ISLAMABAD, Aug 28: The Competition Commission of Pakistan on Tuesday issued a ‘policy note’ to the Ministry of Information Technology and Pakistan Telecommunication Authority, to withdraw its decision to establish an international clearing house exchange.

The CCP said the decision was not tenable in terms of Competition Act 2010.

The IT ministry had issued a directive this month to establish an international clearing house (ICH) exchange for international incoming calls for long distance, fixed-line local loops, wireless local loops and mobile operators.

The proposed clearing house exchange arrangement has been supported by the IT ministry through its directive for amicable settlement of pending cases relating to Access Promotion Charges (APC) and to curtail and eliminate the grey traffic, in line with the existing Deregulation Policy 2003, and the existing regulatory regime.

In a statement, CCP observed that while it may be within the domain of IT ministry to issue policy directives in relation to the subject industry, it needs to be appreciated that any such policy decision/directive/circulars are in fact subject to the substantive provisions of the statute in force.

With respect to the curtailment and elimination the grey traffic, CCP observed that under the proposed ICH arrangement the termination rate for Pakistan is expected to go up to 8.8 cents from the current rates. This may provide further incentive for grey market players to increase their traffic.

Also, in future if an arbitrage opportunity exists, the players operating in grey traffic will likely exploit that, thus ICH move is unlikely to curb the grey traffic and may kindle its further growth.

CCP said that through the proposed ICH arrangement it appears that the competition among the LDI Operators is restricted/prevented/diminished as each operator will have a guaranteed quota of incoming international traffic as per their existing market share.

The CCP further noted that the proposed ICH arrangement directly violates Section 4 of the Act, and particularly, clause (a) and (b) of subsection 2 of Section 4 which prohibits price fixing and division of market via quotas. Under the proposed ICH arrangement the consortium will designate PTCL to undertake negotiations on termination rates with foreign operators, and LDI operators also signing up to a percentage quota, will be guaranteed from the revenue PTCL collects from the incoming
international terminations.

The CCP also noted that a substantial advantage will be available to the existing LDI operators due to the proposed ICH arrangement. The incumbent LDI operators will be in a position to exploit the said arrangement through a cost advantage over potential new entrants.

CCP concludes that under the directive and proposed ICH arrangement price fixing and sharing of market (quota allocation) are promoted.