DEREGULATION OF TELECOMMUNICATION SECTOR

An interview with Chairman PTA

From SHAMIM AHMED RIZVI
Islamabad
Mar 25 - 31, 2002

Pakistan Telecommunication Industry which is presently in a process of transition moving away from regulated state-owned monopoly to a deregulated competitive structure is poised to have a phenomenal growth during the first decade of the (2001-2010) 21st century.

This was stated by the Chairman Pakistan Telecommunication Authority (PTA), Maj. Gen. Shehzad Ahmad Malik while talking to this correspondent in his office in Islamabad last week. Replying to a question in an exclusive interview to PAGE General Malik said, PTCL's monopoly is going to be over by the end of 2002.

Telecommunication sector would be deregulated completely including voice after expiry of PTCL exclusivity by the end of this year. This will create an environment of competition in telecom industry. PTA has geared up its all resources to face the challenges of post monopoly era and will play a role where fair competition can be prevailed and opportunities for investment in the sector may be provided. The public investment opportunities will be as follows:

The foreign investment has been fully protected and will surely enjoy a high return. Telecommunication market has an ability to offer a high growth potential for a population of over 140 million people and current teledensity of only 2.5 per cent i.e. only 4 million lines. PTA plans to uplift the teledensity to 7 per cent i.e. about 10 million lines by 2010. Therefore about one million additional lines will be installed every year. The opportunities of Telecom market are to emerge as the regional hub in South Asia, he added.

Following are the questions asked by PAGE and their answers given by PTA Chairman.

Q. Why PTA was created and what specific functions and responsibilities have been entrusted to it? How far it has been able to meet its target so far?

Ans: At the advent of twenty-first century, the global telecommunication industry is being reshaped by fundamental changes in ownership, market structure, regulatory practices and technological advancement. Transitional periods of market exclusivity are ending in some countries, and competition is being introduced at a quick pace in the formerly insulated market segments. The industry is becoming large and more diversified.

Until recently telecommunication (telecom) has been provided in most countries as user-pay public services administered by the government typically through Post, Telegraph and Telephone (PTT) ministries or by the government regulation of private monopoly operators.

Telecom reforms are underway in all countries and at the regional and international levels. This reform is characterized by new laws and policies, and the establishment (or reorganization) of telecom regulatory agencies to implement them in a new dynamic international market environment. The success of telecom reform will depend heavily upon the establishment and maintenance of effective regulation, which must encompass a wide range of expertise and be informed, forward looking and adaptive in helping to shape the information infrastructure that will provide the foundation for 21st century information societies.

The Pakistan Telecommunication Authority was established under the Pakistan Telecommunication (Re-organization) Act, 1996. It consists of a Chairman and two members, Member (Technical) and Member (Finance). The PTA's functions include:

  • a) Regulating the operation and maintenance of telecommunication systems in Pakistan.

  • b) Protecting interests of the consumers.

  • c) Ensuring transparency and non-discrimination in telecommunication licensing.

  • d) Managing radio frequency spectrum resource.

  • e) Promoting universal service obligation to make basic telecom service accessible to all.

  • f) Encouraging introduction of modern terrestrial, cellular and satellite services in the country.

  • g) Supporting modernization of telecommunication systems through liberalization, de-regulation and privatization.

  • h) Creating a rationalized tariff structure for the telecommunication industry.

  • i) Investigating into complaints against the licensees for alleged violations of the Act.

  • j) Protecting and representing Pakistan's telecommunications interests at international forums.

PTA is fulfilling its responsibilities in accordance with Pakistan Telecom Re-organization Act, 1996 and issued 2754 licenses upto 14th February 2002 so far. PTA is playing a vital role to promote the industry. Recently it has reduced royalty of Card Payphone Services and ISPs from 4 per cent to 1.5 per cent and 0.66 percent respectively. This was being demanded by service providers since long time.

Q. What plan of action you have in mind to meet your enhanced responsibilities as a regulator, especially to protect the consumers?

Ans: Section 6(d) of the Act, 1996 requires the Authority to ensure that the persons affected by its decisions get a fair chance of being heard. Hence it was incumbent upon the authority to adopt ways and means to consult users of the services and keep them informed on the proposed changes in the tariffs and charges.

The authority instituted a system of advisory committees on which eminent citizens and learned men from all walks of life. The Authority also consulted with these advisory committees on issues of public interest.

Public hearing and web hosting were important steps in the consultation process. PTCL tariff proposal submitted in July 2000 was placed before the Central Advisory Committee for consultation on 14th July 2000. PTCL presented the proposal to the committee and extensive discussions were held. The members offered valuable suggestions, which helped the Authority to conclude and arrive at a fair and more informed decision. The Authority also held a public hearing on 15th July 2000 to discuss the proposal with important consumer interest groups. A large number of eminent citizens, academicians, representatives of Chamber of Commerce & Industry, Stock Exchanges, Consumers Right Commission and Citizens Committees etc participated in the hearing and offered suggestions on the issue.

PTA consulted the consumers on other important issues before taking decision. For example, it heard the views of the general public in three public forums held in Islamabad, Karachi and Lahore regarding the complaints of the people on card payphone industry. Same was its procedure while deciding on CPP and cable TV tariff.

Consumer information

One of the key objective of the Pakistan Telecommunication Authority was to create an informed community by providing them regular information about matters relating to the telecommunication industry. PTA is responsible under Section (18) of the Telecommunication Act, 1996 to submit a yearly report at the end of each financial year on the conduct of its affairs including action taken for protection of consumer's interests. It was again in this backdrop that PTA published its Annual Report to provide information about the performance of different telecommunication services, consumer benefits and the quality of service. PTA lurings out Telecom Status Report every year which presents a broad overview of telecom industry and services in Pakistan as well as global market.

PTA has also developed a website to inform the consumers about the activities of the PTA. The site provides necessary information about the operational nature, new standards, and issues regarding consumer satisfaction and consumer benefits.

The electronic media was also part and parcel of PTA in its efforts to inform the public about new challenges of the information revolution. The campaign proved effective in raising awareness about consumer's rights and duties and encouraged the Authority to increasingly focus on their needs.

PTA's role has strengthened with the passage of time and it is aware of technological and market trends. It is focusing on competition and a proper role in public private partnership in infrastructure for investment promotion. Recently PTA has taken very bold and investment friendly decisions in order to promote telecom industry in the country. Annual renewal fee and revenue sharing fee for ISP's and Card Payphone has been drastically reduced from 4 per cent to .66 per cent and 1.5 per cent respectively.

For the first time in PTA's history the PTCL tariff enhancement proposal was not accepted in the interest of Public.

Complaints cell

PTA has created a complaint cell at its headquarters to handle the complaints received from various corners of the public against any telecom service providers. The complaints can be send on line, by fax, by telephone and by post. These complaints are resolved expeditiously and action taken on them is intimated concerned complainant.

Q. The introduction of satellite phone technology is something new in Pakistan. What are its future prospects, and what significant change do you think the new technology will make in the existing infrastructure of the telecommunication sector?

Ans: The satellite phone technology is a satellite-based mobile communications system providing services to user terminals deployed anywhere in the world service area. The system represents a major advance in communications technology wherein mobile satellite communications capability will be integrated with the public land mobile networks (PLMNs) for the first time. Satellite phone will provide the interface with the public switched telephone networks (PSTNs) and PLMNs allowing users to call anyone anywhere in the world.

The system will offer users personal mobile satellite communications including digital voice, alerting and paging services as well as facsimile and data transmission.

The satellite phone user terminal will be a dual-mode satellite cellular terminal, which will be able to select either satellite or GSM cellular modes of operation automatically or under user control. The satellite service offered will be line-of-sight with a voice quality similar to digital cellular systems.

Focusing on the needs of the Pakistan market, satellite phone will be more suitable than the planned global persona communication systems. Because of its coverage services specifically within the region and remote areas in Pakistan, the satellite Phone System will provide more affordable communications than the competing global systems as circuit capacity will not be wasted on ocean or polar coverage. Despite the rationality of the system satellite phone subscribers travelling outside the coverage will be able to roam using the GSM networks worldwide.

A major feature of the satellite phone system design is the integration of a satellite system with the PLMNs to provide mobile communications service. Satellite phone designed to be a satellite-based version of the Global System for Mobile (GSM) terrestrial cellular standard and will use GSM procedures in its integrated system.

The satellite telephone service is especially helpful in remote areas where no other telecommunication services are available. Satellite telephone permission issues to those firm which have agreement with Government of Pakistan and are engaged in drilling activities for producing petroleum, gas and other natural resources within Pakistan in far flung areas.

Q. Are you satisfied with the quality of services and its cost to the consumers?

Ans: Internet business in Pakistan was started in the private sector and it has blown into a fully competitive business with more than 100 Internet service providers in the market. Since Internet service is a fully competitive business, market forces decide the cost which is commensurate with quality of service. There are service providers who are selling Internet connectivity at as low a rate as Rs.5/- per hour and there are others who are providing service at a rate high as Rs.30/- per hour and to top it all there are no activation charges for most of the service providers. Naturally the quality of service provided by the vendor at Rs. 5/- per hour cannot be compared with the quality of service, which costs Rs. 30/- per hour. Customer has a choice to select the service provider according to his budget. PTA has further facilitated the business by lowering the royalty from 4% of the gross revenue to 0.66% of the gross revenue. It is hoped that this facilitation will help Internet service providers to improve quality of service and lower the rate further to facilitate the customers.

PTA has published major service quality indicators for almost all the Internet Service Providers, in the National press, to facilitate the customer to make an informed choice of his service provider.

Q. While PTCL is reducing its charges, the cellular connections are getting expensive. Why? What action you have taken or propose to take to check this trend?

Ans: 1. Regarding connection charges of cellular mobile service, it is pointed out that at present:

* Mobilink is charging up to Rs.750/- as connection charges for their postpaid package.

* Currently Mobilink and PTML are not selling prepaid connection. However, previously Mobilink was charging Rs.500 to 2500 as connection and cost of SIM Card for its prepaid package.

* U-Fone is not charging any connection fee.

* Paktel and Instaphone are not charging any connection fee.

2. I feel, it would not be appropriate to compare cellular mobile and fixed line service. These are two distinct services, hence may have different tariff structures as tariff levels. Moreover, the cellular mobile is a competitive service, for which lean regulation would be more suitable.