PTA Intends to Regulate Prices for Telcos, ISPs

Pakistan Telecommunication Authority (PTA) is apparently working to regulate the tariffs of telecom operators and Internet Service Providers (ISPs), while monitoring the charges for the services including calls, SMS, mobile internet, broadband services, etc.

In the draft, the “Tariff of Telecommunication Services Regulations, 2021”, published late last week, the telecom watchdog said that the telecom operators, which are non-SMP (Significant Market Players), are free to revise tariffs of various services; however, it soon contradicted its first statement and said that PTA will have all the rights to reject or modify the proposed changes if the authority considers them as burdensome on consumers.

Not to mention, for SMPs (such as Jazz in cellular services) it will be mandatory to get PTA’s nod before making any changes in the tariffs.

The SMP operators will need to furnish a request for tariff revision through the submission of a written proposal to the authority which could take up to 15 days to be approved. The operator will be allowed to revise the tariff seven days after the approval of the proposed tariff plans.

Regardless of this, PTA can, on its own or at the request of the consumers, initiate an inquiry to determine whether any tariff is burdensome – for players that are SMP or non-SMP.

The burden of proof shall be on the telecom operators and they will have to satisfy the authority that the tariff is not anti-competitive or burdensome.

The telecom authority, while making decisions, may refer to the cost of licensee, affordability of consumers, tariff of other licensees in similar circumstances and the economic viability.

The tariff can be considered as burdensome if profit to the licensee is abnormally higher than the reasonable rate of return, taking into account the cost of operations, the regulations’ draft stated.

The telecom watchdog may set a price ceiling or price floors for tariff plans from SMP and non-SMP operators for their basic services.

Are We Getting Regulated Again?

We have seen this before when prices were regulated (during ICH for instance or before 2004) but then the market was de-regulated and operators were set free to sail on their own.

The benefits of deregulation have been humongous without a doubt. Then it begs the question, why take a U-Turn from the previous stance of the need for a deregulated market?

Experts are already raising questions, and they are probably right as well.

It must be mentioned though that PTA had been mandated to keep prices competitive — and to avoid any cartelization; through telecom policy 2015, however, as the experts opine, regulating the anti-competitive pricing is one thing but then removing burdensome from pricing is a different ball-game altogether.

According to industry experts, it wouldn’t be wise for PTA to regulate the market as there are countless variables that may affect the market negatively.

For instance, it will be extremely hard to justify a price-tag for a voice call or a broadband plan considering there’s a lot that is accounted for when prices are defined. The ISP industry is already facing challenges of high taxation.

PTA has every right to become CCP and (block cartelization), but not become an activist: Experts

Experts said that it would be especially challenging for the regulator to set floors considering that telecom and broadband tariffs in Pakistan are dirt cheap when compared to regional or global markets.

“When there’s a fear of cartelization, then PTA has every mandate to intervene, but otherwise they better not get into regulating the market”, opined a market expert.

PTA’s Response:

When asked from PTA on this, it said that authority is empowered under Section 26 of the Pakistan Telecommunication (Reorganization) Act, 1996 to regulate tariffs of telecommunication services in accordance with the regulations.

“It is clarified that PTA has never deregulated tariffs rather it is regulating the same through Significant Market Power (SMP) regime and merger conditions to keep the prices competitive and affordable for the general public / consumers and avoid any burdensome pricing”.

PTA further said that existing tariff regulations are being expanded to all telecom services which presently were applicable on Fixedline services only.

PTA explained that operators unanimously levied service / maintenance charges @ 10% on card reload services and introduction of other charges i.e. helpline, balance inquiry etc which were previously offered free of charge. “Such measures were anti-consumer and anti-competitive but action could not be initiated due to non-promulgation of tariff regulations”, and hence this consultation process on tariff regulations is here to provide price flexibility to the operators while protecting the interest of consumers.

PTA, however, didn’t comment on its intention of regulating prices for non-SMP players, as the draft policy clearly states that non-SMP players can revise tariff, however, authority may or may not intervene if the prices are considered burdensome.

Will This Hurt Investment in 5G and FTTH?

These proposed regulations, if enacted, will be applicable on upcoming 5G services as well. Considering that there’s a potential regulator’s hammer on tariffs, it is yet to ascertain if 5G investments will flow as freely as we saw in the case of 3G and 4G.

For example, a data plan from a 5G operator or an FTTH ISP for that matter, could be deemed burdensome or unreasonable and then PTA will have all the right to direct a telco (or the particular ISP) to revise the rates (downwards).

Significant on ground investment is required to build and maintain a 5G network or fiber infrastructure and if this regulation is promulgated, PTA will get the authority to decide to reduce tariffs which may cause losses to the telcos.

Telcos will be hesitant to invest in spectrum sales since they’ll feel PTA will force a reduction in prices and they won’t be able to recover their investments.

Clearly, the operators and everyone working in the sector isn’t happy with the proposed draft and – from what we have heard – they are prepared to voice against it.

PTA said that stakeholders can comment on the draft by February 17th.

PTA, while speaking with ProPakistani, said that it will give due consideration to the comments and opinion of the experts while finalization the regulations.

Free Emergency Services

The draft regulations maintained the facilitation to customers including the provision of emergency calls to customers without any charges.

PTA may allow telecom operators to revise the tariff of value-added services at any time in any manner provided these operators notify the customers and the regulator 7 days before the action.

The date of notification to the consumer will commence after any modification made by the authority, if required.

Telecom operators, including landline and mobile phone companies, may offer premium rate services to the consumer within the price ceiling as per notified limits of the authority. The premium services are recorded and live conversation can be provided to customers at higher rates.

PTA, however, can reject and modify any changes which are anti-competitive and burdensome upon consumers.

Transparency in Tariffs

The operators shall not provide/ enable/ activate a chargeable service of tariff package to consumers without their explicit consent.

The operators are not allowed to charge for a service, which was earlier free of charge, without the explicit consent of consumers through email, SMS and mobile application, shortcodes, or social media platforms.

The telecom companies will also not be allowed to charge customers for services supplied on a free trial basis during free trial period.

If a mobile company displays multiple tariffs for a service at the same time, then it will charge the lowest rates for the same service.

PTA, in its draft regulations, will direct telecom companies to notify their customers when they finish 80% of their credit balance or credit limit via SMS. In case a service is intended to be extended beyond the credit balance or credit limit of the consumer, explicit consent of consumer shall be obtained.

The regulations also restricted operators not to renew any service or package automatically without having consent of renewal from the customers.

The telecom operators should upload latest tariff of local and international calls and services on their websites. They may also notify the tariff through advertisement and communication through various platforms.

Operators have also been advised to avoid misleading and superlative statements in advertisements such as, “best network” or “widest coverage” until they can provide a proof to the regulator.

The companies should notify the category of the services to the consumers however the authority will assist the operators towards providing them clarity of services.

Telecom companies should provide a dedicated helpline service to customers for technical assistance. The IVR services have to be free of charges.

PTA Repeals the Fixed Line Tariff Regulations, 2004.

The aim of revised regulations was to provide telecom services to the customers at reasonable prices whereas operators’ rights are also protected for their rate of returns against their investments.

  • PTA has become quite irrelevant in this market. They want to regulate low telecom prices. The only sector where you can budget PKR 300/- for calls for a month for the past 15 years. PTA should regulate electricity or gas tariffs. Which would ultimately lead towards a further decline in telco tariffs

  • Here PTA go again. Instead of solving genuine issues of telecom operators they are going to try to play politics and look good. Nobody will fault them immediately for reducing prices but over time there will be no cash flow left to reinvest. Then PTA will complain and blame telecom companies for not investing enough in quality of service or new technology. Forget 5G if they can even do 4G properly it will be a big deal. FTTH tu forget. The business case for this was dead years ago. Only top cities will have this technology. Rest must wait till 2030 for 5G to come.

  • Well said. Who will invest in 5G and FTTH if the new PTA Chairman comes and says the modelled price in feasibility after project is too high and needs to be reduced. Better invest in Pakistan stock market or government bonds than invest in telecom infrastructure.

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