The Pakistan Telecommunication Authority (PTA) is set to evaluate and reassess the pricing structure for wholesale IP bandwidth, commonly referred to as internet bandwidth.
Sources told ProPakistani that currently, Pakistan boasts seven submarine cable landing stations, with operators consistently investing in their respective cable networks to meet present and future demands.
Consequently, entities like PTCL, TWA, and Cyber Internet are incurring costs in USD to international operators, covering expenses such as O&M charges, IP ports charges, circuit charges, inter-linking charges, and transport of bandwidth within Pakistan.
Meanwhile, costs incurred within Pakistan, including HR salaries, network operations, and domestic bandwidth transport, are denominated in Pakistani rupees.
The input cost of a product can be a mix of USD and PKR. To ascertain the impact due to any change in the USD value on the output costs/price of a product, the percentage share of USD and PKR in the input cost is required to be calculated, official documents revealed.
The objective of the exercise is to refrain from intervening in private disputes among licensees. Instead, it aims to scrutinize whether any commercial arrangement, established or intended under the licensing regime, necessitates regulatory intervention. This assessment specifically considers if such arrangements fall within the realms of cross-subsidization, anti-competitive practices, or burdensome practices that may impact consumers’ rights to access telecom services through licensed operators.
Internationally, prices of internet bandwidth are declining, and so is the case that wholesale IP bandwidth service providers are passing on the benefit of reduced international bandwidth prices to the downstream operators in Pakistan.
PTA stated that wholesale Internet Bandwidth in Pakistan is denominated/charged in US Dollars (USD) and payments are made in Pak Rupees (PKR) equivalent on the date of payment. Therefore, whenever the Pak Rupee depreciates versus the USD, the cost of Internet bandwidth for wholesale customers automatically increases with the same proportion.
Further, wholesale internet service providers also have to pay a higher amount to worldwide/international internet bandwidth providers in terms of PKR due to Rupee depreciation. As per the State Bank of Pakistan, from January 2020 till August 2023, PKR depreciated by 83 percent, i.e., approx. 17 percent yearly depreciation. On the other hand, the inflation in Pakistan during these three years averaged around 16% per annum as per the Pakistan Bureau of Statistics (PBS).
Vide its Determination dated 23rd July 2021, the Authority has declared PTCL and TWA as SMP operators in the wholesale IP bandwidth market.
The Fixed-line Tariff Regulations, 2004 states: Section 11(1) The tariffs for leased line services of an operator, who is determined to have SMP status in the leased line market by the Authority, shall be on cost. Until the determination of cost, the Authority may take into account the international benchmarks of comparable countries while setting/approving tariffs of leased lines.
The operator may set the tariffs of leased lines below the approved tariffs provided that they shall inform the Authority about their proposed tariffs thirty (30) days before the applicability of the new tariff.
Consultation has been initiated considering that issues related to wholesale charging practice in the market come under sections 4(c), 4(d), and 4(m) of the Act and Regulation 6 of PTA’s (Functions & Powers), 2006.
PTA under the applicable regulatory regime is empowered and has jurisdiction to carry out consultation on wholesale charging mechanisms in the market. It is clarified that the consultation process will not prejudice any commercial arrangement already executed and implemented between the parties.
IP bandwidth is a facility where bandwidth providers offer capacities to multiple users. Bandwidth is the amount of data that can be transferred over the network in a fixed amount of time. Internet bandwidth provided by operators in Pakistan is coming from a giant pool of bandwidth from different worldwide bandwidth providers.
IP bandwidth is not a point-to-point circuit between two parties like IPLC. An important feature of IP bandwidth is that it is offered on a distance-less basis as the traffic flows in multiple directions to reach multiple destinations.
Prior to August 2023, there were only two submarine cable operators in Pakistan, Pakistan Telecommunication Company Limited (PTCL) and Transworld Associates (TWA). Recently, the PTA has allowed the operation of the PEACE Cable System in Pakistan to Cyber Internet Services. Presently, Cyber Internet Service is utilizing bandwidth capacity for its own requirements. However, services to other operators are planned for Q4 2023.
All other downstream providers (e.g. fixed line, mobile cellular operators) buy International bandwidth from PTCL, and TWA (submarine cable operators) wholesale and sell in retail to home and corporate customers.
SCO owns OFC based Transmission Network and operates a cable station at SCO node Khunjerab. SCO is also providing an End-to-end Circuit to CMPak for its sole and exclusive use under a Tripartite Agreement with CMPak and China Mobile International (UK) Limited.
It is anticipated that operators will be investing in acquiring international bandwidth infrastructure which will bring more international cables into Pakistan in the near future.