August 19, 2016

The Telephone Sector Should Have Been Privatized Long Ago

Women using their mobile phones seen in Yangon. Photo: Yelay (gnlm)
Women using their mobile phones seen in Yangon. Photo: Yelay (gnlm)

We are about sixteen years late in privatizing the telephone sector. It should have been done by the year 2000. The International Telecommunication Union (ITU), a specialized agency of the United Nations based in Geneva, Switzerland, had been advising all its member countries, of which we are one, as early as 1994 to privatize them. In October, 1994, “The Telecommunication Towards The Year Two Thousand Seminar”  was held in Bangkok under the joint aegis of the World Bank and the ITU. A senior executive of the ITU, in his keynote speech said, “Whether you like it or not, the telephone entities of all the countries attending the seminar, should be in the hands of the private sector by the year 2000”. He pointed out that those who do not get it done by then would lagged behind”.
Representatives from the Asian Pacific nations attended the seminar and I represented Myanmar at that seminar. The countries that had already privatized and those in the process of planning to privatize spoke about their procedures and plans. In those days the Myanmar Post and Telecommunications (MPT) had no immediate plan to privatize, thus I spoke about the present situations of our entity only, in my presentation. Apart from being an interested observer, I did not actively participate in discussing the privatization, while others were enthusiastically asking questions to those who had privatized. However, I followed the discussions with great interests and made notes of the salient points, so that I would be able to prepare a  comprehensive report on my return.
We were not the only ones who were not ready for privatization but there were many Asian countries like us. As far as I can remember, only Indonesia, Japan, Korea, Malaysia, Philippines, Singapore and Thailand had already privatized. India was still in the process of privatizing. All the other Asian countries had no immediate plans to privatize. As for the Pacific nations, I will not be discussing them.
At that time I was serving dual roles: as the Deputy General Manager ( Admin:) of the MPT and also as the Head of Office at the Ministry of Communications, Post and Telegraph. As I wanted to submit a comprehensive report I was preparing it meticulously, describing in detail what and how the countries that had already privatized, did. On the other hand, as I had to see to the smooth running of the two offices under my charge, my report was a bit delayed. As my superior was anxious to know about the seminar, I had to report verbally, before I could submit the written report.
In doing so, I mentioned in detail, the two good examples of privatizations, which I learned at the seminar. One was that of the Philippines. They have a Commission headed by a Commissioner who is directly responsible to the President to handle the privatization process. The Minister of Telecommunications had no authority over him. In my opinion he has more freedom and also free from conflict of interests in carrying out his duties. That arrangement would surely promote free and healthy competition among the different telephone servers, including the state-owned entity. As the Commissioner is the sole authority for the private sectors, the state organization has no authority over them. That would afford an equal and fair competition. The tariff rates would be significantly reduced and the services would be more efficient, benefiting the subscribers.
The second example was that of India. They also formed a special Commission headed by a Commissioner, who is directly responsible to the President (Prime Minister?) and not to the Minister of Telecommunications; somewhat similar to that of the Philippines. In both the countries all investors are required to take on local partners to be eligible to bid for the right to invest. One interesting thing in India’s case was, they gave priority to the security measures in allowing foreign servers into the telecommunication sector, as it is a vulnerable spot that could  jeopardize the independence and sovereignty of the country.
In reporting to my superior, I emphasized the necessity to consider planning for the privatization immediately. However, as he had his own ideas for telephone sector developments,  he was not convinced the privatization was urgently needed.
In those days the MPT was fulfilling the needs of the public by introducing the subscriber self-help scheme. That scheme required the subscribers to bear all the costs necessary to install the telephone. A lump sum of money, supposed to be the total cost for one telephone had to be paid in advance, before the project was implemented. That amount included the expenses for the infrastructures, such as: the telephone exchange equipments and accessaries. Along with them, motor vehicles too were bought with those funds. Actually, the expenses for the infrastructures and vehicles should be borne by the server; in this case it was the MPT.
The introduction of the subscriber self-help scheme started with the manuel exchanges in the Bago Region around 1993/94. Some twenty or so manuel exchanges were installed. The equipments were bought from a local trader who purchased them from China, just across the border. It was undeniable that the newly sprung-up exchanges caused noticeable network congestions. The second time was in Mandalay. This time it was the automatic telephones, so they cost more than those in Bago. As far as I can remember, the amount was about kyat three lakh per telephone. However, the subscribers were happy and willing to pay in advance the amount asked by the MPT.
At that time, as the demands for automatic telephones in Yangon were very high, the MPT expanded the capacity of the existing exchanges with own expenses. So the subscribers  need not pay in advance, but the price was raised to five lakh per telephone. Even then the public was ready to pay that amount gladly, if they were lucky or well connected to get the previlage of installing one. In the past, a subscriber need to pay only one thousand two hundred Kyats as deposit to get one telephone installed.
When the mobile phones were first introduced, they cost only five lakh including the hand sets. Later the official price of a sim card shot up to fifteen lakh. That price compared to other countries in the region was very high. However, even at such high prices, the demands were so great that we couldn’t fulfil all the needs. That led to the black marketing to set in and the price of one sim card rose to around forty lakh on the black market. The sim cards became commodities of trade.
I am of the opinion that the reluctance to privatize in those days must be due to the state policies, which I was in no position to know. The introduction of the subscriber self-help schemes, which were ready remedies to overcome the inability to fulfill the telephone demands due to lack of state budgets, provided some relief for the MPT and also pleased the public to certain extents. However, such practices are unheard of in other countries as far as I know.
Provision of a viable communications system is the responsibility of the state and if the state is not capable of doing it on its own, privatization should be considered. Due to the reluctance to privatize in time and the continuation of the monopoly on the telephone sector, and above all, the introduction of the subscriber self-help schemes are the root causes that led to the rampant corruptions that plagued the MPT in the long run. As actions are dictated by the prevailing situations, I don’t want to pin the blame on any individual for those shortcomings.
Today, we are witnessing the advantages of privatization. The most significant are the drastic reduction in the costs and more availability of the sim cards. The private servers started selling sim cards for one thousand five hundred Kyats each and the tariff rates are cheaper. The MPT followed suit. Thus making it affordable and easily accessable for more people to own telephones. The telephone density or penetration rate today is over 50 per cent, a vast increase from the 0•02 per cent in 1994, which was mentioned in my country paper presented at the aforementioned seminar. Also the quality of the services had greatly improved and had become more efficient.
We should have privatized earlier, however, I must agree that being late has its advantages. The subscribers are able to get the more modern, advanced and efficient services straight away. With the new technologies rapidly developing, the late comers provide the more advanced technologies. Now we are using the 3G networks, not very much behind other countries in the region and hopefully, it wouldn’t be long before the 4G networks would be introduced. My intentions in writing this article is not to condemn any individual, but to afford lessons to be learned from the past experiences.


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