Battle for control of ‘telecoms borders’ begins

The International Telecommunications Union (ITU) is set to do the first ever amendment of its International Telecommunications Regulations (ITRs), which are a set of binding policy guidelines on all countries with regard to telecoms and the ICT industry. The proposed amendments to the ITRs would be put to vote at the ITU’s World Congress on Information Technology (WCIT-12) in Dubai, in November this year.

The re-visitation of the ITRs is essentially due to the evolution of the telecoms sector, the arrival of the internet into the mobile networks, and the arrival of new powerful players like Facebook, Google and others.

Top among the matters that would come up for consideration for amendment are a list of the most controversial regulations, including the tariff for international telecommunications between countries; the necessity for new rules to govern the payment of settlements; network security, network vulnerability, network neutrality, fiscal jurisdiction, measuring the internet traffic flow, cyber threats, evolution to IP, network externalities, etc.

The debate is expected to be between countries like Ghana, Rwanda, Bangladesh, Congo, Guinea, China, France, Liberia, Spain, Hungary and others, who have already taken the decision to adopt transparency and enforce accountability at their ‘telecoms borders’, as opposed to other countries like the USA that opposes any government intervention in controlling tariffs and measuring traffic flows.

The giant careers/telecoms companies in the west are strongly opposed to government interventions in telecoms border transparency because of the unfavourable financial implications it has for them. They would want the status quo to be maintained, so they keep making the big bucks while telecoms companies in Africa made little profit, and the African states in which the calls terminate got next to nothing.

The truth about international calls is that when an international phone call is originated from a subscriber in country A, to another subscriber located in country B, the calling party pays for the call, but the receiving party does not pay. This is not different from the rules for domestic calls.

The calling party in the USA calling Ghana, for instance, pays a value added tax (VAT) in the USA for that call to Ghana; and the network operator in the USA also pays Corporate Tax on that revenue generated from that call to the tax collector in the USA. But the tax collector in Ghana, which is the Ghana Revenue Authority (GRA) gets no VAT on that call coming into Ghana.

Meanwhile, the local network on which the call is terminated in Ghana (MTN, Airtel, Vodafone, Expresso, Tigo or Glo) gets paid a specific amount for every minute of overseas calls terminating on their network.

The GRA has always had to wait for the local networks to voluntarily declare revenue, without any audit of the revenue or verification of the volumes of call, before the GRA could determine what Corporate Tax that network should pay to the state from international calls that terminated on that network.

Furthermore, the tariffs for international calls entering Ghana were unilaterally set by the local mobile network operators, who are often coerced by powerful international players to lower the amounts to be declared to the GRA in Ghana.

The powerful international carriers collect an average of 85 cents (GH¢1.66) for each minute, when anyone calls from the USA or the UK to Ghana. On a measured total volume of at least 100 million minutes of airtime from overseas calls arriving in Ghana per month, the carriers easily generate in excess of $85 million per month.

Since the adoption of the Electronic Communication Amendment Act, Act 876, 2010, it has become an obligation for the local mobile operators to request from their carriers to repatriate $19 million to Ghana, out of that $85 million that they earn every month. This is because the Act placed a fixed rate of 19 cents per minute on all overseas calls coming into Ghana.

Before that, all Ghanaian local operators were together collecting an average of only $7 million based on their different tariffs on incoming overseas calls, and so the tax element for the state was very insignificant compared to the whole.

But since the Act came into force, the state has been receiving six cents from every 19 cents charged per minute of incoming international call. This means for every $19million operators collect in a month from incoming international calls, Ghana gets $6 million, thanks to the new policy.

This in a nut shell, is the origin of the phenomenon that has taken the size of a tornado in the telecoms industry in developing countries, and in Africa in particular, in the form of a cold war between the mobile network operators and the regulators that are increasingly opting for the “Ghana model”. And they intend to take the war to the ITU this year.

The local telecoms operators are also nervous about the revenue government seems to be generating from incoming international calls, and they would rather want to be left free to compete in that market so the most competitive network gets to terminate more calls than the other.

They tend to forget that when the regime used to be dictated by competition among operators, they together generated only about $7 million a month, but with the new policy that fixed the rate at 19 cents per minute, their revenue from that market has almost doubled to $13 million a month, and Ghana is also getting some $6 million a month from that.

Meanwhile, over 13 countries in Africa visited Ghana’s award-winning National Communication Authority (NCA) to seek advice on this matter: they included Mali, Niger, Liberia, Sierra Leone, Burkina, Senegal, Rwanda, Tanzania, Kenya, Mauritania, Cote D’Ivoire, Malawi, and Uganda. Even countries from South-East Asia are learning from Ghana’s experience.

Ghana and Rwanda have, as part of this policy adopted a Telecoms Transparency and Revenue Assurance Policy, which has made the operators even more nervous, in spite of all the good implications it has particularly for developing countries.

For instance, within a period of 24 months, between June, 2010 and June 2012, Ghana has collected a total of $143 millions from implementing the new policy. This is extra revenue collected by the NCA, on behalf of the Public Treasury. Money that otherwise was not available to the state.

That revenue comes directly from the fat profit margin of the international carriers that are absolutely resolved to lobby, in order for all countries to abandon that policy.

That may be why France Telecom, for instance, sponsored a group of telecoms operators in Anglophone West Africa, in 2010, to fight against gateway monitoring and levying of incoming overseas calls to Africa, but that effort failed.

The Bottom Line

The bottom line is that the hardworking African Diaspora living in the richer countries up North, make a lot of calls back home; and each call generates hard currency revenues for operators in those rich countries, and for local mobile network operators here in Africa.

With a market of about 16 million subscribers, and over 21 million active mobile phone lines, the Government of Ghana has generated a steady $6 million per month from the money Africans abroad spend, and that is good for the economy of Ghana and its people.

This represents an average of 40 cents USD per subscriber. Imagine 500 million subscribers in Africa generating an average of 40 cents for the economy of the continent, every month. This would be a substantial money flow leaving the Western rich countries to Africa.

Gateway Monitoring

But the Telecoms Transparency and Revenue Assurance, which Ghana adopted, require the telecoms regulator (NCA) to acquire the proper tools to oversee the money flows that is generated outside of Ghana’s ‘telecoms borders’.

This promises to generate even more revenue for the country because as things are now, the local operators still control the information on the number of minutes of incoming international calls, and the NCA only gets to know the number of minutes when they are declared by the companies in what they refer to as call data records (CDR).

But the installation of gateway monitoring equipment, by the NCA, would check the number of minutes of incoming international calls in real time, and ensure total transparency in the system, and possibly boost revenue for the state.

This would obviously make Ghana richer, but also make many giant careers abroad mad and angry; and they seem to get support from telecoms operators in Africa, some of whom, in Ghana, allegedly sponsored some citizens to file a court suit against efforts to implement the Telecoms Transparency and Revenue Assurance Policy.

Those citizens cited interference of call quality, and possible breach of privacy, since the monitoring equipment are said to have the ability to listen into private calls.

The telecoms giants in the west would be using that, at the ITU meeting in Dubai, to try and secure votes against telecoms transparency and revenue assurance policy; as they have already been doing, to make manufacturers of those equipment look like some ‘crook’ organizations.

But the implementation of those policy guarantees increased tax revenue for developing countries like Ghana; and that has the full support of the ITU, as per its decision at the Plenipotentiary Conference of 1998, where it posited that taxes are a major source of revenue for developing countries, like Ghana, and so its (ITU) protocols can be set aside when it conflicts the taxation drive in those countries.

The ITU is a one country, one vote organization, and so the countries on each side of the argument may have some lobbying to do to get the neutral ones to come along with them. The way the votes would go would have implications for the full implementation of the transparency policy, which has currently been stalled by a court injunction in Ghana.

By Samuel Dowuona