The Cabinet calls for the development of digital infrastructure

The cabinet members suggested that half of the revenue from the telecom spectrum auction should be deposited in the Universal Service Fund (USF), the entity responsible for developing digital infrastructure in the country.

The proposal was made at a recent cabinet meeting, chaired by the prime minister. While discussing the upcoming spectrum auction, cabinet members proposed transferring 50% of the spectrum auction revenue to USF.

The cabinet formed a committee, headed by the finance minister, to monitor the spectrum auction process. The committee will determine the percentage of spectrum auction revenue to be allocated to USF to fiberize towers nationwide to support digital infrastructure development.

The cabinet observed that the mark-up condition – Karachi Interbank Rate (Kibor) plus 3% – for deferred payments was too stringent and should be revised to bring it to Kibor plus 1%. Some cabinet members recommended relaxing the terms of the deferred payment by allowing the licensee to pay any percentage of the amount payable after one year of the license being issued, with the remainder being paid in 10 equal annual installments starting in the second year of the license being issued.

The cabinet was of the view that to ensure complete transparency, spectrum auction proceedings should be telecasted live on all media channels, as was done during the recent privatization of Pakistan International Airlines (PIA).

The Ministry of Information and Telecommunications (MoIT) informed the cabinet that the proposal to auction International Mobile Telecommunications (IMT) spectrum licenses to improve mobile services in Pakistan aimed to increase the speed of 4G by five times and 5G by 13 times.

The cabinet was informed that according to the GSMA’s Mobile Connectivity Index Report 2023, Pakistan was ranked lowest in South Asia in spectrum allocation, which was reflected by slow internet speed, and the proposed spectrum auction would bring Pakistan up to a middle tier country in terms of spectrum allocation.

The MoIT said successful bidders will have the option of either opting for a full upfront payment or a deferred payment by releasing a minimum payment of 50% by the first anniversary of the license issue date with the balance payable in five equal annual installments from the second anniversary of the license.

The cabinet was informed that the deferred amount will carry a cumulative Kibor surcharge of one year plus 3% per annum and the spectrum license fee will be fixed in the license in Pakistan Rupees equivalent instead of US Dollar.

Therefore, the decision taken by the Economic Coordination Committee (ECC) was placed before the cabinet for approval. After considering a summary titled “Sanction of Decisions taken by the Economic Coordination Committee”, the Cabinet gave its nod to the ECC’s decision on “IMT Spectrum Auction to Enhance Next Generation Mobile Broadband Services in Pakistan”.

The Cabinet also constituted a committee, named “Cabinet Committee on IMT Spectrum Auction for Improvement of Next Generation Mobile Broadband Services”, under Section 17(2) of the Rules of Business, 1973, consisting of the Finance Minister as the convener and the Minister for Economic Affairs and the Minister for IT as members.

The committee will direct and monitor the IMT spectrum auction process and streamline, if required, the payment terms, including the down payment structure, deferred payment options and installment arrangements.

According to the terms, the decisions taken by the committee will not require the approval of the cabinet subject to the proviso to Regulation 17(1)(c) of the Business Rules, 1973. All tendering and auctioning processes to be conducted by the federal government or any of its entities will be telecast live to ensure transparency.