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Draft  National  Telecommunications  Policy  of  Bangladesh:  What  should  we  expect?  M.  Rokonuzzaman,  Ph.D  Professor,  Department  of  Electrical  and  Computer  Engineering    North  South  University,  Dhaka  Zaman.rokon@yahoo.com,  Cell:  +880.1710.899.768  

 

Telecom is an imperfect industry--which has strong tendency of natural monopoly. Governing profitable competition, in such an industry, to maximize social welfare--in a sustainable manner-- is the core issue in designing Telecom policy. The challenge of telecom policy formulation hinges on dealing with complexities to determine suitable industry structure set by both vertical and horizontal segmentations, define boundaries of operators, decide about optimum number of operators, deal with market failures to intensify competition between operators, and minimize market power accumulation to prevent monopolistic behavior, so that benefits from economies of scale, scope and dynamic efficiencies are maximized--to increase both consumer and producer surpluses simultaneously. In a nutshell, sustainable, profitable competition between operators to continuously reduce price, increase quality and spreading reach, to every layer of the pyramid of the society, is the core issue to formulate telecom policy for a nation.

Selected specific comments on the draft policy document are as follows:

1. Section 2: Vision should have measureable and comparable targets to relate as well as assess progress of the proposed policy.

2. Section 3: Mission seems to be unfocused, needs to be specific to have some measurable indicators.

3. Section 4: In guiding principles, emphasis on regulation should be reduced; rather focus should be on polices to have effective competition to achieve objectives.

4. Section 5: In absence of any time bound objectives and policies to achieve them, setting the time horizon of 10 years does not make sense.

5. Section 6: (a) Targets for attaining affordability and universal access should be set; their current levels and kind of progress we would like to see over the policy period should be spelled out, (b) Present state of quality of service and customer protection level should be spelled out along with target progresses to be made, (c) current state of market should be spelled out and envisioned state to be defined to justify adopted policies, (d) Indicators of utilization of scare resources should be mentioned and their current values should be noted to recommend policy options to make progress over next 10 years, (e) Targeted investment in terms of $ figure to be mentioned along with areas to be improved to design polices to attract those investments, (f) To talk about efficiency and innovation, indicators to be defined and targets of progress to be set, (g) current state of sustainability of job, local ownerships, and entrepreneurial activities to be spelled out to set objectives which could be guided to achieve through policies, (h) current state of local value addition in Telecom related software and HW should be outlined, and binding constraints faced by local value addition should be

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spelled out to progress to set target to achieve, so that policies are formulated accordingly, and (i) current state of environmental concern should be indicated and targets for improvement should be set to investigate and compare appropriate policy options.

Bangladesh’s journey to pursue market-based reform of state monopoly has a history of 30 years. Learning of those 30 years should be taken into consideration within the context of global dynamics of technology and market based reform to set measurable objectives, so that appropriate policies could be designed to achieve them, mostly through market forces. In policy objective section, no indicators have been set to guide the policy making exercise. Therefore, there is no reference to compare to justify the merit of any policy recommendations for Bangladesh. Such generic objectives are applicable to any nation, irrespective to current state of the industry, the learning of the past journey, and development aspiration of the nation.

6. Section 7: (a) Strategy should be investment friendly, competitive environment to maximize benefits for consumers, (b) current state of non-value added competition and significant market power issues to be spelled out and strategy to address them by strengthening market forces should be clarified, (c) The strategy of taking advantage of cost reduction though economies of scale and scope, and dynamic efficiencies should be clearly stated, (d) Strategies of nurturing competition between multiple technology platforms such as cellular, WiFi, WiMax/LTE, Ethernet LAN, ADSL/DSL, Cable TV, FTTH, and FTTx should be spelled out to facilitate high speed broadband services., (e) there should be further clarity in justifying utilization of social obligation fund to increase efficiency of private investment, to expedite roll out of network in unconverted areas, to stimulate competition in innovating high value servicex for the bottom of pyramid, and to minimize deadweight loss to encourage production at socially optimal level, (f) likely issues related to technology, service and network neutrality should be spelled out and strategy to address them to be defined to maximize benefit from technology innovations and utilization of already deployed assets, minimization of the scope of applying foreclosure strategy, and encouraging private investment, (g) in reference to Protection of Customer rights and Service quality, indicators to defined and targets to be set to achieve through policy and regulatory instruments, (h) technology strategy along with its migration path to be spelled out to benefit from growing spectral efficiency, (g) likely demand for spectrum should be taken into consideration to figure out role of other technology platform so that spectrum scarcity does not limit the supply to meet likely demand, (h) spectrum utilization factor should be taken into consideration to come up with strategy so that non-performing operators having license does not keep allocated spectrum unutilized, (i) strategy of using spectrum as a tool to increase investment, intensify competition, improve quality and reduce cost should be spelled out; it should be noted that holding of spectrum either by non-performing operators or the regulators simply limits the opportunity of improving quality and reducing price--at no cost, (j) strategy of increasing value addition capacity, targets for R&D investment, and interventions to address binding constraints must be spelled out, (k) specific issues related to competitiveness of state owned Telecom enterprises to be

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spelled out and strategy to address them should be justified, so that policies could be formulated to implement them, (l) issues related to security and disaster to be spelled out further relating them to current and likely situation of Bangladesh’s telecom industry, and (m) current as well as likely environmental concerns to be clarified out to recommend strategy to address them, so that progress could be measured and compared.

It seems that proposed strategies are very generic and qualitative, which could be recommended to any telecom industry of the world. Progress to be made to relate it to Bangladesh’s telecom industry to justify effective and efficient usages of resources through market forces to reach the goal in possible shortest time, at least cost and facing minimum risk.

7. Section 8: (a) some targets have been set without giving justifications; development targets should be related to technology feasibility, socio-economic context, market forces and public investment need to address market failures, and (b) role of different technology platforms such as cellular, WiFi, WiMax/LTE, Ethernet LAN, ADSL/DSL, Cable TV, FTTH, and FTTx should be spelled out to attain targets.

8. Section 10: broadband policy should be embedded inside telecom policy; it’s to be noted that convergence of technologies and services will make Telecom as just one of many services to be delivered over the broadband network.

       CONTENTIOUS  ISSUES  TO  BE  ADDRESSED  THOUGH  POLICIES:       Although the draft document was expected to spell out philosophy, mission, objectives, strategies and the methodology to ensure equitable and judicious execution of the business of telecommunications in the country, it’s talks mostly philosophy. Some of the pressing issues for policy options to deal with over next 10 years to be followings:

1. How to reduce cost add up at different links to deliver broadband service to end-users? It should be noted that MNOs pay less than 2% of price paid by 3G service consumers to international connectivity providers, BSCCL or ITCs.

2. How to develop very competitive nation wide backbone service market? Such market development should take into consideration of rapid reduction of transmission cost and accelerated penetration in rural areas. Both competition and public investment, particularly at the passive segment, and price regulation to be taken into consideration to subsidize take off and to profit from economies of scale at a later stage.

3. How to stimulate demand to reduce per unit cost and increase socio-economic gain? Such demand creation should pay attention to the people at the bottom of the pyramid, so that they can generate income and benefit from reduction of cost of accessing services such as health or governance. As a matter of fact, demand creation is critical to reduce the price in a sustainable manner—by taking advantage from scale and scope—and to increase socio-economic benefit.

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4. How to foster competition between multiple technology platforms such as cellular, WiFi, WiMax/LTE, Ethernet LAN, ADSL/DSL, Cable TV, FTTH, and FTTx to deliver service to address diverse demands such as static, nomadic and mobile in an effective and efficient manner?

5. How to enable small, loss making operators—particularly late entrants-- to reach to profitable state without the need of merger or acquisition, increasing price or restricting fair competitive behavior of profitable ones?

6. What are the current state of consumers’ concerns about rights, protection, and quality of service and how to address them?

7. How to stimulate telecom network centric service expansion, such as mobile financial services, without the inclusion of mobile operators in service segment?

8. How to strengthen the ecosystem so that local value addition capacity and the demand for such capacity increases in the local telecom market?

9. How to enable the flow of public fund to address market failures without giving anti-market advantage to state owned operators? How to support state owned Telecom operators to compete in equal terms with all other operators?

10. How to determine optimum vertical as well as horizontal segmentation of the industry and also how to determine optimum number of operators in each of those segments?

11. How to maximize benefits from economies of scale and scope, and dynamic efficiency without opening the door of market power accumulation to exercise monopolistic behavior to cause deadweight loss? BSCCL’s pricing of bandwidth, before the advent of ITCs, to maximize profit is one of worst examples of deadweight loss caused by a monopoly—even a state owned one.

12. How to have optimum taxation regime so that loss of consumer surpluses, particularly at the bottom of the pyramid, caused by taxation is not more than collected tax? If it happens, the justification of tax collection does not make sense.

From an overall perspective, it seems that philosophical aspect of the process of formulating Telecom policy has been stated in the Draft National Telecommunications Policy of Bangladesh, posted by the Ministry of Telecommunication in August 2015. We hope that upon taking feedbacks on this initial philosophical outline, actual process will begin to address pressing issues through policies of strengthening market forces. Such policies should provide mechanism to implement strategies to address those mentioned issues by defining appropriate industry structure, optimum number of operators and their boundaries, market friendly competitive behaviors, technology and spectrum utilization, and role of state intervention so that consumer benefits from economies of scale and scope, and dynamic efficiency are maximized. It should be noted that core challenge is to nurture profitable competition of private investment to lower price, increase utility, and accelerate penetration to maximize both consumer and producer surpluses simultaneously. For this purpose, significant work yet to be done to define appropriate Telecom Policy for Bangladesh---to guide us over next 10 years.