Incoming calls to Pakistan: US suspends payments to telecos over call rate hike

US regulator declares International Clearing House ‘anti-competitive’.

KARACHI: The Federal Communications Commission (FCC), an American regulator that oversees interstate and international communications for America, has ordered American telecom operators to suspend all settlement payments to Pakistani long distance international (LDI) carriers for call termination services.

According to a Memorandum Opinion and Order released by the FCC on March 5, American carriers cannot pay any amount exceeding $0.02 per minute in call termination charges to Pakistani LDI operators – the termination rates in place prior to when the International Clearing House (ICH), a telecom gateway, was established by Pakistani operators on October 1, 2012.

“By this Memorandum Opinion and Order, we seek to protect US consumers from the effects of anti-competitive behaviour and to promote competitive, cost-based termination rates on the US-Pakistan route,” read the order.



According to details, American firm Vonage Holdings Corporation had filed a petition on October 3, 2012, requesting the FCC to issue an order stopping settlement payments to specific Pakistani LDI operators.

The petitioner had stated that the LDI carriers had implemented the ICH for all international incoming calls to Pakistan, creating a monopoly. The FCC found that termination rates to be paid by international telecommunications carriers for terminating calls into Pakistan increased by approximately 400% to more than $0.088 per minute as a result.

The development came as a blow to telecom stocks on Friday as stock prices of four listed LDI operators went down by an average 7.85%.

If companies from the US pay only $0.02 per minute to Pakistan Telecommunication Company (PTCL) – the market leader in the telecom sector – its earnings per share are likely to be revised downwards, Global Securities, an investment bank, said in a report released by its research wing. Assuming that 11% of incoming international traffic is from the US, the estimated revenue loss for PTCL will be Rs3.1 billion, it said.

But both telecom analysts and LDI operators see this as a short-term impact, as they say that international calls from the US account for only 10% of total traffic. However, analysts also warned that the industry would be hurt more severely if other countries follow suit.

Pakistani LDI operators also seem unfazed by the development.

“The Pakistani LDI industry will continue with the existing ICH arrangements for inbound traffic,” said Salman Mazhar, public relations and corporate manager at Wateen Telecom. “Any adverse order passed in any territory outside Pakistan is of no legal and material effect, and as such must not be relied upon for doing telecom business with Pakistani
licensed operators,” he said.

Published in The Express Tribune, March 9^th, 2013.

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