July 10, 2015 Print

Three years ago, Pakistan established the International Clearing House (ICH) to monitor incoming international calls and curtail illegal traffic. This essentially established a cartel of telecom operators raised costs for overseas calls into Pakistan, dramatically reduced voice traffic, and reduced customer choice for telecom services, explains Ali Salman, founder and executive director of Atlas Network partner Policy Research Institute of Market Economy (PRIME) in Pakistan, in a recent commentary. The Competition Commission of Pakistan deemed the directive that established the ICH to be anti-competitive.

Not only did the ICH and the policy directive reduce competition significantly, it also directly violated the ministry’s own deregulation policy of 2003, which called to “increase service choice for customers of telecommunication services at competitive and affordable rates and liberalise the telecommunication sector by encouraging fair competition amongst service providers.” According to Pakistan’s minister of IT and telecommunication, ICH caused a “loss of around 44.4 billion international call minutes to the telecom sector, translating into a loss of Rs400 billion,” or half of the federal PSDP budget.

Writing for the Express Tribune, Salman commended the ministry’s June 2014 withdrawal of the ICH policy directive and the federal government’s victory in Pakistan’s Supreme Court in April 2015 over telecom operator challengers.

“This policy reform not only deserves to be applauded but also a careful scrutiny as a case-study of reform,” Salman wrote.

Several lessons can be derived from the failure of the ICH, including the role of external governments in reprimanding through building strong political opinions, such as pressure from the US FCC and Middle East regulators to withdraw from ICH, rather than funding reform avoidance. In the year since the ICH policy directive was withdrawn, formal voice traffic into Pakistan has climbed from 300 million minutes to 1 billion minutes per month.

“One big lesson — reformers should have some patience — results eventually bear them out,” Salman concluded.

Read Ali Salman’s full analysis, “Reversal: Lessons to learn from the ICH fiasco,” in the Express Tribune.