The new policy allows private sector participation in both the LDI and LL operations

July 28 - Aug 03, 2003

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 to consumers.

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?