The National Economic Research Associates Inc. (NERA), a leading US-based consultancy, has recommended critical changes for Pakistan’s upcoming 5G spectrum auction. Addressing the National Broadband Network Forum 2024, NERA emphasized aligning pricing and policies with regional and global standards to ensure long-term sector growth.
Key Recommendations:
Rupee-Based Spectrum Pricing:
Pegging prices to the Pakistani Rupee would mitigate risks caused by currency devaluation. Since 2021, the Pakistani Rupee has devalued by 70%, raising spectrum costs significantly.Lower Reserve Prices:
High spectrum prices deter investments and competition, leading to slower innovation and poorer consumer outcomes.
Extended Payment Terms:
Inspired by countries like Vietnam and Indonesia, NERA suggests easing payment conditions to support network investments.Spectrum Availability:
- Release the entire 190 MHz spectrum in the 2600 MHz band, including portions under litigation.
- Address delays and ensure no unused spectrum is reserved unnecessarily.
Promote Fiber Optic Backhaul:
Only 15% of Pakistan’s 55,000 mobile towers use fiber backhaul, far below global standards. Fiber optic infrastructure is crucial for reliable 4G and 5G services.Accelerate Smartphone Adoption:
With only 1% of current devices 5G-capable, policies to reduce smartphone costs (e.g., cutting import taxes) could boost adoption.
Challenges Highlighted by NERA:
Spectrum-Starved Market:
Pakistan ranks the lowest in South Asia for spectrum allocation, per GSMA’s 2023 report.Policy Inconsistencies:
Unfavorable terms, such as requiring operators to buy less desirable bands before accessing sought-after ones, hinder sector growth.Inflation and Forex Risks:
Spectrum tied to the dollar further increases costs amidst rupee depreciation.
Infrastructure Sharing and Reforms:
The federal government’s Telecom Infrastructure Sharing Framework (2023) could enable active and passive infrastructure sharing, driving affordability and profitability. Optimal utilization of this framework is critical for long-term success.
Long-Term Revenue Perspective:
High spectrum prices yield short-term revenue for governments but risk stifling innovation and competition. Lower prices, on the other hand, enable a vibrant telecom sector, ultimately contributing to greater government revenue through broader economic growth.
NERA’s insights highlight the need for a balanced, future-focused approach to spectrum auctions, ensuring Pakistan remains competitive in the global digital economy.
