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Withdrawal of International Clearing House regime leads to significant decrease in grey traffic

Islamabad, May 12, 2015 (PPI-OT): International Clearing House (ICH) regime, a consortium of Long Distance International (LDI) operators formed to terminate all international traffic through a single gateway exchange, eliminating competition from the market was introduced by the previous government in August 2012 (ICH Directive), upon active lobbying of some LDI operators.

Under the ICH regime, rate for international call termination was fixed at 8.8 US cent per month, thus call rates for calling to Pakistan from abroad increased manifold leading to unprecedented rise in grey traffic and pushed consumers towards over the top (OTT) services like Skype, Tango, Viber etc. which were never the first choice for consumers before ICH. The legal traffic that stood at almost two billion minutes per month immediately before introduction of ICH regime, dropped to less than 400 million minutes per month by June 2014.

ICH regime replaced open competition for fixing of calling rates to Pakistan from abroad, wherein LDI operators were allowed to negotiate their margins independently with the foreign operators and over-all call charges for international call termination were low due to lesser LDI margins. There was immense hue and cry by the general public, businesses and overseas Pakistanis against the increased call rates.

Upon Supreme Court reference, the Competition Commission of Pakistan (CCP) also declared ICH regime unlawful being anti-competitive and collusive and imposed heavy fines on respective LDI operators. The Prime Minister of Pakistan had constituted a high level of Steering Committee which after extensive meetings with the stakeholders concluded ICH regime to be the main cause behind increase in grey traffic. Finally, ICH Policy was withdrawn by the Ministry of IT on the recommendations of PTA vide a revised policy directive dated 17.06.2014 to take effect from 01.08.2014.

The withdrawal of ICH Policy was challenged by some LDI operators having vested interest through a well orchestrated scheme. Initially four LDI operators approached the Honourable Sindh High Court and obtained an ex-parte stay order against withdrawal of ICH regime. By the time government filed replies, another LDI operator approached the Sindh High Court through another civil suit and obtained another ex-parte stay order followed by three more cases filed in Sindh High Court.

The government successfully defended these cases in Sindh High Court leading to their withdrawal or dismissal by the court. However, these LDI operators challenged the order of the Sindh High Court dismissing their stay applications and while the arguments before Sindh High Court were at final stage, another LDI operator approached Lahore High Court and obtained yet another ex-parte stay order on 04.12.2014 which was extended on successive dates of hearings.

Observing nefarious plans of some of LDI operators abusing process of law, government invoked the Appellate jurisdiction of the Honourable Supreme Court against the stay orders issued by the Lahore High Court and Sindh High Court. The Honourable Supreme Court set aside the stay orders on 24.02.2015 while observing that the ICH regime was causing unjust enrichment of the LDI operators at the cost of telecom consumers.

It is pertinent to mention that the continued uncertainty due to the stay orders resulted in further decline of the incoming white minutes as the beneficiaries of ICH as well as the grey operators continued to enjoy the arbitrage. Such was the bonanza of the grey operators that the month of November 2014 saw a record low of 367 Million minutes of recorded white traffic.

As per the working done on the basis of bench mark of legal traffic of two billion minutes per month recorded before introduction of ICH, it appears that ICH regime caused a loss of 44.4 billion international call minutes to the telecom sector of Pakistan which resulted in loss of approx Rs.400billion. Now with revocation of ICH policy, tables have turned on the grey traffickers and a sharp increase in white traffic has been observed.

White traffic increased to more than double 852 Million within first month subsequent to passing of the order of the Honourable Supreme Court and then to 1.02 Billion minutes in the month of April 2015 and is still on the rise. While traffic from grey calls is expected to be contained to minimum some of the pre ICH traffic of 2 Billion minutes has also been lost to OTT services (Skype, tango, viber etc.) and may be hard to recover.

Although it is difficult to calculate the exact traffic that has shifted to OTT, it is estimated to be around 500 million call minutes per month. Thus, the legal traffic is expected to stabilize at around 1.5 billion minutes per month as the benefits of revised policy fully mature.

In view of pure traffic statistics the reversal of ICH policy has been immensely successful and the result of increase in white minutes will soon have corresponding positive impact on the legal revenues of the industry as well as increase in tax collections based on this increase. However due to various factors associated to the pattern of international incoming calls including the OTT effect it wouldn’t be prudent to strictly link the recovery of the whole of the 2 Billion pre-ICH minutes as a benchmark of curbing grey traffic.

For more information, contact:
Haji Ahmed Malik
Principal Information Officer
Press Information Department (PID)
Tel: +92-51-9252323 and +92-51-9252324
Fax: +92-51-9252325 and +92-51-9252326
Email: piopid@gmail.com

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