Comparative Analysis of Policy Approaches for Telecom Competition

May 10 - 16, 2004

"If you don't invest for long term, there is no short term."
George David
adapted from Strategic Management, text book by Prentice Hall, International, 5th Ed.


Living in a world of materialism and economics further divided into the developed, the developing and the least developed a future of a country is determined by it's ability to create wealth, growth and prosperity for its people better than others. In a world grappled with issues of international trade, environment, poverty, and corruption, there is no single panacea for the ills which can address these socio-economic and problems. To improve from the state of poverty, there sees to be two guiding approaches: the social approach and the economic approach, each one having its pros and cons. Development studies deal with social aspects where economic studies deals with them differently. As in theory, the end of economic philosophy is to ensure social welfare, the economic approach seems the most widely used, economic strength is directly translated into social welfare of a country. The fall of Russia, the global world order of US reconfirms the benefits of market economy, creating waves of privatization, foreign direct investments and corporatization. Principles of market-economy provide a measurable mechanism of understanding for evaluation of wealth and prosperity of a society. This market-based system relies on creation of economic value by the mechanism supply and demand. By regulating these market forces the whole objective of economic policy is to use capital market mechanism to ensure welfare of people by improving standard of living, providing better employment opportunity, social security, health and education facilities. Today, the approaches of economic policy is very much an institutionalized job, undertaken at the global, regional and national levels respectively as shown (in table 1):

Table 1







Sector Specific (Micro-Economic Approach)


World Economic Forum, World Bank, IMF, ITU WB, IMF, WTO, UNCTAD, UNDP, WIPO, OECD, UNIDO,


European Monetary Union, D8 Forum, Paris Club, London Club

Asian Development Bank, COMSATS, APT, SAARC

African Development Bank, South Center, Third World Network


US Central Bank (Monetary Policy)

Ministry of Commerce (Trade Policy)

Ministry of Communications & IT (Telecom Policy)

As time goes by, new developments in economic though bring new and innovative ways to tackle the old problems with new approaches contrary to the old economic wisdom of providing subsidies and protection. It is quite interesting to see that in the wake of dying socialism and emerging capitalism, how capital market reforms take place in the form of sector-specific regulation and privatization of previously nationalized or state-owned entities ranging from telecommunications, energy, agriculture, and manufacturing.

Therefore, it is important to determine the economic priorities a country by bringing economic order to ensure reasonable economic growth is achieved. In a changing global village with new multilateral commitments undertaken by countries to ensure cross-border market access and zero-tariffs, a new dawn of economic policy making is in the making where, sector-specific competition can bring economic efficiencies in the economy resulting in optimum productivity, providing employment, financial return and attracting foreign investments. Though in a liberalized world of international economics, this phenomenon is quite complex and each country has to determine and choose the best policy measures, which can ensure sector-developments contributing to overall national economic growth. This also mean, where there is a provision of foreign firms to enter into domestic industry, there must be a regulatory mechanism ensuring level playing field for all the competitors, casting limits to market abuse in case of a monopoly, oligopoly or significant market power.

Being a developing country as diverse as Pakistan bordering with Central Asia, Middle East and South Asia, having four provinces, a long sea cost, rich history, Islamic ideology, multilingual, multi-ethnic and multicultural heritage with rich historic affiliations, rich in natural resources and agriculture output, among one of the most populous countries of the world, with reasonable depth in trade, industry, commerce and diplomatic affairs Pakistan faces considerable socio-economic issues of abject poverty, rural-urban divide, digital divide, illiteracy, backwardness, social imbalances, corruption, political exploitation, ethnic rivalries, black economy, mistrust and injustice. Here, Paksitan has to face a tough choice either to address these issues with traditional means of government intervention or to find and explore new ways of solving them through public-private cooperation using information & communication technologies (ICT) especially telecommunications to facilitate exiting new ways of doing so! With telecommunications services becoming a part of basic utilities basket as endorsed by Kofi Annan, the Secretary General of United Nations (UN), there are international efforts to close the social divide by bridging the digital divide. Social-divide an issue of access to basic needs such as education, health, and employment opportunity to address the core issue of poverty. Telecommunication services provide new means to access basic social needs and providing opportunities to generate income with a combination of wire and wireless solutions, as successfully experimented in Bangladesh by Grameen Telecom, a subsidiary of Telenor, a Norwegian company which is also a successful bidder to win the 5th mobile license in Pakistan, on 14th April, 2004, in a competitive bidding process administered by Pakistan Telecom Authority (PTA). Keeping in view the close correlation of tele-density and economic growth, the recent Telecommunications De-Regulation Policy 2003 and Mobile-Cellular Policy 2004 provide interesting insights to the telecom-policy-framework which Pakistan has opted. Pakistan's Cellular-Mobile sector policy is an important economic development instrument, but requires a critical comparative test to measure its ability to get the desired economic goals of improving multi-sector economic growth, industrial competitiveness, entrepreneurial spirit, employment opportunity and living standards with out compromising on socio-cultural and religious norms. Therefore, it is interesting is to have such a comparative outlook of Pakistan's mobile-cellular sector policy with India and Malaysia, providing attention-grabbing insights.

Keeping Pakistan's cellular-mobile sector policy the following are some important questions which are attempted to be answered, those are:

o What is the objective of mobile cellular policy?
o What is the difference between policy vs regulation?
o How to draw lines between role of Ministry vs Regulator?
o Should the policy address overall macro-economic issues or cover micro-level sector-specific issues?
Is there really a need for Mobile-Cellular policy, after all or Telecom De-Regulation have been sufficient?

Public Policy for Private Sector is a comprehensive goal-setting exercise to identify economic and social imperatives to be achieved in a particular sector. So, a telecom policy must establish guiding principles for overall sector development using a macro-policy-instrument. The micro-aspects and details of market-making is left to the regulator which provides a market making mechanism. Where the goal of regulation is of market-making, by managing the rules of doing business, defining rights and obligations, and controlling market entry and exist.

A clear difference between Policy and regulation can be elaborated as in table (2-A) and the direction of commitment of telecom policies of Malaysia, India and Pakistan's national telecom policies (NTP) is shown in table (2-B), respectively.

Table (2-A):



  • Public Welfare Objectives
  • Provides Sector-specific vision
  • Identifies Priority areas
  • Promotes private participation
  • Promotes investment
  • Promotes Employment
  • Consolidate with overall economic policy
  • Protect National Interest
  • Provides Certainty and clarity of goals
  • Consolidate with Multilateral and bilateral commitments
  • Subject to change in Political Leadership
  • Industry specific
  • General
  • Promulgated by the Ministry
  • Public Welfare Objectives
  • Sector specific Regulation
  • Provides a mechanism for Market management
  • Consumer Choice at affordable prices
  • Encourages Competition
  • Is a legal instrument
  • Provides well defined Rules and regulations
  • Ensues level playing field for all
  • Controls barriers to entry and exit
  • Limits number of players
  • Protects Domestic Industry
  • Subject to change in Law or legislation
  • Subject to market conditions and changes technology changes
  • Industry specific
  • Explicitly identified modus operandi
  • The Regulator runs the show


TABLE (2-B):







General Economic Vision


Very High


Sector-Development Vision

Very High

Very High


Regulatory Guidelines


Just enough

Too much

International Benchmarking

Just enough

Just enough

Very High

Promoter of Self Reliance


Very High



Very High

Very High

Very Low

Therefore, with reference to the above mentioned approaches for telecom policy, the difference between the goal of policy and regulation must always be kept in mind, which is by far the most complex issue hindering the sector development of most developing countries around the world. Malaysian, Indian and Pakistani national telecom policies (NTP) in the wake of the age-of-internet and convergence provide a very interesting comparison, with each country choosing a unique pathway to achieve economic prosperity, prioritizing telecommunications as the focal point. When chalking down the possibilities a policy can be comprised of should keep in view the country's comparative advantage, bilateral and multilateral commitments to develop a Policy Possibility Matrix as given in table (3), where the policy should be able to cover broader telecom sector components with out which the policy goals can be compromised.

Table (3):




Public Welfare

Creation of equal employment opportunities,, protection to domestic industry, Efficient use of national resources, Improving national standard of living, Social Security

National Policy Framework


Movement of Natural Persons (No. foreigners working in a Country)


Investment Policy


Commercial Presence (No. of branches of a foreign firm that can be opened)


Investment Policy

Entrepreneurship & HR

Fixed % of business to be given to SMEs or Startups

Industrial Policy

Technological Self Sufficiency, R&D

Transfer of Technology Mechanism, Promoting Research, Intellectual Property

Industrial Policy

National Culture, Ethics and Moral Values

Content Regulation over Mobile, and issues of Convergence

Information Regulation

Global Outlook for Economic Strength

Supplying technical manpower abroad, BPO, encouraging foreign consultancy business and international ventures

Export Promotion & Commercial Policy

Social Security

Fair Terms of Employment, Gender Equality, Equal Employment Rights, Working Conditions

Industrial & Labour Policy


Development Issues

Digital Divide, Poverty Alleviation, Tax-Free Connection for Special Purposes, Rural Development

MDG (Millennium Development Goals of UN) & National Commitments

In the age of globalization where international and regional cooperation is becoming more vital for achieving economic growth and stability one must keep an eye of the development goals, inventions and innovations, and commercial opportunity across borders. Not every country makes the telecom policy, keeping in mind the broader cross-sector and cross-country linkages because they had no previous experience of formulating telecom sector policy or regulation prior to 1995 when World Trade Organization (WTO). WTO service sector commitments under General Agreement on Trade and Tariffs (GATS), are formalized under the Fourth Protocol in Basic Telecom Services (1998) agreed by some 69 countries, under Negotiations Group on Basic Telecom (NGBT) and Agreement on Basic Telecom Services (ABT) of WTO, which chalks down a comprehensive approach towards introduction of domestic regulation covering the following areas of basic telecommunication services in table (4). Therefore, making a policy for competitive telecom service provision is only one side of the story, which should also be linked the bilateral investment ties, like if a Malaysian mobile company wants to invest in India, then Malaysia must provide an equal commercial opportunity to Indian firms to enter Malaysian markets. The whole exercise should be based on establishing mutual commercial ties between countries, so that both can benefit from each other. This is exactly the essence of WTO agreements, GATS and GATT, to provide market access, national treatment and most favoured nation (MFN), to facilitate trade negotiations.

Table (4):


Competitive Safeguards

  • prevention of anti-competitive practices
  • engaging in anti-competitive cross-subsidization
  • withholding information


  • provided under non-discriminatory terms
  • transparent and timely
  • additional network termination points on
  • request at cost-oriented rates
  • Published terms and rates
  • Disputes procedure

Universal Service Obligations (USO)

  • at discretion of Member State but no more burdensome than necessary

Licensing Criteria

  • publicly available
  • and having a transparent issuing process

Independent Regulatory Authority

Allocation and use of Scarce Resources

  • objective, timely, transparent
  • and non-discriminatory procedures for allocation

Source WTO

In addition to WTO Reference paper on Telecom, when formulating a sector-specific policy, multi-policy and multi-regulatory must be kept in mind which exert influence in everyday business for the telecom service provider, besides the telecom sector-regulator. In the age of convergence, where telecommunications, IT and broadcasting industries consolidating put a lot of pressure on the policy formulation exercise when it becomes difficult to make a classification of industry to regulate voice, multimedia and information separately. Besides, the convergence, there are a number of indirect regulators and policies which influence the cost and way of doing business in telecommunications or mobile-cellular industry, which can be seen in table (5).

Table (5):




Electronic Content over mobile: (MMS, SMS)

  • Ministry of Information (Media & Information Policy)
  • Ministry of Religious Affairs

Pakistan Electronic Media Regulatory Authority


Ministry of Finance (Finance Bill, Monetary and Economic Policy)

  • Central Board of Revenue
  • Income Tax Commissioner
  • Customs

Corporate Governance and Company Law

Ministry of Finance

Security and Exchange Commission of Pakistan

Trade and Investment related Issues

(Expatriation of Profits, % of equity sharing, % of management)

  • Ministry of Finance
  • Ministry of Commerce (Trade and Investment Policies)
  • State Bank of Pakistan
  • Board of Investment

Labour, Employment and Industrial Relations

  • Ministry of Labour, Manpower and Overseas Pakistanis
  • Ministry of Industries (Industrial Policy)
  • Court of Law
  • Pakistan Engineering Council


  • Ministry of Interior (Homeland Security Policy)
  • Federal Investigation Agency (FIA)
Source: Government of Pakistan

In a multi-regulatory environment a policy must be explicit and avoid ambiguities if no provision in the law, if possible, otherwise the business or government may face lengthy law suits like in the case of India. Similarly, institutional responsibility and job specialization must have clearly drawn lines to function efficiently specially in the case of Ministry and the sector-specific regulator. In most countries, a ministry covers wide range of sectors, whereas the regulator is sector-specific. In the case of Pakistan, the wide range of Ministry is no more, as Ministry of IT is more of a telecom-sector ministry, over and above the regulator, unable to cooperate with each other. Ideally, there would have been a Ministry of IT and Information, most suited in the multi-sector converging environment. Whereas, with the recent boom of information technology (IT), like many other countries Pakistan has exercised to make IT and Communication sector as an independent economic and industrial sector. Ministry of IT emerged in 2002 comprising of IT and Telecom Division, initially from a structural separation from Ministry of Communications and then from Ministry of Science and Technology, respectively. Still, a number of legal changes has yet to be promulgated keeping in view the dichotomy between the Telecom Re-Organization Ordinance 1996 and the current Telecom Policy framework, comprising polices for fixed and mobile. While chalking out the De-Regulation Policy 2003 and Mobile Cellular Policy 2004 the role/jurisdiction of regulator and the ministry as a policy maker has some what become unclear. Also, the inter-ministerial framework for cooperation is missing in the policy addressing hot issues of competition, convergence, labour, social security, disaster management, dispute settlement, trade and tariff. The focus of mobile policy is of micro-level, covering licensing issues, spectrum allocation, migration from 2G to 3G and other issues which should have been promulgated by the PTA as rules of doing business in mobile sector.


Looking at India and Malaysia, we find a complete contrast in the scope of telecom sector policies and mobile-cellular sector has been dealt as a subtopic being a sub-sector of the overall telecom market. Malaysia has defined a Telecom Vision as in her National Telecom Policy (1994-2020), which provides long-term guiding principles for telecom sector development covering macro and micro issues to integrate IT and Telecom sector in to the mainstream policy-document by setting a goal to make Malaysia as a global telecom-hub in the region. Whereas, in the case of India, we see the National Telecom Policy (NTP) of 1994 and 1999, again provide a comprehensive framework to make country a global player in IT where telecom sector becomes an engine of growth for the whole economy as illustrated below, in table (6), first Malaysian and then Indian policy outlines, respectively:

Table (6):




Macro Objectives

  1. Aim to create national unity

  2. encouraging b/w races & regions through telecom facilities

  3. creating educated & modern info-rich society using telecom networks

  4. expansion of IT and development of new technology

Micro Objectives

  1. providing modern & quality telecom services
  2. expanding telecom services to Rural as well as Urban populations
  3. Offering reasonable prices
  4. Growth of VAS
  5. HR Development
  6. use of local products
  7. R & D
  8. Improving bilateral relations with foreign nations by making Malaysia an International Telecom HuB
  9. Participating of Telecom companies in International market
  10. Investment in other countries in field of telecom
  11. Spectrum Resource management
  12. Encouraging active participation of Bumiputera Entrepreneurs


  1. Expansion of services in systematic manner
  2. Development of Strategic and Export-Oriented Manufacturing Industry
  3. Encouraging Industrial Competitiveness
  4. R&D to enhance application of technology
  5. Development of a dynamic and innovative HR
  6. Upgrading Rural Telecom facilities
  7. International Strategic Interaction

Guidelines for the development of Telecom

  1. Network Infrastructure improvement
  2. Telecom Services (Basic + VAS)
    1. Basic
    2. Supplementary
    3. Data & Information
    4. Text transmission
    5. Radio Communication
    6. New Services such as Satellite
  3. Corporate telecom network infrastructure
  4. IT Super-Highway Network Infrastructure




An orderly Licensing System

  • Bidding
  • Open Tender System

Efficient & equitable Spectrum Mgt.

Creation of Radio Communication Network System

Tariff Design

Based on principal of fair play ensuring reasonable RoR

Network & Service Standard System

Comprehensive NSSS covering:

  • Numbering plan
  • Access interconnection
  • Wiring (RoW)
  • Public Safty
  • Directory Services

Consultative Forum

Comprising of all stake holders




Access to Telecom services

At affordable and effective prices

Universal Service

cover rural areas

Development of telecom facilities

In remote, hilly and tribal areas


To make India an IT Superpower

Public Tele-info Centers

Convert Public Call Offices into multimedia centers

Competitive environment

Equal opportunities & level playing field for all players


To build world-class manufacturing capabilities

Nation Interests

National Security

Spectrum Mgt.

Efficient and transparent

Global Outlook

Enable Indian Telecom companies to become truly global players


Role of Regulator

Telecom Regulatory Authority of India (TRAI) formed in Jan 1997 to act as licensor and arbitrator

Telecom Policy Maker

Ministry of Communications and IT, GoI


  • Telecom Engineering Center (TEC)
  • To promote indigenous telecom equipment manufacturing for export and domestic usage

HRD and Training

Development of HR for domestic usage and to be made available to other countries


On a contribution basis by telecom Service Providers and Manufacturers

Disaster Management

  • International cooperation in the use of terrestrial and satellite telecom technologies in the prediction, monitoring and Early Warning System for DM
  • Financial commitment to DM telephony
  • Development of necessary regulatory framework for trans-boundary telecommunications

Remote Area Telephony

Rural Areas, Kashmir

Export of Telecom Equipment and Services

Establishing Synergies b/w local and international players


  • RoW
  • Changes in legislation


Licensing Regime

Initially class based now unified Licensing


  • National Frequency Allocation Plan (NFAP)
  • Wireless Planning Coordination Committee (WPCC)


Permitted with sharing of infrastructure

Universal Service

Universal Service Fund

Soruce: Department of Telecommunication, India

It is quite interesting to note that both countries have promulgated single integrated-policy instruments to gear-up economic development, and have successfully achieved significance as global IT players of the world. Moreover, both countries have been able to integrate convergence and competition successfully by providing room for a comprehensive dialogue to take place between the public and private sector, using mature means of conflict resolution, advocacy and commercial diplomacy.

Whereas, in the case of Pakistan, the exercise of evolving telecom policy seems to be more of having micro-level scope, where the Ministry has issued three different policies, being on the telecom sector (IT Policy and Action Plan 2000, Telecom Deregulation Policy 2003, Mobile Cellular Policy 2004). The national telecom de-regulation and mobile polices provide an "investment protectionist regime" contrary to the India and Malaysia, which provide a pro-competitive regime for telecom competition and convergence. Significant detail of the policy covers the portions of regulatory guidelines, spectrum allocation, role of incumbent, rights and obligations of market players, ideally a domain of regulator and telecom regulation. Moreover, the claim of Pakistan's mobile cellular policy to be technology natural is not fully correct, as the mobile policy revolves around GSM-technology and quite anti-convergence in nature. Moreover, with elaborations of regulation, it is also unclear what will be the future role of De-Regulation Facilitation Unit (DFU)? The policy is also leaves grey area to identify a comprehensive framework of most important issues to disburse a huge pool of funds which should have been elaborated in detail in the policy, which are:

o Universal Service Obligation/Fund
o Research & Development Fund
Access Promotion Charge

Lets have a look at national telecom policies of Pakistan:

Table (7):



Service Choice

At affordable and effective prices

Infrastructure Development

cover rural areas and to improve tele-density

Investment Promotion

Encourage private investment and local telecom manufacturing/service industry


Liberalize to ensure fair competition


Maintain an effective and well-defined regulatory regime

IT promotion

Ensure and maintain existing IT and Internet Service provision regime

Protectionist Safeguard Measures

Protecting incumbent to protect government revenue

National Security

Safeguarding national security interests


Universal Service

Creation of Universal Service Fund

Existing Organizations

Role of NTC, SCO and PTCL

Continuity of IT Policy

Existing multi-metering regime for Internet Service Provision

De-Regulation Facilitation Unit

To implement the policy in collaboration with concerned agencies and entrepreneurs

Licensing Regime

  • Technology Neutral Licensing regime
  • Proposed introduction of class licensing

Tenure of Policy

5 years

Research and Development Fund

Created with % R&D tax on telecom market players


Type of Fixed Line Licenses

  • Local Loop
  • Long Distance International

Rights of Licensees

  • Right of Way
  • Access Network and Career Selection
  • Interconnection
  • Indefeasible Rights of Use (IRU)
  • Co-location
  • WLL with limited mobility

Obligations of new licensees

  • Performance bond
  • Rollout commitments
  • Directory Services
  • Call termination
  • Quality of Service Obligations (QoS)
  • Regulatory Fee
  • R&D contribution

Access Promotion Contribution

  • One country one rate regime
  • No provision for Mobile Operators

Radio Spectrum

  • FAB is the spectrum regulator
  • Sharing of spectrum
  • Use and re-use of bands
  • Spectrum Fee
  • Spectrum Allocation
  • Spectrum Standardization


  • Reference Interconnection Offer (RIO) by PTCL
  • Cost unbundling of PTCL
  • Prices based on international benchmarks
  • Right to interconnect
  • Based on Long Run Incremental Costs (LRIC) framework

Obligations of PTCL

  • Interconnection
  • Collocation
  • Pre-career selection
  • Cost-based pricing
  • RIO
  • Rural telecommunication provision till 2008

Pricing Regime

  • Significant Market Power doctrine for fair competition
  • Tariff Regulations

Cellular Mobile Operators

  • Continuation of present policy of nation-wide service provision





Efficient usage

Consumer Choice

At affordable and competitive rates


To increase private investment

Role of Service Provide

To recognize rights and obligations of service providers

Competitive environment

Ensure fair competition for mobile and fixed operators


To maintain effective regulatory regime consistent with international best practices


Universal Service

Service providers has to pay a Universal Service Charge

Access Promotion

Access Promotion Contribution not to be given to Mobile Operators

Industry Status

Reclassification of Mobile sector from Service to Industry

Policy Review

After 5 years


Spectrum Reassignment

To ensure efficient spectrum usage FAB will reassign spectrum

Spectrum Pricing

Cellular Spectrum Price

No. of Licenses

2 new licenses to be issued under the policy

Method of Grant of License

As per Telecom Reference Paper Guidelines GATS, WTO

Renewal of existing Licenses

This policy will hold applicable with all its terms for the renewal of existing mobile operators

Market Integration

Mobile operators can hold LL or LDI licenses

3G Licenses

As soon as possible subject to market conditions

Retail Prices

A price cap fixed from time-to-time by the regulator

Significant Market Power (SMP)

SMP status will be determined by the regulator in case of mobile market

Resale of Mobile Services


Mobile License Conditions

  • Self provision of services by owning infrastructure
  • Coverage and roll out requirements
  • Quality of service
  • Use of spectrum
  • Infrastructure sharing
  • National Roaming
  • International Roaming
  • Interconnection
  • Mobile Number Portability
  • Customer Charter
  • Standard Contract
  • MVNO
  • Interception
  • License Fee
  • R&D Fund

Obligations of Incumbent Operator

  • Prepare for interconnection
  • Unbundling
  • Reference Interconnect Offer (RIO)

Besides Pakistan, none of the two countries, namely Malaysia and India, have gone into so much detail over regulatory-affairs, providing over-commitment from the Government to avoid ambiguities and lacunas which might become an apple-of-discord in future between the existing players or the new entrants. Although, the intention of the Government seems to ensure a kick-start by attempting to eradicate ambiguities from the application of policy and spectrum pricing yet, the problematic areas of divergence from the Telecom Act 1996 will be a serious bottleneck yet to be address. Though the policy suggests overriding such loopholes, later in due course of time. Still it remains a hard fact that the scope of this policy is just a gesture of goodwill from the government as to clarify official stance, but having no legal binding until enacted into law or regulation. Therefore, Pakistani mobile market may have to meet its fate in the court of law, due to the absence of dispute resolution mechanism after an year and half from the end of exclusivity period of incumbent operator. There is yet any competition in fixed telecom sector and an an inefficient oligopoly dominates in mobile sector due to technology-centric market conditions!

Here it is necessary understand the international experience from US, UK and other countries specially India that suggests no matter how good is the intention of a policy, disputes are bound to arise and they are rather an indicator of market maturity. Ideally, a pro-competitive and broader scope of a policy is most useful, providing room to the regulator and competition to adjust to the ever-changing needs of this highly technology-intensive competitive business of mobile telecommunications. Let's have a look at comparison of the policy approaches the three (3) countries have opted, provided in table (8).

Table (8):




Ministry of IT, IT and Telecom Division

Service-specific Policies
Telecom & Mobile Sector Policies
Covers Spectrum allocation, licensing process, QoS, licensing fees, interconnection, migration process, R&D, USF, APC

Policy implementer: Pakistan Telecom Authority (PTA)

Ministry of Communications and IT, Department of Telecommunications
Single Policy
Sets objectives

General guiding principles

Telecom Regulatory Authority of India (TRAI)

Ministry of Energy, Communications and Multimedia

Single Policy

Macro & Micro Objectives


Malaysian Multimedia and Communication Commission (MMCC)

Source: Ministry of IT, Pakistan; Department of Telecommunications India; Malaysian Ministry of Energy, Communications and Multimedia

Guiding Principles of Liberalizing Telecommunications Policy from Regulation to Full Competition

Liberalization is about transforming monopolistic industry structures into competitive markets. The purpose of introducing competition is to promote greater rivalry among firms, leading to improved productivity, wider consumer choice and lower prices. Productivity improvements in the communications sector are also seen as a catalyst in stimulating the competitiveness of an economy as a whole. Telecommunications and other networks industries have special economic characteristics, which raises questions about whether and how they should be regulated. While competition has been or is being introduced into the market, several factors, if left unchecked, constrain its effectiveness and diminish its benefits.

The most significant constraining factors are:

o The legacy of monopoly control
o Widespread public ownership and government subsidies
o Political and institutional diversity
o Public service objectives
The existence of natural monopoly (bottlenecks) elements within network infrastructures and the need for network interconnection between rival networks.

To understand telecommunication liberaization process, a difference between regulation and de-regulation must always be kept in mind, which is:

"Where regulation is introduced to control market failure,
de-regulation is implemented to avoid regulatory failure."

The regulatory failure is a result of a Regulatory Capture, resulting from political influence over the telecom regulator or regulator becoming too inefficient and bureaucratic to pass high costs of regulation to the market, by charging unreasonable fees and other charges eventually leading to market failure along with regulatory failure Whereas, theoretically, the ultimate goal of regulation is to ensure maturity of the competition and then deregulate the market, by lessening the intensity of regulation from heavy handed to light handed regulation, eventually no regulation at all. Pakistan's policy makers seem to mix up the fundamental difference between regulation and deregulation, denouncing Telecom De-Regulation Policy 2003 at a time when the competition in fixed-line has yet to see the light of the day, though its been more than a year since December 2002, where the exclusivity period of the incumbent operator has finished... ... ... where the de-regulation policy provides very important guidelines influencing the business of mobile telecom operators specially dealing with issues of interconnection, national roaming and access promotion contribution charge.

The liberalization of network industries to which telecommunication belong could be seen as evolution along a path from monopoly (phase I), to monopoly and competition (phase II), and possibly on to competition (phase III). The three phases of market structure are described in table (9).

Table (9):






One firm supplies services and regulation is concerned with the prevention of monopoly abuse in retail markets.


Monopoly and


Competition is gradually introduced into some or all markets and regulation focuses on: monopoly abuse in both retail and interconnect markets by dominant incumbents, emerging competition issues, and public service obligations.



Here competition is extensive and increasingly effective in some or all markets. Some light-handed regulation is needed, as in other competitive markets, to ensure fair trading practices and maintenance of public service objectives.

The intensity of regulation differs from one phase to another. Under monopoly, provision of services in phase I, is relatively straightforward for public authorities to direct firms to provide certain loss-making services. Prior to liberalization, monopoly firms mainly incumbent i.e., Pakistan Telecommunication Company Limited (PTCL), in case of Pakistan typically is subject to the array of public service obligations. These usually are financed through cross-subsidization, i.e. some customers pay prices above costs to meet the costs of serving costumers who pay prices below cost. The entry of new firms into an industry dramatically changes the incentives for incumbents to engage in cross-subsidization. Thus regulation is required; particularly in the early stages of competition to ensure that public service objectives are met. In Pakistan this has been a phase from 1996-2002, when the Telecom Re-Organization Ordinance 1996 broke up Pakistan Telecom Corporation into establishment of Pakistan Telecommunication Company Limited (PTCL), Pakistan Telecommunication Authority (PTA), Frequency Allocation Board (FAB) and National Telecommunication Corporation (NTC).

For Pakistan post-2002 exclusivity-period is the phase II, which involves the greatest intensity of regulation, reflecting the presence of both monopoly and competition. Unfortunately, due to the delay in promulgating the national telecom policy i.e., the De-regulation Policy 2003, real competition is yet to arrive in Pakistan practically. Many of the challenging regulatory problems arising in phase II relate to interconnection i.e., entry of new firms in the industry coincides with demands for interconnection to existing network infrastructures. Where infrastructure is owned and operated by vertically integrated incumbent, interconnection problems are likely to be severe. Many of these problems are compounded when private firms seek interconnection with publicly owned firms. It is also in phase II when public service (fairness or equity) objectives need to be reassessed. Phase II is also the period in which greater regulation overseeing the way that publicly owned firms obtain finance will be required. Regulatory intensity in the three phases of market structure can also be elaborated in the figure.



If an industry were to enter phase III, the market would provide most incentives needed to obtain desirable outcomes. It is likely however, that some regulation would still be required, as in other competitive industries, to ensure fair trading practices. However, regulatory intensity in phase III lies below that in phase I: unsurprisingly, when an industry structure is competitive there is much less need for regulation. After all, regulation is largely a surrogate for missing competition in phases I and II. In phase III, it is the competition authority like Monopoly Control Authority (MCA) in case of Pakistan would have regulatory rights ensuring fair trading practices across the board by controlling mergers and acquisitions, market abuse and consumer protection. In Pakistan, under the Regulatory Authorities Ordinance 2002, the power of competition Monopoly Control Authority has been transferred to the sector-specific regulator, i.e., PTA in Pakistan.

Comparison of Pakistan and Indian Policy and Regulatory Frameworks for Cellular- Mobile Sector Development

Though India and Pakistan have quite different geographic, demographic and economic profiles, it is quite interesting to see how India has achieved telecom and mobile-cellular sector market maturity quite successfully and how she has efficiently managed the telecommunication liberalization with skilful peace of policy. India experience suggests, that it is imperative for a government to chalk out the future policy framework through consultative process, ensuring an open dialogue between public and private sectors, encouraging domestic intellectual capital development, as success have to come from within not from outside! Indian experience of relying on indigenous resources and people is quite important, as against the Pakistani policy formulation exercise, relying more-over on international consultants such as ICC and Mac Carthy Tesult etc. Therefore, Pakistani policy exercise lacks serious pre-policy consultation process and debate which would have brought maturity in formulating telecom policy. Only comments have been desired over a draft-policy document within a short time span. Looking at Indian telecom sector and mobile-cellular sector developments provides broader vision when comparing the policy areas shown in table (10).

Table (10):




Policy Maker

MoIT, IT & Telecom Division

Telecom Commission, Ministry of Communications & IT






Department of Telecom, India

Licensing Regime

Service based

Unified Telecom Licensing (UTL)

Telecom Policy

Telecom Policy 2003

Mobile Cellular Policy 2004

NTP 1994 and 1999

Dispute Resolution

- NA -

Telecom Dispute Settlement and Appellate Tribunal (TDSAT)

Alternate Dispute Resolution & Advocacy

Proposed APTOP (All Private Telecom Operators of Pakistan)

  • Cellular Operators Association of India
  • GSM India

Spectrum Management Agency

FAB under PTA

Wireless Planning & Coordination Wing (WPC) under DoT

Spectrum Plan

Proposed under Telecom Policy

Nation Frequency Allocation Plan 2002 (NFAP)


- NA - Outsource

  • Group on Telecom,
  • Group on Telecom & IT Convergence
  • Telecom Engineering Center


- NA - Once CTRL, PTCL

Telecom Engineering Center (TEC)

Consultancy Services

- NA- Out source

Telecom Consultants India Ltd, DoT as Worlds leading telecom consultancy service providers to over 50 countries

Telecom technology development


  • Center for Development of Telematics,
  • Telecom Technology Center, GoI

Telecom Equipment

- NA - Once Telephone Industries of Pakistan (TIP)

Indian Telephone Industries Limited (ITI)


USF 1.5% of Gross Rev.

USF 5% of AGR


Fund 0.5% of Gross Rev

Contribution as required by TRAI time-to-time


NA for Cellular Operators

Access Deficit Charge (ADC)




Grant of License



Mergers & Acquisitions

- NA -

Competition Bill 2001


- NA -

Convergence Bill 2000

License Fee

25% Down-payment + EMI

12%, 10% 8% of Annual Gross Revenue (AGR) for Circles A, B, C, respectively

Spectrum Charges

Price per MHz per Annum

2% of AGR for 4.4 MHz, or 3% of AGR for 6.2 MHz

Length of License

Initial 20 yrs extended for 15 yrs

Initial 20 yrs extended for 10 yrs

Accounting Separation


Yes, Accounting Separation System

Migration to 3G

Through Auction of Spectrum

- NA -


if > 25%

If > 30%


Air Interface Blocking <= 4% - 2%
Call Completion @ > 96% - 98%
Call Connection Time <= 7-5 sec
Call Quality MOS3 Score > 3
Network Down-Time <2% -1% per month
Site Down Time < 48-24 Hrs

Call Success @ > 99%
Service Access Delay 9-20 sec
Call Drop @ <3.0%
Call Quality > 95%

Sharing of Infrastructure



Roll Out requirements

70% of Tehsil H/Qtrs in 4 yrs with min. of 10% Tehsil coverage in all Provinces


Performance Bond

USD 15 Million

Financial Bank Guarantee (FBG) of amount equal to Rs. 50, 25 and 15 Crores for category A B & C service areas


Allowed by 2006

Allowed under ULS

Mobile Number Portability




Limited Mobility

No more limited


Although the mobile sector policy is technology neutral, yet GSM has become a de-facto standard due to the spectrum allocation policy, which has pushed forward issuance of 3G licenses farther into the future not to available for Pakistani customers for another 2 to 3 years. Besides the (2) new licensees, there are (4) existing players in the cellular business namely, Ufone, Paktel, Instaphone and Mobilink, but practically there are only (3) players as Millicom has majority ownership of both Paktel and Instaphone, and there has yet no regulatory rules to manage vertical integration, neither the policy has provided any guidelines. In the wake of migration of wireless services from 2G to 3G, the current mobile operators has to compete with Wireless Local Loop (WLL) operators with limited mobility in the case of Pakistan, which is going to become a serious apple-of-discord once the fixed license are issued and start operating in respective regions.

The true competition will be seen between the incumbent (PTCL) owned Ufone against strong international brands and consortiums of Orascom Group (Mobilink), Millicom Group (Insta & Paktel) and the new operators which are Space Telecom (Pakistan State Oil + Syrian Telecom) and Telenor (International arm of Norway Telecom). Moreover, these mobile operators can develop market synergies by acquiring Local Loop (LL) or long distance international (LDI) licenses not to mention Internet Service Provision (ISP). These market consolidation possibilities pose new challenges to the existing policy and regulatory regimes. These possibilities open backdoors providing room to these mobile operators to by-pass cellular and regulatory checks to be able to claim APC, or to cross-subsidize telecom or internet service provision by deploying emerging technologies such as VoIP (voice over IP). History of Pakistan mobile-cellular market suggest that the existing players have been quite inefficient and exploitative practicing unethical ways of earning money, by charging over and above their existing prices without acceptable level of service-provision. The story of causing customer-headaches are true for Mobilink and Ufone, both services providers have seriously failed to expand their network services appropriately. With these facts in mind it is quite interesting to observe the coverage of current GSM service provides in Pakistan in contrast with companies having operations in other countries and also able to become new GSM operators which will be starting their services in Pakistan, namely Telenor and SpaceTel.


Ufone (<5%)
Mobilink (<10%)
Grameen Telcom (Bangladesh)
Telenor (>70%)
Space Telecom (Syria) (>50%)
Mobitel (Sri Lanka) (>20%)
Millicom Group
Vodafone UK (>98%)


First of all we must bear in mind, the current Mobile Cellular Sector Policy 2004 is not an end but the beginning of an exciting times in Pakistan, where over USD $500 million of investment is promised. After the successful competitive auction of two (2) new mobile licenses by PTA, there are some nice surprises too, due to unexpected results of license issuance are announced. Out of (33) potential bidders, only (9) actually fulfilled the complete pre-requisites set by the regulator one key requirement being the Performance Bond, which remained a thorny issue, preventing big players to come forward, which the market was anticipating to be the winners and holder of licenses. With grant of licenses in fixed line, the market will really be ready to become hot battleground between the incumbent and the competitors, and the success or failure of the policy will be determined quickly, afterwards.

The most important point about this policy is, that it is more of a Mobile-Cellular Licensing-Policy than a Sector-Policy. To call it a "Mobile-Cellular Sector Policy" is misleading. Contrary, to this India has a single-telecom-sector policy and Unified Licensing Regime. Moreover, this policy does not bring anything astonishing which cannot be covered within the "De-Regulation Telecom Policy", including spectrum management. The only components forcing a independent policy-framework remain spectrum and licensing, being the sole reason deter of promulgation of this policy. Under the new developments FAB has become a sub-organ of PTA, meaning that both licensing and spectrum will be managed by the regulator through regulatory framework of rules and laws.

Keeping in mind, the ideal goal of any policy is to ensure well-fare of the society. Full competition and de-regulation can only be achieved with introduction of a fully competitive market with no barriers to entry or exist, like in the case of Internet Service Provision (ISP). Here, this policy limits competition in a number of ways, specially through allocation of spectrum to only (2) more licensees. Though a scare resource spectrum should not become a tool to restrict competition like, in advance countries such as US and UK, there spectrum is traded as a commodity and managed by the private sector.

Being silent over critical issues of convergence, competition issues such as mergers & acquisitions, services-trade related issues of WTO, over dispute settlement mechanism in case of an anomaly between policy and regulation makes the implementation of policy a challenging task. Moreover, the going back to telecom de-regulation policy promulgating inception of De-Regulation Facilitation Unit (DFU), creates doubts over implementation of this policy either to be handled by PTA or DFU! Which actually means that the exercise of policy making will continue as we will be need a policy on Dispute Settlement, a policy of R&D, a policy on Access Promotion Charge, and a policy on Universal Service Provision.


With specialization industrial competitiveness and telecom management, Mr. Yousaf Haroon is currently working as Assistant Professor (Management) at the Institute of Communication Technologies (ICT), formerly National Post Graduate Institute of Telecommunications and Informatics (NPGIT&I), Pakistan Telecommunication Company Ltd. His functional responsibility is heading corporate management trainings for PTCL top and middle management levels all over Pakistan. With his specialization in WTO, International Telecom Markets, and Telecom Regulation, World Bank Institute, Washington extended the invitation to participate in "International Negotiations in Services Trade" program. Mr. Haroon has also studied some 20 developing telecom markets around the world as Swedish International Development Agency (SiDA) scholar and attend "Liberalized Telecom Markets" advance telecom course at Blekinge Institute of Technology, Sweden. Prior, to PTCL, he has worked for COMSATS Internet Services and FFC-Jordan Fertilizer Company. He is an honorary advisor on trade and information and communication technologies (ICT), with Development Gateway, World Bank besides having taught Telecom Business Management course at Centre for Advance Studies in Engineering (CASE). Now ICT, NPGIT&I, under Pak-French protocol had offered MS Telecom Management program in collaboration with INT-France, being the only institute to conduct extensive telecom business management research program in the country. ICT students have conducted more than 300 MS thesis over a wide range of telecom technologies and market models, with a focus on Pakistan. For more details you can reach Mr. Haroon at (+92-51-4430247, or