Evaluating Performance of GrameenPhone as the Leading Cellular Company in Bangladesh (Part 2)

 Payroll, Tax And External Affairs Department

This is a very sensitive and important segment in finance department. This department compiles the Companies Act. And rules regulations of the Government. This is also working as legal advisory of tax, VAT and other external affairs. Presently there is no manager in this department but a managerial position proposed for overall supervising and proper internal activities through sectional works. There is several sections based on work volume and criteria of the extended works. The main role of this department defines as under:

• Preparation of payroll statement and bank advice
• Preparation of salary perquisite and return submission
• Preparation accounts and financial statement for tax and audit
• Company’s tax return and ensure assessment
• Ensure tax deduction and issuing certificate individuals
• Ensure treasury deposits for tax, VAT and deduction at source
• Supervising and arrange VAT register and reconciliation statement
• VAT return and revenue statement preparation
• Preparation VAT report periodically and annually
• Price declaration for service offering and ensure approval
• Supervision Provident fund and ensure investment of fund
• Supervising welfare fund and ensure internal using
• Ensure work permit and foreign loan registration
• Internal audit co-ordination and external audit final inspection.
• Quarterly report to NBR (National Board of Revenue) regarding connection and handsets
• Return and relevant document submission to join Stock Registrar
• Co-ordination and corresponding with external organization and internal department.

In-addition to the above activities, special tasks assigned by the departmental/management in lieu of emergency basis also performed by this department, i.e. the Company secretarial affairs temporarily done by this department in supervision of manager finance. And the payment statement regarding Govt. fees and royalty for handsets and base-station pursuant to the license agreement between GP and MOPT (Ministry of Post and Telecommunication).

Information System (IT) Department

IT is responsible to manage the following areas-

• NT Server/Workstations
• Alpha Server System
• Mail/Internet System
• PABX Systems.

IS mainly works with Switch, and Customer Care department. IS maintains and manages the server oriented application software which is known as CABS 2000. Billing and Customer Care use CABS 2000 and in this way they are closely related with IS Department.

 Mail/Internet and Pabx  system

All the GP Officials have their own E-mail address, which helps in easy communication and easy data transfer. IS handles all mail and Internet related issues and problems.

All the desk telephones are connected to the PABX system which helps in connecting GP officials and the out side world.

In short, the whole GP for its day to day activities like computer application, PABX phone system. E-mail etc. which is a must to carry out the regular duties, are all managed by IS.

Whenever user face any problem related to the above-mentioned activities, IS members are always active to provide instant help.

 Information Department

 This is a department responsible for information flow both within and outside the organization.

 External Co-Ordination & Legal:

This division is responsible for booking after the regulatory obligation and legal finding of the Company. Now only two people are in this division excluding the director. They look after the legal issue that continuously arises handling both external and internal legal matters.

Employees of GP

Employees are distributed at different divisions as follows:

Strength, Weakness, Opportunity and Threat of Grameen Phone Ltd.

 Strengths:

• Good Owner Structure.
• Availability of Backbone Network (Optical fiber).
• Financial Soundness.
• Market Leader.
• Brand Name / Grameen Image
• Skilled Human Resource.
• Largest Geographical Coverage.
• Good Human Resource and Infrastructure Installation all over the country through Bangladesh Railway and Grameen Bank.
• Access to the widest rural distribution network through Grameen Bank.
• High Ethical Standard.

Weaknesses:

• Lack of co-ordination is used as an excuse not to solve problems
• Too much inside out thinking in the company.
• Different departments not working together.
• Inadequate interconnection with BTTB.
• Public relations not up to the mark.
• Sometimes a tendency to be arrogant
• Complicated price structure
• Billing System can’t handle sophisticated billing.
• No long-term Distribution/Channel strategy.
• SMS platform has insufficient capacity.
• High employee turnover.
• Advertising is not too creative.

Opportunities:

• Economic growth of Bangladesh.
• New and better interconnection agreement
• Huge need for telecom services
• Increased intentional activities in Bangladesh
• Declining prices for handsets
• Future privatization of the fixed network
• New international gateway
• Demand for inter-city communication
• Growth in other operator will give more connection.

Threats:

• More rigid government regulations.
• More influence of competitors on the fixed network
• Change of government might lead to competitors having more clout
• Devaluation of Taka
• National catastrophes.
• Sabotage of installation.
• Non-co-operation of government and fixed PSTN (Public Service Telephone Network).
• Risk of fire in GP’s Installations.
• Price war.
• Non-availability of funds.
• BTTB has limited capacity for interconnections.

Competitive Environment

GrameenPhone is to compete mainly with three other mobile operators. Of them Pacific Bangladesh (City Cell) uses the analogue AMPS system while AKTEL and Sheba Telecom are competing with same technology (GSM) as GrameenPhone. The competitive

environment that GrameenPhone is placed into is shown in the following tables:

Table: Mobile operators of Bangladesh at a glance

Different strategy and slogan of different Mobile operators:

Situational Analysis

  Initiation

GrameenPhone Ltd. is a multinational cellular mobile telecommunication company engaged in an ambitious project of bringing the whole Bangladesh under its coverage area by the year 2006. The company is first to introduce GSM technology in Bangladesh. GSM that stands for Global System for Mobile Communication is a fully digital system standardized only in 1992. Here the term digital system means the data in air interface representing control signal and voice signal are in digital form.

GrameenPhone was awarded license to operate as a mobile telecommunication service provider in Bangladesh on 28^th of November 1996. It officially launched its network on 26^th of March 1997 and went into commercial operation on 15^th of April of that year with 7 based stations on air.

 Coverage of GrameenPhone

GP has the largest and fastest growing mobile network in Bangladesh, with 423 base stations and around 820 cells all over the country. GP’s coverage, i.e. area of service is rapidly expanding through continuous coverage that connects cities and towns of the six major divisions of Bangladesh. Table 3 below, shows an expected area and population coverage, broken down by divisions in 2002.

GrameenPhone Aims to build a full range of service all over the country. Existing coverage areas are divided into Six zones according to the divisional boundary. These are

 Dhaka

 Chittagong

 Khulna

 Sylhet

 Barisal

 Rajshahi

Coverage areas under zones of GrameenPhone are:

Dhaka zone

Dhaka city, Savar, Gazipur, N.gonj, Narshingdi, Bhairav, Daudkandi, Kishoregonj, Maimensingh, Sarishabari, jamalpur,Manikganj,Munshiganj,Jirabo,,Narshingdi.

Chittagong Zone

Chittagong city ,Sitakunda, Feni, Laksham, Comilla, Akhaura

 Khulna Zone

Khulna_city, Jessore, Alamdanga, Chuadanga, Mobarakgonj, Shiramoni

  Rajshahi  Zone

Shirajgonj, Bhangura, Ishwardi, Pakshi

 Sylhet Zone

Sylhet,Srimongal,Moulabhibazar,Akhaura.

Barisal Zone

Sadar road, Girza Mahllah Road, Chawk Bazar Road, Shawas Para, College Road, Hospital Road, Natullabadh Road, CNB Road, Jalakathi Road, Chandmari Road, Club Road, Kaunia First Lane, Lakutia Road, Towards Costal Side, Natun Bazar, Fazlul Haque Avenue, Kirtun Khola Feri Ghat, Airport, Rahmatpur, Babugoang, Barisal Cadet College, Teachers Training College.

The zone in which a subscriber is registered with GrameenPhone is that subscriber’s Home Zone, and all other zones are Remote Zones.

Table: GP Coverage Summary in 2004

°  Fiber Lease

GP has signed agreement with Bangladesh Navy. It has appointed two distributors; Rangs ITT and X-Net to sell its fiber capacity. Both of the distributors are waiting for approval of MOPT to commence their operation.  The dependence of national defense force on GP’s network is strength for GP.

Network coverage

GrameenPhone continued to expand its coverage throughout the country during the year, bringing all six divisional headquarters under the coverage of the GP network. A total of 105 new base stations and 25 transmission sites were added to the network, bringing the total number of base stations to 1750. The work relating to core network up-gradation was completed. The capacity of two switches in Dhaka and Chittagong was further enhanced. The switch and base station controller processor was upgraded. GP services were launched last year in three major cities, Sylhet, Barisal and Rajshahi. The microwave link between Khulna and Chittagong over the coastal areas was also completed last year. This microwave link formed a loop in the GP network, enabling Grameen Phone to provide a more secured service to its valued subscribers. The GP network had coverage in 39 districts as of June 2001.

Grameen Phone Network Coverage Area

Grameen Phone has network coverage in 61 districts. The area that is covered by Grameen Phone are given below:

Few other services and aspects of GP

°   International Roaming

Grameenphone became the first mobile phone operator in the country to offer its subscribers the International Roaming facility from March 1999.

The number of GP International Roaming partner networks increased rapidly from 12 in1996 to 56 in December 2000. Grameen Phone has 76 International Roaming partner networks spread across 36 countries in four continents, as of June 2001.

As of Sep 2006, GrameenPhone has 315 GSM partner operators in 115 countries in 6 continents and 44 EDGE/GPRS partner operators in 16 countries.

The largest share of inbound roamers in Grameen Phone networks comes from SingTel in Singapore, BT Cell net and Orange in the United Kingdom. The most popular roaming partner networks for the Grameen Phone subscribers are: TAC in Thailand, Usha Martin in India, Mobile One and Singtel in Singapore.

The International Roaming facility is a useful service for the GP subscribers who travel abroad and subscribers of the partner networks who visit Bangladesh. It has also become an additional source of revenue for the company. Grameen phone regular (ISD) subscribers can use their mobile phones in the countries where GP has partner networks. The subscribers of the partner networks can also use their mobile phones in Bangladesh. GP regular (with ISD) subscribers can avail the international roaming service if they are holders of International Credit Cards (Foreign currency MasterCard issued by NBL in Bangladesh, American Express Card or any other master card from anywhere in the world). Security deposits and other terms and condition apply to avail the international roaming service.

 Short brief on International Roaming:

International Roaming is the ability to use your own GSM phone number in another GSM network (another country). With International Roaming facility GP subscribers have the ability to make and receive calls whilst traveling to other countries having GSM network provided GP has an commercial operation with that network operator.

The unique roaming features of GSM allow cellular subscribers to use their services in any GSM service area in the world in which their provider has a roaming agreement.

With GP International Roaming, you will be able to:

•    Use All Voice & SMS Based Services (GSM Roaming Services – Voice & SMS )
•    Browse Internet, Check Email, Send MMS, Download Contents & many more (EDGE/GPRS Roaming Services – Internet, Email, MMS )
Are you a GP Subscriber Going Outside Bangladesh?
Are you Foreign Operator’s Subscriber Coming to Bangladesh?
You can also avail International MMS through our International Roaming service

Benefits of Roaming:

• Using the same mobile number
• Reachable at one number
• Same mobile handset
• Reduce high bill
• Tensionless traveling around the world
• Move anywhere, anytime without any notice

IR status in GrameenPhone:

GP started International Roaming service from March 12, 1999.

Now GP has 315 live roaming partners in 115 countries around the world.

Signed roaming partner-315

ABOUT WAP:

WAP stands for “wireless Application Protocol”. This is an open global specification that empowers mobile users with wireless devices to easily access to various Internet information and services instantly. It provides the market with data (non-voice) services available to many more participants-anywhere anytime than a personal computer. WAP bridges the gap between the mobile world and the Internet as well as corporate intranets and offers the ability to deliver an unlimited range of mobile value-added services to subscribers-independent of their network, bearer and terminal. Mobile subscribers can access the same wealth of information from a pocket-sized device as they can from the desktop. WAP is a global standard and is not controlled by any single company. Ericsson, Nokia, Motorola and Unwired Planet founded the WAP forum in the summer of 1997.

Key benefits for a subscriber’s of WAP:

• Easy to use.
• The possibility of having personalized services.
• Portability. You do not have to entail separate investment for WAP.
• Access to a wide variety of services on a competitive market.
• Fast, convenient and efficient access to services.

Billing Format and Credit Policy

Grameen Phone Limited has its own billing format and credit policy. This billing format describes the different types of charges. The bill has three perforated sections, allowing payment in a GP partner bank without a deposit slip. The upper portion is to be retained by the subscriber while the two bottom portions are to be kept by the bank and GP respectively, with a “paid” stamp placed by the bank on all three portions.

The corporate clients of GP receives the total charges of all the mobile phones under the account on the first page while the details of the charges for each individual mobile phone is provided in the subsequent pages.

According to the Credit Policy, introduced from January 1, 2000, the credit limit of a subscriber will be equal to Tk. 1000 plus the amount of security deposit, if any. Once the total charges (billed or to be billed) exceeds the Credit Limit, the connection will be automatically barred at any period of the month. The barring will come into effect the moment the Credit Limit is exceeded. The barring is not related to the monthly bills. It can happen any time after the Credit Limit is crossed.

The service will be restored immediately after receiving the payment information. A subscription will be permanently disconnected if the outstanding dues are not paid within three months of barring of the services.

 Facilities offered by the GP package

ConnectionVoice MailText MailFlat RateXplore – 1üüü Xplore – 2üüüü”Smile” Pre-Paidüüüü”Smile” Pre-Paid (Standard)üüüü

  New value-added Service

GrameenPhone also introduced a number of value-added services during the year. A News Update Service was introduced in cooperation with The Daily Star and Prothom Alo, two leading newspapers of the country. Subscribers can now get a two-minute update of the latest news by dialing 222 on their GP mobile. Similar services were launched providing latest scores of the Asian Cricket Cup held in Dhaka and providing medical information when there was an outbreak of Dengue Fever in Dhaka last year. It may be noted that GrameenPhone was the first mobile phone operator in the country to introduce value-added services like Voice Mail Service, Short Message Service and data transmission.

One country, One phone, One rate

GrameenPhone introduced the EASY Pre-paid product with National Mobility with a flat airtime tariff of Tk. 6 per minute in March 1999. An identical Post-paid product was also launched in June of that same year. These two products enabled the GP subscribers to use their mobile phones anywhere in the country where GrameenPhone has coverage, for a flat airtime rate. Both the products became very popular among the subscribers.

Achievements of GrameenPhone

GrameenPhone successfully ended 4 years monopolized business of Citycell Digital (previously known as Pacific Bangladesh Telecom limited) in cellular market when it entered the market in 1997. The development of the company and its contribution to the telecom sector over the period of 1997 to 2001 can be best viewed as follows:

GrameenPhone is the largest mobile phone operator in Bangladesh in terms of coverage and market share. The investment of GP amounts to 190 million USD by 2004. It has remained at the number 1 position for four years.

  Competencies

GP is well positioned to serve the telecommunications needs of Bangladesh, due to its strengths in a number of key areas:

• Financial backing

 Through financial strength of investors and lenders.

• Wide Coverage

GP currently covers 19% of the country’s population, the widest coverage of all mobile operators. Full coverage (95%) is expected by 2005.

• Distribution

 GP has by far the largest number of points-of-sale of all operators, selling through 402 dealers, outlets, individual agents and 5 sales centers all over the country.

• Operational Excellence

 In every aspect, ranging from product innovation and quality of service to billing and 24hrs/7 days customer care. In 2001, it introduced “Insta Care” a 24-hr automated instant Voice Response service.

• Partnership

With domestic and international companies.

• Accesses

 To Technological know how.

• Knowledge

 About Bangladesh market.

 The current scenario and future of the cellular industry in the telecom sector of Bangladesh

Introduction

The telecom sector in Bangladesh is regulated by the Telegraph Act of 1885 and the Wireless Act of 1933. State run Bangladesh Telegraph and Telephone board (BTTB) operates basic telephone services, national transmission network and overseas communication. All other telecommunication operators depend on BTTB to connect to the fixed telephone lines and international calls.

On 12^th July 2001, the Bangladeshi Ministry of Post & Telecommunications and WorldTell signed a USD$ 300 million deal to install and operate a private telephone exchange, which upon implementation will end the long-standing BTTB monopoly on fixed lines. WorldTell would invest, build, own and operate 300,000 digital phones in the capital city, which would be completed in phases within the next 2 years.

Table: Key telecom indicator figures

Source: Human Development Report 2001 & CIA World Factbook

Bangladesh is a South Asian country where about 135 million people live with world’s one of the lowest tele-density. With a combined density (0.46) of fixed and mobile, Bangladesh was ranked 39^th among the 40 countries of Asia Pacific region in 1999.[1] It also has the lowest penetration in South Asia as shown in Figure 3. Now the combined density is .95 %. The fixed line penetration in .42% and mobile penetration is .52 %.

In the backdrop of 8.51 teledensity of Asia-Pacific and 2.82 of South Asia National Telecommunications Policy of 1998 set a short-term goal of increasing the teledensity to 1.00 by the year 2000 which could not be achieved. Now the combined Teledensity stands at .93%, fixed line penetration is .42% and mobile phone penetration is .53%.

Connection fee for fixed telephones in Bangladesh is Tk. 18,400 (US$ 335), which is 27% higher than the per capita GDP of Bangladesh (US$ 263).[2]

High connection fees and prolonged waiting period largely discourage people from applying for a telephone. This apprehension is supported by the exponential growth in mobile market.

Until recently, the Ministry of Posts & Telecommunications (MOPT) held the responsibility of sector regulation. The Telegraph Act of 1985 is the primary law governing the sector and granted the government exclusive power to establish and provide all telecommunications services and products. The Wireless Telegraphy Act of 1933 governs the operation of one way Radio Communications, Paging and Radio services.

The BTTB Ordinance of 1979 provided BTTB the monopoly rights and powers for issuing license for telecommunications and wireless services. In October, 1995 Government of Bangladesh (GOB) amended the BTTB Ordinance, 1979 and transferred the regulatory authority from

BTTB to MOPT. From February 2002 it has been shifted to an independent regulatory body naming Telecommunication Regulatory Board (TRB).

Presently MOPT is the principal telecommunications policy maker. Other institutions, such as Ministry of Finance and the Planning Commission are also involved in policymaking process.

Situational overview

Dhaka occupied 54% of the country’s total switch capacity in 1999. It gained 2.38 teledensity while rest of the country had 0.16 telephones per 100 inhabitants.[3] Dhaka acquired more capacity in 2000-‘01 and its 83,529 waiting subscribers represent 62% of the national waiting list (Figure 3 & 4). So, Bangladesh while struggling on the darker side of the digital divide, it is really a problem to fight the divide within the divide.

Table:  Regional Exchange Status – June 2003

Table: South Asia – Demand vs. Supply in 2002

A study has been recently carried out by BTTB on the demand of telephone in Bangladesh. Incremental demand for telephone is shown in the following table.

Table-Demand forecast of telephone[4]

The major backbone spreads with a star formation throughout the country about 60% of which is digital. Being located at the Ganges delta basin, the landscape of Bangladesh is dominated by the rivers and canals. BTTB’s long distance infrastructure is, therefore, historically based on the radio resources. Its major transmission backbone is consisted with high capacity digital and analog microwave links. Besides meeting own telephony requirements, BTTB’s backbone supports the country’s broadcasting operations.

BTTB’s backbone is migrating from microwave to fiber. A 276 km. long STM-16 link in the highest traffic bearing Dhaka-Chittagong route has come into operation this year which is likely to be connected to some submarine cable in near future to supplement/replace the four satellite earth stations and a large number of V-sats for international traffic.

Regulatory Body Formation

The Ministry of Posts & Telecommunications (MOPT) holds the responsibility of sector regulation. The Telegraph Act of 1985 is the primary law governing the sector and granted the government exclusive power to establish and provide all telecommunications services and products. The Wireless Telegraphy Act of 1933 governs the operation of one way Radio Communications, Paging and Radio services. The BTTB Ordinance of 1979 provided BTTB the monopoly rights and powers for issuing license for telecommunications and wireless services. In October, 1995 Government of Bangladesh (GOB) amended the BTTB Ordinance, 1979 and transferred the regulatory authority from BTTB to MOPT. MOPT was then in the process of forming a regulatory body named Telecommunication Regulatory Board (TRB).

Presently MOPT is the principal telecommunications policy maker. Other institutions, such as Ministry of Finance and the Planning Commission are also involved in policymaking process.

BTTB had been regulating the sector until Ministry of Posts and Telecommunications (MOPT) took over that function in 1995. The Telegraph Act of 1885 in tandem with The Wireless Act of 1933 had been the only governing tools until the National Telecommunications Policy (NTP 98) was enacted in 1998.[5]

NTP 98 was the first phase of reforming the country’s telecom sector. Establishment of an independent regulator was long been pending with the government.

Bangladesh was the only South Asian country, which had no independent regulator in place until recently. Increasing participation of Private Sector Operators in the Telecommunication Sector in Bangladesh has made it expedient to provide for the establishment of an independent Commission. The Telecommunications Act 2001 was prepared for the establishment of an Independent Commission for the purpose of:

 °  The efficient regulation and development of the telecommunication system in Bangladesh;

°  To provide for the regulation of telecommunication licenses;

°  To deal with the transition and transfer of liabilities and responsibilities from the Ministry of Posts & Telecommunications to the Commission;

 The Strategic Vision of the Telecom Act 2001 is to facilitate Universal Telephone Service throughout Bangladesh and where there is a demand, all those Value Added Services such as Cellular Mobile Telephone, Paging, Data Services, Access to Internet (including electronic mail). Voice Mail, and Video Conferencing – all at an affordable cost without compromising performance.

 To achieve the vision, Government’s role as a service provider will diminish as the private sector’s role increases. The Government’s objective will be to create a new policy environment to support this new scenario. Its ability to create policy, regulate and facilitate will be strengthened through a Telecommunications Act which reflects the Government’s new policies, objectives and strategies and establishment of new institutions, viz. Telecommunication Regulatory Commission (TRC), which will become the guardian of the Act and fulfill its regulatory functions.

 After a prolonged period of being pending with the bureaucratic dilemma, the Telecommunication Regulatory Commission (TRC) has started its operation from the beginning of February, 2002.

 The Commission’s main function is to issue license to private operators, control tariff, regulate technical standard, prepare national numbering scheme, represent international telecommunication organizations and encourage investment in the sector.

The Commission has an autonomous body and its chairman and other members are appointed for a certain period.

 Role of Telecommunications

There has been increasing recognition of the role telecommunications play in yielding significant economic and social impacts.

 A report prepared by McKinsey for the International Telecommunications Union (ITU), states that the least developed countries are most likely to gain the biggest benefits from improvements in telecommunications access due to high multiplier effects and its impact on basic inefficiencies.

 As telecommunication substitutes for other means of communication such as personal travel or post, it significantly lowers transaction costs. It allows a more efficient use of time and resources by lowering the costs and time to travel, reduce expensive delays as well as increase the ease and speed in gathering required information. The time saved can be spent on productive gains.

Reliable telecommunications infrastructure improves a country’s economic competitiveness by building stronger and more productive patterns of communication. It enables businesses to interact with its employees, suppliers, distributors and customers in a timely manner by removing physical barrier. According to Mr Mannaf, a managing director of a Dhaka-based shipping company which transports cargo through the inland river routes around the country, the cellular phones have facilitated the loading and unloading of cargo as the owners of the cargo can now contact the ships directly[6].

Telecommunications increases revenue by providing the producer better access to ‘real time’ information such as market prices for produce and delivery times, as well as reaching wider markets. For small-scale sellers, this information means that middlemen will not undersell them. A World Bank study reported that when Srilankan farmers received telephones, process of produce increased from 55 percent of Colombian prices to 85 percent, as a result of buyers having better access to information. Knowing precise shipment dates for a seller may mean less spoilage of perishable items.

Phone calls also facilitate the smooth flow of remittances by reducing the risk and transaction costs associated with the transfer of funds, and help families in villages provide their wage-earning relatives with timely reminders of the need for funds at home. In poor rural countries such as Indonesia and Philippines, there are large numbers of migrant workers who are earning significantly more outside of their home country and these remittances can become the single most important source of income for their families and relatives back home.

Telecommunications also plays a vital social function in the society as it enables families and friends to stay connected, and allows individuals to quickly access medical, emergency and police services.

Effective Telecommunications

Telecommunications is another area where private initiative holds the key to rapid economic development in general and to successful urbanization in particular. Fast, effective telecommunications are the lifeblood of modern societies and economies. The technology that has made them increasingly versatile has also made them indispensable. The International Telecommunications Union (ITU) has even urged governments to recognize basic telecom facility as a “human right.” It is a right that Bangladesh lacks because its communications are in the grip of a mismanaged state monopoly.

 To join the global information revolution and exploit its potential for accelerating growth, Bangladesh must

 (i)                 concentrate on adopting high-level telecommunications technology and investing in infrastructure,

(ii)               undertake institutional reforms enabling competing private operators to meet demand and effectively deliver services and

(iii)             develop an appropriate governmental regulatory framework to assure consumers and providers alike a predictable environment in which to do business.

These changes amount to major departures from current practices. As reforms, they are long overdue.

From monopoly to market economy

For most of the century in most industrial and developing countries, state monopolies in telecommunications were the standard model because of the size of start-up investments, for instance, to wire millions of consumers and scores of cities together and because of the cost of maintaining that service. A single, monopoly enterprise, it was long held, could best convert economies of scale into improved service at lower cost.Digital and cellular technology, however, has made that natural monopoly rationale obsolete. It has also prompted the dismantling – often against bitter resistance – of lumbering state enterprises in many countries. More nimble private operators are taking their place, demonstrating that for cellular and digital technology, being small has little disadvantage in cost and being privately and competitively managed has huge advantages     inefficiency.

Except in the case of cellular phones, Bangladesh and the state-run BTTB have been slow to embrace institutional reforms which could begin to remedy the woefully unsatisfactory state of the telecommunications network and the services it should be delivering. Those reforms start with the introduction of economic incentives and competition, with the conversion of BTTB into an autonomous organization run on fully commercial principles a possible initial step, one which Pakistan, for instance, has already taken. Another way to increase network size and efficiency, tried successfully in Thailand, is to contract out some functions to private operators.

Whatever course is chosen, the decision is an urgent one. Without bringing new resources into play, Bangladesh will fall even further behind in adapting such new technologies as digital systems and fiber-optic cables to provide adequate numbers of channels for domestic and international communications.

 Unfortunately, Bangladesh has already been by-passed by two important links that will significantly reduce costs and improve the quality of international telephone traffic:

(a)       the $2 billion 2×5 Gbps Fiberoptic Line Around the Globe (FLAG), commissioned in September 1997, and

(b)       $1.2 billion 2×10 Gbps SeaMeWe 3, due for commissioning in December 1998. This relative isolation could turn out to be a serious setback for future international communication from Bangladesh, affecting export capabilities when India and other competing countries are on the link. On average, it could cost our exporters more and take longer to connect potential buyers worldwide.

Given the stakes in future growth and future urban employment opportunities, Bangladesh have to choose an appropriate strategy to involve its private sector in making the costly investments in telecommunications infrastructure on a BOO/BOT basis. There is no shortage of international interest if the state provides the correct framework.

 The advent of radio-based cellular telephone networks has already introduced an element of competition by bringing in private operators who typically have to vie for market share to remain profitable. New players, given the proper incentives and regulatory guarantees, can bring new advances and a new tempo that a state-run single-provider cannot to the challenge of constructing the telecommunications networks of the future.

At the same time as enterprise restructuring takes place and competition is introduced, some regulatory reform are imperative to induce efficient investment, protect consumers, and ensure fair competition. Ideally, regulatory reform should precede or accompany privatization, but typically it seems to follow.

New entrants in the market need access to the network, which usually turns out to be more a pricing than a physical problem. In practice, rough-and-ready norms for revenue sharing between different components of the network can be adopted.

An important question that will have to be addressed early on is how best to restructure and privatize BTTB.

Global experience, especially from countries where telephone penetration rates are low, point to some definite advantage of early entrance of new players, operating on equal terms with the incumbent. They can provide much needed telephone lines, spur better performance from BTTB, and reduce — but not eliminate — the burden of regulations.

Telecom Policy Objectives

Telecommunications performance in Bangladesh needs radical improvement to be spurred by deregulation, market liberalization, competition and training. Although some progress has been made recently toward private participation in the sector and separating the regulatory agency from BTTB, the operator, the public has yet to reap benefits. The Government has recently launched an effort to attract foreign investment in this sector, but has yet to take the bold step of fully opening the field to private investors and operators. No strategy to promote Bangladesh’s exports and attract direct foreign investment, however, can succeed without the development of fully functional telecommunication services. An immediate action plan is needed to formulate a National Telecommunications Policy, to corporatize and then privatize BTTB so that it gains the capacity as a progressive organization to meet the immediate challenges in this sector and, as competition will compel, to meet the long-term challenges of a fast- growing Bangladesh.

Broad Policy Objectives

The broad Bangladesh Telecommunication Policy objectives are:

• to encourage orderly development of telecommunications system that serves to augment and strengthen the social and economic welfare of Bangladesh;
• to ensure access to and delivery of a full range of reliable. reasonable priced, up to date telecommunications services to as many people as is economically and socially justifiable, both in urban and rural areas, throughout Bangladesh,
• to enhance the efficiency and competitiveness, at the national and international level of Bangladesh Telecommunications;
• to rely increasingly on competition and a market oriented regime in the provision of telecommunication services and to ensure that regulation, where required, is efficient and effective.
• to stimulate research and development in Bangladesh in the field of telecommunications and to encourage innovation in provision of telecommunication services;
• to protect the interest and respond to the needs, both social and economic, of users of telecommunication services,
• to maintain and promote competition among service providers;
• to encourage introduction of new services and to encourage major users outside Bangladesh to establish places of business in Bangladesh.

 The National Telecommunications Act 2001 (Act No. 18 of 2001), placed by the Ministry of Post and Telecommunication (MOPT) has replaced the century old Telegraph Act, 1885 and Wireless Act, 1933, which have become redundant in the light of present day telecommunication needs and introduction of newer technologies.
As a result, subscribers of various telecommunication services have been facing problems over the years.

 The new law would see the BTTB work only as a public sector operator side by side with private operators like cellular phone companies, the source said.

 The act would hopefully open up the telecommunications sector to competition and help improve quality of service, the source said. It will also put an end to the supervisory authority of MOPT and the monopoly of state-run Bangladesh Telegraph and Telephone Board (BTTB) by empowering the Telecommunication Regulatory Commission (TRC), the separate autonomous regulatory commission in character, to work independently.

Findings and analysis

The reasons leading to the emergence of the cellular phone communication industry

 In a country such as Bangladesh where the state-owned operator, the Bangladesh Telegraph and Telephone Board (BTTB), dominates the landline telephone system and provides poor services and infrastructure, cellular phones tend to be substitute for landlines.

For poor countries and rural areas, it is cheaper to build mobile infrastructure than fixed line communications.

In terms of topography, Bangladesh is a flat country where 90% of the country is dominated by alluvial river plains, which does not rise more than 10 meters above sea level. The highest peak is Keokradang (1230m), 80-km southwest of Chittagong in the Hill Tracts. The flatness facilitates the construction of base stations and improves its coverage area. Besides reviewing the macro indicators to identify potential demand, consumer demand for cellular services has also been studied. A case study conducted by the Telecommons Development Group for the Canadian International Development Agency, found that there was a consumer willingness to pay for cellular phone services and a significant consumer surplus experienced by the villagers. According to the report, the consumer surplus for a single phone call from a village to Dhaka (the costs of a call that replaces the physical trip to the city and the costs of wages) ranges from 2% to 12% of mean monthly household income, which translates to a saving of 132 to 490 Taka (USD$2.70 to $10)

Inception of the Cellular/Mobile Phone Industry

 During the early Nineties the Telecom sector in Bangladesh was severely under developed when the market was monopolized by the state owned operator, BTTB (Bangladesh Telegraph and Telephone Board). BTTB provided only fixed line telephony services, which was heavily skewed in the urban areas where as 80% of the population of Bangladesh lived in the rural areas. This unequal distribution of services created the opportunity for the mobile operators.  The granting of a paging service license to Bangladesh Telecom Authority in 1989 paved the way for mobile service in Bangladesh. Pacific Bangladesh Telecom Limited (PBTL, now Citycell) operating under CDMA technology was first granted the operating license as mobile phone operator in 1993, and was joined by three other GSM mobile operators namely GrameenPhone, Aktel and Sheba in 1996, 1997 and 1998 respectively.

 Goals of Cellular Technology

 The goals of cellular and other multiple access communication systems are:

 °  Near wire line quality service

°  Near universal geographical coverage

°  Low equipment cost both subscriber stations and fixed plant.

°  Minimum number of fixed radio sets

°  Rapid development of systems

Types of cellular technologies in use

Currently there are a number of analogue and digital cellular technologies in widespread use throughout the world. In Bangladesh, PBTL uses advanced mobile phone systems (AMPS) and CDMA (Code Division Multiple Access) system, while the other three operators use Global System for Mobile (GSM) Communications (a digital technology). PBTL induced CDMA, a new generation digital technology in 1999. In general, digital systems are capable of handling more accurately and at higher capacities.

Current cellular standards

Different types of cellular systems employ various methods of multiple access. The traditional analog cellular systems, such as those based on the Advanced Mobile Phone Service (AMPS) and Total Access Communications System (TACS) standards, use Frequency Division Multiple Access (FDMA). FDMA channels are defined by a range of radio frequencies usually expressed in a number of kilohertz (kHz), out of the radio spectrum.A common multiple access method employed in new digital cellular systems is the Time Division Multiple Access (TDMA). TDMA digital standards include Global System for Mobile Communications (GSM), North American Digital Cellular (know by its standard number IS-54), and Personal Digital Cellular (PDC).

 TDMA systems commonly start with a slice of spectrum, referred to as one “carrier”. Each carrier is then divided into time slots. Only one subscriber at a time is assigned to each time slot, or channel. No other conversations can access this channel until the subscriber’s call is finished, or until that original call is handed off to a different channel by the system.

 a.      AMPS

The most commonly used cellular system in North America, the advanced mobile phone system (AMPS) had also gained wide spread acceptance in Asia. An analogue system which was introduced in the mid 80s and used as a technique known as Frequency Multiple Access (FDMA) to allocate channels. Thus it divides its entire allocation in sections of 30 KHz and uses each of these sections as a channel. Thus AMPS is able to provide 30 channels per 1 Mhz of frequency allocated. The principal behind AMPS is analogous to dividing up a large hall room (the entire frequency allocated to the operator) into a number of smaller rooms (channels). Each room will only admit 2 people, and these 2 will carry out conversation. A second group of people ca only use this room (channel) once the first pair has completed their conversation and left the room (disconnected).

 b.      CDMA

Code Division Multiple Access (CDMA) is a radically new concept in wireless communications. It has gained widespread international acceptance by cellular radio system operators as an upgrade that will dramatically increase both system capacity and the service quality.

CDMA is a form of spread-spectrum, a family of digital communication techniques that have been used in military applications for many years. The core principle of spread spectrum is the use of noise-like carrier waves, and, as the name implies, bandwidths much wider than that required for simple point-to-point communication at the same data rate.

One of the most important concepts to any cellular telephone system is that of “multiple access”, meaning that multiple, simultaneous users can be supported. In other words, a large number of users share a common pool of radio channels and any user can gain access to any channel (each user is not always assigned to the same channel). A channel can be thought of as merely a portion of the limited radio resource, which is temporarily allocated for a specific purpose, such as someone’s phone call. A multiple access method is a definition of how the radio spectrum is divided into channels and how channels are allocated to the many users of the system.

 The CDMA technology gives certain benefits over the other prevalent mobile technologies some of them are:

• Superior voice quality and clarity by eliminating background noise.
• Low power consumption, hence higher talk time, enhanced battery life.
• Minimum health risks compared to other wireless technologies.
• Increased security and privacy as none other then the called person can listen to your conversation.
• Higher data transfer rates.
• Reduced interference on other electronic devices.

c.       GSM

Introduced in the late 90s, the Global System for Mobile (GSM) communications is a digital cellular used extensively in Europe and Asia. In addition to dividing its frequency allocation by frequency, this technology allows multiple users to use same frequencies by using a technique known as Time Divison Multiple Access (TDMA). In this method, each pair of users, on average are assinged only a fraction of a second every second.

Using the above example, GSM is similar in allowing a number of pairs into a room, and allow them to take turns in speaking. Thus while pair 1 speaks, everyone else is silent, thus no interference or conversation can take place. Currently GSM operates apporxmately 40 channels per 1 Mhz of frequency allocated.

 Like AMPS, GSM operators cannot allocate identical frequencies to adjacent cells because of potential for interference. Grameen, TMIB and Sheba currently use four cell reuse patterns. Thus the systems are able to use on average one-fourth of the total allocated frequency on each cell.

 The GSM Industry

 In a market driven by rampant demand, a combination of competitive markets, private ownership, and foreign investment has created an environment for rapid growth. Since 1990, the number of countries with mobile services has increased from 59 to 167, while the number of subscribers will have exploded from 11 million to half a billion by the end of 2000. Every day, 250 thousand people sign up for mobile service.

While most of the world’s mobile subscribers are still found in developed countries, the developing world’s share of subscribers has risen from under 5% in 1990 to more than 20% today. Such rapid growth of mobile services in developing countries may come as a surprise, but there are several reasons why mobiles have become so popular.

• High Demand – There is a huge unmet need for access to communication due to the inadequacies and / or unavailability of the fixed public network.
• Low Cost – Mobile networks can be installed much more rapidly than fixed networks. The wide availability of second-generation mobile systems gives developing countries the opportunity to make a techno­logical and commercial jump.
• Pre-Payment – Pre-paid cards allow users to obtain service where they might not normally qualify for a post-paid service because of their low or irregular income.

Some developing countries have had striking success in mobile and there is reason to believe this can be emulated elsewhere. For instance, in China, mobile devices accounted for one third of the growth in telecommunications over the last four years. Similarly, we expect Bangladesh to experience a significant development of mobile service in the near future.

 Market Supply

With a population of 130 million people and less than 600 thousand working fixed phone lines, Bangladesh has one of the lowest telephone penetrations in the world, lagging behind even other low-income countries. The lag is visible both in terms of penetration (lines available) and telecom expenditure as a percentage of GDP. The relationships to income (GDP per capita) are shown in the two charts in figure 5 While Bangladesh is highlighted, 180 other countries are also plotted.

Bangladesh’s low level of income is usually cited as the main reason for its low penetration. The above chart, however, shows that many countries with income levels (and income disparities) similar to those of Bangladesh have penetrations around 2%, well above Bangla­desh’s rate of penetration of 0.42 % (fixed line). Similarly, Bangladesh’s domestic expendi­ture in tele­com relative to GDP is less than half the 1.2% one could reasonably expect.

  Market Demand

The demand for telecom service in Bangladesh is far greater than the supply. Since 2002, the four mobile operators in the market have acquired more than 676,000 subscribers, and the numbers are growing rapidly. In 1999 alone, the number of subscribers more than doubled. The total demand for telecommunications services is estimated at US$ 1 billion with a penetration of 45% (59 million subscribers).

As mentioned above, international historical data shows that telecommunication expenditures are related to development (see the right chart of figure 5 in the previous page), yet rarely exceeds 3% of a country’s domestic income (GDP).

The data also shows an inverse relationship between penetration and Average Amount Spent on Telephone Services (AASTS). This can be explained by the fact that penetration often follows the income distribution. The first to be served are usually the relatively wealthy who can afford to spend significant sum of money on the service, sometimes more than the national GDP per capita. As services get cheaper, lower income layers are penetrated, and AASTS falls. Both of these relationships are shown in the charts of figure 8.

As the left chart of figure 8 shows, any further increase in penetration would yield only marginal benefits, as rapidly dropping income levels would significantly lower AASTS.

In fact, assuming that penetration strictly follows the distribution of income, and that expenditures on telecommunications converge to 2.5% of GDP, servicing only the top 10% of the population will capture 80% of the market. This relationship between income and market size is shown in the right chart of figure 8.

With 55% of the population living below the poverty level, Bangladesh telephone demand is not expected to reach 100% penetration. With this as background, the total demand for telecommunications services in Bangladesh is estimated at US$ 1 billion with a penetration of 45% (59 million subscribers). The market is expected to grow by 7% annually, as indicated by the chart in figure 7. The current size of the market (2002) is also shown.

Tele Communication and information revolution on the move

The potential growth of telecom sector in Bangladesh is bright, due to the country’s large population and relatively a small number of phones. Bangladesh is one of the least penetrated mobile communication market in the world. But over the past few years this rate has increased gradually. Presently, the mobile phone penetration rate is .53% The fixed line penetration rate is .42% and the total telecom penetration rate is .93%.

Realizing the need to improve the telecommunication infrastructure in the country, the Bangladesh Government has set short, medium and long term target to increase its tele-density. Currently the tele-density is .93 phones (mobiles and fixed) per 100 population and BTTB’s target for 2012 is to have 1 fixed line per 50 population, which seems like an ambitious undertaking.

The average growth rate of the mobile subscribers in Bangladesh over the last three years has been 115%. This trend of growth at over 100% per annum is likely to continue until 2002. The addressable market is projected to be between 10 million to 15 million over the 2011 to 2014 period. With the current demand in view, if such targets are to be achieved, then a concerted effort and investment by both the private and public sector need to be dramatically increased.

The market share, growth trend and the increase in subscriber base of each of the telecom operators in Bangladesh over the past few years certainly accentuate the telecom market’s potentiality, especially the mobile market’s potentiality in Bangladesh.
Figure 10 shows the growth trend of the four telecom operators from 1998 to 2001.The last three years trend shows a very slow growth rate of the state run fixed line operator BTTB (PSTN) and the fastest growth rate of Grameen Phone Ltd. (the leading operator in Bangladesh). The over all four years growth trend of the mobile operators delineate the assenting future of the mobile market.

The above trend distinctly shows the gradual fall of BTTB’s market share and an increasing trend of the mobile operators market share, especially that of GP. As of September 2001, the total mobile subscriber base has surpassed the fixed line subscriber base, where Grameen Phone’s contribution is the largest.