactory, based on our discussions with several small web publishers in Pakistan.

There are only two data centres complying with international standards in Pakistan, however the lack of concrete peering mechanisms as specified in (a) above limits the commercial viability for website owners who wish to explore content hosting within Pakistan.

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“No one in the industry, nor the regulator is talking about long-term health indicators of the industry. No internet efficiency goals have been set

Current Peering Infrastructure:

by the industry or

Peering between ISPs in Pakistan is currently of two forms:

the regulator”

a. Peering and interconnect at the Internet Exchange

– Tariq Mustafa

Since all ISPs intersect either at the PIE or at TWIX, it is assumed that they are peered. While this is true, it must be kept in mind that the connection taking place at the exchange is meant to allow ISPs to receive internet access from the Exchange and not share traffic between each other.

b. Peering between two ISPs ISPs currently manage small connections between themselves privately. At best, very few ISPs are connected this way to each other and this does not offer a level playing field to all consumers.

An ideal peering infrastructure would allow internet users to make direct high speed connections to each other, irrespective of their ISPs. • A small business should be able to freely connect to other offices/warehouses/manufacturing facilities to each other, without being limited by the ISP • Field staff should be able to feed data into online databases for customer orders etc using basic mobile internet packages and the order management division should be able to see these in real time

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•

On ground emergency response services should be able to receive faster, easier access to incident information and have access to facilities while on the move

Currently, a connection between two ISPs means that the data flows to the relevant Internet Exchange (assuming

“As a 3rd world country, we have some problems and some advantages.

We have cheap connectivity. The regulator and the industry need to come up with ideas on how to put our unique advantages to good use” – Tariq Mustafa

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both ISPs use the same Internet Exchange), from where it is re-routed from the source to the target ISP. These connections at the Internet Exchange are designed to be internet connection sharing arrangements, instead of the data path optimization connections that are required to engage in high efficiency peering between ISPs. At present, if a consumer has two connections from different ISPs which are both using different internet exchanges, the connection takes significantly longer between the two.

If strong peering infrastructure is put in place, it will enable Pakistan to bypass the Internet and operate on a large local network, or a Wide Area Network.

To enable this, ISPs will need to have large connections, placed at a neutral data centre with adequate fail-safe procedures across multiple locations in the country and configuring networks to automatically select the shortest route between two physical locations. These peering locations should be designed to facilitate a traffic exchange to minimize time.

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Issues and Concerns The industry and the consumers in general have shared a range of concerns and issues they have regarding the current state of affairs.

These matters have been summarized below, along with their suggested resolutions to each concern.

Bandwidth Pricing Concerns: Bulk bandwidth pricing (the price at which ISPs purchase bandwidth from the Internet Exchange) is in control of one operator, PTCL. The business viability of the smaller player, Transworld, depends on being competitive to PTCL. PTCL allegedly made a bid to acquire Transworld, which it denies. Bandwidth in Pakistan is also more expensive than most countries in the region.

Resolution: PTCL should not be permitted to acquire Transworld – if such a situation does arise. It should also be disallowed from using its pre-eminent negotiating power gained from negotiating international call termination deals to gain additional discounts on bandwidth acquisition. In order to reduce dependence on the four undersea cables, Transworld and/or other ISPs should be allowed to peer with India and Iran. India will open up options to more bandwidth at a cheaper price, and Iran requires Internet access, which can be routed via Pakistan. This is a potential revenue opportunity.

Continuity Risk: All three of PTCL’s fibre optic connections pass through or close to the Suez Canal which is a vital, high traffic shipping route. This increases the risk of disturbance to the fibre optic cables, which could lead to a service degradation if any damage occurs. Pakistan has faced this situation in the past on multiple occasions when fibre optic cables were damaged by shipping lines. The connection via the Transworld operated cable is also subject to service vulnerabilities simply because the same route is used to bring Internet connections to the Middle East, from where the Transworld cable initiates.

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Resolution: Pakistan’s regulators should encourage the private sector to bring more Fibre Optic cables to Pakistan via diversified routes, including terrestrial (land-based) links from India and China. Pakistan can also serve as a vital traffic hub connecting to Afghanistan and the rest of the Central Asian states.

Peering Concerns: The peering infrastructure has limited advantages currently and it will not yield us, as a country, any significant benefit if it is not changed.

Resolution: PTA should stipulate the establishment of peering centres in all three major cities and set up a reference interconnect agreement for all ISPs to sign and allow content to pass through between ISPs directly. This will significantly improve the internet infrastructure in the country and allow possible cost reductions for local content, as well as enable greater e-learning options at a lower cost.

Hosting Concerns: Locally produced and locally consumed content needs to be hosted locally. This will save us foreign exchange and improve the quality of services.

Resolution: PTA needs to reach out to the industry and promote local content hosting by creating regulations that protect servers and content hosted on such servers from any form of direct access, except under legal warrants and while maintaining a chain of custody, should any legal issues arise. Local software and mobile app development firms can be given content hosting quotas to use for their clients and projects free of cost and the dependence on local content hosting will free up high cost internet bandwidth, along with improving speeds and response times.

This step is only viable once a peering model has been put in place.

PTCL Monopoly: PTCL has become an uncontrolled, unrestricted monopoly. This has limited the options available

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to consumers, both business and domestic from a DSL and Wireless standpoint.

Resolution: a. Control of PTCL Actions PTCL falls under the Significant Market Power status as defined by the Telecom Deregulation Act 1996, hence its activities, promotions and actions need to be regulated and controlled. The pricing of its services and expansion needs to be checked. Other players need to be incentivized to stimulate growth. One option could be the mandating of a better pricing plan from wholesale bandwidth providers. b. Promoting other ISPs Using Pakistan’s existing vast fibre optic network, other ISPs must be allowed to deliver wired internet services to customers. The Fibre Network becomes the utility that other private ISPs can use to serve their own customers.

Such a parallel wired-connection network must be promoted to allow customers to retain a choice between service providers. c. Creating a level playing field Either PTCL should be required to adhere to the limited mobility like the WiMax ISPs, or the WiMax ISPs should be permitted to step out and become mobile. Additionally, the cost of their bandwidth acquisition must be brought down by the regulator through positive action to allow and foster competition.

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Industry Impacts Potential & Concerns

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E-Commerce, Internet and the Legal Framework The consumer market in Pakistan is largely in the form of an informal, undocumented economy – a problem which plagues the banking sector and the tax departments at large.

The rapid change in population dynamics and education levels is bound to create unprecedented opportunities for e-commerce and electronic enablement by the year 20162017. The government, along with the industry stakeholders, have a unique opportunity to capture this change in audiences and take advantage of it to document the economy and serve the country and its population better.

Unfortunately, this change cannot be harnessed unless Pakistan, as a country, adopts laws and regulations that facilitate the development of content and platform to help enable the economy to function electronically.

There currently is no law in place in Pakistan that specifically deals with the legal structures of businesses and services in e-commerce. All business and taxation related matters are accumulated and treated under normal, offline business rules.

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“When things are not clear, people come up with stories and views on what is happening.

Uncertainty needs to be cleared out.

All organizations, small and large, are thinking if the law is sufficiently safe and clear to operate under” - Jehan Ara

Online publishers operate under vague laws relating to the print media days, when the editor or publisher of a publication would be the go-to person anytime the government or anyone else had a concern about the publication. However, in the internet age, people create and post content using platforms provided by companies – often international – better known as intermediaries in this context. Users of these platforms take pictures, write small SMS sized pieces, stories, articles or simply express themselves artistically, and share this content with the world.

In the event of a legal dispute, there are no laws to define boundaries that segregate the treatment of online content from offline content or those that pertain to their distribution and promotion.

These laws are essential to promote investment in these business areas by both local and international investors.

The internet and businesses that exist online need to be considered in their own right, instead of an online retailer being counted as simply a retailer, and provided the necessary protections – in law.

It is important to be able to gain indemnity from third party content creators. Many news websites exist in Pakistan, however, very few permit the public to comment freely.

All comments need to be humanly moderated to ensure that they do not bring liability upon the publishers and this alone is an intensive task. The same applies to product review websites and other websites that solicit audience feedback.

Once the requisite legal frameworks are in place, various local and international businesses and other entities would gain significant clarity on legal permissions and legally acceptable practices in Pakistan, which includes the collection and use of customer information, extent of data collection permitted and regulatory oversight on abuse of user privacy.

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Trust and security: Another important aspect that drives the penetration of e-commerce and e-governance is the ability to trust an electronic communications medium. The government and the regulators must enforce and uphold the integrity of SSL secured websites and make violation of HTTPS secured communications a crime. No exceptions should be made to this law, even from an investigative perspective. Only when the public trusts the transactions system, will they actually use it and this, in turn, will help drive both cost reduction and documentation of the economy itself. The ultimate benefit for both of these features, is the Government and the citizens of Pakistan.

“Why should companies, venues etc be allowed to collect ID cards before entering a premises? Showing an ID card is acceptable, however, storing it is not. Has my data been discarded after I have left the building? There need to be privacy and data protection laws. Some legislations need to be in place to protect communication and data” – Jehan Ara

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Content Hosting in Pakistan: Pakistan and Pakistanis have a lot of popular websites that serve both the needs of overseas Pakistanis and those of residents. These include, for example most news websites and websites catering to the popular TV genre category as well as the fashion and local e-commerce segment.

The impacts of external hosting, include slower end user experience for residents in Pakistan and of course, the expenditure of foreign exchange in both hosting the site and then to bring the content back to Pakistan for users.

Once content is made available locally, reliably, it can serve the needs of many educational platforms and remote service systems without exposing them to internet costs or making an internet connection necessary to access the content. ISPs can make arrangements to make local content available to specified users for discounts.

In summary, the internet is designed to be a network of networks. Unfortunately, the networks in Pakistan are very loosely connected and serve very little purpose than to deliver content broadcasted from universally accessible locations.

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Cellular Phone Services, Users and Operators Pakistan’s mobile telecommunications industry started in 1991 with Paktel, and since then there has been nothing but positive change in user numbers, consumer adoption and service cost reduction.

While ease of customer acquisition has seen changes as a process itself, a significant change came about with the launch of prepaid mobile connection with the cost of acquiring a connection falling to under Rs. 200.

Positive regulatory regimes have helped the industry grow and as of June 2013, Pakistan had over 75% (Fixed and mobile) teledensity, with over 139 million subscribers (as of May 2014) across Pakistan, which has been the result of growth over the past 10 years specifically.

There has also been a downside to the free growth of the mobile consumer base, which needs to be addressed in the interest of consumer safety and public security.

Data Cleansing: Concerned with misuse of mobile connections, a regulatory order in 2010 was introduced, requiring sales of preactivated SIM cards to be stopped and mandating all SIM cards to be activated by the subscribers themselves by calling the operator helpline.

A campaign was also run requesting people to SMS their CNIC numbers to 668, to allow them to verify and validate the number of SIM cards they have in issue under their identity. This helped consumers block unknown SIM cards and hence weed out potential misuse.

According to some unconfirmed reports, SIMs were also blocked on certain cut off dates for those consumers who had not updated/corrected their data by contacting the CellCo.

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However, as of August 2014, the PTA updated their SIM verification policy by ordering that the activation of new SIMs could only take place with biometric verification of the individual purchasing the SIM.

Mobile Ban:

“The assumption that cellphone blocks will stop terrorism is not practical. In that context, terrorists use roads so we should block roads; they use planes, so we should stop planes. The whole country will cease to operate if that’s the logic we apply” – Wahaj us Siraj

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Since 2008, on various occasions of national, religious or political importance, the citizens of Pakistan have been deprived of a mobile phone service. These bans were sometimes localized (limited to a city, or a part of the city) however, most often, these services were suspended in multiple cities.

These bans stem from a concern that criminal elements are using mobile networks to plan and coordinate attacks on people, law enforcement agencies and government installations. While there is some truth to this, however the negative aspects of the bans must not be evaded.

Unfortunately though, there is very little understanding of the total impact of these mobile phone service suspensions: a. Average consumers, who need to coordinate with friends, family and external service providers (mechanics, carpenters, plumbers etc) cannot get in touch with anyone b. Universities use SMS systems to send updates to students. In the event of a mobile ban, students have no option but to go to the university and find out if they will have classes on a certain day or not c. Instances of medical emergency mean that are left hunting for a landline phone (there proximately three million landline phones country, including PTCL, NTC and a few operators, compared to over 139 million phones) May 2014 PTA

people are apin the private mobile

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d. Self-employed persons and businesses who serve customers based on phone requests are unable to do so. This includes restaurants who cater to customers via home delivery service (delivery now forms over 50% revenue for many small restaurants) e. Many retail outlets and fuel pumps now use GPRS powered terminals for credit card transactions.

These companies are unable to conduct business because the mobile service is unavailable. However landline based terminals continue to operate. f. Most residential and commercial alarm systems are deactivated, since many use mobile SIMs to inform their base stations about their status g. Vehicle tracking systems do not function since most of these operate via CellCos to update the car location information

Subscriber Taxation Issues: Mobile subscribers are currently subjected to over 34.5% of the total bill amount in taxes and charges levied by the Government and collected through the Cellcos.

All prepaid customers are charged with 15% WithHolding Tax (WHT) upon loading the prepaid card. In addition to this, a further 19.5% Federal Excise Duty (FED) is also charged and billed with each call made.

While WHT is refundable when submitting a tax return, most low end and bottom of the pyramid users use prepaid. These include guards, drivers, domestic helpers, pushcart vendors and even small shop owners etc; people who have no recourse to a refund/adjustment against their existing liability, purely because they either have such low incomes, or because they operate in segments that are not taxable.

The tax system mandates that there must be a place of

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business, bank accounts, rubber stamps etc, which isn’t even possible for some of the most basic services we use today. Bus drivers, taxi drivers etc do not always have a place of business and hence cannot be registered in the tax system. Them not being able to do so automatically makes them unbanked.

Less than 1% of the total mobile subscriber base files tax returns and as such, they have no recourse to recovering this money. While the government should encourage filing of tax returns, it is only possible if we register all small shops in all markets, and all push cart vendors and every domestic and short-term employee. Unless this is done, the bottom of the economic pyramid continues to be taxed extensively. While registering these individuals is possible, we must also consider if they are liable to pay income taxes. None of the segments earn enough to match the current tax limit.

This excessive taxation (and its increase from 10% to 15% in July 2013) is an indication that the excessive use of telecommunications is a luxury and not a commodity for everyone.Opportunities to connect and increase businesses must be identified.

Upgrade to 3G/4G: Pakistan has been running mobile services that are defined in terms of technical capabilities as “2G or 2.5G,� meaning they are 2nd generation technologies or a higher version, however not 3rd Generation.

These Generations refer to the combination of services and speed of services available to the average consumer.

A key shortcoming faced by mobile networks in Pakistan is the ability to transmit data at high speeds and the ability to handle calls and data simultaneously. The highest data speed available in Pakistan is limited to 128kbps (even though the ability of a consumer to be able to access it is rare). Additionally, while a data session is in progress, call-

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ers might receive a busy tone.

3G or 3rd Generation Mobile services allow users to have a minimum of 384kbps in data transmission speeds and have the capability to handle voice and data simultaneously. 4G takes it a step even further, requiring even higher speeds while being mobile.

What had been in the offing for years came to pass on April 22, 2014, when the 3G/4G spectrum auction was finally held in Pakistan. In the weeks leading up to it, telcos conducted tests and consumers frequently ran speed tests in anticipation. The auctions raised $1.1 billion in revenue for the government of Pakistan and since the launch an increase in mobile internet consumption has been predicted.

“Official IT exports for Pakistan is about 250 million USD annually, but Pakistan has an 18-23 age bracket young group, that have apps they’ve created on app stores etc. These are approx 100 million USD per year.

Freelancers are massive revenue generators, however the payment and ICT systems are not mature enough. The government does not consider this revenue as export revenue for the country. The existence of an available, reliable and accessible payment gateway will be the first tipping point for this industry, giving impetus to a completely local digital economy” – Sajeed Aslam

3G/4G opens up other business and revenue opportunities through HR development, value added services and development of new products. The government and PTA, in consultation with the industry, should find ways to accelerate and maximise these.

Higher license pricing with a risk of shutdowns should be unacceptable, just as lower fee is unacceptable to the government. Days on which mobile services are blocked do

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not yield any revenue for the mobile operators and result in unpredictable losses for them. Little known fact is that the government suffers too in terms of taxation earned when mobile services are shut down. Naturally, it has an adverse impact on citizens as well, the most notable being the difficulty it poses to health and emergency services, putting more lives in danger than the suspension purportedly seeks to save.

Industry experts feel there needs to be a clearly laid out policy for permitting such scenarios and compensating operators for their losses in these cases – as is also stipulated in law. According to them there should exist a policy that sets out procedures and guidelines for disabling mobile phone services. And even with a clear policy, they contend services should be suspended in exceptional circumstances only.

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Small Businesses / MicroPayments/ Consumer Financial Services As a regulator of the telecom space in Pakistan, PTA has the additional responsibility to help with the adoption of its technologies and assess their impact on the lives of consumers. These assessments need to be done in the form of benchmarks and targets that need to be identified, and the industry needs to be pushed to achieve certain targets.

Targets need to be in multiple facets, ranging from knowledge development for public, to e-governance initiatives and assessing impact on businesses.

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“One of the biggest grievances for entrepreneurs in Pakistan is the payments system” – Babar Ahmed

While Pakistan has been making factional attempts to introduce e-governance, almost all government properties are extremely disparate and lack any cohesion.

In a fashion similar to the FBR which only talks to companies and business entities that have a “place of business” and the ability to manage a set of accounts, the Pakistan Software Export Board (PSEB), completely ignores the huge software development segment that is serviced by freelancers through portals like ELance, ODesk, Freelancer etc.

Pakistan’s talent ranges from creative design, to programming to complete software lifecycle management. Thousands of Pakistanis work via these portals to make a living and receive funds via a linked-debit card, for which they incur a transaction cost when they withdraw funds.

Over the past three years, there has been a multifold growth in companies that service customers via the internet. However, a vast majority of such companies have little or no access to internet-based payment mechanisms because: a. International payment systems are wary of doing business with Pakistanis

“There is no e-commerce policy, there needs to be at least some structure under which e-commerce sites operate, which protects customers, as well as the vendors” – Jehan Ara

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“We need the ability for people to use credit and debit cards, be able to use Paypal and Google Wallet etc to do e commerce internationally� – Zafar Khan

b. International service providers which do serve Pakistan, charge higher transaction rates than most companies can afford. This also makes bringing money into Pakistan a costly proposition c. There is little or no knowledge of local payment gateways (UBL recently launched one, but even the large e-commerce platforms are not aware of this) As a consequence, most companies employ teams of motorcycle riders who collect cash and deliver the product, or the vendor resorts to non-conventional means, by identifying their bank account and instructing customers to deposit a payment into their (personal) account.

All of these methodologies are both risky and do not contribute to the recorded economy in any form.

An integrated approach needs to be taken by the PTA, in collaboration with other regulators (SBP for example) that focuses on the transactional needs of small businesses and large customer bases, especially with respect to the unbanked population.

The potential for banking the unbanked population is significant if mobile wallets can be created, easing the process for depositing funds and transferring them via simple phone numbers or USSD commands.

The ability to use mobile credit as a means of consumer-to-business and consumer-to-consumer payments has tremendous opportunity impacts for the unbanked population and initiating recording process for the so far undocumented segment of the economy.

Neighbouring UAE uses mobile credit to pay for parking charges, bus fares and train fares already, in addition to a product currently being tested that will allow retail payments, eliminating the need for credit/debit cards.

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Industry Concerns on IP Blocking Since October 2013, the PTA has enabled automatic IP address blocking and disabling, allegedly under the guise of blocking IP addresses carrying grey VOIP Traffic.

“The PTA’s position on disallowing VPNs or encrypted communications is harmful to a lot of customers, it will impact the banking and BPO industry, who depend on confidentiality and privacy of data” – Jehan Ara

This is a highly contentious claim since multiple registered call centres have also reported that their IP addresses have been blocked. In response, the PTA has asked companies to re-register their already registered IP addresses.

Additionally, multiple international companies and websites have also reported that their IP addresses and access to their servers were blocked. This naturally impacts the capability for many companies to do business.

This IP address blocking is random and arbitrary. Connections stop working and then they become accessible once again after a few days.

Industry Concerns on VPN Blocking & Secure Browsing The PTA has taken a position that implies that all VPNs need to registered and approved by the regulator. The same communication also implies that that any communication that encrypts communication to the extent that it restricts monitoring is not permitted.

It is worth mentioning that the HTTPS protocol also en-

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crypts traffic between the browser and the server. The fact that the government is able to monitor this communication implies that no communication is secure and private, including email and the use of secure online transaction systems.

All banks and electronic banking systems require encrypted communications to ensure privacy of user data, however, the state of privacy afforded to consumers, a fundamental right, seems to be vague. The PTA and the government of Pakistan need to clarify the state of privacy afforded to customers and ensure that privacy is afforded in line with the Constitution of Pakistan.

“The creation of the ICH was mentioned in the telecom policy. The implementation of the ICH has resulted in the establishment of the government-defined rate, which was very high and has not been accepted by many countries, creating a business case for grey market operators” – Sajeed Aslam

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Grey Market Telephony and ICH Issues

“The formalization

The Telecom Deregulation Policy of 2003 touched upon the establishment of an International Clearing House (ICH) to handle incoming international voice calls. There are several LDI licence holders in the country that were competing to bring international calls to Pakistan by offering better pricing to Telephony service providers internationally.

This helped Pakistan in two ways.

shape of the ICH,

a. Overseas Pakistanis find it easier to just pick up their phones and dial a voice call instead of connecting on Skype etc, due to the amazingly low rates that were made available

of the cartel in the has resulted in overseas Pakistanis being taxed through telephone calls” – Afaque Ahmed

b. International calls, when terminated in Pakistan via a licenced LDI operator, would bring tax revenue to Pakistan since these calls are charged In August 2012, the LDI licence holders agreed to set up an ICH to create a standardized pricing for routing of call traffic. This essentially meant that all LDI operators had formed a cartel to preserve pricing.

Call volumes were assigned to operators by means of a quota allocation to each LDI operator. This led to the creation of a non-competitive environment and locking down of a price that was higher than most LDI operators offered.

A higher price and a non-competitive environment created a business case for grey market operators.

Despite a Competition Commission ruling that the ICH created a non-competitive environment and violated the Competition Act 2010, it remained in place. PTA, in a letter to MOITT had also recommended a review of the ICH policy. Ultimately, on June 17, 2014, MoITT issued a policy directive withdrawing its earlier policy directive that had established the ICH. As stipulated in the directive, this was

“Every country has a USF type fund. Even European nations are struggling with broadband infrastructure rollouts. Pakistan, however, is advising on these contracts and rollouts” – Sajeed Aslam

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done to increase competition, decrease grey traffic and discontinue the excessive raters that applied to expatriate Pakistanis and other callers, calling into the country.

However, the matter is now pending before courts as the LDI operators have challenged the dissolution of the ICH.

Industry Concerns on Use of Industry Contributions Telecom operators in most countries contribute to a fund used to finance access to underprivileged areas, or areas of low commercial viability, with the intention of increasing and allowing access to everyone. In Pakistan, this fund is called the Universal Service Fund (USF). Another fund to which companies in the communications space in Pakistan contribute, is the ICT Research and Development Fund.

The USF in particular has been utilized to extend access to underdeveloped areas, both via fibre optic data networks and also to purchase and deploy shared base stations by cellular operators.

Key players from the industry and international observers agree that Pakistan’s USF model adds great value to the country’s broadband capability. Credit for this goes to the PTA and its advisors for helping set up a remarkable model that makes Pakistan proud.

In June 2013, a sum exceeding Rs. 100 Billion, comprising the reserves available in the ICT R&D Fund and the USF were moved from a dedicated USF account to the Federal Consolidated Fund (FCF) – the federation’s general account established under Article 78 of the Constitution.

As a result, the funds became available directly to the Federal Government and industry experts maintain the same were then also used for payments related to the Circular Debt Crisis.

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The unilateral change of process brings the USF, a private contribution pool managed by a group of trustees, under political review and subject to budgetary procedures.1Bringing the USF under Government purview indicates that political forces will decide where the funds raised by licensed telecom operators be used.

This matter too, is now pending before courts.

Industry interviews also reveal that the ICT R&D fund has not been used frequently and the projects approved under the fund were not purely research and development focused.

Multiple sources have cited the need for developing centres of engineering excellence in technology in partnership with mobile network equipment providers, allowing a local pool of engineers and equipment specialists to emerge.

While such engineering centres have not been made, and the career path for telecom engineering students seems stagnant. There have also been reports of certain aspects CellCo technical operations being outsourced and supervised by the mobile network equipment providers themselves.

 

1 http://www.thenews.com.pk/Todays-News-3-213897-ICT-R&Dfunds-not-released-despite-assurances http://www.moremag.pk/2013/12/11/government-beautifully-denies-robbing-rs-62-billion-from-usf/ B O LO B H I | 45

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Issues and Concerns: Suspension of Cellular/Mobile Communications Services: These have become major concerns for the ordinary citizen who are trying continue their lives in a lawful manner. The communications restrictions affect individuals who are trying to reach their loved ones and affect those who are trying to reach emergency help and law enforcement, in times of need.

“The Government seriously needs to look at the problem of funds transfer and allowing our talent to legally export their skills” – Sajeed Aslam Resolution: These need to be eliminated at the earliest.

The state and law enforcement must realize that communications is not a luxury. It is a utility, which means that people depend on communications that they are used to and have no alternatives, much like we don’t have alternative water supplies or electricity supplies at our homes.

Law Enforcement needs to do a better job at controlling and identifying threats which lead them to block mobile phone communications.

Taxation: The taxes are prohibitive and are putting the service out of usable reach by the low income category groups. This is also affecting mobile operator revenue and the eventual profit that these mobile operators are additionally taxed on.

Resolution: Indirect taxes must either be brought down, or a campaign needs to be run that these are claimed by the payers. All indirect taxes imply that they can be reclaimed by the payers, however, the FBR must check how much of the indirect taxes charged via telecom operators are reclaimed. If these are not reclaimed, they must be refunded. A large number of prepaid users include students, domestic help, low income workers, small businesses etc,

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who do business on the street. Most small shopkeepers and low wage employees also have prepaid connections and no tax identity. Either the creation of an NTN and reclaiming procedure must be made simple, or this tax should be eliminated because FED & GST is already being charged.

Lack of Inbound Payment Gateways: The lack of a sufficient number of local payment gateways makes it restrictive to launch online retail businesses. These should be treated as exports when serving international markets and have all benefits available to exporters should also be made available to individuals & companies working via online portals to gain freelance work.

Inbound payments are a cause of concern and these individuals have to resort to expensive means to transfer funds into Pakistan, which benefits third party entities.

Resolution: The central bank needs to come forward and welcome these funds transfers into Pakistan. Pakistan needs to start engaging with these service providers to allow them to wire funds directly into Pakistani bank accounts, which will yield a positive impact on the foreign exchange reserves and will also be counted towards export related revenue.

Pakistan also needs to have conversations with Google Wallet, Paypal etc to allow vendors from Pakistan to sell from their platforms and realize funds directly in Pakistan.

Pakistani banks need to integrate online merchant account services – currently only UBL has these services.

Online transactions must be given special incentives over offline, since they help document the economy and keep the funds inside banks, instead of cash-based transactions which deprive banks of liquidity.

Capacity building initiatives need to be taken to appraise the tax departments on the impact and value of the electronic and mobile commerce economies in national interest.

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CHAPTER 3 The State of IT Governance in Pakistan

The Cause for Concern A State of Confusion

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“ICT development is hugely dependent on supportive regulation, not on investment” Running a government and a regulatory body are no easy tasks, especially when economies are developing and even more so, with the rate of technological developments being as fast as they currently are. The need for able, intelligent and available leaders cannot be made stronger.

– Ehtisham Rao

The Government is responsible for the formulation of policies, laws, frameworks and induction of persons at key positions, and these activities are conducted via key team members via the Ministry of IT and Telecommunications.

It is also apparent, from various actions taken by the regulators, that there seems to be a significant planning deficit on the overall governmental scale, which is responsible for assigning targets and goals to the incumbent ministry.

These goals and objectives should be defined by a national strategy designed to help take advantage of this global transition and to place Pakistan in a position to take advantage in the internet-based business space.

Sadly, a look at the last few years reveals there has been a complete lack of goals and initiatives, as the ministry and regulator have been busy tackling short-term goals that have little, or no significance in the long-term economic development of the country.

While there has been a lack of objectives and goals, there has also been a crucial lack of decision making along with

“We are chasing revenue targets in a way that it will eat up the industry itself, because we are not expanding our offerings, except selling just connections” – Tariq Mustafa

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capable human capital across multiple areas.

The presence of key persons and their availability is crucial to the development and continuity of policies and their implementation. There has been, however, a significant lack of presence of a coherent leadership at the MOITT, leading to probable concerns across many fronts, including legislative and policy directives.

“Pakistan has 8 laws, 23 regulations and 3 policy documents.

Our laws and policies have significant lack of clarity. We can buy electricity from India and we can sell them onions, but we can’t peer with India using Fibre. The same goes for Iran” – Sajeed Aslam

Leadership Crisis at MOITT Pakistan did not have a full time IT minister for the last three years of the previous government’s tenure. For those three years, the portfolio was housed under the then Prime Minister.

After the May 2013 elections, Ms. Anusha Rahman Khan was appointed as a full time Minister for State for IT and Telecommunications. There was finally representation for the sector in the Federal Cabinet.

“The grand design which goes into the policy & regulation is missing, not just in the IT & Tech sector, but across the country” – Ehtisham Rao

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The position of Secretary IT has been notorious as a fast changing one. Some tenures have spanned mere weeks and appointments and replacemnets have been frequent. Each replacement has meant additional time to get acquainted with the Ministry’s affairs. And, often, by the time that the familiarization drill is complete, the Secretary is on his way out.

According to industry sources, the launch of 3G/4G and the recent closure of the ICH are the only concrete and positive steps taken by the Ministry to encourage development and provide relief to the industry. The much deliberated over cybercrime

The Cause for Concern

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legislation has only recently made it to Cabinet. However, other issues such as the YouTube ban and the appointment of officials at key posts within MOITT and organizations under its control still require significant attention.

“If our industry

Leadership Crisis at PTA

in revenue terms,

General Views and Concerns Unfortunately, all hasn’t been too rosy for companies under the PTA’s purview. While mobile telecom is probably the largest tax contributor, other industries, even they have concerns about how certain matters are handled and how the PTA simply follows orders instead of defending the position of the industry.

Over the last few years, the internet service provider industry was almost eliminated and long distance operators killed. Grey voice traffic was widespread and mobile phone services shut down at a less than 24 hours’ notice, forcing a significant part of the nation to wait before they are able to communicate.

managers just do amazing quarters they stand the risk of winning the battle and losing the war. The operators have no lack of capability, but they are too busy with their revenue targets” – Tariq Mustafa

In addition, several companies reported that their call centre connections were blocked; several websites reported a blockage of IP addresses and home users were and still are subjected to random blocking.

The PTA position assumes that encrypted communications are illegal and this impacts the growth of the online industry as a whole, which, as an industry, has immense potential to change the fate of this nation.

PTA, it seems, is more focused on regulating the mobile phone companies than the data operators and the Long Distance International Operators.

Monopolies were made and officially endorsed under the regulator’s nose and no action was taken. This was enabled due to limited efforts by the regulator to vacate the stay orders sought by companies against which determinations were made. A major incident was when PTCL was accused

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“We are thinking on very small programs and plans, we are not planning on how to convert the country into a 20bn economy in the next 20 days.

We look at province level automation, data centres, income support programs etc, which do not translate into larger goals” – Ehtisham Rao

of breaching the allocated radio frequency spectrum and the courts had to be approached for action, while the regulator simply watched. Only in 2014 was a determination made and PTCL was fined.

There is a need for increased action by pursuing cases in courts, which now seems to be happening far more actively on PTA’s part than before.

There is also general consensus that there seems to be a significant lack of long-term planning, and ad-hoc policies and measures prevail, which also begs the question, is the PTA a mere policing body? Or is it responsible for development of the telecommunications space as a whole?

The PTA has been suffering from a leadership crisis after the tenure of Dr. Muhammad Yaseen ended in July 2012.

After his departure, Mr. Farooq Ahmed Awan took charge of the PTA on July 27, 2012 and was subsequently dismissed by the Supreme Court of Pakistan citing “Illegal appointment” on January 15, 2013. PTA remained without a chairman for almost 10 months, until the appointment of an Acting Chairman, Dr. Syed Ismail Shah, in September, 2013. Dr. Shah was subsequently notified as Chairman on November 27, 2013.

Since then, a significant number of steps have been taken

by PTA that auger well for the telecommunications industry, the biggest of which includes finalization of the bidding process and announcing dates for the 3G and 4G spectrum licence auctions. Another key initiative was to determine conclusively, that PTCL had encroached on a wireless spectrum beyond its allocated limit. PTCL was subsequently fined for this violation.

Dr Shah played a proactive role in clearing away misconceptions vis a vis blocking on the Internet. He appeared before parliamentary committees and went on recond in the media to clearly state that no technology could ensure 100% blocking of content citing interstitial screens as a viable option.

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CLOSING SUMMARY Since most of these areas are inter-related, PTA’s actions, even if directed by the cabinet division or the MOITT, tend to have a knock on effect across multiple industries. However there have been instances where PTA’s actions – and at times inaction – has created concerning conditions for many industries.

“Regulators should be forward-looking, not regressive. They

These concerns have been highlighted, along with suggestions on possible redressal mechanisms, which are not exhaustive. We continue to express that all of the matters highlighted, should be addressed by including all stakeholders in the decision making and review process to create a level playing field for all players and participants, in the ultimate interest of the consumers, not just companies.

must understand

What is required is systematic change and progress – not the kind that is accelerated or hindered depeding on who is at the helm of affairs. Or that is affected in instances where there is no one in top management positions.

the future impact

developments in technology around the world and understand of those for their jurisdiction” – Tariq Mustafa

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APPENDIX The State of IT Governance in Pakistan

Interviewee Profiles Afaque Ahmed He is the founder and director of Breezecom group of companies, which is based out of Cyberjaya, Malaysia with operations in 5 countries, providing wholesale voice aggregation services to approximately 1000 telecom companies in 25 countries.

Afaque is also the Founding Chairperson of The Education Enrichment Foundation (EduEnrich) and is a member of the board of Governors for Karachi Institute for technology and Entrepreneurship (KITE).

Tariq Mustafa Tariq Mustafa has over 16 years of experience in establishing and managing large scale, cross country data network using various technologies. Tariq is currently the Vice President for Technology at MultiNet Pakistan.

Jehan Ara Jehan has 29 years’ experience in Marketing, Communications and interactive new media in Hong Kong, the Far East, the UAE and Pakistan.. Jehan currently serves as the President of Pakistan Software Houses Association.

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APPENDIX

Ehtisham Rao Ehitsham has over 12 years of experience in diverse IT & technology fields, with over 6 years in the telecommunications sector of Pakistan, where he has been responsible for billing, business performance analysis and Business Intelligence in addition to various strategic roles. Ehtisham is currently Director of B2B Marketing at Mobilink.

Sajjeed Aslam Sajjeed has over 20 years of board and management level expertise in various business aspects and has served in various countries on the boards of management consulting, education, investment banking, a technology company in Pakistan, data analytics company in the UK and a content aggregation company in the US. Sajjeed currently runs a business transformation consulting firm in Lahore.

Naeem Zamindar Naeem has over 23 years of experience in entrepreneurship and technology based businesses, specifically in the telecom sector. He initiated the Broadband business role in the Mobile operator space in Pakistan and launched a WiMax based internet service.

Naeem is currently the CEO of Wateen Telecommunications.

Salman Ansari Salman Ansari is a leading technology and telecommunications consultant with over 30 years of experience in various telecommunications related industries. He was also the co-author of the Telecom Deregulation Policy in

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APPENDIX The State of IT Governance in Pakistan

2006 and served as an Advisor to the Ministry of Science & Technology from 2000 to 2003. He was also the author of the National IT policy in 2000 and the first Electronics Policy in 2006.

Wahaj us Siraj Wahaj Us Siraj launched Pakistan’s first DSL IS, Micronet Broadband in 2002 and then went on to launch Nayatel, Pakistan’s first FTTH (Fibre to the Home) project in 2006.

Wahaj is a graduate from the University of Melbourne and has also worked with the Governemnt of Pakistan on a Policy making level.

Wahaj is currently the CEO of Nayatel and also the founding member and chairman of ISPAK.

Zafar Khan Zafar Khan is a highly accomplished engineer from CalTech with several electronic advertising related patents to his name. He has launched and run a $20 million business internet marketing business from Pakistan called Sofizar from Lahore.

Zafar is currently the President and CTO of Constellation CK

Babar Ahmed Babar Ahmed has over 10 years of experience with 8 years as CEO of Mindstorm Studios. Babar specializes in game design and engineering. Babar is an Engineer from the University of Texas at Austin and holds an MS from Stanford University.

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Glossary

APPENDIX

Glossary Call Centres

Call centres are locations where companies arrange for handling of queries and complaints telephone services. Usually a call centre would have many persons in staff who would handle customer calls.

CellCo:

Licenced Cellular / Mobile service operator, to do so by the PTA

CPE:

Consumer Premises Equipment: Equipment installed by a service provider at the consumers premises to provide a service. Usually involves a Wireless or DSL modem for internet services, however depending on customer needs, this may change.

Data Centre

A shared / dedicated facility to host computers in a secure, controlled access environment to ensure data and protection uninterrupted functioning of equipment in a safe space.

DSL

Digital Subscriber Line. A telephone line based connection that transmits data without interfering with the voice communications.

DSLAM

Digital Subscriber Line Access Multiplexer. Equipment used by the DSL service provider, placed at the telecom operators end to link the DSL modem to the internet service.

FBR

Federal Board of Revenue

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FI

Financial Institution. Any institution authorized by the State Bank of Pakistan to conduct a financial services business, ranging from collecting deposits, issuing cheques, transferring funds on behalf of its clients, issuing loans etc.

FLL / Fixed Local Loop Wire based telephone system, by means of which end consumers are connected via a physical wire entering their premises.

FTTH / FTTX

Fibre To The Home or Fibre To The Premises. Meaning the practice of bring an optic fibre connection straight to the users premises.

Hosting

The act of making a website / application / software available over a network.

This is usually done via a a computer on which the software / website is placed and is accessible to others using the same network. In case of the internet, both the host and the user have to be connected to the internet.

Internet Backbone The main connection to the internet on a community / country level is referred to as a backbone. A country may have multiple connections.

IPLC

International Private Leased Circuit. A dedicated high speed data connection between two locations anywhere.

ISP

Internet Service Provider / Entity licenced by the PTA to provide connectivity to the internet on a commercial scale.

IX / Internet Exchange Internet Exchange. A location / facility where ISPs can gain access to the Internet Backbone.

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Glossary

Kbps

kilobits per second. 1 kilobit is equal to 1024 bits of data. A measure of speed of a data connection.

Latency

Amount of time taken for a signal to travel from one part of the network to a designated location. Generally measured in milliseconds.

Mbps

megabits per second. 1 megabit is equal to 1024 kilobits of data. A measure of the speed of a data connection.

Modem

Modulator / Demodulator: A device used to enable data communications over phone lines using a voice calling system.

MOITT

Ministry of Information Technology and Telecommunications

APPENDIX

Multimetering / Multimetered calls Metering is the process of distributing the consumption of any material or access into units for billing purposes. telephone calls are billed in minutes and hence telephone based connections, when used for dial up internet, also are billed by the telephone company in terms of minutes for the entire duration of the call. Mutimetering for internet connections was terminated before DSL was launched in Pakistan.

NADRA

National Database Registration Authority

Peering

The practice of connecting using multiple computers / servers to handle traffic / load across various regions to allow faster / easier access to data.

Premium Rate Numbers Telephone numbers which are charged a higher rate than normal if they are called or they are sent a text to. The call originator / text sender is charged a

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APPENDIX The State of IT Governance in Pakistan

highet than normal service charge. This usually involves a revenue model for the person soliciting such a call / sms.

ShortCode

A shorter number, often common between multiple telecom operators, allowing faster access to services for the general public without remembering a full telephone number. Often used for SMS based servcies and call centres as a customer service point of contact.

Spectrum

A segment of electromagnetic / radio frequencies used for all forms of wireless communications. Use of radio frequencies for communications over large areas is regulated.

Terminal Equipment Equipment used at both ends of the communications system / service, completing the objective of the network.

For example, in a phone call, the terminal equipment at both ends is the Telephone handset / unit.

VPN

Virtual Private Network: A means of creating a secure, encrypted connection between two points to ensure secure data communication. These are essential for many financial transactions as well.

WiMax

WiMax is a high speed wireless data communication technology. Currently in use by some ISPs in Pakistan.

WLL / Wireless Local Loop A telephone system that is primarily wireless, however, is not mobile and cannnot be carried freely from one region to another.

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