Digital dilemma: building a firewall against growth

In today’s world, internet connectivity is as essential as electricity or running water. Remarkably, it remains one of the few services in Pakistan that is still relatively affordable, even as the country battles unprecedented inflation.

However, seamless access to the internet is becoming increasingly elusive. Telecommunications companies (telcos) are hesitant to invest in infrastructure and expand bandwidth, primarily because a cash-strapped government is more focused on generating revenue through spectrum auctions.

Despite suboptimal service, internet penetration and remote work, including freelancing, have continued to grow. Yet, the government’s recent efforts to install firewalls and ban social media sites threaten to undo much of the progress made in online job creation and productivity. These measures are also cutting into telcos’ revenues, further discouraging investment and tarnishing Pakistan’s international reputation.

Last week was perhaps the worst in terms of connectivity. Rumors in tech and telco circles suggest that authorities are attempting to install firewalls to control social media narratives. While the social implications of curtailing freedom of speech are significant, the economic impact could be even more severe.

Experts are uncertain about the specifics of what the authorities are installing, but the unintended consequences are clear: massive inconvenience and disrupted connectivity. Although the situation improved over the weekend, a looming question remains—was last week’s extreme slowdown a one-time glitch, or is this the new normal? If it’s the latter, the consequences for an already struggling economy could be disastrous.

The authorities appear to be experimenting with little regard for the collateral damage—a recurring theme in Pakistan over the past few decades, where experiments are conducted without learning from past mistakes.

The recent efforts to control social media began with a ban on X (formerly Twitter) a few months ago. Initially, no one in the government, including the then-IT minister, acknowledged the ban, and the Pakistan Telecom Authority (PTA) remained silent. Yet, ironically, government officials continued to access X using Virtual Private Networks (VPNs), which are technically illegal in Pakistan unless registered.

The government’s actions are a stark contradiction—banning social media while demonstrating how to bypass these bans. The irony is not lost on anyone, but it has not deterred those responsible for these restrictive measures.

As always, the laws of unintended consequences are having a broad impact, extending well beyond social media. Freelancers, particularly those using online marketplaces like Fiverr, are suffering. VPN usage causes their locations to appear inconsistent, making their accounts look suspicious and leading to suspensions. As a result, they are losing jobs—a significant blow in a country where youth unemployment is already high.

The recent installation of firewalls has slowed internet access across the board, affecting platforms like Facebook, WhatsApp, Instagram, Google, YouTube, and X. This slowdown is reducing productivity across all economic classes, particularly among lower-income groups who rely on voice notes for business communication.

The macroeconomic impact of this collective productivity loss is staggering. Telcos are also feeling the pinch. With 70% of their revenue coming from data, and half of that from Meta and Alphabet platforms, last week’s 65% traffic reduction led to a 30% drop in revenues. Why would any telco invest in infrastructure under such conditions?

Proponents of firewalls argue that Pakistan is not alone—countries like China, the UAE, and Saudi Arabia also impose restrictions on social media. However, the comparison falls short.

China, for instance, has developed homegrown alternatives that have allowed businesses to thrive and productivity to soar among its billion-plus population. Pakistan, on the other hand, cannot replicate this model. Most of the content consumed in Pakistan is produced outside the country, and banning it is akin to banning the internet itself.

If firewalls must be implemented, they should be targeted. Broad restrictions only push more consumers to use VPNs, which consume even more bandwidth, further slowing down the already limited internet. The direct impact is felt by tens of millions of domestic users, hundreds of thousands of freelancers, telcos, ancillary businesses, and ultimately, Pakistan’s global image. “Overall productivity loss could exceed a billion dollars per annum if these internet outages continue,” lamented the CEO of a major telco.

The government promised to bring PayPal to Pakistan, achieve 5G penetration, and transform the country into the next IT hub. Instead, the availability of 4G is becoming increasingly scarce.

The ambition to boost IT exports to $15 billion now seems like a distant dream, with even the current $2-3 billion becoming difficult to maintain. The government’s actions are not just stifling internet access—they are putting a firewall not only on future growth but, more disturbingly, on the dreams of a progressive nation that its youth may still harbour.

Copyright Business Recorder, 2024