By Sohaib Sheikh
Ever received an international call with a local number? If yes, then that call came through illegal grey channels.
For those who are not familiar, grey traffic is the way to carry
international voice traffic into Pakistan through the internet (VoIP)
and then terminating those voice calls on exchanges within the country.
These exchanges are capable of transferring VoIP calls to local
networks.
The costs of carrying voice traffic to Pakistan, government taxes and
various levies involved during the process is pocketed by grey traffic
smugglers, which is estimated to be around the $350 to $400-million mark
per year.
This industry is only growing with time and resulting into huge
losses to the national exchequer, local telecom operators and the
national economy.
The scourge of grey traffic
The phenomenon of grey traffic dates back to the nineties. However,
it picked up only during 2006-07 when mobile penetration in the country
grew at optimum rates.
Grey traffickers cause a loss to the national exchequer by setting up
illegal exchanges as they do not pay LDI license fee worth $0.5 million
and a renewal fee of 0.5% of the annual gross revenue. They do not
collect any taxes for the government and pose a grave threat to national
security as all calls are unmonitored.
The illegal exchanges can be set up at low cost by grey traffickers
amid the presence of cheap Chinese equipment is in the country.
Operators also set up multiple SIMS of local cellular service providers
which route these calls through VOIP services.
What is the ICH?
Serious concerns over grey traffic first surfaced around 2008, when
the then Pakistan Telecommunication (PTA) chairman and other officials
of the telecom industry tabled the idea of bringing in International
Clearing House (ICH), essentially a centralised place through which
international calls would be brought into Pakistan.
The main goal of the ICH was to centralise traffic route through a
single channel so that illegal traffic could be detected and curtailed.
Along with improving the margin of incoming calls, the operators would
provide equipment to relevant authorities to detect the location of the
illegal exchanges set up by the grey traffickers.
The premise of the ICH was also to improve return for the government
with enhanced collection of taxes and monitoring of sensitive
information. The ICH would have also improved viability for LDI
operators and protect loss of jobs due to failure of business. Inflow of
foreign exchange would have increased as well. The ICH would also help
the Universal Service Fund bridge the digital divide providing access to
telecom facilities to all citizens of Pakistan.
The IT ministry, under the previous government, re-reviewed the ICH
proposal and went ahead with its implementation. As expected, the
initial rise in tariffs also gave rise to grey traffic as people
resorted to using cheaper medium of communication — illegal exchanges.
There is a misconception that the Pakistan termination rates have
increased after the establishment of the ICH. The settlement rate in pre
ICH scenario was 6.25 cents, which has increased to 8.8.
While looking at the LDI business holistically, it must be reviewed
that the termination rates of foreign operators in Middle East and
Europe (for mobile termination) are in the range of 10-15 cents that is
still higher than 8.8. These countries account for two-thirds of the
traffic terminated in Pakistan.
Although the Pakistan market termination rates in the pre ICH period
were low, foreign operators were still charging higher tariffs to their
subscribers. Therefore, the entire margin was reaped by the foreign
operators resulting in a loss to the national economy. The ICH merely
balanced this phenomenon, helping local operations become more viable.
What lies ahead for the industry?
The requirement for the ICH needs to be understood before being
rejected and outrightly banned. The ICH may have a teething problem but
given time, grey traffic would be reduced and, eventually, resolved.
The PTA has already blocked over 200,000 IPs that were routing grey
traffic, thousands of SIMs have been blocked and multiple raids have
been conducted to shut down illegal gateways. In addition to this, the
PTA has created awareness among people to report any illegal call they
receive in an attempt to track and shut down these illegal exchanges.
Although there are calls within the industry to also cancel the
licence of Chinese companies who are selling the gateways in Pakistan,
it seems unlikely.
On the other hand, the PTA needs to draft a policy where these
companies would need to declare details of their transactions. Any sale
to unlicenced operators would then be curbed.
This would be another step to curb the setting up of these illegal exchanges.
Some LDI operators who are involved in such activities are coming to
light as Wisecomm, an LDI operator, was recently shut down by FIA and
their bank accounts seized on account of grey trafficking. The post ICH
world is much better for the government and all players involved should
also try to understand its importance.
The writer is head of marketing at Wateen Telecom Limited.