There is a report in the media that a mobile network operator (MNO) has been penalised for offering fibre optics Internet services to a large state-owned bank. If MNOs offer better broadband connection at lower price, why should we not welcome it? If terms and conditions of license do not permit, should we not change them? At the end of the day, the purpose of telecom sector regulation is to create opportunities for profitable competition among multiple operators to offer high quality service at low cost to consumers. The focus of policy and regulation should be adapted with the evolving opportunities to intensify competition for increasing both consumer and producer surpluses simultaneously. It appears that the given license does not allow MNOs to offer Internet service over the wireline infrastructure. On the other hand, there appears to be very slow growth of wireline broadband penetration. If MNOs can do the job far better than the licensed Internet service providers (ISPs), why should not the policy makers and regulator review the situation to bring necessary amendment?
The mobile network operators are being lauded for their role in increasing tele-density in Bangladesh, like many other developing countries, from less than 1.0 per cent to more than 60 per cent - just over a span of one and half a decades. But during the same period of time, the wire-line infrastructure, particularly for providing quality Internet service, connecting consumers to broadband service is yet to show noticeable progress. Although it's being claimed that during the last one decade nationwide transmission network has significantly improved reaching to 54,228 kilometres (as stated in the media), but consumers are finding wireline Internet connection to be at the same sorry state as it was before. As a result, despite the ramp up in 3G Internet penetration reaching to 28.8 million in fiscal 2015-16, the wireline Internet penetration is being reported to experience negative growth. Does it mean that the demand for wireline Internet in Bangladesh is very low? If that is true, why are we noticing reports that the a mobile operator is making substantial revenue by providing fibre optics-based wireline connections? Despite having the risk of being penalised why is a highly profitable mobile operator so eager to roll out wireline Internet service?
In Bangladesh, more than 50 Internet Service Providers (ISPs), including state-owned Bangladesh Telecommunication Company Limited, are in the business of providing wireline Internet connections. It's being reported that these ISPs are struggling to remain in business as both the profit and growth rate are shrinking. In such a fiercely competitive market, the entry of a highly profitable mobile company in offering wireline Internet connection to a state-owned bank raises several questions. The first question is that if the scope of making profit in wireline Internet market is very low, why is there an interest among mobile network operators (MNOs) to enter this market? The second question is about the availability of nationwide fibre optics network which is accessible to wireline Internet service providers to offer quality broadband service connecting offices spread across the nation. The third question is about the cost and quality of connections.
Private Nationwide Telecom Transmission Network (NTTN) providers have the largest segment of the transmission network. Altogether, they have more than 36,000 km fibre optics network, consisting of almost 66 per cent of the nation's facility. As per the regulation, this whole network is accessible to any ISP in a non-discriminatory terms and conditions, as NTTN operators have been allowed to deploy the network only to serve the transmission need of ISPs. Moreover, mobile network operators are bound to lease unused fibre optics transmission network to NTTN operators to sublease it to ISPs. Therefore, it could be reasoned that ISPs have access to all available nationwide transmission networks, irrespective of ownership. The ISPs are using the same transmission network as used by MNOs, whether that is owned by MNOs or laid by NTTN providers. Therefore, the quality at the transmission level should be the same, whether the consumer end connection is provided by ISPs or MNOs. The question could be at the local loop. Mobile network operators are not specialised in providing local wireline loop; rather this is the area of specialisation of ISPs. Moreover, ISPs have already wireline business serving both residential and commercial customers. So in terms of cost, being largely affected by scale and scope, ISPs are supposed to be least-cost providers. In such a scenario, what is the proposition of developing profitable wireline service business for MNOs? Does it mean that MNO in question is attempting to cross-subsidise the wireline service to weaken the competition? Through predatory pricing, using subsidy, it may not be difficult for a highly rich MNO to crowd out competition in the wireline segment as most or may be all of the wireline ISPs are financially in a very vulnerable situation. Once ISPs are driven out from the market, it would make it easier to marginalise the operation of NTTN operators. The progression along this line will lead to accumulation of monopolistic market power for MNOs.
The question could be, if monopoly provides better quality at lower cost, why should we not welcome it? What is the argument in favour of customers to limit the boundary crossing of a large provider? If a large provider offers better service at lower cost, why should we not change terms and conditions of the given license to rather welcome such a move?
While an operator aggressively reduces the price and improves the quality, mostly incurring loss, to weaken the competition to monopolise the market, mistakenly it's being perceived that such a situation is a welcome development of competition for the consumers. But due to such predatory practice once competitors exit the market, will the monopoly keep offering the same value to consumer at the same price? The likely answer could be NO. In order to maximise profit, the monopoly will be producing far less than the socially optimal quantity, causing deadweight loss to society. Once a state-owned monopoly in international connectivity showed this behaviour. That monopoly kept significant capacity of submarine cable unused, because the company was maximising profit by selling only a small fraction of the capacity at a very high price - wasting the capacity, while the consumers were suffering from very slow Internet connections. The advent of competition due to the entry of International Terrestrial Cable (ITC) providers changed the scenario. Despite having good intention, due to information asymmetry, the regulator will be helpless to find instrument to regulate the price of the monopoly. On the other hand, due to the absence of competition, the monopoly will have no incentive to risk investment to innovate and pursue supply-led strategy to offer better products at lower cost to consumers. It's time to investigate the matter from the perspective of competition strategy. Necessary measures should be taken to intensify healthy competition among ISPs and to prevent counter-competitive strategy of others, including the mobile network operators, to weaken the competition with a view to monopolising the industry. This should be done to ensure better quality service to consumers at a lower cost under the condition of sustainable competition.
M. Rokonuzzaman, Phd is Professor, Department of Electrical and Computer Engineering,
North South University.
[email protected]
