Will 3G end the market for Conventional Broadband Service Providers in Pakistan?

Sibtain Jiwani
June 05, 2014

3g-vs-broadbandWill 3G end the market for Conventional Broadband Service Providers in Pakistan?

In a word, NO!

Based on current infrastructure, Pakistan is some ways off in even launching proper 3G service, let alone 4G.  The market for trial 3G services is not even a month old and only offered in limited geographical zones within the popular urban centers of Karachi, Lahore and Islamabad.

The average smart phone user is still figuring out, on how to use, the limited 3G trial services currently available.  It was less than 2 weeks ago that the Pakistan Telecommunication Authorities formally awarded 3G licenses to the successful bidders of last month’s 3G and 4G auction.

The nature of 3G technology is such that it will be quite some time before it makes older technologies like DSL, Wimax and Cable irrelevant. In his 2012 article for PCMag, Sasha Sagan presents the technological elements of  the Wimax vs 3G and LTE debate.  While the article focuses primarily on mobile phone networks, the implication is clear.  Customers will always opt for higher bandwidth that is consistent. Towards that end, they will ultimately opt for 3G and 4G.

However, based on infrastructural, product and pricing constraints, Pakistan is still a long way off from this switchover.  In a recent report for Express Tribune, Farooq Baloch presents some of the infrastructural challenges that have to be met before 3G and 4G service is even widely and properly available. Some of the comments for this article are equally instructive including this exercpt from the optimistic commentator Garam Aaanday:

“………In a Nutshell 3G+4G Deployment requires less than 1 year to be implemented throughout Pakistan.”

Until then, it will be difficult to see the real effects of the switch over from DSL and Wimax to 3G and LTE.  Nonetheless, even after successful implementation of 3G and LTE networks, the Pakistani internet user is not likely to completely discard older technologies.

This study by Delta Partners highlights that the latest technology might not always be the most optimal for every user. The usage patterns, as highlighted in this study, are actually quite paradoxical and show that it is rural users who will benefit more from 3G and LTE networks as opposed to existing urban users in higher population densities.  Urban users who still be better served by continuing with their DSL and Wimax service providers.

In a country like Pakistan, it is difficult to see Wimax, DSL and cable becoming obsolete in the near future. Aside from infrastructural concerns, it makes more sense to view the newer 3G and LTE services as complimentary products to the existing Wimax, DSL and Cable services currently being offered.

One must not forget that these existing services represent those companies that have survived intense competition.  These companies also include the semi-private PTCL – a national behemoth that provides multiple products and whose existing infrastructure is unbeatable in the short run.

Similarly, even if it is premature to talk of pricing, one can safely argue that the successful bidders for 3G and LTE services need to recoup their auction bid.

(At this point, and for the purposes of this article, it is pointless to highlight the alleged problematic nature of the auction where the successful bidders will simply be adjusting their existing receivables with the PTA).

With Data usage packages being quoted at Rs.20/Mb (Zong) and comprehensive bandwidth packages likely to cost multiple times the existing bandwidth packages, the 3G and LTE customer is already looking at a hefty increase in their internet costs.  Furthermore, the market for such services is also restricted by the smart phone owner market in a developing country like Pakistan. Segment the 3G and LTE market further and this niche market shrinks even further as the price range for smart phones supporting LTE makes such a service affordable to only a select few. This is likely to make pricing even more uncompetitive compared to existing technologies.

There is no doubt that video steaming and video calling appear very enticing but how large is this market segment in Pakistan?

With increasing censorship and the prevailing ban on YouTube, the compelling attraction to switch to 3G and LTE reduces further. In the long run, DSL, Wimax and cable may well go the way of the dial up internet connection. However, studies show that that is a slow and gradual switch over even in developed economies.  In a country like Pakistan, the introduction of 3G and LTE will simply serve as an incentive to the World calls and Qubees to further improve both their service and their pricing.  The Pakistani customer can finally be introduced to a technology that has been enjoyed by its Indian and Afghan neighbors for nearly a decade.  For an upbeat conclusion, that is not a bad place to be as a consumer.

Image courtesy www.jehzlau-concepts.com

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