Fiber liberalization key for broadband growth in Afghanistan

Since 2001, Afghanistan has experienced incredible growth in telecommunications services, especially mobile services, in spite of security instability in the country. Mobile-SIM-card penetration has reached 75% of the total population — on a par with Bangladesh, India, and Pakistan. This has been thanks to the critical role of private-sector investment unleashed by government liberalization of the mobile market. Today, five mobile operators compete fiercely for customers across Afghanistan. More than 20 ISPs also compete for retail and business customers wanting to access the Internet in this very competitive market segment.

In 2013, the total size of the mobile market (the only market segment for which we have data) was 55 billion Afghanis or approximately $1 billion. According to the World Bank, Afghanistan’s 2013 GDP was $20 billion. This means mobile-industry revenues are worth 5% of total GDP, not taking into account considerable additional economic activity generated in support of the mobile sector and other segments of the overall telecommunications market. This is a success story of competitive markets thriving in spite of security challenges.

Mobile revenues, however, have stagnated since 2013. In spite of all five operators having 3G licenses in the 2.1 GHz band, 3G growth has been slower than one would expect. Total broadband penetration in the country is only 3%.

To unlock further growth the government of Afghanistan should address one area where market liberalization has yet to take place: the provision of longhaul and backhaul connectivity. At present this is subject to monopolistic control by Afghan Telecom (AFTEL), the state-owned fixed-line incumbent. As such it owns the only nationwide fiber-optic network, which it leases to other operators at the sort of rates one might expect from a monopoly. Unless all operators are allowed to build and operate their own fiber-optic networks, the broadband potential in the country, both mobile and fixed line, is unlikely to be properly unleashed.

Data consumption is very sensitive to pricing. Currently, wholesale prices for optical fiber cable (OFC) capacity in Afghanistan are at least three times higher than in neighboring Pakistan—and 50 times more than in the United States. At this price level, a mass market for data will not take shape in Afghanistan, negating the policy objective of developing broadband Internet access in the country. A newly-elected government in Kabul has a golden opportunity to liberalize the fiber market. In so doing, it will create a new wave of telecoms growth, but this time in data to complement the voice surge of the past decade.