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172 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA the grant of cellular mobile licenses. Additional commitments to review the opening of the national and international service have been deleted in India’s latest offer. In any case, these had become redundant given domestic developments. Further there is now no restriction on the number of players in Basic, national and international service. India has committed to unlimited competition in these service segments. The commitment to allow foreign equity participation of 25 % has been relaxed to 49% in all categories except ISPs. For ISPs the offer has been enhanced from 51% to 74%. In the case of foreign investors having prior collaboration in that specific service sector in India, FIPB approval would be required. Perhaps, this provides the window for enhanced foreign equity participation subject to FIPB approval which is normally done on a case to case basis. While the revised offer shows significant improvement over the Uruguay Round commitments and initial offer (submitted in January 2004), it is significantly less than the existing liberal regime. If India were to bind its existing regime in telecom there are perhaps no concessions that India can leverage in the telecom sector itself due to the following reasons: • One, there does not seem to be any major constraint on India’s telecom operations in developed countries, including with respect to any planned investments in other countries. In general, Indian telecom companies are not planning major investments in telecom ventures in large markets; in any event, there is considerable flexibility provided in these markets in case Indian firms contemplate operations there. In certain cases where investment abroad may be considered by the major Indian companies, request for such investment comes from the Governments of the countries concerned, such as Sri Lanka, Nepal and Afghanistan. • Two, currently for the near future, the Indian market is likely to be the focus of attention for the Indian players. As described in detail above, the sector in India is on the verge of a second burst of high growth due to the opportunities in rural areas and as a result of coming of 3G. In such a scenario, the major Indian providers such as Airtel, Tata Tele Services, Vodafone-Essar, BSNL/MTNL, and Idea will focus on consolidating their business in the Indian market. And finally, although telecom is a growing market there is intense competition among domestic players in developed markets to make such new entry unattractive for Indian companies. The only real possibility is that India like other SAFTA countries will look to trade off increased market access in telecom under GATS to secure benefits in sectors of their comparative advantage, such as Mode 4. Pakistan For many years Pakistan adopted a traditionalist approach to the telecommunications sector. The state monopoly served as a cash cow: rate rebalancing was largely ignored; international traffic was constrained; investment was directed disproportionately toward rural areas; and taxation on both carriers and consumer devices slowed market demand. Pakistan has recently embraced dramatic steps to reform the sector, best captured as three broad themes: • Opening the market for basic fixed line services to competition through minimal licensing requirements; • Renewing efforts to restructure and privatise Pakistan telecommunications corporation limited (PTCL), the incumbent operator; and, • Updating its mobile sector policy, including introducing two new operators in 2004. The benchmark legislation for telecom is the Pakistan Telecommunication (Re-Organisation) Act 1996. The Law established the regulator, the Pakistan telecommunication authority, PTA; created PTCL as a statutory corporation (which was later partially privatised through a public market listing); and granted PTCL a monopoly over basic services until 31 December 2002, among other matters. The PTA was initially embedded within the ministry of information technology (MoIT), the highest policy body for the sector. The first significant step of the government’s liberalisation program was to open the fixed-line sector to competition. In July 2003 the government published the Telecommunication De-regulation Policy. The policy codifies the scope and rights for competitive entry in basic services, and sets broad terms for interconnection. The centerpiece is the establishment of two new categories of basic services licenses: Local loop (LL), for fixed line telecommunication within the 14 PTCL regions, and Long-distance and International (LDI), for connectivity among regions. In March 2004, the government opened both classes of license to general competition. The process specifically allows participation by foreign firms. The registration fee for a LL license is $10,000 per region. For the LDI license, which
P ROSPECTS FOR THE TELECOMMUNICATION SECTOR UNDER SAFTA 173 includes rights to provide international connectivity, the fee is $500,000 plus a $10 mn performance bond. LDI licensees will also be subject to ‘stringent requirements of technical and financial capability, experience and roll out,’ including specific targets for deployment; the objective is to raise the barriers of entry to encourage strategic operators. Companies can obtain permission to operate in multiple service areas, or to combine LL and LDI franchises. License duration for both is 20 years. Fees for any spectrum required are subject to separate licensing fees. Tariffs on both types of licensees are not regulated for carriers that do not have significant market power. After a long history of monopoly control, liberalisation of the basic services sector, however has not met with much success. In fixed local loop, PTCL controls 98% of a market which is showing signs of stagnating. Overall fixed phone service saw a negative growth of 5% in the quarter ended March 07 and total subscribers were 4,995,902. Beginning February 2004, additional competition was introduced in mobile telephony in Pakistan. An auction was held 14 April 2004, with winning bids submitted by Norway-based Telenor and UAE-based Warid Telecom. The net effect of introducing additional mobile competition has been overwhelming. As a result of competition, mobile sector in particular and the telecom sector in general in Pakistan is booming. This year the annual growth rate of mobile telephony segment was 80%, taking the total number of subscribers to over 70 mn. With the entry of two new telecom players in 2004, mobile telephony is witnessing intense competition and as a result prices have fallen substantially. As on date there are 6 cellular service providers in the country. In a recent development, Paktel was taken over by China Mobile for an amount of $460 mn. This deal has the potential to shakeup entire mobile market and also reflects the attractiveness of the Pakistani market. Pakistan has sixteen international long distance players. A growth of 173% was registered in long-distance traffic though due to intense competition and low tariffs profits remained low. In the WLL segment four players have started operations. Pakistan introduced this technology in 2004, and since then average quarterly growth has been 39%. On the Internet front, the DSL segment grew at 82% whereas Dial Up had a slower growth of 14%. Total number of DSL subscribers however remained very low at 26,611. Total FDI inflow in the telecom sector in last three years was more than $3 bn. Table 15.5 Key Telecom Indicators for Pakistan Population 159 Fixed lines 4.73 Fixed teledensity 2.97% Mobile phones 70.01 Mobile density 44% Source: www.pta.gov.pk Comparison of the applicable regime described above and the commitments made by Pakistan (1994) reflect the limited nature of the commitments made (see Appendix Table 15.5). Pakistan undertook the following commitments in 1994: • For voice telephony: – Mode 3, i.e. ‘commercial presence’ unbound for voice telephony. – Commitments under ‘commercial presence’ are subject to incorporation in Pakistan with 100% maximum foreign equity participation permitted. – Until 2003, no bypass of PTCL network and PTCL shall have exclusivity. • For circuit switched data transmission services • For facsimile services • For private leased circuit services: PTCL except for domestic VSAT, is the exclusive service provider for seven years. This exclusivity shall expire by the year 2003. • Has filed for MFN exemptions with regard to accounting rates. Pakistan’s commitments also did not endorse the regulatory principles enshrined in the Reference Paper. Compared to the meager commitments made by Pakistan in the last round, the current offer (2005) covers new areas. Pakistan now offers to end exclusivity on cross-border supply of voice telephony as of January 2004, with no limitation on commercial presence. 9 Also commits on full competition in private leased circuit services (transmission capacity) as of January 2004. Further the offer allows competition in satellite-based services, including voice telephone and value-added services subject only to restrictions on cross-border supply to preserve monopoly rights on basic and international networks and services until their expiry. 9 Under Mode 3, ‘None’ has been specified against voice telephony services under market access. This implies there exist no limitations on access. However under the general conditions, the schedule reads as follows: the number of operators, service providers and licensees may be limited due to technical constraints.
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QUANTIFICATION OF BENEFITS FROM ECO
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QUANTIFICATION OF BENEFITS FROM ECO
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Preface Our consultations with seni
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viii CONTENTS 7. Revenue and Welfar
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Executive Summary OBJECTIVE This st
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EXECUTIVE SUMMARY xiii Table 1 EAMA
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EXECUTIVE SUMMARY xv India A full S
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EXECUTIVE SUMMARY xvii indicates th
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EXECUTIVE SUMMARY xix ments on basi
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Part I BENEFITS FROM TRADE, INVESTM
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4 QUANTIFICATION OF BENEFITS FROM E
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2 Literature Review and Rationale f
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4 Effective Additional Market Acces
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6 Impact of SAFTA on Member Countri
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7 Revenue and Welfare Implications
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8 Impact of SAFTA on Inward and Out
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9 Quantification of Benefits from T
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Part II BENEFITS FROM DEEPENING INT
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11 Construction and Related Enginee
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12 Tourism and Travel Related Servi
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Appendix 14 Table A14.1 Telecommuni
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Appendix 15 REFERENCE PAPER Scope T
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Bibliography Abelson, P. (1996),
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BIBLIOGRAPHY 241 Cuba (2002), Negot
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BIBLIOGRAPHY 243 (2004), Impacts of
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BIBLIOGRAPHY 245 Silva, Patricia an
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BIBLIOGRAPHY 247 (1998), Tourism Se
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