SOLUTIONS FOR GLOBAL BUSINESSES
16
DEC
2015

Telecommunication Sector

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Introduction

The telecommunication sector in Pakistan has seen a period of rapid growth, modernisation and change during the last decade. The market is rapidly expanding with continued development in infrastructure and new technologies such as wireless telephony and telecom including broadband internet and 3G and 4G technologies. This calls for a fast-moving, fast-changing legal environment in harmony with economic and market realities, together with the technological aspects thereof.

Pakistan was finally able to auction 3G and 4G spectrum licenses in 2014. Pursuant to the Policy Directive of the Federal Government, Pakistan Telecommunication Authority (“PTA”) invited bids for the auction of spectrum in 2100 MHz, 1800 MHz and 850 MHz bands and to grant the successful bidders rights to establish Next Generation Mobile Networks (NGMN) and provide Next Generation Mobile Services (NGMS) across Pakistan. Four out of five existing cellular mobile operators submitted bids. The auction was held in April 2014. The Government earned $902.82 million from the auction of four 2100 MHz band licenses and $210 million from the auction of one 1800 MHz band license. No interest was shown in the remaining licenses i.e., one 1800 MHz band license and one 850 MHz band license reserved for new entrants.

Regulatory Framework

The establishment, operation, maintenance and provision of telecommunication systems and services are regulated by the PTA under numerous laws, regulations and rules. The parent legislation for all these is the Pakistan Telecommunication (Re-organisation) Act, 1996 (the “Telecom Act”). PTA is tasked with the enforcement of the Telecom Act which prohibits the establishment of telecommunication networks and provision of telecommunication services without a license. PTA has the power to grant, renew, regulate the tariffs of, monitor, and enforce all licences for any telecommunication system and any telecommunication service in Pakistan.

All applications for telecom licences and the use of radio-frequency spectrum are made to the PTA. Although, in the case of the latter, the PTA refers such applications to the exclusive authority of the Frequency Allocation Board (“FAB”) for a more technical function of frequency allocation, the assignment of which must be pursuant to any applicable recommendations of the International Telecommunication Union (“ITU”).

PTA Regulation and Government Policy/Regulation

To perform its various functions and duties, the PTA has the power to make delegated legislation in order to regulate the telecom sector. The PTA is also empowered to regulate specific aspects of, and particular licensees in, the telecom sector through the issuance of decisions and determinations that it makes from time to time. All of its decisions and determinations must be made promptly, in an open equitable, non-discriminatory, consistent and transparent manner.

The PTA is also charged with enforcing the Policy Directives of the Federal Government. Such directives are binding upon the PTA and, through the performance of its functions, powers and duties, therefore, indirectly binding upon all licensees, until such time as they become directly applicable through the promulgation of regulations and issuance of decisions or determinations.

Like many other countries, there exists a mixture of both policy and regulation in Pakistan, each of which with its own attendant strengths and weaknesses. There is, however, also an overlap in jurisdiction with respect to both policy and regulation in the hands of Government vis-à-vis the PTA’s own regulatory functions. At times, it creates an unwanted element of both market and legal uncertainty due to the possibility of governmental influence. This not only distorts the market, but also sends a message that is contradictory to the Government’s stated aim of liberalisation and deregulation in the telecommunication sector.

Licensing procedure

Licenses may be issued under the Telecom Act for the establishment of telecommunication networks and the provision of telecommunication services. Individual licenses for the establishment of telecommunication networks called “infrastructure licenses” or for provisions of certain telecommunication services including value added services may also be issued. The procedure for the issuance of telecom licenses varies depending upon the nature of license applied for.

Except in the case of certain individual licenses, the PTA will not normally consider applications for a licence submitted without a publicly notified invitation. Interested persons may file “Expressions of Interest” which the PTA may take into account while deciding to issue an invitation for licences.

An application for a license should include information regarding the proposed project, the applicant’s credentials including experience, financial and technical capabilities, nationality and a financial forecast of the project.

Applications for a licence are, in the first instance, short-listed using certain prescribed criteria. In determining whether or not to grant a licence, the PTA must consider applications on their individual merits, taking into account certain factors. In the award of a licence, the PTA must adhere to the Government’s policy directives.

The duration of a license depends upon the nature of services to be rendered under it. A licence may be granted for an initial term of not more than twenty-five years consistent with the policy of the Federal Government for the time being in force, which is renewable on such terms and conditions as may be determined by PTA.

Generally, the licenses issued by the PTA include, inter alia, provisions regarding the quality of service, the access promotion contribution, universal service fund, research and development fund contribution, provision of mandatory services, access to LDI public voice telephone services, number portability, numbers and short codes, access to submarine cables and space transmission facilities, network roll-out, call records, monitoring, terminal equipment, standard contract of service, complaints service and billing regime, harassing, offensive or illegal calls, bundling and unbundling etc. The conditions of a license may vary depending upon whether the license is for establishment of a telecommunication network or the provision of telecommunication services or both. Furthermore, the conditions of a license may also vary depending upon the nature of services to be rendered under such license. The licenses are generally issued on a “technology neutral” basis.

A licence may only be modified by a licensee with the approval of the PTA. Similarly, the PTA may not modify a licence without the consent of the licensee, other than in exceptional circumstances. Transfer of a license or substantial ownership interest in or control of a licensee or merger of licensees requires prior approval of PTA.

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