In The Name of Allah, The Most Beneficent, The Most Merciful

PAKISTAN TELECOMMUNICATION AUTHORITY

Headquarters, F – 5/1 Islamabad
www.pta.gov.pk
F. No. 15-08/06(CA)/PTA April 17, 2006

CONSULTATION PAPER ON INTERNATIONAL BANDWIDTH TARIFFS

This paper intends to seek opinion of all stakeholders including the ISPs, Call Centres & LL/LDI operators. The
stakeholders are urged to look into these issues and send their comments and observations in writing within 15 days.
This paper does not convey in any sense a decision of the Authority in respect of the issues discussed in this paper.
Your response, queries and clarifications may be addressed to Ms. Fatima Khushnud, Assistant Director
([email protected]) and Mr. Aadil Umar Khalil, Assistant Director ([email protected]) PTA Building, F-5/1
Islamabad Fax: 2878133

INTRODUCTION

The Pakistan Telecommunication Reorganization Act:

The Pakistan Telecommunication Authority (The Authority) is responsible for the regulation
of the telecom sector, which is being highlighted in the following sections of the
Telecommunication (Re-organization) Act 1996:
Sections 4(c) and 6(e)
The Authority is required to promote and protect the interest of users to telecommunication
services as well as to encourage fair competition in the telecommunication sector.
Section 4(d)
The Authority shall promote the availability of wide range of high quality, efficient, cost
effective and competitive telecommunication services throughout Pakistan.
Section 26
The level of tariffs for telecommunication services including basic telephone service shall be
regulated by the Authority in accordance with the following general principles:

(a) The regulations shall be made with a view to achieving the greatest possible degree of
pricing flexibility and stability compatible with safeguarding and protecting the interest
of consumers.
(b) The regulations shall apply to comparable providers or users of any regulated
telecommunication service.

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(c) Tariffs shall be at a level, which provides a reasonable rate of return on investments
taking into account the cost of operation.

Broadband Policy 2004

The Broadband Policy asserts:

(a) Spreading of an affordable, ‘always on’, broadband high speed internet service in
Pakistan in the corporate / commercial and residential sectors across Pakistan
(b) Encourage the entry and growth of new service providers while stimulating growth of
existing ones at the same time.
(c) Encourage private sector investment in local content and broadband services.

The policy has defined a roadmap to proliferate broadband in the country and has set the
target of 500,000 broadband users within five years. The broadband policy has suggested
some measures (such as hosting of content in Pakistan, Reduction in prices of domestic as
well as international IP bandwidth and establishment of national and regional peering
points), which could help in the promotion of broadband growth.

Telecom Rules 2000

It is pertinent to mention that the Authority vide its determination dated August 25, 2004
has already declared Pakistan Telecommunication Company Limited (PTCL) as SMP in the
leased line market as per section 17 of Pakistan Telecommunication Rules 2000 elaborated
below:
Section 17
An operator shall be presumed to have significant market power when it has a share of more
than 25% of a particular telecommunication market. The relevant market for these purposes
shall be based on sectoral revenues.

Fixed-Line Tariff Regulations 2004

In continuation to the above, the fixed-line tariff regulations 2004 states:

Section 11
The tariffs for leased line services of an operator, who is determined to have SMP status in
the leased line market by the Authority, shall be on cost. Until the determination of cost, the
Authority may take into account the international benchmarks of comparable countries
while setting/approving tariffs of leased lines.

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The operator may set the tariffs of leased lines below the approved tariffs provided they shall
inform the Authority about their proposed tariffs thirty (30) days before the applicability of
new prices.

BRIEF OVERVIEW ABOUT LEASED CIRCUITS

In today’s world, the competitiveness of any economy heavily relies on the availability of
advanced telecommunication infrastructure. Leased lines form the critical building blocks
used by service providers as the basic infrastructure upon which their services are built. The
availability of leased lines, thus, can be considered as the foundation of new economy. With
the expansion of the internet and data related services, leased lines are used by internet
service providers to build backbone networks thus becoming crucial for the availability and
affordability of the networks.

In Pakistan, full liberalization of telecom sector started in 2002 with the award of new local
loop, long distance international and mobile cellular licenses. The Authority has adopted
open licensing regime and has also awarded VAS (value added services) Licenses, which
include payphone, internet service providers and Audiotex (Premium Rate) services.

Leased Line
Leased line services provide a defined transmission capacity between termination points in a
communications network. Leased lines can span short or long distances. They maintain a
single open circuit at all times, as opposed to traditional telephone services that reuse the
same lines for many different conversations through a process called switching. These lines
are used for applications such as private network/Intranet (voice and data), dedicated
Internet access and data downloads.

Leased lines are one of the most important network elements appropriately termed as
backbone infrastructure, which enable the telecom operators and service providers to offer
telecommunication services. In addition to corporate customers, software exporters and
educational institutions; LL/LDI, ISPs, DNOPs and cellular mobile operators are the major
users of leased lines in Pakistan.

In general, the leased lines can be segmented as follows:

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Analogue leased lines: These provide voice and data traffic at speeds up to 56Kbps.

Digital leased lines: These can be used to carry voice, video, and data traffic, at speeds between
9.6 Kbps to 155Mbps and above. Digital leased lines are divided into four bandwidth
categories:
• Up to and including 64 Kbps
• Greater than 64 Kbps but less than 2Mbps
• 2Mbps
• Greater than 2Mbps

Domestic Private Leased Circuits (DPLC)

DPLCs are dedicated, fixed, point-to-point digital transmission channels between two points
within a country. DPLCs can carry data, digitized voice, video or any other form of digital
transmission at bandwidths ranging from 64kbps to 155 Mbps.
PTCL has been reducing its domestic leased line charges since 1999. These charges were first
reduced by 15% on July 1, 1999 and again on December 1, 2000 by 50% for cellular mobile
operators and 40% for other users. The domestic leased line charges were further reduced by
16% – 48% for local loop and long distance operators at the time of finalization of PTCL
RIO through a determination by PTA summarized in the following table:

Table 1
DPLC Charges for LL/LDIs
Fig in Rs.
Capacity 0-100KM 0-200KM 0-600KM 0->600KM
If exceeds 25 Km If exceeds 100 Km If exceeds 200 Km If exceeds 600 Km
2Mb 4,000 3,318 3,047 2,800
8Mb 13,552 11,613 10,664 9,800
34Mb 46,464 39,816 36,564 33,600
155Mb 162,624 139,356 127,974 117,600

In order to promote information technology and data related services, the charges for ISPs,
corporate and other private sector data customers have been subsidized and PTCL is
charging Rs. 2,536 per km per annum for 2 Mbps.

International Private Leased Circuits (IPLC)

IPLC forms the basic building blocks for international communications, providing raw
bandwidth for global communications networks. These point-to-point private line services
are dedicated to the customer’s exclusive use, reliable digital transmission, seamlessly

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integrating data, voice and imaging services. A wide variety of applications are supported by
IPLC including internet access, LAN-to-LAN connectivity, telemedicine, video and
teleconferencing.

IPLC enables operators with a global reach into over 200 countries to serve their
international requirements by an extensive range of bandwidth options.

At present, PTCL is providing IPLC services through SMW-3, SMW-4 and Flag to call
centers, educational institutions, ISPs and LL/LDI operators. The charges for IPLC vary
for different categories of different service providers.

Internet Protocol (IP) Bandwidth offered by PTCL

The growth of internet and its related applications demand new requirements for different
telecommunication networks capacity and bandwidth. Moreover, the rapid growth of IP
based networks have resulted in significant changes and telecom operators are now making
significant investments in IP-based infrastructures.

In Pakistan, PTCL is also offering IP bandwidth to ISPs, Call centers and software exporters
at higher discounts than incase of other services. IP bandwidth or commonly known as
internet bandwidth is a shared facility where bandwidth providers offer capacities to multiple
users. As the bandwidth is shared with multiple operators and it is not specifically linked to
any geographical station on the other end, it has certain QoS related deficiencies that make it
relatively less reliable. Although bandwidth providers try to ensure the amount of bandwidth
at their end, it is difficult to manage the bandwidth on the overall network, as it is open to
multiple users internationally.

Managed Bandwidth
Keeping in view the demand characteristics, bandwidth providers are introducing new
products that offer combination of prioritization, bandwidth reservation and other
management features, which allow control over their networks. This in turn helps the
operators to deliver multiple service quality levels.

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Managed bandwidth refers to providing connections between two specific points with
guaranteed bandwidth. The connection is usually established between routers on the
network.

PTCL is offering managed bandwidth services to ISPs and Call Centers via Flag Telecom.
The tariffs are summarized below:

Table 2
Managed Bandwidth Tariff for ISPs offered through FLAG

Destinations: London, Paris, New York and Hong Kong

Speed Charges per Month USD
E-1 8,910
DS-3 98,010
STM-1 196,603

Monthly Price USD

Countries E-1 DS-3 STM-1
Tokyo 10,710 117,810 235,620
Seoul 10,710 117,810 235,620
Taiwan 10,710 117,810 235,620
San Francisco 11,700 128,700 257,400
Singapore 11,610 127,710 255,420
Rest of Europe 9,810 107,910 215,820

Table 3
Managed Bandwidth Tariff for Call Centers

Speed Monthly Charges for E1 (USD)

London, Paris, New York and Hong Kong 6,500
Los Angeles & San Francisco 10,000

GLOBAL IMPORTANCE OF BROADBAND

The access to bandwidth at globally competitive prices is not only a vital determinant of
competitiveness in knowledge-based economy but also makes important contributions to the
quality of life, in terms of education, health services and social inclusion.

Broadband connections can also allow businesses to develop new e-commerce activities that
are not feasible over bandwidth constrained dial-up services. E-commerce is becoming an

6
increasingly integrated and important component of business. Presently this has been
predominately carried out through narrowband connection using either PSTN or ISDN
technologies. E-Commerce allows businesses to restructure their supply chains and
distribution systems by removing intermediaries between suppliers and customers thus
facilitating reduction in costs.

Another important aspect which tends to stimulate broadband is whether the network of
incumbent operator is bundled or unbundled. The local loop unbundling of incumbent
operator plays an important role in providing competition in the broadband segment.

Market Overview of International Bandwidth segment in Pakistan & its current

status
IPLC that offers global connectivity through submarine cable or Satellite is a critical input
for provision of Broadband and Internet services, International Long Distance Voice
Telephony and for a number of key industries like information technology services. The
cost of IPLC forms a substantial portion of the total cost of the user industries. The
competitiveness of these industries in the global market to a large extent is dependent on the
prices they pay for IPLC. In addition, Internet Service Providers (ISP) also use IPLC for
their upstream connectivity abroad and high cost of IPLCs get reflected in the tariff which
has an adverse effect on the growth of broadband in the country.

Current scenario
The prevalent market structure of IPLC in Pakistan is such that presently there is only one
active player i.e. PTCL. It is offering international bandwidth through SMW-3 (South East
Asia Middle East and Western Europe) SMW-4 and Fiber Optic Link around the Globe
(FLAG). Each of these communication media is briefly discussed below:

SMW-3 & SMW-4

Submarine Cable is an integrated high capacity fiber optic-system linking South East Asia to
Europe via Middle East. PTCL has an available capacity of 1.2 and 1.28 terabit in SMW-3
and SMW-4 respectively. Both SME-3 and SMW-4 are also being used as back up to each
other.

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SMW-3, with a total length of 39,000 km has 40 landing points in 34 countries and 4
continents from Western Europe (including Germany, England and France) to the Far East
(including China, Japan and Singapore) and Australia. There are 92 parties in this project,
which are licensed International Carriers and have signed the Construction and Maintenance
Agreement. The use of Wavelength Division Multiplexing provides an unprecedented
connectivity between the various landing points. The backbone is equipped with two fiber
pairs operated at 8 times 2.5 Gbit/s. The two wavelengths have been further upgraded to
10Gbps.

SMW-4 with a total length of 20,000 km is the fourth project in the SMW series. It has 16
landing points in 16 countries, linking South East Asia to Europe via the Indian Sub-
continent and Middle East with Terminal Stations in Singapore, Malaysia, Thailand,
Bangladesh, India, Sri Lanka, Pakistan, United Arab Emirates, Saudi Arabia, Egypt, Italy,
Tunisia, Algeria and France.

Pak UAE Submarine Coaxial Cable System

This is an analogue cable around 1,178 Km long linking Karachi and Fujairah (UAE).

FLAG [Fiber Optic Link around the Globe]

FLAG offers an alternate physical optical fiber route out of Pakistan for Internet access and
point-to-point international corporate data networks.

Satellite Connectivity
PTCL is a signatory to the INTELSAT and INMARSAT satellite consortia that allows it to
use their capacity to establish direct connections with telecommunication carriers around the
world. As of June 30, 2004, PTCL has access to a total capacity of 7,278 channels connected
to the International Gateway Exchanges (IGEs).

ISSUES HIGHLIGHTED BY THE INDUSTRY

The industry has been approaching PTA for quite some time requesting the Authority to
regulate the bandwidth tariffs. They have been emphasizing that the tariffs charged by
PTCL are abnormally high and thus do not give them any competitive advantage in the
International Market. Moreover, some investors have also contested that the current tariff
structure is discouraging them to make investment in Pakistan as it is cheaper to acquire

8
these facilities from other Asian countries. The issues highlighted by the industry have been
summarized as under:

a. Bandwidth tariffs are un-regulated. They should be regulated by PTA to remove

tariff anomalies and bring them down to a reasonable range comparable to other
countries in the region.
b. PTCL’s IPLC tariffs in the region are not competitive. The tariffs offered by PTCL
to ISPs for higher capacities are several times higher than similar and advanced
countries i.e. it is offering USD 3,950, whereas South Korea and Japan are offering
USD 2,462 for the same capacity.
c. Similarly PTCL is offering IP tariff at USD 2,000 whereas the same is available at
USD 650 in Philippines.
d. The multiples for higher capacities offered by PTCL are inconsistent with the
international standards (as shown in Table 8 & 9) and thus result in competitive
disadvantage.
e. Tariffs charged by PTCL for domestic leased circuits are also not competitive as
compared to other countries. The same is illustrated in Table 6.
f. Although PTCL’s tariff for E-1 capacity is relatively lower, however, for DS-3 and
STM-1 capacities the tariffs are much higher when compared with regional countries.
The comparison can be viewed in Table 9.
g. The charges of IP & IPLC, which serve as the backbone of a call center, are
exorbitant in comparison to other countries such as Philippines, Argentina and India.
(See Table 11)
h. For managed bandwidth via Flag Telecom, PTCL is charging USD 10,000 per E1 for
destination of USA (full circuit) whereas in India, the ceilings for half circuit rates for
the same capacity, irrespective of any cable system is fixed at USD 2,462.

COMPETITION IN THE INTERNATIONAL BANDWIDTH SEGMENT

Effective competition has not yet emerged in the bandwidth business segment. At present,
PTCL is the only provider of bandwidth in Pakistan, and is likely to maintain its dominance
in the market for the next few years.

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Monopoly of PTCL
PTCL has a market monopoly over the provision of international and domestic leased lines.
Over the years, PTCL has been reducing the leased line charges and the following table gives
a glimpse of reductions since 1998.

Table 4
Reduction in IPLC Tariff
(2 MB Half Circuit charges)

Date of tariff review Bandwidth charges Reduction

(USD) (%)
01-07-1998 56,333 -
01-07-1999 47,883 15%
01-01-2000 32,325 32%
01-05-2001 20,000 38%
01-09-2000 15,000 25%
24-12-2001 9,900 34%
June 2002 6,000 39%
June 2003 5,400 10%
2004 to date 3,950 27%

Although the prices of IPLC have significantly reduced worldwide, the benefit of reduction
has not been passed on to the operators, which has necessitated regulatory intervention.

New Entrants
Transworld Associates (a joint venture of Saif Group and Orascom) is in the process of
laying submarine cable for international connectivity to Pakistan that will be operational in
July 2006. This would lead to increase in availability of bandwidth and would result in
increasing competition in the bandwidth segment.

Need for Regulation

PTA has generally observed forbearance regarding regulation of IPLC tariffs keeping in view
the other sectoral priorities. It has also been observed that during the past few years, there
has been major decline in the cost of building submarine cables. In the Trans-Atlantic
region, the STM1 prices decreased by 70% in 2,000, 65% in 2001, 26% each in 2002 and
2003 and 25% in 2004. In the Trans-Pacific region, the price of STM-1 fell by 56% in 2003

10
and 40% in 2002. In the Europe-Asia region, the STM1 dropped by 42% in 2003. The STM-
1 prices in Asian region dropped by 50-60% in 2003. Keeping in view the worldwide trends
of tariffs, PTA has decided to review IPLC tariffs of PTCL in order to bring them in line
with the international benchmarks.

In this regard, several countries were analyzed in order to examine regulation regarding
IPLC. Different countries have adopted different approaches concerning regulation of
IPLC. The countries which are considered competitive regulated IPLC tariffs through Price-
Cap / ceilings. For example in Singapore, their dominant operator Singtel is required to
submit its IPLC tariffs for approval. The IDA (regulator) on April 12, 2005 exempted Singtel
from the requirement of filing tariffs for IP transit and Satellite IPLC. However, Singtel was
retained as dominant operator in the backhaul and terrestrial international private leased
circuits markets. IDA assessed that while competition is developing in the IPLC market,
Singtel still controlled the essential infrastructure and inputs for these services. Similarly, in
Taiwan & Vietnam, the regulator / ministry is regulating IPLC tariffs in the form of price
ceilings.

Disparity
The Authority has received several submissions by the users that the bandwidth capacity
provided by PTCL is extremely high priced. In their representation, they have stated that
while the price for E-1 link is higher than international norms, this differential increases
significantly for higher capacities i.e. DS-3 and STM-1. Moreover the international
bandwidth prices have significantly declined and similarly tariffs in several countries across
the region have also decreased substantially. However the benefit of reduction in
international bandwidth cost has not been passed on to the users by PTCL. Thus the
industry has requested the Authority to intervene and regulate the international bandwidth
prices of PTCL.

COMPARISON AND ANALYSIS OF IPLC & IP

IPLC

PTCL is offering IPLC services to ISPs, Call Centers, and other operators. The tariffs are
recapitulated below:

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 Table 5
IPLC Tariffs offered through SMW-3 & SMW-4
Fig in USD
Capacity ISPs and Others Call Centers
E1 (2Mbps) 3,950 3,500
DS3 (45 Mbps) 67,150 57,150
STM1 (155 Mbps) 184,950 -

As evident from the above table, PTCL is offering discount to call centers for E-1 & DS-3
capacity. However, the tariffs for higher capacities are same for all operators. The multiple
of price for E1:DS3: STM1 turns out to be “1:14:47” which is substantially higher than
international benchmarks.

The above-mentioned tariffs are inclusive of domestic leg charges for the destined area/city.
However, if, any operator decides to connect its service from that exchange onward to any
other point within the same city or another, it has to pay leased line charges (local leg)
depending upon the distance /capacity.

The industry has submitted that in addition to IPLC, the domestic leased line charges for
higher capacities are also overpriced when compared with India.

Comparison of Domestic Leased Circuit Charges with India

Following graphs show the comparison of domestic leased circuit tariffs between India and
Pakistan. Analysis of DPLC tariffs depicts that Pakistan’s tariffs are more competitive for
lower capacities such as 2 and 8 Mbps. But as we move on to higher capacities, the situation
is vice versa (For higher capacities tariffs of Pakistan are almost 2.5 times higher than that of
India).

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 2 Mbps Comparison
6

5
5
USD in Thousands

3 3
3
2 22 2

1
1
-
200 600 1,000 1,500
Distance in KM
India Pakistan

45 Mbps Comparison
60
55
50
USD in Thousand

40 39
33 35
30

20
23

12 14
10
5
-
200 600 1,000 1,500

Distance in KM India Pakistan

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 155 Mbps Comparison
140

120 123
100
USD in Thousand

94
80 87
74
60 62
40 37
27
20
13
-
200 600 1,000 1,500

Distance in KM
India Pakistan

Table 6
Comparison of DPLC Tariffs
Fig in USD
KM KM KM KM
Distance Country 1,500 (Above
0 - 200 0 - 600 600 - 1,000 1000)
India 652 1,928 3,213 4,820
2 Mbps
Pakistan 648 1,753 2,067 2,917
India 2,281 6,748 11,246 16,870
8 Mbps
Pakistan 2,333 6,312 7,440 10,500
India 4,171 12,339 20,565 30,847
34 Mbps
Pakistan 7,777 21,040 24,800 35,000
India 4,783 13,970 23,283 34,924
45 Mbps
Pakistan 12,313 33,313 39,267 55,417
India 12,826 37,471 62,451 93,676
155 Mbps
Pakistan 27,218 73,640 86,800 122,500

Internet Protocol (IP)

PTCL is also offering IP bandwidth to ISPs and DNOPs. The IP bandwidth is shared
among multiple operators. Due to high charges of IPLC, ISPs are forced to use for IP
bandwidth. The tariffs for the same are summarized below:
Table 7
IP Tariffs offered
Fig in USD
Capacity Prices for ISPs/DNOPs/Call Centers
E1 (2Mbps) 2,000
DS3 (45 Mbps) 61,913
STM1 (155 Mbps) 123,826

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For cities other than Karachi, Lahore and Islamabad, the Local Media charges are also
applicable ranging from Rs. 2,333 to Rs 58,800 (depending upon the distance and capacities).
Although, PTCL has waived the charges up to 2 Mbps in these three cities, it acts as a barrier
for operators who intend to acquire higher capacities for enhancing their network.

PTCL announced different IP bandwidth tariffs for LL/LDI operators for provision of data
services and the same were contested by them. Upon intervention of the Authority, PTCL
agreed that under the ambit of broadband policy, the tariffs for internet bandwidth available
to ISPs shall also be applicable to local loop operators for providing ISP/data related
services and the same was implemented.

IPLC & IP bandwidth Tariffs for Voice Services

PTCL is offering following IPLC and IP bandwidth tariffs to LL/LDI operators:

Table 8
Fig in USD
Capacity IPLC IP tariff for LL/LDI
(Voice Services) (Voice Services)
KHI LHR ISB
E1 2,852 3,500 9,373 10,842
DS3 - 42,000 114,743 132,929
STM1 - 133,000 387,602 451,252

Due to segmentation of bandwidth in terms of voice and data, many anomalies exist in
PTCL’s bandwidth tariff structure. Incase of E-1 capacity, PTCL is offering IPLC
bandwidth at USD 2,852 to LL and LDI operators for voice services, whereas for data
services, the ISPs and call centers are paying USD 3,950 and 3,500 respectively.

It has also been observed worldwide that IP bandwidth tariffs tend to be lower than IPLC
but in case of Pakistan, PTCL is charging higher tariffs for IP bandwidth (See Table 11). In
addition to the above-mentioned IP bandwidth tariffs, last mile charges ranging from Rs.
2,333 to Rs.58,800 (depending on the distance and capacity) are also applicable.

Comparison of IPLC Tariffs with regional countries

As indicated in the foregoing paras, in the absence of cost, the fixed-line tariff regulation
empowers the Authority to use benchmarks while fixing ceiling of IPLC. The Authority is

15
in the process of awarding consultancy on cost based fixed and mobile interconnection
charges, whereby the consultant would also determine cost of domestic as well as
international private leased circuit. Until the determination of cost, it becomes imperative
upon PTA to gather tariffs of similar countries for fixation of IPLC tariffs.
Another justification for comparing IPLC tariff with similar or advanced countries is that
these countries are offering competitive tariffs in order to grasp more market share for
business process outsourcing and information technology services.
Table 9
Fig in USD
Capacity Pakistan India Japan China Hong Malaysia Singapore South
Kong Korea
E-1 3,950 2,462 1,916 2,300 2,000 1,408 2,750 1,196
DS-3 67,150 20,000 8,333 11,500 10,000 16,469 14,166 8,333
STM-1 184,950 56,666 16,666 27,416 25,000 40,737 25,000 16,666
Ratio 1:17:47 1:8:23 1:4:8 1:5:12 1:5:11 1:12:29 1:5:11 1:4:8

As evident from the above table, Pakistan’s IPLC tariffs are not only much higher than other
countries but are also exorbitant for higher capacities. The cost of DS-3 and STM1 in
Pakistan is 3 times higher than India and around 4.5 times higher than Malaysia. In China,
although all the three operators are government owned, the IPLC tariffs are fixed by the
government and are very competitive. In Malaysia, the incumbent operator (Telecom
Malaysia) is offering restorable and non-restorable IPLC via eight different routes. The
tariffs of these routes are also lower than those of Pakistan.

Analysis of global multiples reveals that the price differential of E1 to DS3 ranges
between 4-7 times, and that of E1 to STM is between 8-17 times. This is illustrated in the
following Table.
Table 10

E1:DS3:STM1
High 1:7:17
Low 1:4:8
Source: Telegeography

However, price differential of different capacities in Pakistan is 1:17:47, which is not in line
with the benchmark. On the contrary Japan & South Korea are offering 1:4:8 while
Malaysia has a differential of 1:12:29. Keeping in view the internationally prevalent tariff

16
level and structure, it becomes imperative that the IP/IPLC tariffs of PTCL should be
rationalized in order to bring the price differential in accordance with the rest of the world.

Comparison of IP Tariffs with regional countries

Analysis of PTCL’s IP tariff with regional countries reveals that for E-1 capacity, all the
regional countries are offering IP tariffs below USD 1000 whereas PTCL is charging USD
2,000. The tariffs of IP bandwidth are tabulated as under:

Table 11
Fig in USD
IP Tariffs Pakistan Philippines India Argentina
E1 2,000 650 900 700

Similarly, the price differential charged by PTCL prior to the issuance of the Broadband
Policy for E-1: DS-3: STM-1 was 1:16:31 but despite reduction in IP bandwidth tariffs, the
differential for E1 to STM1 increased by 7 times as shown in the table given below:
Table 12
Fig in USD
Capacity Before Policy Present Scenario
E-1 3,950 2,000
DS-3 61,913 31,348
STM-1 123,826 76,000
1:16:31 1:16:38

17
INTERNATIONAL SCENARIO

Case Studies

India
In India, the international long distance segment was liberalized in 2002. In 2005, Telecom
Regulatory Authority of India (TRAI) initiated consultation on Domestic as well as
International Leased Circuits. TRAI reduced the prices of domestic leased circuits for DS-3
and STM1 by 67% and 70% respectively. Regarding international private leased circuits,
TRAI observed that only VSNL (the incumbent operator) had landing station facilities in
Mumbai, Cochin and Chennai. The other two operators Bharti Info Tel and Reliance
Infocomm were in the process of establishing cable landing facilities. Based on cost
methodology submitted by VSNL and on the basis of benchmarking, TRAI has substantially
reduced IPLC tariffs. It is pertinent to mention that the IPLC tariffs would be applicable to
all kinds of services i.e. voice as well as data.

Japan & South Korea

In Japan, the dominant operator was required to take prior approval of their tariffs and the
ministry was regulating IPLC tariffs in the form of price ceilings. In April 2004, all the
regulations were abolished as the DPLC and IPLC markets were considered competitive.
Independent International report on broadband has revealed that Japan, Taiwan and South
Korea markets are the most competitive in the Asian region whereas the Indonesia and
Malaysia are least competitive markets. In South Korea alone, there are 14 broadband service
providers. The following table presents the number of bandwidth providers in different
locations:
Table 13
Location Number of Bandwidth Providers
London 33
USA-NY 32
Germany 32
France 24
Pakistan 1

Singapore
In Singapore, the IDA has published the Code of Practice for Competition through which a
dominant licensee is required to take prior approval of tariffs. Singtel an incumbent operator
has been declared as dominant operator in Singapore and has regularly filed tariffs with IDA

18
for approval. In April 12, 2005, the IDA partially exempted Singtel from dominant license
obligations for provision of International IP transit, Leased Satellite Bandwidth, Satellite
IPLC and VSAT. For these services, Singtel was no longer required to file tariffs and was
given the flexibility in packaging and bundling different services. In IDA’s opinion, the
above-mentioned markets were fully competitive and Singtel did not have the significant
market power to impede competition. However, for terrestrial IPLC and backhaul, singtel
was still required to file its tariffs for prior approval.

Hong Kong
In April 2001, OFTA (Office of the Telecommunications Authority) imposed ceilings on
dominant operators. Reach was declared the dominant operator in international private
leased circuit. However, in March 2002, OFTA declared that Reach was no longer dominant
and removed the price ceilings.

CONCLUSION

Based on the analyses, following conclusions are drawn:

i. PTCL is differentiating its bandwidth tariffs among different business segments,

which needs to be reviewed and corrected.
ii. The tariff structure (voice & data) and different multiples of PTCL’s international
bandwidth are inconsistent with international norms.
iii. PTCL IPLC tariffs for data services offered to ISPs and DNOPs are twice as
compared to IP bandwidth.
iv. The telecommunication market has been fully liberalized since 2002. However, the
gestation period for completing backbone infrastructure project is relatively high,
therefore, it will take some time for broadband penetration to increase.
v. Lack of competition and high international bandwidth tariffs are holding back
consumers and other businesses from fulfilling their communication needs, including
the optimum utilization of broadband services.

Recent Steps taken by Authority:

Keeping in view the importance of the issue, PTA has decided to regulate IPLC /IP tariffs.
In this regard, PTCL has been directed to review and rationalize its international bandwidth

19
prices, remove the distortions and submit a comprehensive proposal for all categories of
international bandwidth rates.
This consultation paper is an additional step in order to involve the industry in rationalizing
IPLC/IP tariffs. The Authority will take certain decisions to improve the situation based on
stakeholders feedback, PTCL’s tariff proposal and international benchmarks. If PTCL’s
tariff proposal and feedback from all stakeholders is either not received or is not helpful
enough in improving the broadband situation in Pakistan, PTA will issue a determination on
in accordance with the relevant provisions of the Act, Policy, Rules and Regulations.

20
 Annex-1
Table 1
DPLC Charges for LL/LDIs
Fig in Rs.
Capacity 0-100KM 0-200KM 0-600KM 0->600KM
If exceeds 25 Km If exceeds 100 Km If exceeds 200 Km If exceeds 600 Km
2Mb 4,000 3,318 3,047 2,800
8Mb 13,552 11,613 10,664 9,800
34Mb 46,464 39,816 36,564 33,600
155Mb 162,624 139,356 127,974 117,600

Table 2
Managed Bandwidth Tariff for ISPs offered through FLAG

Destinations: London, Paris, New York and Hong Kong

Speed Charges per Month USD
E-1 8,910
DS-3 98,010
STM-1 196,603

Monthly Price USD

Countries E-1 DS-3 STM-1
Tokyo 10,710 117,810 235,620
Seoul 10,710 117,810 235,620
Taiwan 10,710 117,810 235,620
San Francisco 11,700 128,700 257,400
Singapore 11,610 127,710 255,420
Rest of Europe 9,810 107,910 215,820

Table 3
Managed Bandwidth Tariff for Call Centers

Speed Monthly Charges for E1 (USD)

London, Paris, New York and Hong Kong 6,500
Los Angeles & San Francisco 10,000

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 Table 4
Reduction in IPLC Tariff
(2 MB Half Circuit charges)

Date of tariff review Bandwidth charges Reduction

(US$) (%)
01-07-1998 56,333 -
01-07-1999 47,883 15%
01-01-2000 32,325 32%
01-05-2001 20,000 38%
01-09-2000 15,000 25%
24-12-2001 9,900 34%
June 2002 6,000 39%
June 2003 5,400 10%
2004 to date 3,950 27%

Table 5
IPLC Tariffs offered through SMW-3 & SMW-4
Fig in USD
Capacity ISPs and Others Call Centers
E1 (2Mbps) 3,950 3,500
DS3 (45 Mbps) 67,150 57,150
STM1 (155 Mbps) 184,950 -

Table 6
Comparison of DPLC Tariffs
Fig in USD
KM KM KM KM
Distance Country 1,500 (Above
0 - 200 0 - 600 600 - 1,000 1000)
India 652 1,928 3,213 4,820
2 Mbps
Pakistan 648 1,753 2,067 2,917
India 2,281 6,748 11,246 16,870
8 Mbps
Pakistan 2,333 6,312 7,440 10,500
India 4,171 12,339 20,565 30,847
34 Mbps
Pakistan 7,777 21,040 24,800 35,000
India 4,783 13,970 23,283 34,924
45 Mbps
Pakistan 12,313 33,313 39,267 55,417
India 12,826 37,471 62,451 93,676
155 Mbps
Pakistan 27,218 73,640 86,800 122,500

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 Table 7
Internet Protocol Tariffs
Capacity Prices for ISPs/DNOPs/Call Centers
E1 (2Mbps) 2,000
DS3 (45 Mbps) 61,913
STM1 (155 Mbps) 123,826

Table 8
IPLC & IP Tariffs
Fig in USD
Capacity IPLC IP tariff for LL/LDI
(Voice Services) (Voice Services)
KHI LHR ISB
E1 2,852 3,500 9,373 10,842
DS3 - 42,000 114,743 132,929
STM1 - 133,000 387,602 451,252

Table 9
Comparison of IPLC Tariffs
Fig in USD
Capacity Pakistan India Japan China Hong Malaysia Singapore South
Kong Korea
E-1 3,950 2,462 1,916 2,300 2,000 1,408 2,750 1,196
DS-3 67,150 20,000 8,333 11,500 10,000 16,469 14,166 8,333
STM-1 184,950 56,666 16,666 27,416 25,000 40,737 25,000 16,666
Ratio 1:17:47 1:8:23 1:4:8 1:5:12 1:5:11 1:12:29 1:5:11 1:4:8

Table 10
Capacity Benchmarks

E1:DS3:STM1
High 1:7:17
Low 1:4:8

Table 11
Fig in USD
IP Tariffs Pakistan Philippines India Argentina
E1 2,000 650 900 700

Table 12
Fig in USD
Capacity Before Policy Present Scenario
E-1 3,950 2,000
DS-3 61,913 31,348
STM-1 123,826 76,000
1:16:31 1:16:38

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 Table 13

Location Number of Bandwidth Providers

London 33
USA-NY 32
Germany 32
France 24
Pakistan 1

24