USTR Recommends Pakistan to Withdraw ICH to Comply with WTO Obligations

USTRUnited States Trade Representative (USTR) has urged government of Pakistan to withdraw International Clearing House to to ensure the functioning of a competitive market for the termination of international voice calls and taking necessary steps to prevent collusive behaviour among international operators.

United States Trade Representative (USTR) is an agency that negotiates directly with governments to create trade agreements, to resolve disputes, and to participate in global trade policy organizations.

USTR mentions that LDI operators in Pakistan in October 2012 – upon direction of MoITT – established “International Clearing House” (ICH) under which thirteen Pakistani carriers assigned Pakistan Telecommunications Company Limited (PTCL) the exclusive right to terminate inbound international calls in Pakistan at the “approved settlement rate” set by the Pakistani Telecommunications Authority (PTA).

As part of the ICH agreement, every carrier, other than PTCL, suspended their interconnection arrangements for incoming international traffic and in turn received a fixed share of the revenues PTCL generates from the termination of incoming international traffic in Pakistan.

The new international termination rate set by the PTA was $0.088 per minute, an increase of approximately four hundred percent over the competitive market rate of approximately $0.02 per minute that existed prior to the ICH agreement.

Upon a petition filed by Brain Telecom, Lahore High Court suspended ICH and directed PTA to ensure pre-ICH rates for international incoming calls to Pakistan.

USTR said that multiple international carriers have informed it that PTCL remains the only provider of international termination services in Pakistan and that the increased rate of $0.088 per minute remains in effect, even though it is no longer mandated by the PTA.

Most recently, the Pakistan Supreme Court overturned the Lahore High Court ruling and remanded the matter back to the CCP.

United States Trade Representative, in its review, said that Pakistan’s actions to increase its international termination rates have led to a massive increase in rates for telecommunications into Pakistan, hurting both global telecommunications companies seeking to terminate calls in Pakistan and Pakistanis living abroad trying to call home as well as other non-Pakistani consumers.

The immediate cost to U.S. telecommunication companies (and their subscribers, if cost increases are passed on) will be in the tens of millions of dollars. As Pakistani companies and U.S. companies investing in Pakistan depend on competitively-priced telecommunications to engage in trade, Pakistan’s actions also stand to affect these companies’ competitiveness as well, to the extent that they depend on incoming international calls for their business (e.g. from customers, suppliers and affiliates).

USTR said that Pakistan is a member of the WTO with commitments under the GATS Annex on Telecommunications. Section 5 of the Annex on Telecommunication requires the provision of access to telecommunications networks and services in Pakistan on reasonable terms and conditions. The WTO Dispute Settlement Body has found that “access to and use of public telecommunications transport networks and services on ‘reasonable’ terms includes questions of pricing of that access and use.”

USTR commented that there is substantial evidence that Pakistan carriers participating in the market for terminating international traffic into Pakistan appear to be colluding to avoid competition and to fix the rate for such termination at a level significantly above the prior range of rates that was offered when all such participants were actually competing to provide such services.

These actions raise concerns about Pakistan’s obligation to provide reasonable terms for access and use as required by the GATS Annex on Telecommunications.

USTR said that it looks to Pakistan to ensure the functioning of a competitive market for the termination of international voice calls by rejecting the ICH agreement and taking necessary steps to prevent collusive behaviour among international operators.