This will help PTA in considering the latest market conditions while determining the SMP operators.
INTRODUCTION (1) Pakistan Telecommunication Authority (PTA) was established under section 3 of the Pakistan Telecommunication (Re-organization) Act, 1996 (Amended in 2006), with the objective to regulate the establishment, operation and maintenance of telecommunication systems and the provision of telecommunication services in Pakistan. Under section 4(d) and 6(e) of the Act, the Authority is required to promote and ensure of competitive telecommunication services throughout Pakistan and to encourage fair competition in the telecommunication sector. (2) In order to promote fair competition in the sector, it is essential that operators with Significant Market Power (SMP) status should be identified with respect to each relevant market in order to prohibit them from abusing their dominant positions through anti-competitive practices. (3) Pakistan Telecommunication Rules, 2000 have laid down the criteria for determination of SMP operators in the relevant markets. Rule 17 of these Rules states as follows: “17.—(1) An operator shall be presumed to have significant market power when it has a share of more than twenty-five per cent of a particular telecommunication market. The relevant market for these purposes shall be based on sectoral revenues. (2) The Authority may, notwithstanding sub-rule (1), determine that an operator with a market share of less than twenty-five per cent of the relevant market has significant market power. It may also determine that an operator with a market share of more than twenty-five per cent of the relevant market does not have significant market power. In each case, the Authority shall take into account the operator’s ability to influence market conditions, its turnover relative to the size of the relevant market, its control of the means of access to customers, its access to financial resources and its experience in providing telecommunication services and products in the relevant market.” PTA considers it appropriate to review the existing and other possible relevant markets in consultation with all stakeholders and sought seek opinion on the existing and new possible relevant markets along with the criteria to be used by PTA for determination of SMP operators in these markets.
PTA to Identify Operators with Significant Market Power Status
ASSESSMENT OF POSSIBLE PROPOSED MARKETS FOR SMP The telecom market of Pakistan including AJK & GB can be divided into different relevant markets on the basis of (i) geographical area and (ii) products / services offered in that particular market segment. Geographic market may continue to be based on the area where an operator is authorized to operate under its respective license. Regarding product/service markets, PTA has introduced new “IP Bandwidth Market” besides the markets determined in the Determination of 30thSeptember 2016 and will assess as to whether these markets should be considered as relevant markets for the purpose of determining SMP operators. Below is the list of product/service markets which shall be discussed as potential relevant markets for the purpose of declaring SMP operators along with the justification. (1) Fixed Local Loop Telecommunications Market (i) Fixed Local Loop Telecommunications Market includes provision of access and call services to end-users (whether through PSTN or WLL) in the region for which the Local Loop licenses have been granted by PTA. Geographically, this product/service market can be further sub-divided into fourteen (14) Regions in Pakistan and three (3) Regions in AJK & GB. (ii) PTA vide its Determination of 30th September 2016 declared PTCL and SCO as SMP operators in all telecom regions of Pakistan and AJK & GB respectively. PTA is of the view that this market should continue to be identified as relevant market for the purpose of declaring SMP operators. (iii) For the purpose of determining the total market size and the market share of a particular operator in Fixed Local Loop Telecommunication Market, only the revenues from the provisioning of licensed Local Loop (including WLL) telecommunications services to the subscribers shall be taken into account. Such revenues may include installation/shifting charges, line rental, call charges, etc. for the avoidance of doubt, interconnection revenues from call termination services shall not be included in the total revenue base. (2) Long Distance & International (LDI) Telecommunications Market (i) LDI Telecommunications Market includes provision of long distance and international call services on national basis to end-users. Geographically, this product/services market can be further sub-divided into two (2) markets; Pakistan and AJK & GB markets. (ii) PTA declared PTCL and SCO as SMP operators in LDI telecommunications market of Pakistan and AJK & GB respectively. With the entrance of new LDI operators in the market, the monopoly of incumbent(s) has ended. However, keeping in view the criteria for measuring the market size for determining SMP, it is expected that still more than 25% of market share belongs to already declared SMP operators. PTA, therefore, intends to identify this market as relevant market for the purpose of declaring SMP operators. (iii) For the purpose of determining the total market size and the market share of a particular operator in LDI Telecommunications Market, only the revenues from licensed LDI Telecommunications services shall be taken into account. Such revenues may include call charges for long distance and international outgoing calls, whether collected from the customers directly or from other operators (excluding call transit charges). Revenues generated from calling cards (if any) shall also be considered while assessing the market share. However, revenues from international incoming calls shall not be included in the total revenue base. (3) Mobile Cellular Telecommunications Market (i) Mobile Cellular Telecommunications Market includes provision of wireless-based telecommunication services (other than WLL) on national basis. This product/service market can be further sub-divided into two (2) geographic markets; Pakistan and AJK & GB markets. (ii) PTA in its determination dated 30th September 2016 declared PMCL and Telenor as SMP operators in Mobile Cellular Telecommunications Market of Pakistan and AJK & GB respectively. PTA intends to seek fresh data from all mobile operators of both Pakistan and AJK & GB to determine the latest position of market shares and declare SMP operator. (iii) For the purpose of determining the total market size and the market share of a particular operator in Mobile Cellular Telecommunications Market, only the revenues from the licensed mobile telecommunication services to subscribers shall be taken into account. Such revenues may include connection charges, line rent, outgoing airtime, roaming charges, revenue from data services, etc. 4. Retail Broadband Market (i) Broadband services involve the provision of always-on internet connection. The broadband services are provided to end-users by means of various technologies like DSL, Cable, Fiber, Wireless etc. (ii) PTA in its Determination dated 30th September 2016 declared PTCL as SMP operator in the retail broadband market. PTA intends to seek data on this relevant market to assess whether retail broadband market should be declared as relevant market for the purpose of determining SMP operators. (iii) For the purpose of determining the total market size and the market share of a particular operator in Broadband Market, the monthly rental revenues from the licensed services to subscribers, bandwidth capacity charges etc. shall be taken into account. For clarification purpose, revenues from sales of consumer premises equipment and installation charges (if applicable) shall not be included in the total revenue base. 2.2 Wholesale Level Markets (1) Domestic Leased Lines Market (i) Domestic Leased Lines Market means the telecommunication facilities which provide for transparent transmission capacity between network termination points for interconnecting mobile switches, other telecom switches, building etc. within the national boundaries. This product/service market can be further sub-divided into two (2) geographic markets; Pakistan and AJK & GB markets. (ii) PTA in its determination dated 30th September 2016 declared PTCL and SCO as SMP operators in Domestic Leased Lines Market of Pakistan and AJK & GB respectively. PTA is of the view that despite presence of LINKdotNET, Wateen and Multinet this market requires assessment to determine level of competition. Hence, it should be identified as a relevant market for the purpose of declaring SMP operators. (iii) For the purpose of determining the total market size and the market share of a particular operator in domestic leased lines market, only the revenues from the provisions of domestic leased lines services shall be taken into account. For the purpose of clarification, only the revenues from the original rental or sale by the operator, and not the revenues from reselling of domestic leased lines shall be considered. (2) International Private Leased Lines Market (i) International Private Leased Circuits (IPLC) means the telecommunications facilities which provide for transparent transmission capacity between network termination points through submarine as well as terrestrial cable systems and by other means. IPLC is used by an organization to communicate from one area to another that are geographically dispersed throughout the world. IPLCs can be used for Internet access, business data exchange, video conferencing, and any other form of telecommunication. (ii) PTA in its determination dated 30th September 2016 declared PTCL as SMP operators in International Private Leased Lines Market of Pakistan. PTA is of the view that this market is not fully competitive as only two operators are offering IPLC services. Furthermore, some of the operators also informed that IPLC prices have not declined over the past few years. Therefore, the market should be identified as a relevant market for the purpose of declaring SMP operators. (iii) For the purpose of determining the total market size and the market share of a particular operator in international leased lines market, only the revenues earned by the operators from the international leased lines services shall be taken into account. For the purpose of clarification, only the revenues from the original rental or sale by the operator, and not the revenues from reselling of international leased lines shall be considered. (3) Call Transit Services Market (i) Interconnection always comprises of call origination and call termination as well as transit traffic, when traffic is carried through the network of third party. Call transit service means transmission of switched voice service originating from another telecom network. This includes transmission of traffic through the network of a third party both inside a Telecom Region (i.e. Metropolitan Transit) and between Telecom Regions. A third party means a network operator that conveys switched voice services, which does not originate from or terminate on its own network. (ii) Most of the LDI operators throughout all Telecom Regions have made interconnection with each other. However, some of the operators especially new Local Loop have not directly interconnected their networks with other operators due to practical, technical or economic reasons. On the other hand, the incumbent operator i.e. PTCL is interconnected with almost all telecom operators. In this scenario, if an operator wants to provide voice transmission services within a Telecom Region or between Telecom Regions by means of transit services, it must acquire the transit services from PTCL. Similarly, in case of AJK & GB, SCO is providing call Transit Services to LL & LDI operators. Keeping this into consideration, PTA is of the view that this market should be declared as relevant market for the purpose of declaring SMP operators. (iii) PTA in its determination dated 30th September 2016 declared PTCL and SCO as SMP operators in Call Transit Services Market of Pakistan and AJK & GB respectively. (iv) For the purpose of determining the total market size and the market share, revenues generated from call transit services to other operators shall be taken into consideration. (4) Wholesale Broadband Access Market (i) Wholesale broadband access is composed of the wholesale broadband service provided by the network operator to the broadband service operator. Wholesale broadband access service (also known as local loop transmission capacity) means provision of network access service to broadband service providers, through technical equipment (e.g. splitter and DSLAM), that enable them to provide broadband services. Alternatively, Optical Fiber Access Networks (OFAN) may also be used for the enhanced transmission capacity. (ii) PTA in its Determination No. 15-73/14(CA)/PTA dated 30th September 2016 declared PTCL as SMP operator in Pakistan in wholesale broadband market. Now, PTA intends to identify this market for the purpose of declaring the SMP operators. (iii) For the purpose of determining the total market size and the market share, revenues generated from the provision of access services to broadband service providers shall be taken into consideration. (5) IP Bandwidth Market (i) IP Bandwidth market includes provision of wholesale IP Bandwidth to other operators for voice as well as data services. (ii) PTA is of the view that only two operators are offering these services therefore the market should be identified as a relevant market for the purpose of declaring SMP operators. (iii) For the purpose of determining the total market size and the market share of a particular operator in IP Bandwidth market, only the revenues earned by the operators from the provision of IP Bandwidth services shall be taken into account. For the purpose of clarification, only the revenues from the original rental or sale by the operator, and not the revenues from reselling of IP Bandwidth shall be considered. (6) Individual Fixed Interconnect Market Individual Fixed Interconnect Market includes provision of call termination services by a given individual LL operator (PSTN) or WLL) for local, long distance, and/ or international calls. PTA is of the view that this market should be declared as relevant market for the purpose of declaring SMP operators. (7) Individual Mobile Interconnect Market Individual Mobile Interconnect Market includes provision of call termination services by a given individual mobile operator to other telecom operator for local, long distance, and/ or international calls. PTA is of the view that this market should be declared as relevant market for the purpose of declaring SMP operators. CRITERIA FOR DETERMINING SMP OPERATORS (1) Regarding the criteria used for determining SMP operators, the Rules have given the primary criteria i.e. share of more than twenty-five per cent (25%) of a particular telecommunications market in terms of revenues. The Rules have also provided other measures, on the basis of which PTA may determine that an operator with a market share of less than twenty five per cent (25%) of the relevant market has significant market power, or the operator with a market share of more than twenty-five per cent (25%) of the relevant market does not have SMP status. (2) PTA intends to use the criteria for the purpose of determining SMP operators. However, if the market share of any operator is close to the threshold value of 25% then PTA may consider other factors, as given in the Rules, for the determination of SMP operators. It is pertinent to highlight that Telecom Policy 2015 states that the telecommunication sector will be managed through the application of Competition Rules, however, PTA is of the view that till finalization of said Rules the market should be regulated in light of the criteria given in Pakistan Telecommunication Rules, 2000. (3) PTA is of the view that for the purpose of comparability and objectivity, the reports from all operators should cover the same period and operators should send requisite data duly audited by their auditors for the separate periods of January 1, 2017 to December 31, 2017 and January 1, 2018 to December 31, 2018. However, as the year-end of all the operators is not the same, PTA understands that it might not be possible to send the audited information to PTA. In case it is not possible for an operator to send the audited information, in that case, the concerned operator is required to send interim report for the above mentioned period to PTA (with the undertaking for the correctness of the data sent) along with latest audited information (Yearly / Half yearly, as the case maybe). This will help PTA in considering the latest market conditions while determining the SMP operators. Also Read: PTA Organizes International Training Course on Unlocking Rural Mobile Coverage
