Cornering the market: PTCL accused of violating competition regulations

CCP issues show-cause notice to the telecom company to defend its position.

ISLAMABAD:

The anti-trust watchdog has issued a show-cause to Pakistan Telecommunication Company Limited (PTCL) for abusing its dominant position in the market while providing broadband services.

The Competition Commission of Pakistan (CCP), headed by Rahat Kaunain Hasan, issued the show cause notice following an inquiry that determined that the PTCL was restricting and reducing competition in the market.

The commission has given a fourteen day deadline to the PTCL for defending its position in front of the CCP before it passes final judgement. According to the CCP Act 2010, the violation of the act may result in a penalty of up to Rs75 million or 10% of the total sales, whichever is higher.

“The inquiry report concludes that PTCL through the practice of margin squeeze has made the market for provision of broadband services through Digital Subscriber Line (DSL) technology uncompetitive and prohibitive”, announced the CCP on Tuesday.

The PTCL has prevented, restricted, reduced and distorted the competition in the market for provision of broadband services through DSL technology, said the CCP.

The commission is struggling to establish its writ as most of its decisions remain unimplemented. The CCP is also seeking financial autonomy as all other regulators are not paying their fees to the CCP, as required under the CCP Act.

The CCP held enquiry on a formal complaint filed by Micronet Broadband Limited, LinkDotNet Telecom Limited and Nexlinx Limited, alleging that PTCL has abused its dominant position in the market for the provision of DSL services by being involved in the practice of predatory pricing and refusal to deal.

According to the enquiry report, the relevant product market has been divided into the upstream market for access to the copper infrastructure and the downstream market for the provision of broadband services through the DSL technology. The relevant geographic market for both products has been determined to be the whole of Pakistan.

According to the enquiry report, the PTCL having a nation-wide copper infrastructure holds a dominant position in the upstream market for access to copper infrastructure, which is an essential input for the downstream market.

Based on the findings of cost analysis conducted by the enquiry officers, the PTCL being a vertically integrated incumbent, through pricing for access to its copper infrastructure, has reduced and squeezed the margins in the downstream retail DSL market to an extent that an equally efficient competitor cannot operate profitably.

The findings of the enquiry report reveal that this margin squeeze by PTCL, through low retail prices has gradually reduced the profit margins of the other retail operators which as per their financial statements are incurring losses.

Since PTCL’s entry in the DSL retail market, the number of total service providers has reduced from 11 to six and no new player has entered the market, an indication that the PTCL is violating its dominant position in the relevant market, said the CCP.

The enquiry report stated that generally lower tariffs in the retail market will be regarded as beneficial for customers, however, in this case lower retail tariffs have led to competitors being driven out of the market and may in the long run lead to the creation of a monopolistic situation.

“This would leave the consumers at the mercy of one super dominant player who will be at its free will to exploit the consumers”, concluded the enquiry report.

Published in The Express Tribune, June 20^th, 2012.