Reforming Pakistan’s Telecom Regulations for a 5G and IoT Future

The telecom industry in Pakistan has made notable advancements in recent years, yet as the world moves toward the high-speed era of 5G and the Internet of Things (IoT), the country’s regulatory framework is beginning to reveal its limitations. While the existing regulations served the needs of 3G and 4G technologies well, they are proving insufficient for the demands of these next-generation innovations. There is a need to reform Pakistan’s telecom regulations for a 5G and IoT future. This article delves into the key regulatory challenges and the necessary changes that could set Pakistan on a transformative path toward a connected digital future.

Reforming Pakistan’s Telecom Regulations for a 5G and IoT Future

Current Regulatory Landscape and Infrastructure Readiness

Pakistan’s telecommunications sector is primarily regulated by the Pakistan Telecommunication Authority (PTA) and the Ministry of Information Technology and Telecommunication (MOITT). These entities are responsible for licensing, spectrum allocation, and enforcing telecom policies. However, the current regulatory framework largely focuses on traditional telecom services and provides limited provisions for newer technologies like 5G and IoT.

As of 2023, Pakistan’s mobile broadband penetration stands at about 53%, with 4G networks primarily concentrated in urban areas. Fibre-optic connectivity, a critical requirement for widespread 5G implementation, remains sparse, with only about 20% of the country’s land area covered. This limited fibre infrastructure, compounded by ongoing regulatory delays, has stunted the progression to 5G. Although the PTA conducted limited 5G trials in partnership with international firms in 2019, full-scale commercial rollout remains on hold, as mobile operators express concerns about the nation’s readiness to adopt 5G.

Spectrum Allocation and Pricing Issues

In any wireless communication technology, spectrum serves as the backbone, and 5G’s requirements demand broader, high-frequency bands to enable its full capabilities. In Pakistan, however, spectrum allocation has long been hampered by prohibitively high pricing that too in dollar currency and complex bidding processes that deter investment. The 2014 spectrum auction, for example, raised over $1 billion, but the high auction floor prices and restrictive conditions discouraged operators. Zong was the only operator to secure both 3G and 4G spectrums, while others acquired only 3G, reflecting limited interest and affordability.

Subsequent spectrum auctions in 2016 and 2017 saw a single operator participate each time, and again, bidding was minimal, with the licenses acquired at floor prices. By 2021, all major operators except Ufone withdrew from the bidding process due to unsustainable pricing. This trend signals a critical need for a well-organized spectrum auction with affordable, flexible payment options. Long-term leases and deferred payment models, which have been successful in other countries, could stimulate competition and foster a more comprehensive 5G rollout in Pakistan.

Infrastructure and Rural Connectivity Challenges

The high cost of building and maintaining telecom infrastructure remains a barrier to widespread 5G and IoT adoption in Pakistan. Over 60% of the population resides in rural areas, where high-speed connectivity is sparse, and telecom operators face significant financial burdens in deploying the necessary infrastructure. Current regulations lack incentives for infrastructure sharing between telecom operators, which results in redundancy and escalated costs.

A more supportive regulatory approach could encourage infrastructure sharing, allowing telecom operators to reduce costs through collaborative efforts, especially in remote areas. Network-sharing agreements, as well as subsidies for rural deployment, would enhance connectivity in underserved regions, driving digital inclusivity across Pakistan.

Taxation and Import Duties: A Financial Strain on Growth

The telecom industry in Pakistan is heavily taxed, which constrains operators’ ability to invest in new technologies and upgrade their networks. The government imposes a General Sales Tax (GST) on telecom services alongside substantial import duties on essential equipment. Recently, the GSMA urged the government to eliminate the 15% Advance Income Tax (AIT) on telecom services and the 19.5% sales tax on mobile services, arguing that these taxes restrict digital access, particularly for low-income households.

Reduced taxation and tax exemptions on 5G and IoT equipment could drive investment in these technologies. Neighboring countries, such as India, have implemented tax incentives for 5G infrastructure, accelerating their network deployment. Pakistan could benefit from similar relief, allowing operators to prioritize infrastructure and technology upgrades.

Privacy and Security Gaps in Regulatory Standards

As 5G and IoT bring data and cybersecurity challenges, Pakistan’s current regulations fall short in ensuring adequate protection for consumers and industries. While the National Cyber Security Policy introduced in 2021 aims to address cyber threats, its slow implementation has left Pakistan’s digital infrastructure vulnerable. The Prevention of Electronic Crimes Act (PECA), enacted in 2016, intended to curb online crimes, yet it has drawn criticism for vague definitions and restrictions that risk stifling free expression rather than promoting data security.

For effective data protection, Pakistan could implement a robust privacy framework like the European Union’s General Data Protection Regulation (GDPR). Such legislation would protect consumer data, build trust in IoT and 5G solutions, and establish Pakistan as a more secure environment for digital innovation. Strengthening cybersecurity regulations is crucial for attracting investment in IoT and 5G applications, especially in sensitive sectors like healthcare and finance.

Internet Consistency and Regulatory Impact on Service Quality

This disruption to connectivity, combined with unclear regulatory guidelines, makes it difficult for operators to offer reliable service, ultimately undermining user trust in Pakistan’s telecommunications infrastructure.

In addition to service interruptions, the government’s import restrictions have compounded the industry’s difficulties. Last year, a ban on Letters of Credit (LCs) severely limited operators’ ability to import essential equipment, impacting network expansion and quality upgrades. On top of this, operators are required to contribute a significant portion of their revenue to the Universal Service Fund (USF) and the Ignite Fund, which are intended to improve digital accessibility and innovation across Pakistan. These financial burdens, combined with rising operational costs, put immense pressure on telecom companies that are already struggling to maintain service standards.

Furthermore, the recent government mandate requiring operators to install firewalls to monitor and secure network traffic has complicated matters further. While security is a priority, this mandate has led to technical issues and service disruptions, creating additional operational hurdles. The lack of a clear, supportive regulatory framework is driving operators away from the market, with Telenor’s recent exit highlighting the impact of these uncertainties on investor confidence. Without clear regulations and reforms to encourage stability and quality improvements, the future of Pakistan’s telecommunications sector remains uncertain, potentially leading to limited investment and growth in a crucial industry.

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Interoperability and Standardization for IoT

For IoT adoption to succeed, devices and systems need to be interoperable across industries. In Pakistan, the lack of standardized IoT protocols complicates deployment and increases costs for companies. Establishing universal standards in collaboration with global organizations, such as the Open Connectivity Foundation (OCF) and the 3rd Generation Partnership Project (3GPP), could enable devices from different manufacturers to work cohesively. This would simplify IoT implementations across sectors like healthcare, agriculture, and manufacturing, lowering costs and ensuring a seamless user experience.

Prospects for 5G and IoT in Pakistan

Pakistan’s journey toward widespread 5G and IoT deployment hinges on regulatory reform that aligns with the dynamic needs of these advanced technologies. Current spectrum auction practices need overhauling to make 5G viable for operators. Shifting spectrum payments from US dollars to Pakistani rupees could stabilize costs, allowing operators to navigate currency fluctuations more effectively. Similarly, facilitating license and infrastructure sharing would foster cost-effective deployment, especially in rural regions.

A consistent, supportive regulatory environment will be essential for telecom operators to invest confidently in Pakistan’s digital future. Ensuring the right policies and frameworks will not only accelerate 5G and IoT adoption but also help position Pakistan as a digitally competitive nation in the global landscape.

A Roadmap for Telecom Regulation Reforms

To unleash the potential of 5G and IoT, Pakistan must undertake substantial regulatory reforms. The current framework, crafted to support legacy technologies, does not accommodate the complexities of next-generation innovations. Reforms in spectrum pricing, currency stability for transactions, tax incentives, infrastructure-sharing agreements, and internet reliability are fundamental steps toward a prosperous telecom sector. Addressing these regulatory gaps will pave the way for Pakistan’s transition into a digital economy powered by 5G and IoT, fostering growth and global competitiveness.