The lingering dispute between Long Distance & International (LDI) operators and the industry regulator, Pakistan Telecommunication Authority (PTA), over the application of allegedly wrongful, higher Access Promotion Contribution (APC) rates on LDIs during 2008 and 2010 is now threatening to drastically impact the country’s telecom and digital ecosystem, and affect mobile service quality, banking operations and the broader economy.

The contentious issue resurfaced in recent months after the PTA refused to renew the licenses of seven LDI operators unless they cleared their unpaid APC dues for the said period. In all, the dispute on APC calculations involves 13 operators out of 21 license-holder LDI operators responsible for providing long distance and international telecommunication services by bringing voice and data communications to and from Pakistan.

Four of them have fully cleared their contributions for the period and have had their license renewed. The remaining nine operators, the PTA claims, owe nearly Rs78.6 billion — Rs24.1bn in principal APC dues and Rs54.5bn in late payment additional fee.

These operators are said to control nearly 90 per cent of the market. Seven of these operators, which were issued licenses in 2004 for a period of 20 years, are already up for license renewals. But, they are operating under court orders due to refusal by the regulator to renew their licenses on account of non-payment of APC owed by them.

In case of non-renewal of LDI licenses, about 40pc of ATM machines might shut down

APC, introduced under the 2003 telecom deregulation policy, is a contribution made by LDI operators from their profits towards the Universal Service Fund (USF) for telecom infrastructure expansion in unserved and underserved areas to foster teledensity. The APC for the USF regime was introduced towards the end of 2006.

The dispute arose, LDI operators argue, when PTA began applying rates notified for Access Promotion Contribution for Local Loop (APCL) — a category payable to local loop operators licensed to provide public voice and data communication services — to the APC for USF payments.

This switch in calculations introduced legal and logical inconsistencies. “LDI operators are demanding compliance with the prevalent law and, in particular, compliance with the rules and regulations that provide a clear formula to calculate APC for USF,” argues an LDI executive.

Interestingly, PTA complied with the prevalent rules and regulations till 2007, but deviated from the prevalent law in 2008.

“That PTA reverted back to the requirements of these rules and regulations in 2011 and ended the dispute is enough evidence to validate our stand on the issue as lawful,” he concluded.

“The timeline of PTA’s behaviour before and after the disputed period is clearly indicative of malafide intent. It was also the sole reason for the high volumes of grey traffic generated in Pakistan during that period. Once PTA reverted to the law, grey telephony also reduced.”

Industry sources say the Lahore High Court has already ruled in favour of operators, ordering PTA to recalculate the APC payments according to the correct formula.

The Auditor General of Pakistan, in its 2011 PTA audit report, has pointed out significant irregularities in the application of the APC regime, declaring the actions of the PTA as unlawful, endorsing operators. Yet, the PTA continues to demand payments based on incorrect rates, intensifying the dispute.

Operators claim they have consistently met their financial obligations, both before and after the dispute began. The reality is that they have overpaid by around Rs8bn, with another Rs6bn held in the Escrow accounts opened in 2012, pending resolution of the court cases. PTA’s claim of the outstanding amount of Rs24bn has been consistently challenged by the operators.

Additionally, the Sindh High Court continues to adjudicate on multiple cases filed by LDI operators against PTA, seeking the recovery of amounts that were allegedly overcharged. These cases, valued at over Rs29.2bn, underscore the operators’ grievances.

Neither PTA nor the Ministry of Information Technology and Telecommunication (MoITT) officials are ready to speak on record. However, they provided Dawn with a presentation documenting the issue, which says five operators out of nine that continue to contest the APC calculations are ready for payment of the full disputed principal amount of Rs8.2bn in instalments. The remaining four are not ready to pay any of the Rs15.8bn amount due to them.

In July, the MoITT gave policy guidelines to allow operators to pay half principal amounts in 30 quarterly instalments over seven and a half years. These were withdrawn later after the PTA objected that the guidelines covered recovery of only half the principal amount owed by operators.

Operators insist that PTA had proposed that their exaggerated calculation of APC for USF be taken as a basis for instalment plans or for an upfront payment of the entire demand without consideration of the prevalent law and the subjudice nature of the matter. Such a proposal is so preposterous and was offered only to force operators to let go of their legal stand in the courts to get their licenses renewed, LDI operators insist.

The presentation also lists the implications of the non-renewal of LDI licenses on account of outstanding dues. Such an extreme action would affect half of the current mobile traffic and around 10pc of internet traffic, besides shutting down around 40pc ATM machines. Furthermore, the restoration of these services would take significant time.

Likewise, some LDIs operate satellite hubs with substantial throughput capacities, supporting critical remote communication and banking. Moreover, international communication could suffer, as the nine LDI operators currently handle 21pc of Pakistan’s incoming voice traffic.

Cross-border data links with Afghanistan, managed by these operators would also be at risk, potentially leading to significant connectivity issues.

“The operators are not asking for leniency or forgiveness; they are seeking justice and correct application of the law. This dispute could have serious ramifications for Pakistan’s telecom infrastructure. Besides, tens of thousands of jobs are also at risk, adding further urgency to finding a fair resolution,” the LDI executive goes on.

At its core, the APC dispute between LDI operators and PTA/MoITT is a matter of financial fairness and legal accuracy. The primary issue remains the calculation of APC for USF and PTA’s continued insistence on demanding inflated payments.

Published in Dawn, The Business and Finance Weekly, September 16th, 2024