The report said that the government only offered three licences for 3G spectrum despite there being five operators in the market. The auction generated $1.1 billion but artificially limited the supply of spectrum to the market. This contributed to eliminating one of the operators from the market and played a key role in the merger of two cellular companies. In mobile markets, spectrum concentration may lead to market share concentration; in effect, data suggests that there could be correlation between Herfindahl-Hirschman Index (HHI) for spectrum allocation and market shares (on subscribers) after the merger was approved by the CCP in July 2016.
The report recommended harmonisation of the competition rules established in the Competition Act and in the Draft Competition Rules enacted by the MoIT. Secondly, elimination of the possibility of the PTA giving exemptions to hardcore horizontal agreements in the telecoms sector and development of an MoU between the CCP and the PTA which clarifies the cooperation modalities in enforcing competition rules in the telecom sector. It recommended strengthening the institutional guarantees of PTA and FAB in order to strengthen their technical independence and ensure the integrity of their decisions and implementing a transparent and technical selection process to appoint board members.
The government should clarify the circumstances in which the government can directly intervene in telecom markets bypassing PTA and FAB and undertake a functional review of PTA and FAB to identify areas for making its mandate more effective. The concerned government departments should adopt the bylaws necessary to ensure the effectiveness of the Telecommunications Policy 2015 (e.g. development of a general authorisation regime and a regime for unlicensed spectrum). It made recommendations to promote entry, expansion and a level playing field by facilities-based competitors by developing a general authorisation regime separate from the existing licensing regime.
The government should clarify the circumstances in which the number of operators can be limited, and an auction procedure followed under the licensing regime. As a general rule, the number of operators in the market should only be restricted whenever scarce resources (e.g. specific radio frequencies), and the authorisation regime should be adopted for the remaining situations.
The PTA and CCP should implement a revised framework for the sharing of passive and active infrastructure, which takes into consideration the competition implications of sharing agreements. The government should adopt binding timetables for the release and assignment of spectrum in order to make the process more expedite and aligned with market changes, as well as to prevent the awarding of undue competitive advantages, it recommended.
The report said that the collaboration between competition authorities and sector regulators is key to enhance the effectiveness and efficiency of their actions to the benefit of consumers. Having a common understanding of the market and competition instruments and recognising the value that each authority brings to the table, are essential for collaboration.
The MoUs delineating respective areas of intervention are critical to ensure effective resource allocation while avoiding contradicting decisions and potential discretional policy application (e.g. merger in a regulated sector). Such MoUs should govern the effective exercise of their responsibilities and establish mechanisms for practical cooperation in the exercise of those responsibilities, including the exchange of information, mutual support, general cooperation and the use of the sector-specific expertise of the PTA in respect of competition law investigations.
In addition to MoUs, the CCP and PTA should consider establishing working groups on competition issues and exchanging staff in order to develop expertise in the application of competition law in telecoms. In this regard, the experience of the UK can be used as best practice in shaping the development of the relationship between the CCP and PTA.
It said that the telecommunications sector requires a strong regulatory framework that enables the management of scarce resources (e.g. radio spectrum), ensures access to bottlenecks and overcomes the lack of private initiative in some areas of the country where commercial participation may otherwise be unviable. An ineffective regulatory framework will allow players with substantial market power to distort competition and prolong the market power historically gained prior to the liberalisation of the sector.
The fact that Pakistan is lagging behind in the adoption of technologies, 3G and 4G, also seems to also have an effect on the user adoption of smart phones. The market for services enabled by 2G, 3G and 4G technologies are rather different. More technology advanced countries are already moving towards 5G markets. There are demand substitution effects between xG market services. Consumers do not tend to use xG mobile services as complements, rather they use them are substitutes. However, as not all consumers change at the same time, there is an overlapping of markets as some consumers adopt new xG technologies faster than others, it said.
The report added that a new framework is expected to be developed by the MoIT, which tackles the following aspects: (i) standardised processes for granting Rights of Way (RoW); (ii) arbitration processes; (iii) responsibilities for granting rights of way; (iv) an outside plant code for roads and footpaths to ensure ducts and access points; (v) formulae for reasonably pricing RoW with the aim of: (1) providing a uniform charging mechanism in line with the decision already taken by the Inter Provincial Coordination Committee of the government of Pakistan applicable to all government organisations including cantonments and areas administered by defence organisations, and (2) encouraging site sharing by way of levying no additional charges on sharing a site. However, and notwithstanding Section 27-A, and the Telecommunications Policy 2015 statements, Pakistan has not yet put into place RoW reforms that can facilitate and encourage investment, it added.