The APC epic

It seems like the issue of Access Promotion Contribution (APC) is weighing heavily on the Long Distance & International (LDI) telephony operators in Pakistan. As per the telecom deregulation policy (2004), LDI operators were allowed to retain a fixed share of termination charges paid by international carriers for international incoming calls. The remaining amount, called APC, is passed to fixed local loop (FLL) operators and to the Universal Service Fund (USF) - the organisation which undertakes ICT infrastructure development in un-served and under-served areas. In case of incoming calls landing on mobile networks, whether domestic or international, mobile operators get fixed Rs0.90 as mobile termination charges. However, the FLL operators enjoy benefit from APC regime and get multiple folds of revenue for every international incoming minute when compared to domestic termination charge. The LDI industry is currently nurturing two major preoccupations that stem directly from the APC regime. Firstly, LDI operators are not happy that they are still paying APC charges for incoming calls to FLL operators (read PTCL). It must be noted that the 2004 telecom policy had set 2008 as the year by which the APC charges would be brought to zero. Secondly, LDI operators are bereaved at the illegal exchanges or gateways in the country which have been undercutting their revenues by routing international calls in the guise of local calls, bypassing legal channels. Not having to pay the APC rates charged along the legal channels lets unscrupulous operators offer lower rates on international calls and enjoy lucrative margins. Some in the LDI industry believe that the APC regime provides undue advantage to PTCL. This helps the telecom giant in cross-subsidising other offerings and creates uncompetitive business conditions for other telecom operators, especially LDI operators, thus making it harder for them to operate. According to industry sources, PTCL has a lions share of 40 percent of total incoming calls (app. 700 million minutes per month) among the 14 LDI operators. According to a rough estimate, around 15 to 20 percent of international incoming calls are made to landlines in Pakistan, a majority of which land to PTCL as it controls over 95 percent of the FLL market. There has been inconsistency on the part of Pakistan Telecommunication Authority (PTA). From a high of 12.5 cents per minute to a low of two cents per minute, the APC rate has varied since it was initiated. From two cents per minute in 2007, it was first increased to five cents per minute in 2008, and then increased further to 7.5 cents per minute in February 2009. It was later reduced to 5.5 cents per minute in July 2010 and reduced again in April 2011 to the current rate of 2.75 cents per minute. Experts believe that with the latest cut in APC, many LDI operators have found some breathing space. The second concern of the LDI operators is genuine indeed. Some industry analysts put the illegal termination of international incoming calls at more than 15 to 20 percent of total incoming international voice traffic. APC does seem like customs duty in a sense: the more the duty, the higher is the incidence of smuggling or incentive to cheat. Its time for this saga to conclude. The solution lies in slashing APC completely or reducing it to a very low level so that LDI operators may increase their revenue streams owing to competitive forces, sans the fixed levies. To render unfair practices unfeasible; the incentive to cheat has to be withdrawn. Illegal gateways are a global phenomenon. They use advanced technology and PTA needs to understand that it will always be chasing thieves if it does not address the core, underlying reason - the APC regime.