Cost of the ban

As published by Dawn Magazine Special Report on 20th Oct’2013 

Never mind that it is morally wrong. Never mind that it infringes upon people’s constitutionally guaranteed right to freedom of expression. Never mind that it is a Canute-like futile attempt to command the tides to turn back. If there is one reason why the government’s attempt to censor the entire internet should be opposed, it is this: it will cost us all — including the government itself — more money than we can imagine.

One is not concerned with the cost of setting up, installing and operating a mass-censorship system and then constantly coming up with up-to-date iterations of it. What should trouble every Pakistani is the massive opportunity cost of never entering the age of Big Data, never fully participating in the era of truly high-speed communication and never partaking in the economic fruits of being fully plugged-in to the ever-regenerating creative engine of wealth that is the internet.

No more speeding

The single biggest way in which censoring the internet imposes a cost on the economy is by the fact that such an attempt would cause overall internet speeds throughout the country to slow down dramatically. In periods of high traffic, some experts estimate that the reduction in speeds could be as high as 75pc, based on the experience of countries like China that have engaged in similar attempts. That may not sound like such a big deal, but in reality it is.

Let’s start with the most obvious examples. There are a large and growing number of technology companies in Pakistan that provide services to clients outside the country, and they rely almost exclusively on the internet to deliver their products and services.

Take Arbisoft, for example. It is a Lahore-based company that provides much of the back-end architecture behind some of the largest websites in the United States. In order to stay in business, Arbisoft needs the ability to transmit large volumes of data at very high speeds to its customers. In theory, such a company can continue doing business even if the internet is censored in Pakistan, but it would then need to pay much higher costs for the high speeds of internet that it needs in order to do business. In effect, its cost of doing business would go up, and may affect its ability to stay profitable.

Job slash

Pakistan’s software industry may be small by global standards, but according to the Pakistan Software Houses Association, it generates upwards of $2b a year in revenues, which is not small given the total size of the economy. It also provides one of the fastest-growing sources of well-paying middle-class jobs for young people, something the country needs far more of. Choking off growth in this industry is tantamount to strangling the nation’s future to death.

But it is not just the tech nerds who need high speed internet. Increasingly, it is going to become a necessity for doing business in virtually all sectors. The requirements of bandwidth in the financial services industry, for instance, are growing rapidly.

More charges

Banks in Pakistan relied on internet-based networks to process 87.5 million transactions worth Rs7.8 trillion in the second quarter of 2013 alone, according to data provided by the State Bank of Pakistan. That number is up nearly 20pc compared to the year before and looks set to continue growing at exponential rates for the foreseeable future, since internet-based transactions still constitute a miniscule fraction of the overall level of transactions in the economy.

Censoring the internet will not cause these transactions to stop, but it will slow them down, and cause the transaction costs associated with adopting more technology to go up. Think higher ATM fees, higher debit card and credit card fees, etc. That, in turn, will dis-incentivise the move towards a more documented economy and thus make it harder to crack down on illicit activities, including tax evasion.

Students suffer

And then there is the economic impact on higher education. Not many people are aware of the fact that the computer labs in all registered universities across the country are actually linked to a single system that the Higher Education Commission uses to provide them with free access to subscription-based journals and other knowledge resources that the government has paid for. Slower internet means a reduced ability of students across the country to collaborate and compete with each other.

In pure economic terms, censoring the internet means slowing down the nation’s pace of progress and making it more expensive for everyone. In a country that already lags behind the rest of the world and has a large population that can barely afford the essentials of life, it seems like an insane policy. But perhaps, for the proponents of the censorship, that is precisely the point. One can only hope that they do not prevail in the end. But this is Pakistan. They probably will.

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