Over the last 20 years, the issuance of licences to private operators and also enforcing them, have been the core function of telecom policy-makers and regulator in Bangladesh. The accelerated growth of telecom penetration, from less than 1.0 per cent to more than 70 per cent, has been frequently cited as triumph of policy and regulation. The growth of revenue from less than USD$200 million to more than $3.0 billion, coupled with proportionate growth in tax and regulator's revenue collection, has also been cited as success of market-driven reform of the telecom industry.
Except one, although most of the operators are struggling to reach to profit, after making investments worth billions of dollar over the last 15 years, but surprisingly serious questions are not being asked, except tax level, about policy weaknesses to create possibilities of profitable competition to ensure sustainable benefit from market-led reform - a never-ending progression of increasing surpluses for both consumers and producers simultaneously.
It appears that the prevailing telecom policy-making in Bangladesh is primarily dominated by the approach of disintegrating, both vertically and horizontally, the industry and issuing as many as possible licences, to collect as much as possible licence fees. In many situations, the challenge of creating profitable possibilities has not been adequately looked upon as the responsibility of either policy-makers or regulator in Bangladesh. Moreover, many investors, mostly driven by irrational exuberance, secured licence and borrowed money to lay network without doing adequate homework -- resulting in colossal loss and also piling up of lawsuits. Although upon segmenting the industry by more than a dozen ones and issuing licences to more than 100 operators, the regulator has collected more than a billion dollar as licence fees, but the level of investigation to assess the merit of such exercise on key parameters, such as cost, price, value and profit, appears to be inadequate.
The market reform of the telecom industry faces a serious intellectual barrier: how to benefit from economies of scale to reduce cost by introducing additional operators in an imperfect industry, which has the minimum economies of scale even larger than the size of the entire market? In such an industry, the monopoly makes better usages of economies of scale benefit, than introduction of multiple operators. For this reason, regulated monopoly, instead of competition, had been the preferred option to govern the telecom industry for more than 100 years -- across the globe, including the USA.
But monopoly has four major limitations: 1. Information asymmetry that makes regulation an erroneous tool, 2. Deadweight loss caused by sub-optimal production by monopolist to maximise profit, 3. Slow response to innovation, and 4. Lack of aggressiveness to pursue supply-driven strategy to expand the network and services to benefit from economies of scale and scope, to minimise cost as well as price. The challenge of having an optimum level of segmentation and deciding about number of operators to benefit from competition appears to be formidable -- which outpaces common sense easily.
It seems that the success of segmenting the industry further and issuing additional licences has come to an end in Bangladesh's telecom sector. Many licence-holders have got the lesson that licence alone does not create profitable business in telecom. By having hundreds of millions of dollar default loans, which may become non-recoverable, lenders have learned that lending to just any licence-holder does not ensure profitable return.
Upon facing the reluctance from MNOs (mobile network operators) to pick up 4G licences, the policy-makers and the regulator alike are getting the message that the option of generating additional revenue from licensing spectrum or issuing new licenses is getting harder than before. With stagnant revenue situation, even well-performing operators are having difficulty to encourage investors to be aggressive to break new ground for growth. The obvious question is: how to repeat the vibrancy, coupled with success stories, of the past 20 years?
As it has been mentioned that the core challenge of policy-making is to create possibilities of profitable competition to make progress along four major dimensions: 1. Lowering cost, 2. Offer of higher value, 3. Reduction of price, and 4. Making greater profit. It seems that this challenge has been largely missing in the exercise of policy-making and regulation in Bangladesh. As a matter of fact, not only low hanging fruits, but fruits from all existing trees, are already being picked up -- new trees to be grown to pick additional fruits to count future successes: where are those possibilities to grow fruit-bearing new trees?
Significant economic value, as it appears, could be created in many segments of society with low cost, but high value, broadband contents. Some of these segments are: 1. Agricultural yield growth, 2. Addressing socio-economic issues being faced by families of 10 million migrant workers, 3. Online employment generations for millions of graduates, and 4. Online education and training for 40 million students.
It is estimated that more than $10 billion (6.0 per cent of gross domestic product or GDP) additional economic value could be created by exploiting broadband-centric opportunities in these four segments alone. Although operators are busy in serving top of the pyramid, with Facebook, YouTube and other social media-centric usages of broadband, these opportunities are at the bottom of the pyramid. To tap into this huge economic potential, $10 billion per year, we need to deliver more than 50 GB data to each of 100 million users at a rate of 1 GB/BDT10(USD0.12) - almost 25 times lower than current rate.
Core policy making challenge appears to be: how to create possibilities of profitable competition to deliver such huge data at such a low price, primarily at the bottom of the pyramid?
To address this core challenge, the policy-makers as well as the regulator should do adequate homework through research along following seven dimensions:
1. Instead of just cellular, how to benefit from combination of multiple technology platforms such as i.3G/4G/5G, ii.ADSL/G.fast, iii. FTTx/FTTH, iv. Ethernet LAN, v. WiFi/WiMax, and v. DOCSIS over Cable TV network to lower the cost.
2. Instead of just segmenting the industry further and issuing additional licences, focus should be on how to lower the cost and increase value through scale and scope benefits by leveraging demand aggregation as well as creation.
3. Instead of just suing loss-making operators to collect dues, focus should be on how to create possibilities of profitable competition, so that operators do not face financial difficulties to clear dues.
4. Instead of restricting business practices of profitable operators to address market power, focus should be on how to take the advantage of good business practices of profitable operators to open new growth opportunities, without enabling dominant operators in gaining additional market power to monopolise the market.
5. Instead of focusing on tax rate, the attention should be on options for reducing cost through reuse of already deployed resources to be benefited from scale as well as scope, so that market expands to increase tax base.
6. Instead of just collecting revenue from operators, focus should be on creating possibilities of new business opportunities to encourage them for profitable investment to expand.
7. Instead of just counting subscription, bandwidth consumption or reducing wholesale bandwidth price, focus should be on economic wealth creation through broadband consumption and finding means for profitable reduction of price at the end user level.
It seems that to unlock huge economic growth potential, as high as $10 billion per year, telecom policy and regulation should focus on research to explore options to decide about optimum path of progression to address four conflicting indicators simultaneously: lower cost, increase value, reduce price and grow profit.
Source: http://www.thefinancialexpress-bd.com/2015/11/09/116161