PTA Intends to Set Price Floors for Telecom Services

In order to combat price war among telcos and reduce volume of grey traffic calls, PTA intends to regulate the tariffs of Cellular Mobile Operators by introducing a price flooring mechanism.

The authority mentioned in its consultation paper that telecom operators have been requesting a course of action for price flooring of telecom services for many years now.

While PTA previously believed that telecom operators should drive the market on their own without any external input, it now has changed its view in line of aggressive promotional campaigns which have resulted in a race to the bottom and lower revenues for some operators.

Declining revenues and hyper aggressive promotional campaigns have forced PTA to rethink its stance on price floors

Financial health of operators is poor, with three out of five operators posting losses in FY14 despite making positive profit margins. In fact, one operator recorded a decline in revenues during FY14.

This ongoing situation of negative growth in telecom revenues has pushed PTA to take measures to regulate tariffs in the sector.

In this regard, the telecom watchdog has sought a consultation of the industry stakeholders. Based on feedback of operators and customers alike, a price floor mechanism to regulate tariffs will be introduced.

The authority has set a deadline of one month for industry stakeholders to offer comments on the consultation papers floated recently in the telecom industry.

Consultation paper can be found here (PDF File – 1.75 MB)

The authority asked CMOs to give their input on the floor price for various telecom services. CMOs will also provide details of per minute cost of voice calls and SMS for both on-net and off-net and for both post-paid and pre-paid connections.

PTA has asked stakeholders:

“Should PTA direct operators to stop offering unlimited on-net calls or curtail the time of offering unlimited promotions?”

Uptil now, market and competition have determined pricing for various services but PTA has made it clear that it reserves the right to review the appropriateness and adequacy of service charges of telecom operators on regular basis as per clause of 9.4.1 of new Telecom Policy 2015.

Are CMOs Overcharging Customers through High Off-net Charges?

PTA highlighted an issue raised earlier in National Assembly that alleged that mobile phone companies are overcharging customers through high off-net tariffs

According to PTA investigation, the price difference between on-net call charges and off-net call charges is significant.

According to PTA, mobile phone companies introduced unlimited on-net calls for as low as Rs. 5 per day as compared to up to Rs. 1 charges for off-net calls. PTA said that this pricing mechanism is followed by every operator

As a result, all market players followed each other in introducing daily packages which carry a heavy cost for all companies and hurt the whole sector ultimately.

According to PTA:

  • Zong is offering 160 promotions including 148 location based packages
  • Mobilink is offering 18 promotional offers including 36 location based packages
  • Ufone is offering 29 promotional offers including 41 location based packages
  • Warid is offering 13 promotional scheme including 4 location based packages
  • Telenor offers calling packages from Rs5 to Rs 16.73 for unlimited on-net calls

According to a report from the Telecommunication Management Group, a US based consulting firms, telecom operators create a significant increase between on-net minutes and off-net minutes either by lowering charges of on-net calls or increasing charges of off-et calls.

PTA has asked stakeholders:

“What are your views on the offer of general/ country-wide promotions instead of city-specific promotion offered by CMOs?”

This difference in call prices creates a cluster of subscribers in the form of calling circles within the network of networks. As a result, operators with big subscribers base grow faster compared to lower subscribers base.

PTA mentioned in the paper that telecom authorities of different countries intervened in the market not only to reduce imbalance between on-net and off-net call charges but to safeguard the interest of industry as well.

It presented models of different countries including Turkey, Singapore, Colombia, Kenya and Slovenia.

CMOs Tariff Structure Hurts Business of Fixed Line Operators

Fixedline operators showed concerns that higher termination charges by mobile phone operators have squeezed their business in terms of customers and volume of services; resulting in anti-competitive behavior in the industry while restricting the share of fixedline operators in the industry.

The authority is also investigating the matter of fixedline operators alleging mobile phone operators involvement in cross-subsidizing of their on-net calls which cost them higher termination charges on landline calls as compared with calls terminated on the network of mobile phone networks.

PTA has asked stakeholders:

“What is your view on the concerns of fixedline operators regarding higher termination charges by mobile phone operators and lower termination charges by landline operators?”

In the absence of any consumer forum in Pakistan, ProPakistani will encourage its readers to give their feedback in the comment section, which will be later presented as their views to the authority.

PTA’s consultation paper of tariff flooring can be found here (PDF File – 1.75 MB)

  • Increase reliability and quality of voice calls to a significant extent. People WILL pay for quality and peace of mind.
    Stop offering all those sms bundles. They are giving rise to spam only.
    Aggressively pursue all those mobile and sms marketing skunks. They are making life miserable.
    Stop slapping customers with hidden or surprise charges,
    Introduce 3/4 G bundles with reasonable prices, high speed, smaller caps like 5-8 GB and maximum uptime. We do not want a 42 mbps throughput if internet is not going to work for even 42 minutes a day.
    Discourage down loaders aggressively for instance by blocking torrents.
    Dont apply tarrifs on OTT services like whatsapp etc. To combat them, offer cheap video calls. Give people a reason to not use OTT providers.
    Send location based service uptime/downtime alerts and publish on websites as well. People want/like/seek transparency.
    In short, go for quality, reliability, 99.99% uptime instead of quantity. People WILL pay. Proof lies in pudding called Warid.

  • its a free market, as long as its not hurting consumers PTA needs to stay out of this…telling companies how to do business not very smart move

    • To aap kia chahte hain k companies billions of dollars ka infrastructure deploy kr k awaam ko khairat k taur per free calls aur sms krwaen ta k log sakoon se din rat sexting aur deegar besharmiyan sastay daamon kr saken.

      • ap rat bhar bachio se baaten karte ho to mtlb sab ye harkaten karte han ? koi agr kuch sasta dera ha to dene do na, PTA ko kia Masla ha ? baqi Companies se ni hopata to Band karo Apni Apni Dukanen, han phr jab ek Company Reh Jaegi phr wo Monopoly ki waja se Rates Barhaegi Phr Ana Chaie PTA ko Beech me. tab tak jesa chalra ha chalne do, bajae is k key har CheeZ k Rates Barhae Jare han usko Control me lane k lie Kuch karey PTA or Mehngai karane k Chakkar me ha, bus MOTA TAX Nikal ae kisi Trah.

        • For your information, 1 dukan to band ho chuki (Warid)… aur baki 4 mei se b 1 (Ufone) ya to band ho jai gi ya PTCL ki backdoor support aur govt. officials ko paise khila k telenor ya zong mei se kisi ko band hony pe majbur kr de gi.

  • Isn’t fixed line operator (PTCL) doing the same thing by offering free on net calls? Why blaming only mobile operators? Will someone ever stop PTCL from bullying other telecom companies by offering unchecked & unabated cut-throat competition?
    Oh wait…. what about the much controversial excess data usage charges imposed by PTCL every month even if you hardly use internet? Almost every customer having capped data package suffers from this thing “bhatta”. I hope, competent authorities would look into this issue as well.

  • bakwas … another way to finish off packages like super card. bhai jab itna hi dar tha revenue ka to itna tax kiyun lagaya? pakistan woh dunya ka wahid mulq hai jahan card load karne per bhi tax kata hai aur miss call kane kay charges hain….

  • Telecom operators are advertising too much and hence investing a great deal in publishing new offers. Fixing the tariff base is indeed a very good initiative by PTA, and in my view they should impose limits on promotions per fiscal year. As a result, it would be easier for operators to not only prejudice the revenue but will also offer a piece of mind to the subscribers. On the other hand, fixed line operators are doing the same but with greater extent. Unlimited calls to other fixed line numbers with minor monthly charges, whereas quite expensive calls to mobile operators. This has to change and PTA should deploy some rules as soon as possible.

  • 1. Please the CMO must reduce the number of packages to make things simple.
    2. Difference in on net and off net could be due to interconnect charges also.

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