Telecom Deregulation Policy

Two license types are available: Local Loop (LL) licenses for fixed-line service within a PTCL region at the Pak rupee equivalent of US$10,000, and Long Distance & International (LDI) licenses at US$500,000. Entry is unrestricted and open to any applicant meeting licensing requirements. However, LDI applicants face stringent requirements for technical/financial capabilities, experience, and rollout plans, with licenses preceded by an open public hearing process. A company may hold both LL and LDI licenses simultaneously.

LDI licensees must build Points of Interconnect in five PTCL regions within one year of award and all thirteen regions within three years. They must own a minimum proportion of transmission infrastructure (10% in year 1, rising to 50% in year 3 measured in 2 Mbit/s x km), though long-term leases of 5+ years are acceptable in lieu of ownership. LL licensees must build at least one Point of Interconnect within prescribed periods in each licensed PTCL region. Failure to begin operations within 18 months may result in license cancellation and withdrawal of allocated spectrum.

Both LL and LDI licensees have rights to interconnection, leased lines, and co-location from incumbents. Pending PTCL's development of unbundled cost accounts approved by PTA, interconnection prices will be based on international benchmarks, with initial prices notified by October 2003. PTA will issue a Reference Interconnection Offer (RIO) as the default interconnection offer with PTCL pending LRIC-based pricing determination. Both licensees have rights to co-locate in PTCL exchange buildings and connect their own fiber and radio links.

The APC mechanism redirects a portion of international incoming termination charges to support infrastructure development. LDI licensees may retain up to 6 US cents per minute of termination charges paid by international carriers, with the remaining amount (APC) passed to local loop licensees to encourage new infrastructure and increase teledensity. PTA retains intervention rights in case of windfall profits not attributable to efficient performance. The sharing formula will be reviewed and notified at least every six months, based on Long Run Incremental Cost (LRIC) methodology. Cellular operators are excluded from APC payments.

Licensees must pay PTA a fixed annual fee not exceeding 0.5% of last year's gross revenue minus inter-operator and related PTA/FAB mandated payments. A mandatory 1% of gross revenue (minus inter-operator payments) must be devoted to a Research and Development Fund. The Universal Service Fund charge, capped at 1.5% of gross revenue minus inter-operator payments, applies to all basic telecommunication service licensees after completion of their first full operational year. Cellular termination rate premiums will also be diverted to the USF from a date to be notified by the Government.