Convergence

Pakistan Telecommunications industry is heading for deregulation. This is a brief synopsis from way back in 2002?

The two types of license categories have been created by the regulator PTA.

• Long Distance and International (LDI)
• Local Loop (LL)

There is no cap on the number of licenses to be issued.
A company can hold licenses for both LDI and LL.
The license issuing process will take up to 6 months.
The applications for licenses are to be submitted in Q4.
The fee payable to PTA will be 3% of annual revenue.

For LDI

More stringent technical and financial criteria for LDI licenses is suggested where a US$ 10 million bank guarantee and a US$ 0.5 million license fee will be required. LDI Operators will be able to retain only up to 6 cents/min for international incoming traffic, the rest will be passed onto the LL operator as APC (Access Promotion Contribution) however, APC will not be available to cellular operators. PTCL will lead the consortium of LDIs to negotiate bilateral accounting with international operators, (source of contention) the principle of one country, for one rate to be implemented (source of contention). The LDI operator must own a %age of the transmission systems and cables comprising its network or may lease PTCL infrastructure in the following percentages :

• 10% within the first year
• 30% in the second year
• 50% in third year

Local Loop

Local Loop licenses will be issued on a per region basis for each of 13 regions (equivalent to PTCL regions). The LL operators can offer limited mobility within the same cell site and no inter-cell hand over can be offered. LL operators cannot carry calls between two different regions. LL operators will be exempted from offering indirect access (carrier selection) facility to their customers until they reach Significant Market Power (SMP) status (to be determined by PTA). Until SMP is reached, there will be no obligation to open ducts or poles and tariff regulation will not be applicable. The Government intends to follow ITU-T specified radio frequency bands for WLL and Microwave transmission services. Where demand exceeds available frequency, spectrum will be allocated through bidding or other competitive process. PTA will notify about the initial interconnection prices by Oct, 2003. PTCL will prepare all transit and tandem switches for interconnection within six months and will prepare 50% of MSU capacity for interconnection within 1 year.

Major Issues

• Details on interconnect agreement
• APC debate
• Primarily contains the “very near future”
• Spectrum issues
• Incumbent related issues
• Unbundling
• PTCL to lead the consortium to negotiate international bilateral rates?

Role of Regulator

Market Landscape (Virgin Territory) There are around 4 million fixed line subscribers (ALIS) where PTCL is the monopoly service provider till date, NTC for the government sector and SCO for Northern Areas/ AJK. Currently, there are over 2.5 million mobile Cellular subscribers, where the predominant majority has pre-paid connections. CPP regime resulted in explosive growth of Card Payphone, Pre-paid Calling Card Services and other major areas which are dominated by WorldCall, Telecard, Dancom, GT etc. There has been a Significant increase in Internet subscribers which is assessed to be over 2 million. This is a healthy sign for Pakistan’s telecom sector in general where there is an extremely low tele-density compared to countries with similar demographics

Opportunity Landscape

The deregulation policy is aimed at striking a balance between LDI and LL through APC and other measures. LDI, though still attractive, will not be a joyride as previously anticipated by certain quarters while making LL more attractive is a positive move as market growth is directly related to local loop subscriber base expansion. The entire market will benefit in the longer run and Pakistan can easily absorb over 1 million subs/ annum in addition to the 0.5 million/ annum being added by PTCL.~ 2 mil cellular subs per annum

LMS (Boon or Bane)

LMS is expected to be a very attractive service for the local market. Over 90% users in Rural/ Semi-Urban areas do not require Inter-cell roaming. Examples from India, China, Japan and other countries Limited Mobility vs Fixed Line vs Full Mobility. The Indian Regulator is talking about a single license in future with regulation against flow of time/ technology which will not be sustainable. Comparatively lower per line cost for Limited Mobility Mobile operators are penetrating low income groups. There is negligible revenue from outgoing traffic for pre-paid subscribers. The low line rent WLL operators can manage to migrate lucrative business customers from PTCL.