Telecom operators have demanded downward revision of special funds (Universal Service Fund @ 1.5% and Research & Development Fund @ 0.5%) before the upcoming spectrum (3G/4G) auction. Official sources revealed to Business Recorder that telecom licensees have submitted a joint request for downward revision of these special funds (currently USF @ 1.5% and R&D Fund @ 0.5%) with the Ministry of IT). The level of receipts to these funds is significant with the government of Pakistan at the moment, while approximately more than half of those remain to be disbursed, maintained the joint request.
The USF was established to spread the benefits of the telecom revolution to all corners of the country. The fund consists of contributions (1.5% of gross revenue) by the telecom operators with no government funding involved.
National ICT R&D Fund works on the pattern of the USF and receives 0.5 per cent from the revenue generated by telecommunication companies. However, the fund is utilised for the promotion of research-based projects in the ICT sector. Telecom operators have asked Pakistan Telecommunication Authority (PTA) to intervene and seek the MoIT stance on the same while finalising the information of memorandum (IM) for the upcoming spectrum auction.
The PTA has responded that all licensees shall be treated at par regarding contributions in the said funds, till the time the government allows for such reductions for the industry as a whole. The licensees have further requested the PTA to review licence obligations in the context of provision of cloud based digital services, already practiced by Internet/OTTs players at global scale including Pakistan, creating disparity among the service providers (licensee regulated by PTA and un-regulated internet/OTTs players).
They maintained that several requirements of NGMSA 2017 IM and licence template, for example those related to data protection, privacy, and cross-border flow of customer information, have legacy origins (2G & earlier) where communication services were offered by national telcos such as cellular mobile operators. Today, the telco industry has radically been changed and is faced with novel challenges. For example, today the cellular mobile operators are competing directly with internet/OTT players which are completely unregulated and not restricted by such regulations. These internet/OTT players have been capitalising on the benefits of virtualisation and cloud architecture for a number of years.
The cellular mobile industry has only just begun the evolution towards network virtualisation and cloud architecture for which the existing data protection and privacy requirements are not optimised. In fact, in many cases, these can be restrictive and put CMOs at a disadvantage.
However, PTA has responded that the existing licensing regime will continue to prevail until any changes/ modifications are introduced by the Authority as and when the new licensing regime is approved by the government with due consultation with stakeholders as per Telecommunications Policy, 2015. The PTA supports the modernisation of the regulatory environment according to the latest technologies and welcomes suggestions from all the stakeholders.
The PTA arranged an information session for prospective bidders, which was chaired by Chairman PTA Syed Ismail Shah. The industry raised joint concerns such as clarity on licence renewal terms, fixation of base price and payment terms, and spectrum reshuffling/ refarming plan. With regard to the concern raised on licence renewal, the chairman PTA informed the participants that an internationally reputed consultant is being hired and CMOs are welcomed to provide their input to finalise the RFP for the said consultant hiring process.
The chairman PTA explained that the base price was fixed by Auction Supervisory Committee keeping in view various factors such as, consultant report on market assessment, benchmarking with other countries, price ratio comparisons between different spectrum ranges, ecosystem development, handset price and equipment cost.
Regarding reshuffling/refarming plan, the chairman informed that PTA is open to all suitable suggestions from the stakeholders and a fruitful outcome depends more on the flexibility shown by the operators to readjust/refarm in order to get a contiguous spectrum range for efficient operations. This reshuffling/refarming might include certain technical and financial challenges. He further said that PTA will finalise the tariff regulations in consultation with all stakeholders including Competition Commission of Pakistan, and in this regard a meeting with the CCP has already been held during which the voice and data pricing issues were discussed at length and it was decided that regulations will be finalised following all legal formalities.
It was highlighted by the participants that the principles of renewal of cellular mobile licence must be identified and set prior to this auction. These principles can act as basic guidelines for the consultant being hired for the said purpose. It was also added that renewal should not be treated as an auction; and base price(s) or auction price(s) should not be treated as basis for determining the licence renewal price.
Participants inquired whether the government has taken into consideration the payment of advance tax while fixing the base price. The chairman PTA responded that advance tax is refundable to the licensee by Federal Board of Revenue (FBR).
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