The International Clearing House (ICH) has become operational and effective from October 1, sources told BR Research, in compliance with the Policy Directive dated August 13, 2012, issued by the Ministry of IT. ICH is now serving as a single termination exchange for all international, incoming voice traffic.
Sources say that the fourteen LDI operators will now share the total quantum of international voice traffic terminating in Pakistan. The business volume sharing mechanism, which will evolve over time, is said to be currently based on each operator’s historic share and infrastructure capacity.
The official response from PTCL – the volume leader among LDIs and a major stakeholder in the ICH regime – indicates that an ICH Board has been formed under the MoIT directives. Responding to queries from BR Research, the Company spokesperson said that the ICH Board has membership from all the LDI operators, including PTCL, and has one representative each from PTA and MoIT as observers.
To oversee the day-to-day operations of ICH and to ensure compliance with ICH Agreement, a five-member ICH Committee has also been formed – with two members from PTCL and three from the remaining LDI operators. It is within the mandate of the ICH Committee to sign any new agreement for international call termination with foreign carriers, the spokesperson added.
Clarity will emerge over time as to the impact of ICH on foreign calling tariffs, grey trafficking and local LDI competition. LDI operators are upbeat about ICH helping improve tariffs for international calls terminating in Pakistan. It is also argued that incoming voice traffic won’t be affected much “because most foreign operators never passed on the benefits of low termination costs to customers calling Pakistan”.
“In the past, the PTA-notified tariffs (the Approved Settlement Rate) were not being followed by the 14 LDI operators owing to negative competition – that only benefitted foreign carriers and caused loss to Pakistan’s economy. The major objective of ICH is to stabilise the ASR, which is a legitimate right of LDI industry, PTA and the Government of Pakistan,” noted the spokesperson.
Grey trafficking in LDI telephony is a serious matter though. Reportedly, the incidence is as high as 40 percent, costing Pakistani exchequer up to $800 million a year. The PTCL spokesperson shared with BR Research that the ICH agreement has obligated the LDI industry to provide a comprehensive monitoring system for grey traffic and lawful interception within 90 days of commencement of ICH operations.
Combating illegal telecom gateways and exchanges is surely a tall order when PTA, reportedly, could not check 70 percent of the incoming traffic prior to October 1. In the absence of effective legislation, heightened surveillance and enhanced scope of crackdown, there is strong likelihood that higher ASRs will motivate the grey traffickers to cheat more after with the ICH in place, not less!
From the onset, ICH has been opposed by the Competition Commission of Pakistan. CCP was concerned that the ICH will monopolise the incoming international voice traffic for PTCL; effectively cartelise the market by instituting fixed quotas and prices; and close the LDI market to new entrants. As it seems, cooperation between sector regulator and the competition watchdog didn’t happen after all.
It’s not clear if CCP will view the ICH as water under the bridge now and make peace with an inconvenient reality confronting its competition mandate. Nor is there any word from TransWorld Associates – the aggrieved party which had earlier become a necessary part to CCP proceedings on the matter – to challenge the ICH mechanism through litigation.
While it is acknowledged that the ICH seems anti-competitive (though it is technically and financially sound) for the LDI sector, the arrangement pertains to only one of many LDI segments: international voice call termination in Pakistan. ICH doesn’t seem to restrict competition in other LDI telephony segments, like domestic long distance telephony, international outgoing telephony, and bandwidth and data services.
Time to move on!?
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