The new telecom policy announced by the government
on the 13th of this month has allowed the private participation in the
fixed-line phone operations for the first time ever. It aims to expand
the telecom infrastructure by offering opportunities and incentives to
qualifying operators in the private sector in both long-distance &
international (LDI) and local loop (LL) infrastructure.
The new policy, announced by the Federal Minister
for Information Technology and Communications Awais Ahmed Khan Leghari,
allows private sector participation in both the LDI and LL operations.
However, stringent technical and financial pre-requisites, as well as
experience, will be incorporated in the licensing documents and the
decision to award a license will be preceded by an open public
hearing. That explains a performance guarantee of $ 10 million in
addition to $ 500,000 licensing fee for the issuance of LDI license.
The licenses for both the LDI and LL will be valid for 20 years though
the policy itself will be revised after 5 years.
A private operator can acquire both the LDI and LL
licenses including the existing license holders of the telecom
services. These operators would not only be allowed to retain their
current licenses but also can apply for new LDI and LL license. The
Pakistan Telecommunication Authority (PTA) will not regulate the
tariffs of the LL and LDI operators until they attain a significant
Market Power status. The PTA, however, will have the right to regulate
tariffs in case there is an evidence of unfair and burdensome pricing
The qualifying LDI operators will have to establish
at least one 'point of interconnect' in each of five PTCL regions
within one year after the awarding of the license, and in all 13 PTCL
regions within 3 years. They would be allowed to lease infrastructure
from PTCL, or any other infrastructure owner, subject to the condition
that they must own a proportion of the transmission system and cables
comprising its network in phases — 10 per cent in the first year, 30
per cent in the second and 50 per cent in the third. The licensed LDI
operators will have to furnish a performance bond of $ 10 million and
will provide incoming and outgoing interconnection services, both for
voice and data traffic.
Unlike LDI operators, the LL operators would not be
allowed to carry voice calls between PTCL regions for long distance
international traffic but could carry voice mails between
municipalities but only with a single region.
The deregulation of the fixed-line phone operations
is also aimed at double the tele-density from 2.7 per cent, which is
the lowest in the region, to around 5.6 per cent by 2010. It is also
aimed at stirring competition in the fixed-line telephone operations
to provide choice of service to the consumers thus far solely
dependent on the state-owned Pakistan Telecommunication Company
Limited, better known as PTCL.
However, comments emanating from the groups active
in telecom sector have been strongly critical of the new policy. The
former president of Pakistan Software Houses Association (PASHA),
Hamza Mateen, said that the new policy is primary comprises an old
package. He said that that there are many loose ends and much remains
unexplained in the policy about the framework and jurisdiction, and
most importantly the attitude of the PTCL particularly as fixed-line
phone operation require heavy investment.
Others have termed the policy disappointing and
primarily aimed at maintaining the status quo to let the PTCL continue
its monopoly by including clauses that protect its interests. For
instance, it primary allows the private sector operators to be a
'distributor' of the telecom services leaving them heavily dependent
on the use of PTCL's infrastructure without any frequency of their
own. The president of Internet Service Providers Association of
Pakistan (ISPAK), Ansar-ul-Haque has called the policy "the de-monopolisation
of the PTCL" adding that it is useless despite being delayed for two
years. Private operators in the telecom sector also said that the
policy fails to mention even the Internet telephony fast replacing the
traditional ways of communication. Concerns were also expressed about
the fact that policy revolves round 'distribution' to give PTCL.
However, the mere bulk of PTCL revenue makes the
new deregulation policy highly attractive for the potential investors.
For the year ended June 30, 2002 the total revenues of the PTCL stood
a Rs 66.43 billion depicting a growth of 7 per cent over the previous
year. Over 71 per cent of the revenue came from domestic sources from
subscribers for calls made to overseas destinations from Pakistan
while the international revenue representing revenue from foreign
network operators for calls orginating outside Pakistan contributed
the remaining 29 per cent. Revenue from telex and telegraph
contributed a negligible Rs 108 million in PTCL's total revenue of Rs
66.43 billion in 2001-2002.
What makes the policy most attractive for the LDI
service to the potential private sector investors is the fact that
PTCL's domestic revenue increased significantly from 60 per cent in
2000-01 to 71 per cent in 2001-02. Who would not love to have a slice
of such a big cake?