Of grey traffic and illegal gateways

A significant number of Long Distance & International (LDI) operators in Pakistan are under stress. Standalone entities have been in the red for many years and are barely keeping themselves afloat. The devil lies in the grey zone, visible only to these victims.
The previous policy regime charged 10.5 cents a minute for international calls coming to Pakistan, out of which, 5.5 cents were passed on as Access Promotion Contribution (APC) to Universal Services Fund (USF), a fund launched to foster telecom infrastructure, primarily teledensity and broadband access.
Grey traffic is a term used to denote the illegal use of exchanges or gateways to route international calls in the guise of local calls, bypassing legal channels. Thus, not having to pay the APC rates charged along the legal channels, unscrupulous operators use these illegal gateways to offer rates as low as 5 cents per minute on international calls.
In March 2011, PTA announced it would halve the APC component to 2.75 cents a minute, bringing down the maximum price offered to international operators to 7.75 cents a minute. This move was hailed by telecom operators as a step in the right direction.
Analysts predicted that illegal gateways and exchanges, which, according to some estimates, hack 15 to 20 percent of international incoming traffic of over 550 million minutes per month, would have found it increasingly difficult to operate had the move been implemented.
But that was not to be. PTAs decision was challenged in the Lahore High Court (LHC) by a market player, and, subsequently, the LHC issued a stay order against the change or cut in the APC component.
To their disappointment, LDI operators had to continue charging the rate of 10.5 cents per minute on incoming calls to international operators, say industry sources.
There is consensus in the industry that unless the APC component is brought down to zero, illegal gateway operators would be incentivised to cheat, evade taxes and inflict damage to an already fledgling LDI industry.
For its part, the PTA keeps the public posted about its crackdown on illegal gateway setups. With its experienced Vigilance Cell and state-of-the-art equipment, several illegal exchanges have been busted and billions of rupees have been saved in the ongoing exercise, says the PTA. What the PTA does not tell, however, is the extent of mushrooming illegal telecom traffic in the country.
The new technology, NARUS, adopted by the PTA to detect rogue trafficking has not been very promising, particularly since the new, supposedly improved technology cannot detect the undercover activities of some of the registered companies.
There is, however, a minority view in the industry that APC cannot be anulled altogether, at least not until the Pakistan telecom market has grown to a point of sustainability. On the contrary, APCs share in USFs revenue is not significant as the latter is primarily dependent on contributions by telecom operators without any federal support, said an industry source.
Telecom operators and experts favour slashing the APC for a variety of reasons. While incentives to cheat and deceive would be drastically reduced in a fair market scenario, low tariffs on Pakistan-bound calls would potentially increase international incoming voice traffic. Further, a market-driven shift from illegal gateways or exchanges to documented LDI operations would take place, thus helping to raise tax revenues.
According to some Telecom experts, it will be easier to detect grey traffic through the formation of a solitary exchange point wherein all international calls landing intoo Pakistan can converge at a single technical exchange, as against being handled by 14 different licensees.
The PTA needs to realise that it would never be able to increase incoming LDI traffic by merely chasing grey traffic setups. A more thought-out strategy has to be adopted.