ISLAMABAD (SPECIAL REPORT)
The international traffic terminating in Pakistan is a rich source of foreign exchange for Pakistan economy. In a bid to stabilize healthy termination rate and minimize the possibility of grey traffic, the Long Distance International Operators (LDIO’s), in compliance to Government of Pakistan’s Policy Directive, have implemented the International Clearing House (ICH) framework. The ICH framework will ensure high revenues for the Long Distance International Operators as well as valuable foreign exchange for the national economy and is expected to generate more than 1 Billion US$ per annum worth of valuable foreign exchange. The Government of Pakistan directly or indirectly, will be recipient of more than Four Hundred Million US$ of revenue from ICH. This will provide strong support to ailing economy of the country at times when all its earning resources are drying up.
The ICH framework has been implemented in compliance with the Policy Directions issued by Government of Pakistan (GoP) and Pakistan Telecommunications Authority (PTA) which mandates all the Long Distance International Operators duly licensed to terminate international incoming telephone calls in Pakistan, to form International Clearing House (ICH) Exchange. An ICH Board comprising all the fourteen parties and representatives from PTA and MoIT is formed.
The termination charge for international traffic, in most countries is determined by the National Regulatory Authority. In Pakistan it is the responsibility of Pakistan Telecom Authority (PTA) to review and determine telecom tariffs including the termination rates for international incoming traffic to Pakistan. There is a misconception that the Pakistan termination rates have been increased many folds after the establishment of ICH. The settlement rate in pre ICH scenario was US Cents 6.25 which has been increased to US Cents 8.8 in the post ICH scenario. Thus the rate increase in the post ICH scenario is only a mere US Cents 2.63. It is relevant to mention that the termination rates of the foreign operators in Middle East and Europe (for mobile termination) are in the range of 10-15 US cents that is still higher than 8.8 US cents. These countries account for two third of the traffic terminated in Pakistan.
PTA determined settlement rates were not strictly followed in the pre ICH scenario due to negative competition among 14 Long Distance International Operators. The independent and non-transparent rate negotiation by all Long Distance International Operators gave rise to fierce competition for share in international traffic and ultimately undercutting. That resulted in significant loss to telecom industry and Government of Pakistan during the last seven years. It is important to highlight that although the market termination rates for Pakistan in the pre ICH period were low, the foreign operators were still charging higher tariffs to their subscribers. Therefore, the entire margin was reaped by the foreign operators resulting in loss to national economy.
There are three major aims of ICH framework that have been envisaged by GoP:
- Stabilization of PTA determined termination rates for international incoming traffic to Pakistan to ensure the legitimate inflow of foreign exchange to the country. This will ensure health of telecom sector specially Long Distance International Operators by providing them an opportunity to discharge their obligations. It will also provide additional tax revenue for the GoP, increased funding for Universal Service obligation and ensure protection and creation of job opportunities in telecom sector.
- Deployment and operation of such Monitoring Systems that can detect and curb the communications through illegal channels and also ensure greater security for the citizens of Pakistan.
- Generate sustainable funding to promote local manufacturing in telecom sector.
In first ten days of ICH operation, ICH has earned a foreign exchange of approx USD 26.33 Million (PKR 2.5 Billion) which will be routed for the development of the country through:
- Universal Service Fund with an amount of approx USD 5.12 Million (PKR 488.9 Million).
- Recovery of past claims from Long Distance International Operators for Universal Service Fund with an amount of approx USD 750,000 (PKR 71 Million).
- Additional Tax revenue for GoP with an amount of approx USD 5 Million (PKR 477 Million).
Mr. Sikandar Naqi SEVP (Corporate Development), PTCL highlighted that the low Pakistan termination rates in the past compared to the other major world destinations resulted in net outflow of valuable foreign exchange from the country. He emphasized that the realization of ICH objective to stabilize the PTA determined Approved Settlement Rates will safeguard the benefits of all the stakeholders ie Long Distance International industry, Government of Pakistan and PTA. Long Distance International Operators will be rightfully earning their legitimate margin, determined by PTA. The future payments of Long Distance International Operators on account of Universal Service Fund will be ensured since all the deductions will be made at source by ICH Operator and additional deductions will be made to clear pre-ICH outstanding dues. Government will receive healthy tax revenues and healthy foreign exchange inflow will help to reduce the trade deficit.