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MOBILE OPERATORS TO BE FINANCIAL SERVICE PROVIDERS

A SMART POLICY MOVE?

ROKONUZZAMAN
**In such healthy, competitive market of specialised services, the provision of entry of mobile operators and strong interest of majority shareholders of the dominant mobile operator raise serious concerns.**
MOBILE networks have now become common information infrastructure that support the delivery of diverse services such as voice, financial, commerce, health, insurance, news, etc. Due to the growing ease of delivery - caused by high subscription, growth of network and availability of affordable, feature-rich handsets -consumers are expected to consume diverse services from these specialised service providers over common communication networks offered by mobile operators.
To take advantage of high mobile penetration - as of today above 75 percent - and countrywide coverage of mobile operators' network, the Bangladesh Bank has issued the license of mobile financial services to 28 banks to extend banking services to the unbanked and banked population, especially to expedite faster delivery of remittances across the country. Due to risky investments, entrepreneurial drive and intense competition, registered customers of 20 operating mobile financial service (MFS) providers - with the support of 538,170 agents, have jumped to 28.65 million in just four years since the launch of the first mobile financial service products in 2011.
From legal and regulatory perspectives, Bangladesh Bank has pursued only the bank-led model for MFS, which has shown spectacular
success to date. Intense competition among these 20 MFS providers, drove the growth of agents from 60,000 to 543,000, the number of registered clients from 5 million to 25.87 million, the number of transactions from 10 million to 76.99 million, and transaction value from USD 301 million to USD 1,423 million between Jan 2013 and Feb 2015, according to a study by USAID. In reference to the history of many other services, such growth appears to be a spectacular success of BB's bank-led competitive model of mobile financial services. In such healthy, competitive market of specialised services, the provision of entry of mobile operators and strong interest of majority shareholders of the dominant mobile operator raise serious concerns.
To reduce the monopolistic behaviour gained from vertical foreclosure strategy, the telecom industry has been vertically segmented. Until there is a strong case of economy of scope or scale benefit, an operator is not allowed to operate in more than one segment. For this reason, NTTN operators are not allowed to operate in access networks; similarly mobile operators are not allowed to be transmission service providers, although MNOs have significant technical specialisation and physical assets. The entry of MNOs, having no relevant specialisation, in financial service delivery simply violates such basic principles of market based reforms of the telecom industry. The entry of MNOs in financial service
delivery will not only enable the dominant operator to gain further market to marginalise smaller telecom operators, but will also open the door of exercising this market power to reduce competition in the highly successful mobile financial service market.
The second concern is net neutrality- the principle that all electronic communications passing through mobile networks are treated equally - in the context of an environment where traffic management, in varying forms and in varying degrees, is ubiquitous. There is a fine line between correctly applying traffic management to ensure a high quality of services and wrongly interfering with data traffic to limit applications that affects the operators' own lines of business. By allowing MNOs in MFS, the door of anticompetitive strategies - such as throttling rivals' mobile financial services so that the MFS services in which MNOs have ownership is more attractive - exercised through measures such as non-uniform access time and security features, will be opened up. Due to asymmetric information, it's more or less impossible to address such anticompetitive practices through regulation. It has been found that the policy of minimising vested interests to ensure non-discriminatory behaviour works much better than regulation.
Within a socio-economic situation, both the cost and coverage of mobile data services are yet to make
substantial improvements to deliver envisioned digital dividends to the grassroots. Instead of investing capital in some other services, MNOs should rather use their limited capital to expand high speed mobile data services, particularly 3G and 4G, and subsidise the take-off at the early
vertical foreclosure strategy to gain economic profits from competitors resulting in weakening competition in both MFS and Telco. Lack of specialisation of MNOs in MFS does not provide the scope to benefit from either economy of scale or scope. Net neutrality should be addressed through
stage, to profit from economy of scale at a later stage. It's to be noted that due to a lack of responsiveness of MNOs, the BTRC is failing to expedite the roll out of 4G services.
Therefore, due to four strong reasons, the policy option of allowing MNOs in MFS does not appear to be a smart move. It opens the door of gaining market power through a
policies by minimising business interests of MNOs in service segments. MNOs should be encouraged to invest their limited capital to increase the coverage and reduce the cost of mobile data services.
The writer Is Professor of Department of Electrical and Computer Engineering, North South University.
E-mail: zaman.rokon@yahoo.com