If you are still getting in touch with your overseas pals by dialing a phone call, then either you are recklessly rich or you are simply ignorant of the perks modern connectivity has to offer. For these days, over-the-top (OTT) applications - such as WhatsApp, Viber, Skype, and a host of social media messengers - allow connected users to powwow at just a fraction of a cost compared to days of yore.
Sure, that must be helping what economists call "consumer surplus", such being the value of making almost-free voice and video calls to anyone, anywhere in the word. But the same cannot be said of a dozen plus telecom operators - specifically, the Long Distance and International (LDI) operators - whose bread and butter depend on folks making and receiving distant calls over landlines and mobile phones. As the illustration shows, LDI revenues took a massive beating in FY16. This happened despite a 155 percent increase in international incoming minutes, which are the ones that used to drive revenues. Outgoing minutes have now flat-lined at two billion per annum, reaching a point of price inelasticity. So why have revenues sharply slid despite the voluminous increase in incoming LDI traffic?
In Pakistan's case, the OTT-led shift is not the whole story. Lets dive into a little history. To shore up LDI revenues, and ostensibly fight grey trafficking in the segment, back in October 2012, the PPP-led coalition government had put in place an International Clearing House (ICH). The ICH was supposed to terminate all international incoming voice traffic through one exchange, operated by the telecom giant, PTCL.
As ICH proved legally contentious and received bad rap in the press, some LDI operators, especially in the cellular domain, pulled away from the scheme. ICH did cause a surge in LDI revenues, as shown in the illustration for the years FY13 and FY14. But it was majorly on account of higher tariffs that the local exchange had started charged to foreign operators for terminating their voice calls in Pakistan - something which was adversely flagged by the US Federal Communications Commission in March 2013.
But higher tariffs under ICH led to a visible fall in international incoming traffic - incoming voice minutes slumped from 17 billion minutes in pre-ICH days to as low as 6 billion minutes in the ICH era. The loss of minutes led observers to wonder whether the monopolistic arrangement had indeed stoked grey telephony - a term for unscrupulous operators terminating calls at lower tariffs, under the radar.
Under the PML-N government, the policy reversal came in June 2014, when the PTA revoked the ICH Policy Directive and liberalized the tariff regime. The APC charges were to zero and operators were allowed to set their own tariff.
From what it looks, the telecom authorities hope to resurrect the incoming LDI traffic has paid off, two year running. But due to presumably lower effective tariffs on international termination to Pakistan post-ICH, the revenues have taken a nosedive. Meanwhile, the OTT Apps are working their magic. As of recently, PTA's latest industry report says that there were 0.45 million daily users of WhatsApp in Pakistan, 0.23 million users of Viber, and 0.2 million users of Skype. Among the 2.5 million daily Facebook users, some, not all, folks would inevitably be using the Facebook IM to get in touch with their peeps, instead of calling.
As 3G and 4G users grow in Pakistan, the volume of OTT users is going to grow in tandem. Barring a sudden implosion of those Apps - and that's a big IF - there is no way for LDI operators to gain back the revenues of yesteryears. From what it looks, LDI operators might still stick around, but in pared down versions of their prior relevance.
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