FCC orders telcos not to pay termination fees to Pakistan

11 Mar 2013

US regulator the Federal Communications Commission (FCC) has instructed US telcos not to pay termination fees of more than USD0.020 per minute to Pakistani long-distance carriers, on the basis that a price hike to USD0.088 per minute was anti-competitive. Prices for international termination were raised in October 2012, after Pakistan’s 14 Long Distance and International (LDI) operators controversially formed a single international gateway, International Clearing House (ICH). Originally proposed and supported by sector watchdog the Pakistan Telecommunication Authority (PTA) as a means to maximise government revenues by eliminating the grey market, the ICH has seen widespread opposition from Pakistan’s competition authority, as well as local and overseas telcos. The LDI operators and telecoms ministry colluded to determine rates, with a quota of incoming international calls distributed amongst the parties involved. The creation of the ICH was immediately followed by a jump in termination fees, which had previously been set at cost level. In its order, the FCC described the actions of the LDI carriers as anti-competitive, noting: ‘By establishing the ICH plan, the Pakistani carriers acted in concert to impose unilaterally this rate floor without engaging in meaningful negotiations with US carriers and foreclosing future separate negotiations between US and individual LDI correspondent carriers.’ The potential impact of the FCC’s instruction is unclear, however; the Express Tribune notes that the LDI operators claimed that US calls account for just 10% of total traffic, whilst business analysts claim the figure is closer to 30%.

Closer to home, Lahore-based operator Brain Telecommunication has launched a legal challenge against the ICH, claiming that the additional fees had increased the price of calls to Pakistan by three to four times, though the case appears to have become bogged down after the PTA told the Lahore High Court that it had withdrawn the higher charges. Most recently, the Supreme Court has instructed the Competition Commission of Pakistan (CCP) to issue show cause notices to the 14 carriers for violating competition laws.

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