The battle for 4G in the North

In 2014, the much hyped telecommunications spectrum auction introduced the country to 3G and 4G technology, propelling it into an ever evolving world of breakneck mobile broadband-like internet speeds where business, education, health, and communication are all at the powerful whim of high speed, top of the line internet connections. But while the rest of Pakistan underwent its transition, Gilgit-Baltistan and Azad Kashmir languished behind.

Why? Because in 1976, the Pakistan Army had been the ones to set up telecommunications in the two mountainous and relatively inaccessible regions under the auspices of the Special Communications Organization (SCO) – an army-run organization that runs, and is responsible for telecommunications services in Azad Kashmir and Gilgit-Baltistan. The auction was for private telecom providers, and the SCO is anything but.

The long wait for access to 3G and 4G internet in these regions has come to an end, however, because the services are set to be officially offered in the regions by early next year. The key, however, is the word ‘officially.’

Perhaps they were tired of being left behind and forgotten in yet another way by Pakistan, especially because of something that happened back in 1976. Because despite there not having been any official licenses granted, private telecom providers have been offering 3G and 4G services in these regions for some time now, and the people of Azad Kashmir and Gilgit-Baltistan have been just as avid consumers of mobile broadband internet as the rest of Pakistan.

The development has been delayed beyond what is reasonable. It is 2019, after all, and your world moves at the speed of your internet. One can sympathize with the residents of the northern areas wanting access to something that is quickly becoming a necessity, and the telecom companies were simply obliging, even if their provision was not, strictly speaking, legal.

A deeper dive into the issue of spectrum telecom in Azad Kashmir and Gilgit-Baltistan will show that while the official 3G and 4G licenses will only be granted by the government in 2020, it is fair to assume that telecom companies have in the meantime been cutting corners, and providing these services to the regions anyway. The ensuing history that will be revealed regarding telecom operators and their licenses in Gilgit-Baltistan and Azad Kashmir, will be as fraught and convoluted as the histories of these regions themselves.

The beginning

In 1976, during an official visit to Gilgit and Kashmir, Prime Minister Zulfikar Ali Bhutto found himself cut off from the rest of the world. Kashmir and Gilgit were still off the phone grid, causing great annoyance to the prime minister. As with all easy fix solutions, Bhutto decided to turn to the military (he still liked them at this point) to solve the communication woes of these northern regions of the country.

Ideally, the private sector should have been able to provide telecommunication solutions to Gilgit and Kashmir, but when they did not come through, the Prime Minister turned to the military. At this point, government telecommunication services were T&T’s responsibility – Pakistan’s Telegraph and Telephone Department and the SCO, which worked under the Ministry of Defense and was providing services to both army and civilian consumers, but primarily to the state authorities and armed forces.

In 1976, the SCO was given the sole responsibility of managing telecommunication in Gilgit-Baltistan and Azad Kashmir. The very same year, the T&T department was transformed into the Pakistan Telecom Corporation (PTC). The new PTC now had four departments: Pakistan Telecommunication Authority (PTA), Frequency Allocation Board (FAB), National Telecom Corporation (NTC) (for government departments, the folks who run the “92” numbers) and PTCL – a public limited company for retail customers.

By the late eighties, the SCO continued to dominate the market in Azad Kashmir and Gilgit-Baltistan. By this time the government had decided to level the playing field and allowed private telecommunication companies to operate in the area, but the SCO still remained the biggest telecom operator in Gilgit-Baltistan and Azad Kashmir, and its authority was preserved through Section 40 of the 1996 Pakistan Telecommunication (Re-Organization) Act, initially promulgated through the 1994 Pakistan Telecommunication Ordinance.

But then the first revolution took place: mobile services. During the early 1990s, InstaPhone and Paktel pioneered mobile telecommunication services in Pakistan, and were later joined by Mobilink in 1998. All three companies began AMPS (Advanced Mobile Phone System) services before moving on to Global System for Mobile Communications (GSM) services in the early 2000s.

Ufone entered the mobile services market in 2001, which until now was heavily regulated and offered expensive rates to consumers. In January 2004, the Ministry of Information Technology announced a new ‘Mobile Cellular Policy’, deregulating the market and encouraging private investment in the cellular mobile sector. 

It was this year that the SCO finally launched GSM cellular services in Azad Kashmir and Gilgit-Baltistan regions, and formed the current brand SCOM. Within one year, international companies like Telenor and Warid set up their operations in Pakistan, but Gilgit-Baltistan and Azad Kashmir still had to wait a long time before they received service from any operator other than SCOM.

Ground realities

As things stood, the SCO seemed set and content in its role. What shook things up was the Next Generation Mobile Networks (NGMN) services, 3G and 4G. As of October 2019, Zong has announced the start of their operations in the area, while Telenor and SCOM are already offering these services in Gilgit-Baltistan and Azad Kashmir, with other telco operators looking forward to joining them. Interestingly, these services have as many opponents as they do contestants.

SCOM claims that no one other than the SCO has the authority to provide mobile services in the area, since their monopoly was never removed. The PTA argues that in the spirit of the Mobile Cellular Policy’s aims of improving fair competition, other ‘licensed’ operators also have the authority to offer these services. 

Gilgit-Baltistan Chief Minister Hafeezur Rehman terms both SCO and private operators’ services illegal because there has not been a proper auction for any player to provide these services. 

Meanwhile, the Islamabad High Court has ruled that all operators must continue their services until the legal issue of licenses vs monopoly vs auctions is resolved. And not to forget the consumers from the northern areas here, who are dissatisfied with the status quo because of poor service standards of SCOM and sparse coverage from any other operator, if at all.

And as with any problem of this magnitude, the core issue remains that of money. SCOM argues that limited powers of operating in Gilgit-Baltistan and Azad Kashmir is causing it an “annual loss of Rs1 billion.” The Gilgit-Baltistan government is irate over loss of auction fees, which according to the chief minister, are in the “billions of rupees”.

Azad Kashmir’s problems began in 2005, when the PTA allowed private telecom operators to offer services and entered into an agreement with Azad Kashmir Council to share licensing fees 50-50. The PTA, of course, has already issued those licenses to operators for a hefty sum of money. And the consumers are lamenting the high prices they have to pay because of not having any alternate option but to yield to the service provider available.

The good, the bad, and the auctions

One of the recurring themes in this problem remains that of auctions for 3G and 4G licenses. In the rest of the country, all telecom operators have followed the path of the PTA in issuing expressions of interest (EoI) to choose consultant companies to conduct the auction for rolling out these services, then short listing companies to issue these licenses to, and finally the chosen telecom operators are granted the authority to operate in the market.

In Gilgit-Baltistan and Azad Kashmir, these auctions have not taken place, and while the solution to this problem may be seemingly obvious, the facts remain complicated. For starters, SCO says that it is neither required nor allowed to become part of any such auction even if it were to take place. 

“In 2016, Azad Kashmir council and Azad Kashmir ministry said that they wanted 3G and 4G in that area. The then Nawaz Sharif [PMLN] government decided that since SCO is government owned so if they are to operate the government will pay them itself. Therefore SCO was not to be seated in the licenses’ auction,” said SCO Director Regulatory Affairs (Headquarters) Col Ghulam Hussain Anjum.

As to why the PTA’s auction became controversial, that is another long story that dates back at least three years. The first time it was formally decided to equip Gilgit-Baltistan and Azad Kashmir with 3G/4G was in September 2015. 

A high-level meeting was held, under the chairmanship of the then federal minister for Kashmir and Gilgit Baltistan affairs Chaudhry Barjees Tahir and attended by then PTA chairman Dr. Ismail Khan, member telecom of Federal Ministry for Information Technology Mudasir Hussain, Federal Secretary of the Kashmir and Gilgit-Baltistan affairs Abid Saeed, Additional Secretary Azad Kashmir Council Ameer Ashraf, Joint Secretary Gilgit-Baltistan Council Ajmal Gondal and other concern officials arrived upon this decision. The formal process, however, did not start until early 2016.

In 2016, the PTA announced ]that the auction for Next Generation Mobile Services will be held on May 16 the same year. It published a memorandum that laid down all the rules, procedures and timetable for the auction with the base price set at $295 million. Gilgit-Baltistan was excluded from this auction. 

The regions’ turn came next year, or was rather supposed to come the following year. In August 2017, the PTA announced it was ready to auction 3G/4G spectrum services in Gilgit-Baltistan and Azad Kashmir. A policy directive was issued that offered different frequencies for licenses and earmarked one of those for SCO.

At this point, the PTA decided to hire a consulting firm and called for Expression of Interest (EoI) by September 15, 2017, which ended up being delayed until the end of September, and was followed by another delay going till October 19. 

The PTA finally decided on two companies to proceed with the auction, and claimed that these regions were expected to have legal 3G/4G services by February 2018. 

Details on this auction and licenses are a little murky which, coupled with PTA’s refusal to respond to Profit’s queries, left us with little knowledge on the prices and details of the licenses that were issued and to which companies. However, Zong announced soon after this auction its plans to launch next generation spectrum services in the area from May 5, 2018.

But before this could come to fruition, the SCO filed a petition in April 2018 under Article 71 of the 2009 Gilgit-Baltistan Empowerment and Self-Governance Order, challenging the Pakistan Telecommunication Authority’s (PTA) decision of issuing licenses to cellular networks for launching 3G and 4G spectrum in the mountainous region.

The Gilgit-Baltistan Council, PTA, Frequency Allocation Board and the Gilgit-Baltistan government were made as respondents, with the claim that SCO had the monopoly to provide the said services in the region.

This lawsuit came in the wake of another tussle that was going on between PTA and SCO regarding PTA’s refusal to grant the Long Distance International (LDI) license to SCO to operate across the country. Ministry of Information and Technology maintains that issuing such a license will go against PTCL’s agreement with Etisalat and can lead to huge penalties. 

The PTA maintains that SCO did not fulfill the codal formalities in their application for the said license. SCO in return argues that while they have been entrusted with exclusive operating rights in Azad Kashmir and Gilgit-Baltistan, PTCL and other companies still operate in the region so they should be allowed to do the same in rest of the country. 

It is difficult to estimate whether the NGSM battle is also a continuation of this previous row, but regardless it resulted in suspension and then resumption of 3G/4G services for the residents of Gilgit-Baltistan and Azad Kashmir areas.

Regarding this case, an SCO official told Profit that in 2017, the government had paid SCO money and they conducted trials in Azad Kashmir and Gilgit-Baltistan both, and provided free service to the consumers for six months. When the PTA decided to do their auction, they tried to stop SCO.

According to the SCO, source, the only reason the PTA asked them to stop was because the auction would not yield the desired result if SCO already providing these services. 

To this effect, the Azad Kashmir Prime Minister apparently personally requested SCO not to suspend service, after which they approached the Azad Kashmir government, the secretary was Pir Bux Jamali and minister for Kashmir Affair was Birjees Tahir at that time, and they instructed the PTA to issue an NOC and not try to stop SCO from providing 3G and 4G services.

At the same time, however, our source admitted that private companies that only have 2G licenses and despite not having the required permissions, still end up providing 4G services because they already have the necessary infrastructure.

In fact, before the previous government terminated the Azad Kashmir council, there were four federal responsibilities that the Azad Kashmir government had to perform – communication, defense, currency, and foreign affairs.

“Communications was given to the council and with it gone; now it is back to the federal government. In Gilgit-Baltistan, now the communications responsibility is also with Prime Minister of Pakistan. So now, since 2018, neither Gilgit-Baltistan nor Azad Kashmir has the right to issue the license as of now,” said the SCO official. 

“We are protected by the law, we have never taken money from anyone, and we have the right to operate in Northern Areas and Azad Kashmir to the exclusion of all other operators. We don’t have entered into any private operator to work with them either. We are completely independent operators and bear no responsibility for what other operators may be doing”.

Much of the same was claimed in SCO’s petition, which termed the launching of 3G/4G services by other operators as “unlawful authority”. The petitioner also claimed that the auction held by the PTA was an attempt to restrain the SCO’s trial-basis services already going on in the region. 

The IT ministry’s response to this case and claims made by SCO was that the army owned company not only takes 80 percent of the IT ministry’s budget every year, but has also been seeking free licenses, income tax exemption, as well as exemption from customer duties and turnover. As of now, the court has allowed SCO to operate their trial basis services and has also directed other private operators to continue with the launch of their services.

A statement received from Telenor on this allegation by SCO and by Azad Kashmir chief minister, Telenor Pakistan’s Chief Corporate Affairs Officer Kamal Ahmed said, “We are already providing telecom services including data, in Azad Kashmir under the license which covers both Azad Kashmir & Gilgit-Baltistan and our provisioning of such services has been endorsed in terms of stay order granted by Azad Kashmir High Court in our favour, and therefore we are within our legal rights to launch data services and add the region of Gilgit-Baltistan falling under the same license.”

SCO’s official stance on IT ministry’s and Gilgit-Baltistan’s allegations is that since SCO is government owned, even if they have to pay a license fee, it will be coming from the government itself and going back to the government kitty, thereby them not sitting in an auction or paying the fee is not causing any loss to the national exchequer.

According to the latest reports, Telenor has started 4G services since September 2019 and as per a local newspaper report from Gilgit-Baltistan, Zong also has some coverage in the said areas. After all is said and done, it is anybody’s guess to define the legality of private telecom operators in Gilgit-Baltistan and Azad Kashmir or SCO’s monopoly. 

From a solely market standpoint however, and perhaps taking into account the plight of the local communities, one might say that telecommunication is as much a need in modern times for consumers as it is a profitable business for providers. Thereby rendering a monopoly in telecom a much less favorable option than fair competition and variety of services, irrespective of what was decided in 1976.