CCP slaps show cause notice to PTCL for dominant position in DSL market

Islamabad: The Competition Commission of Pakistan (CCP) has issued Show Cause Notice to Pakistan Telecommunication Company Limited (PTCL) for, prima facie, preventing, restricting, reducing and distorting competition in the market for provision of broadband services through  Digital Subscriber Line (‘DSL’) technology in terms of Section 3 of the Competition Act, 2010 (the “Act”). 

An official statement issued here on Tuesday said that a formal complaint was filed by Mircronet Broadband (Private) Limited, LinkDotNet Telecom Limited and Nexlinx (Private) Limited, alleging that PTCL has abused its dominant position in the market for provision of DSL services by being involved in the practice of predatory pricing and refusal to deal. The Commission initiated an enquiry and appointed Ms. Shaista Bano (Director) and Ms. Mehreen Ibrahim (Deputy Director) as enquiry officers to conduct a detailed enquiry. The Enquiry Report was completed and submitted by the enquiry officers on 4 June, 2012.

According to the Enquiry Report, the relevant product market has been divided into the upstream market for access to the copper infrastructure and the downstream market for the provision of broadband services through DSL technology. The relevant geographic market for both products has been determined to be the whole of Pakistan.

In terms of the Enquiry Report, PTCL having a nation-wide copper infrastructure holds a dominant position in the upstream market for access to copper infrastructure, which is an essential input for the downstream market. Based on the findings of cost analysis conducted by the enquiry officers, PTCL being a vertically integrated incumbent, through it’s pricing for access to its copper infrastructure, has reduced and squeezed the margins in the downstream retail DSL market to an extent that an equally efficient competitor cannot operate profitably. The findings of the Enquiry Report reveal that this margin squeeze by PTCL, through low retail prices has gradually reduced the profit margins of the other retail operators which as per their financial statements are incurring losses. Furthermore, importantly since PTCL’s entry in the DSL retail market, the number of total service providers has reduced from 11 to 6 and no new player has entered the market an indication that the competition is reduced in the relevant market .

The Enquiry Report states that generally lower tariffs in the retail market would be regarded as beneficial for customers, however, in this case lower retail tariffs have led to competitors being driven out of the market and may in the long run lead to the creation of a monopolistic situation. This would leave the consumers at the mercy of one super dominant player who will be at its free will to exploit the consumers.

The Enquiry Report concludes that PTCL through the practice of margin squeeze has made the market for provision of broadband services through DSL technology uncompetitive and prohibitive,  thus  a prima facie violation of Section 3(1) and 3 (2) of the Act is made out. PTCL has been given fourteen days to show cause in writing and to avail the opportunity of being heard.