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Official Citation: 2024 IHC 246
Court / Jurisdiction: Islamabad High Court
Year of Decision: 2024
Decision Date: 2024-12-03
Parties: Link Dot Net Telecom Limited vs Pakistan Telecommunication Authority (PTA), etc
Ruling Summary: This decision was rendered by the Islamabad High Court on 2024-12-03, officially reported as 2024 IHC 246. In this matter between Link Dot Net Telecom Limited and Pakistan Telecommunication Authority (PTA), etc, the court adjudicated key questions of statutory construction, procedural regularity, and legal precedent under Pakistani law.
Core Holding: The honorable bench evaluated governing statutory provisions and judicial authorities to establish the rights of the parties, delivering the binding reasoning set out below.
Case cited as 2024IHC246
Court Name: Islamabad High Court Judge(s): Babar Sattar Title:Link Dot Net Telecom Limited vs Pakistan Telecommunication Authority
(PTA), etc Case No.: F.A.O NO. 51 OF 2018 Date of Judgment:2024-12-03 Reported As: 2024 IHC 246 Result: Appeal Allowed Judgment
JUDGEMENT BABAR SATTAR, J.- This judgment will decide the afore-titled appeals filed under Section 7(1) of the Pakistan Telecommunication (Re-organization) Act, 1996 ("Telecom Act") against decision dated 14.05.2018 passed by Pakistan Telecommunication Authority ("PTA") declaring that a Tripartite Indefeasible Right of Use Agreement ("JV Agreement"), entered into by and between Pakistan Telecommunication Company Ltd. ("PTCL"), Link Dot Net Telecom Ltd. ("LDN") and HKT Global Singapore PTE Ltd. ("HKT") dated 30.10.2015, for provision of broadband capacity to LDN is not permissible under the Telecom Act, the Rules framed thereunder and the Long Distance International License ("LDI License") issued to LDN. 2. The relevant factual background is that Transworld Associates Pvt. Ltd. ("TWA") filed a complaint with PTA stating that international bandwidth capacity within submarine cables was being sold in Pakistan by an unlicensed operator by offering Indefeasible Rights of Use ("IRUs"). After receipt of this complaint on 04.03.2015, PTA directed all licensees to ensure strict compliance with the regulatory regime overseen by PTA. LDI licensees confirmed that they had no unauthorized agreements or arrangements for procuring international bandwidth capacity. PTCL informed PTA by letter dated 26.03.2015 that it had entered into a contractual arrangement with a foreign carrier in accordance with provisions of the Telecom Act, and the Rules and Regulations framed thereunder. To deliberate the issue of the right of LDI licensees to establish connectivity with providers of international bandwidth capacity, a meeting was convened by PTA on 21.11.2015. The LDI operators took a position that they were entitled to acquire international bandwidth capacity from
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foreign carriers on optical fiber submarine cable systems and/or satellite systems. TWA took a position that LDIs could only purchase international bandwidth capacity by establishing their own submarine cable fiber system or from a licensee authorized by PTA to operate a submarine optical fiber Cable Landing Station ("CLS"). PTA issued a clarification on purchase of international bandwidth by LDI operators in view of LDI License conditions and the De-Regulation Policy for the Telecommunication Sector issued in July 2003 ("De-Regulation Policy") by letter dated 27.10.2015. PTA concluded, while interpreting clauses 4.1.4 and 4.1.5 of the De-Regulation Policy and clauses 1.1.3(g) and 2.2.1 of the LDI License conditions, that "LDI operators may enter into agreement for IRUs either with the licensed operator or with submarine cable consortia and satellite service providers...". TWA impugned the clarification before this Court through F.A.O No.100 of 2015 (Transworld Associates Private Limited vs. Pakistan Telecommunication Authority), which was disposed of by judgment dated 15.02.2018, whereby the clarification was set aside and the issue was remanded back to PTA to be decided afresh after affording the parties an opportunity to be heard. In compliance with such order, PTA convened hearings and issued its decision dated 14.05.2018, which has been impugned in the instant appeals. In its order, PTA held the following: "What has been discussed above in light of applicable regulatory regime and terms and conditions of licenses, it is concluded that LDI operator(s) may enter into agreement(s) for IRUs either with licensed operator(s) or with submarine cable consortia and satellite service providers. Capacity of the submarine CLS licensee(s) shall be sold on right to sue or lease basis only to licensed operators in Pakistan. Therefore, agreement(s) made between PTCL, LDN and HKT Global (being a non-licensee in Pakistan) is not admissible under the current regulatory regime in Pakistan." 3. The learned counsel for LDN submitted that LDN had acquired bandwidth capacity through PTCL and not in a direct independent agreement with HKT. He submitted that provisions of the Telecom Act extended to the whole of Pakistan in terms of Section 1(2) of the Telecom Act and HKT was providing no telecommunication services to LDN within the territory of Pakistan and consequently did not need to procure any license from PTA. He submitted that in terms of Sections 20 and 25(3) of the Telecomm Act, LDI licensees were not barred from establishing interconnection with foreign operators and the only prohibition in terms of Section 25(3) of the Telecom Act was that no agreement entered into by a licensee should be inconsistent with the obligations of such licensee under the Telecom Act, the Pakistan Telecommunication Rules, 2000 ("Telecom Rules") and the licenses issued by PTA. He submitted that under Clause 10 of Schedule 2 of Appendix B of the Telecom Rules, the only prohibition with regard to entering into agreements with overseas operators or satellite consortia was that such Agreement must not exclude other licensed operators from entering into similar agreements in relation to services or facilities related to submarine cables, satellite links and landlines links. He submitted that the right of an LDI licensee to enter into international agreements could not be curtailed. He submitted that pursuant to clause 4.1 of the De-Regulation Policy, LDI licensees were authorized to obtain IRUs from submarine cable consortia apart from having the right to become part of submarine cable consortia. He submitted that in terms of clauses 1.1.3(g) and 2.2.1 of the LDI license conditions, two independent rights had been conferred on LDI operators. One, to establish, maintain and operate an international submarine cable or satellite transmission facility linking Pakistan with multiple countries. And two, the right to obtain access to submarine cable systems subject to reaching an agreement with the operators of such systems or install earth stations to establish connectivity with space station transmission facilities subject to reaching an agreement with the operators of such facilities. He submitted that in terms of seeking bandwidth capacity, LDIs could do so either in earning in submarine cable consortia or by obtaining IRUs from submarine cable consortia through commercial agreements. He submitted that under the provisions of the Telecom Act, Telecom
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Rules, De-Regulation Policy and LDI License conditions, LDI operators in Pakistan could seek international broadband capacity through submarine cable systems in one of two ways: either through a licensed operator such as PTCL or TWA who were licensed by PTA to operate a CLS; or by entering into a commercial agreement for provision of international bandwidth capacity made available through submarine cable consortia. He submitted that HKT was the member of a submarine cable consortia called AAE-I (AsiaAfrica-Europe-I) and the capacity being afforded by HKT through IRUs within submarine cables was being provided through PTCL, which had been licensed to manage its own cable connecting its CLS with an international submarine cable beyond the territory of Pakistan. He submitted that the use of the word operators' in clause 2.2.1 of the LDI License could not be confused with the use of the word 'Operator' as defined in clause 13.2 of the LDI license as where the operator was meant to be an operator licensed by PTA, the o' in the term operator was capitalized, being a defined term. He submitted that PTA did not license or regulate international operators and consequently the JV Agreement could not be declared to be in conflict with the regulatory framework on this basis. 4. The learned counsel for PTCL submitted that PTCL was part of the consortium that owns SMW4 and IMEWE cable systems, which operate on an Open Access System basis, and as a consortium member could procure and arrange the provision of broadband capacity at its landing station for its own use or for the use of a consumer. The cable landing system operated by PTCL is bound to provide interconnection and backhaul, as per the consortium construction and maintenance agreement for both cable systems. He submitted that under the JV Agreement the CLS being used belongs to PTCL, which is licensed to operate it. Similarly, the submarine cable linking the CLS with the submarine cable operated by the submarine cable consortia is also owned and operated by PTCL. He submitted that clause 9.2 of the Agreement clearly provided that HKT would provide LDN access to broadband capacity through interconnection of capacity from the submarine cables SMW4 and IMEWE to Pakistan at two points, which were PTCL exchanges in Karachi. Under the terms of the JV Agreement, HKT was neither establishing any physical setup in Pakistan nor was providing any service to a consumer within Pakistan. It was through PTCL's CLS that LDN was able to interconnect with broadband capacity being afforded by HKT through international submarine cables. It was submitted that HKT was part of another submarine cable consortium and within the Open Access System it was customary for members of consortia to provide excess broadband capacity to other consortium members and/or LDI operators as no single submarine cable had access to all countries across the world. He submitted that PTCL had shared a draft of the JV Agreement with PTA on 25.05.2015 and PTA expressed no reservations in relation thereto. Further PTA's clarification dated 27.10.2015 provided ample room for LDN and PTCL to enter into the JV Agreement with HKT. It was only after the matter was remanded back to PTA pursuant to the order of Islamabad High Court dated 15.02.2018, in Transworld Associates Private Limited that PTA changed its view with regard to the acceptability of the Agreement. The impugned order did not provide any rationale or justification for such U-turn and also did not examine and address the provisions of the JV Agreement or how it violated the Telecom Act, the Telecom Rules, the De- Regulation Policy and conditions of the LDI License. He reiterated that HKT was not providing telecommunication services in Pakistan. HKT was merely affording broadband capacity through submarine cables. The interconnection for which was taking place by virtue of a submarine cable owned by PTCL at the CLS owned and managed by PTCL. As PTCL was a licensee and subject to the telecom regulatory framework enforced in Pakistan and so was LDN, there was no question of any entity providing telecommunication services in Pakistan without a license. He read through Sections 20 and 25(3) of the Telecom Act and clauses 2.3 and 10 of Schedule 2 of Appendix B of the Telecom Rules to argue that the regulatory framework permitted LDIs to enter into commercial contracts for provision of broadband capacity through members of submarine consortia. He
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submitted that the JV Agreement was beneficial for consumers of telecommunication services in Pakistan as it afforded an LDI operator broadband capacity on comparative rates in a manner that would serve the interests of consumers as well as the LDI operator. And TWA and other LDI licensees were also at liberty to enter into such arrangements in their own interest as well as that of their consumers. He submitted that the impugned order was a non-speaking order in terms of the law laid down by the Supreme Court in Muhammad Amin Muhammad Bashir Ltd. vs. Government of Pakistan (2015 SCMR 630). 5. The learned counsel for TWA submitted that HKT was selling broadband capacity to LDN, which constituted telecommunication service within the meaning of Section 2 of the Telecom Act. He submitted that under Section 20 of the Telecom Act only an entity that was licensed by PTA could provide telecommunication service. He submitted that pursuant to the TWA license, sale of capacity was a licensed activity under the telecom regulatory framework. HKT was however selling such capacity and LDN was receiving such capacity in breach of provisions of the Telecom Act, the De-Regulation Policy and the LDI License provisions as correctly held by PTA. He submitted that TWA had a commercial stake as it had expended a serious amount of funds to procure the license and to provide telecom services in Pakistan. Any LDI operator in Pakistan was therefore free to procure a broadband capacity through TWA or PTCL who were licensed to provide such telecommunication service. Allowing HKT to provide broadband capacity would be discriminatory as TWA had been allowed to provide such telecommunication service after procuring a license, which HKT was not being required to do. He submitted that LDN was free under its license to set up its own submarine cable and subject to provision of a license, establish a CLS. But without investing in such infrastructure, it could not bypass TWA and PTCL to procure broadband capacity from an international operator. He submitted that pursuant to provisions of the Agreement, the interconnection between LDN and HKT networks was taking place at a handover point (HOP) in Karachi and payments were also to be made by LDN to HKT, which established that HKT was providing services to LDN in Karachi. He further submitted that HKT was not a member of the submarine cable consortia that served the subcontinent and consequently could not be argued that LDN had acquired capacity from a submarine cable consortium. 6. The learned counsel for the PTA also took the Court through the relevant provisions of the telecom regulatory framework. He submitted that the JV Agreement was based on misrepresentation insofar as LDN had represented that it was licensed to procure broadband capacity from HKT. He submitted that LDI operators could obtain access to submarine cables in accordance with clauses 1.1.3(g) and 2.2.1 of the LDI License read with clause 4.5.1 of the De- Regulation Policy. These provisions, however, allowed the LDI operators to obtain access to submarine cable systems by reaching an agreement with the operators of such systems. The operator of such system in terms of clause 13.2 of the LDI License had to be a person licensed by PTA to provide telecommunication services. In the instant case, HKT was not a licensee of PTA and LDN could therefore not seek broadband capacity from HKT. He submitted that while PTCL had informed PTA that it had entered into the Agreement, the said JV Agreement was never approved by PTA. He asserted that HKT was not a member of a submarine cable consortium and the appellants had not discharged their obligations to establish that HKT was a member of a submarine cable consortium. Instead, PTCL by letter dated 21.09.2016 had maintained that HKT was not party to SMW4 or IMEWE consortia. He asserted that LDN could obtain capacity from TWA or PTCL, which were licensees of PTA and had established CLSs in Pakistan. As under the effective regulatory framework, only license holders were allowed to bring international telecommunication services into Pakistan. He submitted that the JV Agreement would have serious policy implications as in exercise of the sovereign right of a State it was for the public regulatory authorities of such
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State to be able to regulate those providing services within the territory of the State. This is why HKT could only afford broadband capacity to LDN or any other LDI operator if it was a licensee of PTA. 7. After the arguments, as part of rebuttal arguments, PTCL placed on record a copy of construction and maintenance agreement that HKT was a party too, in order to establish that HKT was a member of the Asia-Africa-Europe-I (AAE-1) submarine cable consortium. It was submitted that while HKT was not providing telecommunication services to LDN or any other LDI operator in Pakistan, the argument of PTA as well as TWA that HKT was not the member of any submarine cable consortium was factually incorrect. Neither PTA nor TWA furnished any arguments to contest the authenticity or validity of the construction and maintenance agreement placed on record by PTCL to establish that HKT was a member of the AAE-I submarine cable consortium. 8. Let us start with considering the relevant provisions of the telecom regulatory framework that impinge on the ability of LDI operators to enter into contracts whereby international operators not licensed by PTA to provide telecommunication services in Pakistan are able to provide broadband capacity through submarine cables. The foundational legal question in the instant appeals is whether an LDI operator licensed by PTA is competent to enter into a commercial arrangement with an international operator, not licensed by PTA, to procure broadband capacity being afforded through international submarine cables. 9. To consider this question, let us start with the relevant provisions of the Telecom Act, the Telecom Rules, the De-Regulation Policy and the LDI License. The telecommunication services in Pakistan are regulated under the Telecom Act. Section 1(2) states, as is customary, that the Telecom Act "extends to the whole of Pakistan". Amongst the functions of PTA, listed under Section 4 of the Telecom Act are included that of promoting and protecting the interests of users of telecommunication services, promotion of "availability of a wide range of high-quality, efficient, cost-effective and competitive telecommunication services throughout Pakistan", and "rapid modernization of telecommunication systems and telecommunication services." Section 6 lists the responsibilities of PTA, which include the obligation to protect the rights of licensees, the interests of users of telecommunication services, and to ensure that "fair competition in the telecommunication sector exists and is maintained." A collective reading of Sections 4, 5 and 6 of the Telecom Act reflects that in discharge of its powers, functions and responsibilities, PTA is under an obligation to protect the interests of users of telecom services, and to balance such interests against the interests of licensees in a manner that promotes fair competition in the telecommunication sector. This is consistent with the obligation of the State under Article 18 of the Constitution to regulate trade, commerce or industry "in the interest of free competition therein." What this mean is that PTA is under an obligation to exercise the powers vested in it pursuant to provisions of the Telecom Act to pursue the objects of the Act and in doing so, engender fair competition in the telecommunication sector in the interest of users of telecommunication services and to afford a level playing field to licensees of PTA. It is in this larger context that provisions of the Telecom Act, the Telecom Rules, the De-Regulation Policy and LDI License conditions have to be appreciated and interpreted. Rule 7(4) states that "a license granted in accordance with the provisions of the Act and these Rules shall be subject to the conditions applying to all licensed services contained in appendix B to these Rules." Clauses 2.3 and 2.4 of Appendix B to the Telecom Rules state the following: 2.3 Subject to the other provisions of this license and sub-section 3 of Section 25 of the Act, the licensee shall be entitled to contract with any person to operate, on behalf of the Licensee, any of the Licensed System for the purposes of providing, and to provide, any Licensed Services, subject to the Licensee having given prior written notice to the Authority of the identity of the person concerned and the type of Licensed Services which that person is to provide.
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2.4 Without prejudice to the terms of this License, the Licensee shall be entitled, without reference to the Authority, to make any investments, enter into any contracts or other arrangements and do any other matter or thing for the purposes of and/or in the course of, exercising any of its rights under this License in its absolute discretion. Clause 10 of Schedule 2 to Appendix B of the Telecom Rules places fetters on the right of a licensee to enter into certain international agreements in the following terms: 10. Prohibition of exclusive international agreements: The Licensee shall not, except with permission from the Authority, enter into any agreements with overseas operators or satellite consortia which have the effect of excluding other licensed operators from entering into other agreements with that overseas operator or satellite consortia in relation to any services or facilities, including submarine cables, satellite links and land lines. 10. The permission to enter into contracts as mentioned in clause 2.4 of Appendix B above and the prohibition in clause 10 of Schedule 2 to Appendix B (also reproduced above) must be appreciated in the context of Article 4(2)(b) of the Constitution, which provides that, "no person shall be prevented from or be hindered in doing that which is not prohibited by law." In the context of the subject-matter of the instant appeals, the question before the Court is whether the appellants are prohibited from entering into the JV Agreement under provisions of the Telecom Act and the Telecom Rules, the De-Regulation Policy and the licenses issued thereunder. And consequently, the regulatory framework has to be interpreted with the understanding that a licensee is permitted to do what it is not prohibited from doing under law. 11. Section 20(1) of the Telecom Act states that, "no person shall establish, maintain or operate any telecommunication system or provide any telecommunication service unless he has obtained a license under this Act..." Under Section 21(1)(b) provides that while considering an application for the grant of a license, PTA will take into account, "the public interest and benefits to users of telecommunication services." Section 21(3) provides that, "no license shall confer exclusive rights". Section 21(4) confers on PTA wide authority to tailor the license conditions to pursue the objects of the regulatory framework established under the Telecom Act. Section 25(3) states that, "no licensee shall enter into any agreement or arrangement which is inconsistent with any obligation of the licensee under this Act, the rules or any condition attaching to its license, and any such agreement or arrangement shall to such extent be void." 12. The controversy in the instant appeals revolves around the application of Section 25(3) and to determine whether the JV Agreement is inconsistent with the obligations of the appellants under the Telecom Act, the Telecom Rules and the licenses issued to them. 13. It has been TWA's position that provision of broadband capacity through international submarine cables to an LDI in Pakistan constitutes provision of telecommunication service as defined under Section 2(v) of the Telecom Act, as such capacity is to be used for conveyance of intelligence from Pakistan, (with the term intelligence being defined under Section 2(g) of the Telecom Act). Telecommunication service under Section 2(v) of the Telecom Act is defined as follows: "... a service consisting in the emission, conveyance, switching or reception of any intelligence within, or into, or from. Pakistan by any electrical, electro-magnetic, electronic, optical or optio- electronic system, whether or not the intelligence is subjected to re-arrangement, computation or any other process in the course of the service;" 14. The policy objectives contained in clause 3 of the De-Regulation Policy mentions the increase of "service choice for customers of telecommunication services at competitive and affordable rates" as one of its foremost objectives. Further, clauses 4.1.4 and 4.1.5 are relevant for our present purposes, which state the following:
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4.1.4 LDI licensees will have the right to sub-lease half-circuit capacity on the SEA-ME-WE-3 submarine cable system on non-discriminatory prices under commercial arrangements. In the event of capacity shortage on the system, PTCL shall allocate a minimum proportion of the total capacity employed for voice circuits to new entrants. 4.1.5 LDI licensees will have the right to participate in, and obtain IRUs (Indefeasible Rights of Use) from submarine cable consortia and the right to install earth stations. They will have the right to co-locate in PTCL's international exchange buildings, and backhaul to and from them using their own fiber and/or own radio spectrum, where practicable. Licensees will have the right to participate in future landing points for new submarine cables. Access by licensees to PTCL's satellite earth stations will be on commercially negotiated terms between PTCL and the licensees, subject to PTA monitoring. 15. The information memorandum ("Information Memorandum") for applicants interested in long- distance international and…
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