Dispute between LDI operators and PTA – Gazeta

The ongoing dispute between long-distance and international (LDI) operators and industry regulator Pakistan Telecommunication Authority (PTA) over the allegedly illegal imposition of higher access promotion charge (APC) rates for LDI operators in 2008 and 2010 is now threatening to have drastic consequences on the country’s telecom and digital ecosystem, as well as the quality of mobile services, banking activities and the economy as a whole.

The controversial issue has resurfaced in recent months after the PTA refused to renew the licenses of seven LDI operators unless they settle the unpaid APC dues for the said period. In all, the APC calculation dispute affects 13 operators out of 21 licensed LDI operators responsible for providing long-distance and international telecommunications services by providing voice and data calls to and from Pakistan.

Four of them have fully settled their dues for the period and renewed their licences. The remaining nine operators, the PTA says, owe almost Rs 78.6 billion – Rs 24.1 billion in main APC dues and Rs 54.5 billion in additional late payment charges.

These operators are said to control almost 90 percent of the market. Seven of these operators, who were issued 20-year licenses in 2004, are already waiting for their licenses to be renewed. However, they are operating under court orders due to the regulator’s refusal to renew their licenses due to non-payment of APC due to them.

If the LDI license is not renewed, approximately 40% of ATMs may be taken out of service

APC, introduced as part of the 2003 telecommunications deregulation policy, is a contribution made by LDI operators from their profits to the Universal Service Fund (USF) for the expansion of telecommunications infrastructure in unserved and underserved areas to support teledensity. APC for the USF system was introduced in late 2006.

LDI operators claim that the dispute arose when the PTA began applying rates reported under the Access Promotion Contribution for Local Loop (APCL) — a fee category for local loop operators licensed to provide public voice and data services — to APCs under the USF payments.

This change in calculation introduced legal and logical inconsistencies. “LDI operators demand compliance with applicable law, and in particular compliance with rules and regulations that provide a clear formula for calculating APC for USF,” says the LDI executive director.

Interestingly, the PTA complied with the applicable rules and regulations until 2007, but in 2008 it departed from the applicable law.

“The fact that the PTA reverted to the requirements of these rules and regulations in 2011 and ended the dispute is sufficient evidence to confirm that our position on this matter is in accordance with the law,” he concluded.

“The timeline of PTA’s conduct before and after the dispute period clearly indicates bad intentions. This was also the sole reason for the large number of grey calls generated in Pakistan during that period. When PTA returned to law, grey calls also reduced.”

Industry sources say the Lahore High Court has already ruled in favour of the operators, directing the PTA to recalculate the APC payments as per the correct formula.

The Auditor General of Pakistan, in its 2011 audit report of the PTA, had pointed out significant irregularities in the application of the APC system, terming the PTA’s actions as unlawful and in favour of the operators. Despite this, the PTA continues to demand payments based on incorrect rates, which has exacerbated the dispute.

The operators claim that they have consistently met their financial obligations, both before and after the dispute began. The truth is that they have overpaid by about R8 billion, and another R6 billion is in escrow accounts opened in 2012, pending the outcome of court cases. The PTA’s claim for an outstanding amount of R24 billion has been consistently disputed by the operators.

Moreover, the Sindh High Court is still adjudicating a number of cases filed by LDI operators against PTA, seeking repayment of amounts allegedly overcharged. These cases, valued at over Rs 29.2 billion, underscore the grievances of operators.

Neither the PTA nor the Ministry of Information Technology and Telecommunication (MoITT) officials are ready to give a written statement. However, they assured Dawn with a presentation documenting the issue saying that five of the nine operators still disputing the APC calculations are willing to pay the full amount of the disputed capital of R8.2 billion in instalments. The remaining four are not willing to pay any of the R15.8 billion they are owed.

In July, the MoITT issued policy guidelines to allow operators to pay half of the capital amount in 30 quarterly installments over seven-and-a-half years. These were withdrawn later when the PTA objected that the guidelines covered recovery of only half of the capital amount due from operators.

The operators claim that the PTA has proposed to make their exaggerated APC calculation for USF the basis for installment plans or upfront payment of the entire requirement without considering the applicable law and sub judice nature of the case. Such a proposal is so absurd and has been made only to force the operators to abandon their legal position in the courts for renewal of licenses, the LDI operators claim.

The presentation also listed the implications of not renewing LDI licenses due to outstanding contributions. Such an extreme action would affect half of current mobile traffic and about 10% of internet traffic, and would also close about 40% of ATMs. Furthermore, restoring these services would take a long time.

Similarly, some LDIs operate satellite centers with significant bandwidth capabilities supporting critical remote communications and banking. In addition, international communications may suffer, as nine LDI operators currently handle 21% of Pakistan’s incoming voice traffic.

Cross-border data links with Afghanistan managed by these operators will also be at risk, potentially leading to serious connectivity issues.

“The operators are not asking for leniency or forgiveness; they are seeking justice and the correct application of the law. This dispute could have serious consequences for Pakistan’s telecommunications infrastructure. In addition, tens of thousands of jobs are at stake, which increases the urgency of finding a fair solution,” the LDI executive director continued.

At its core, the APC dispute between LDI operators and PTA/MoITT is a matter of financial fairness and legal accuracy. The fundamental problem remains the calculation of APC for USF and the PTA’s continued insistence on demanding inflated payments.

Published in Dawn, The Business and Finance Weekly, September 16, 2024