LDI sector recovering after ICH closure

15 May 2015

The dismantling of the International Clearing House (ICH) regime, whereby all international traffic in Pakistan was terminated through a single gateway, has led to a drastic increase in legitimate traffic, the Ministry of Information Technology and Telecommunication (MoITT) confirmed yesterday. According to the MoITT, legal international traffic terminating in Pakistan fell from more than two billion minutes per month pre-ICH, to less than 400 million minutes per month by June 2014 before reaching a record low of 367 million minutes in November that year. In March 2015, the first full month after the long-distance international (LDI) space was re-liberalised, legal traffic more than doubled to 852 million and in April 2015 that figure increased to 1.02 billion minutes. The MoITT expects international traffic to recover to around 1.5 billion minutes per month, noting that many users have now permanently migrated to over-the-top (OTT) alternatives such as Skype or Viber for international calls. Traffic through OTT services was estimated to be around 500 million minutes of calls per month. The reduction in legal traffic also led to a substantial drop in revenues for the government, the MoITT added, estimating that roughly 4.4 billion minutes of international calls were lost as a result of the ICH, costing the state approximately PKR400 billion (USD3.9 billion).

As noted by TeleGeography’s GlobalComms Database, the controversial ICH policy was implemented in 2012 ostensibly to eliminate the illegal grey market in international calls, but ultimately had the reverse effect: the elimination of competition in the sector immediately led to a substantial increase in pricing, driving down traffic through legitimate channels and pushing users towards the grey market. Whilst the Competition Commission of Pakistan (CCP) opposed the policy, legal challenges to the ICH were slow to see results and even with sector regulator the Pakistan Telecommunication Authority (PTA) reversing its opinion on the matter it was not until February 2015 that an order from the Supreme Court finally closed down the ICH and re-liberalised the LDI sector.