Why capture telecoms?

Looking back, Pakistan might remember December 19 as a dark day in its economic history. That day, the federal government issued a directive transferring administrative control of five major, quasi-independent sector regulators to respective line ministries. The government has put on a defense using efficiency argument, but the move has been decried by nearly all stakeholders outside the government.

While political economy and CPEC pressures plausibly explain (if not justify) the takeover of Nepra, Ogra and PPRA, the takedown of Pakistan Telecommunications Authority (PTA) and the Frequency Allocation Board (FAB) makes no imminent sense.

The move is baffling. Unlike oil and gas, telecommunications is one of those few sectors where the government is not actively part of the marketplace. Policy folk cite the 2003-04 telecoms deregulation, which revolutionalized the ICT space by creating social and economic value for tens of millions of Pakistanis, as a model to reform-stubborn sectors such as oil and gas.

But that transformation had an able watchdog looking over. The telecoms fast and furious in the last decade and a half owes in part to the PTAs largely balanced, politically-neutral approach to develop the sector. In the PPP regime, one saw PTA becoming politically compromised as the 3G auction languished and the ICH cartel emerged. But the institution withstood that period, came out stronger under the current chairman, and has several regulatory achievements to boast.

This column struggles to find a single reason that can justify PTAs takeover. The Minister of IT, Anusha Rehman, and her counterparts in government, have argued in public that since the ultimate authority of the PTA doesnt change that is, it still rests with the Prime Minister the move would have no effect on regulatory performance. Instead, she maintained that the measure would help in value addition.

We acknowledge some upside. Under the administrative control of the Ministry of IT and Telecoms (MoIT), now the PTA affairs, summaries and reports would have one less federal division to worry about. The Attorney General has made a similar argument. It is fair to assume that now there will be less of paperwork involved and the ministry can save time and expedite things that matter on the policy front.

But the potential downside may be too much. The PTA members would suddenly feel less independent in making those reports and summaries and feel the pressure to oblige the ministrys demands, reasonable or not. They would constantly be looking over their shoulders while implementing government policy, exercising the regulatory powers, and prosecuting market players when and where it is necessitated.

In a sector where competition has largely worked smoothly and which has been a flagship when it comes to attracting FDI, messing with the regulatory structure may prove counter-productive. There are question marks now, for instance, over the competition reach of the CCP, which has already issued a policy note to the PTA to refrain from encroaching on its domain.

The governments broad overreach has already invited litigation. One hopes that the courts would rule and uphold in the favor of regulatory autonomy, transparency and competition. The technocrats at the MoIT should dig their heels and argue for regulatory independence. They can still do that. The otherwise vocal mobile network operators should also speak out. Otherwise their cryptic silence will suggest they acquiesce in this (anti)development.