Simbox Row Provokes More Tension In Ghana

Those who work in telecoms assurance know it is not the centre of the universe, though some believe and wish it was closer to the centre. However, the attention currently being given to assurance in Ghana offers some insights into how and why assurance can rise up the public agenda. It also shows that such exposure has downsides as well as benefits. Recently we featured stories about the implementation of a new national interconnect clearing house in Ghana, and how this has been linked to the prevalence of simbox fraud and the consequential impact on government tax revenues; see here and here. In the last week, there have been yet more developments in this story. Opposition MP Kwaku Kwarteng has blasted the government’s clearing house plans, saying they are “dishonest”. In an article for Ghana’s JoyOnline news station, the MP wrote:

Government is in the process of appointing an Interconnect Clearing House (ICH) operator to connect calls from one network to the other on behalf of the telecommunications service providers.

This is nothing but connivance between government and its cronies posing as some Interconnect Clearing House company to make undeserved money from subscribers and users of telecommunications services…

…perhaps the strangest of all government conduct is the attempt to justify the ICH by presenting it as an answer to sim box fraud. Not only is this deceitful, it is also laughable. Sim box fraud is the practice of routing international calls through the internet in order to bypass the legitimate route for international calls. This is done criminally to avoid taxes. There is nothing about an ICH that can check this bypassing, and government knows this.

I must agree with Kwaku Kwarteng, who also sits on the Communications Select Committee in the Ghanaian Parliament. It makes no sense to combat the illegal bypass of legitimate telecoms operators by imposing a new mechanism for transferring interconnect traffic between them.

The real issue is whether Ghana’s government is getting all the tax they are entitled to, and want, from Ghana’s telcos. You can decide for yourself if what they want is the same as what they are entitled to. However, we can all agree there is a fine line between assurance work designed to validate the accuracy of revenues reported, and audit work designed to extract more tax from businesses. The distinction lies in the objectives and motives of the professionals who review accuracy, and of the people who employ them. Clearly political tensions are running high following a special government-mandated audit of Ghana’s telcos. In response to various insinuations, Vodafone Ghana has felt it necessary to make a public statement about the results of the audit, and how it should be interpreted. When discussing one fine subsequently imposed by the regulator, Vodafone asserted the following:

The fact that Vodafone was providing handling fees to International Carriers for securing its traffic from going via SIMbox fraudsters was perceived by the NCA [Ghana’s regulator], based on an ambiguous regulatory clause, as a regulatory breach (not a revenue assurance breach) and that accounted for the penalty.

In other words, Vodafone took care to say their data was accurate but they disagreed with how the regulatory rules were interpreted and applied.

Vodafone clearly feel they have received unfair criticism from some quarters, as emphasized by the closing paragraph of their statement:

In the name of fairness and transparency, Vodafone reserves the right to exercise all available options, including legal, against any individual or group, who impugns on the hard won image and reputation of the company by peddling falsehoods about this issue.

Meanwhile, rivals MTN Ghana released an extraordinary press release stating they ‘remain committed to the fight against simboxing‘. What makes the press release so unusual is that it efficiently explains what simboxing is, before detailing the various ways that MTN detects and responds to the crime. They then go on to give a table comparing local call rates to international termination costs in several African countries. It shows that simbox fraud occurs where the difference between these prices creates the incentive for crime. This leads MTN to conclude:

The so-called monitoring solution that is practiced by many countries in Africa is one that attempts to treat the problem after the fact, in other words, attempt to put out the fire after it has started. By its very definition monitoring is aimed at detecting the fraud while it is already in progress. Due to the lucrative nature of the business, SIMboxers are able to employ highly skilled technicians adept at detection avoidance. They are also able to side-step controls instituted by telcos to streamline SIM registration.

MTN believes steps must be taken to stop the illegal practice altogether. If the US$0.19 mandatory pricing is removed SIMBox fraudsters will have no commercial reason to even practice SIMboxing in Ghana.

Ghana is not the first country to have debated the purpose of telecoms assurance, only to discover that political and selfish reasons can lead to contradictory conclusions. However, I doubt that any country in the world has ever engaged in such a high-profile and tense public debate about what is, and what is not, telecoms revenue assurance. In my view, this is a foretaste of an increasingly public debate that will occur in more countries. Industry consolidation will lead to less competition between telcos. This will encourage increased political speculation about whether telcos charge ‘fair’ prices, and if their revenues, profits and taxes have been transparently and accurately calculated. Distinctions will be drawn between assurance work done within telcos, and audits conducted on behalf of the government. In turn, this will draw attention to grey areas in the calculation and reporting of some numbers. If our profession is weak, there will be plenty of people employed on either side, each pulling in different directions. It would be better to have a strong profession, that avoids such conflict by being rigorous about its techniques and its terminology. But either way, this tension will make additional work for audit and assurance practitioners.

Eric Priezkalns
Eric Priezkalns

Eric is a recognized expert on communications risk and assurance. He was Director of Risk Management for Qatar Telecom and has worked with Cable & Wireless, T‑Mobile, Sky, Worldcom and others.

 

Eric was lead author of Revenue Assurance: Expert Opinions for Communications Providers, published by CRC Press. He was a founding member of Qatar’s National Committee for Internet Safety and the first leader of the TM Forum’s Enterprise Risk Management team. Eric currently sits on the committee of the Risk & Assurance Group, and is an editorial advisor to Black Swan. He is a qualified chartered accountant, with degrees in information systems, and in mathematics and philosophy.

 

Commsrisk is edited by Eric. Look here for more about Eric’s history as editor.

  • Dan Blackband

    Hi Eric,

    I have been following this with interest since your first post and have a few observations. In Kuwait all interconnect traffic is meant to go through the international gateway owned and run by the Ministry Of Communications (MoC), it doesn’t stop bypass, there is SIMBox but interestingly this is perceived as generating revenue for the operators rather than leakage, you could argue that all revenue is “at risk” as the MoC could potentially revoke the operator’s license if found to not be doing enough to detect it or even condoning the activity…

    I saw in the news broadcast attached to one of your posts that there is an assumption that SIMBox doesn’t occur in Nigeria because the international termination rate and local rate are the same, this has been backed up in talks I have had with RA/Fraud Managers in Nigeria recently, thing is I still see “Grey” routes advertised for this destination indicating that bypass, by whatever means, is still active. I think what is not being considered here is the retail rate at the origin, if there is still an opportunity for arbitrage I believe the bypass and SIMBox will continue, if it does not directly impact revenues then it may be ignored but operators should calculate other factors like churn, number reuse, commissions quality of service and customer experience etc etc.

    Something I am not totally clear on is in the news piece Mr Kwame Baah Acheamfour of the NCA (I hope I got that correct) talks about the Clearing House being a database to validate subscriber details at activation, everyone else is stating it’s a switch i.e. International Gateway. Subscriber validation should already be part of the operators process i.e. KYC but I don’t see how a national database will prevent SIMBox, certainly not in the short term. Perhaps we can have some clarity on this

    • @ Dan, many thanks for another great comment. Maybe we should get you to write a post about your experience with simboxing etc! I know there is plenty you could teach the rest of us.

      You’re right that simbox fraud can generate some revenue for telcos… if somebody pays for the local calls made with those SIMs. One great thing about this debate is that it’s prompting plenty of analysis about how the extent of fraud varies between countries. I would imagine there would be similar variation in how much revenue is generated by local calls, and the extent to which criminals engage in other frauds to also circumvent the cost of making local calls.

      However, you raise a very very interesting point. Depending on how the telecoms market is structured in different countries, there may be some telcos who primarily benefit from simboxing because of the revenues it generates for them, at the expense of the revenues lost to other telcos. There may even be countries where it is possible to argue that simboxing increases revenues overall, though this depends on the supposition that the low cost of the bypass call leads to the generation of a lot of additional traffic, without causing much reduction in the volume of calls that are legally terminated. Such an argument would parallel topical arguments about costing the effect of piracy on media/entertainment businesses, where it is suggested that people downloading films and songs would not have bought that content anyway, so the true leakage is effectively nil, but subsequently they do make a legitimate purchase they might not have otherwise made (merchandise, concert tickets etc).

      Whichever way you look at it, I’m ultimately in favour of free markets because they are better for customers. The question of fraud and crime disappears if you allow people to connect a VoIP call to any other call, and so constructively find ways to lower the cost of making calls. It may be an unpopular argument with telcos, who don’t want even more price competition, but I see no moral justification to laws and contracts which deny people and businesses the right to connect one paid communication service to another paid communication service. Arguably it’s the belief that big telcos bolster their profits by unfairly manipulating the rules around connectivity that encourages so many millions of ordinary customers to support net neutrality.

      On your final point, I agree that more clarity is needed about how Ghana’s government would like subscribers to be validated using a national database. However, based on past experience, I would be surprised if we get that clarity. One problem is that few people who work for a living in a relevant job want to publicly state what most of us know and understand: lumping a lot of data into a database often sounds like a potential solution to problems involving poor data or a lack of data… until you discover that the data in your new database is just as lousy as the data you had before! Nobody wants to list the thousand little ways that data gets corrupted, and the painstaking (and costly) work needed to prevent that happening. Businesses will over-promise what they can deliver in terms of clean and useful data, whilst governments (who may otherwise by cynical about how businesses behave) will believe those promises because they want to believe them. The TV debate perfectly illustrated the divide in thinking between those who understand the practical difficulties and those who want to believe that a database will deliver utopian solutions. If anything, I believe Nixon understated the difficulty of the project proposed by government, whilst the man from the regulator was naive to assert how easy it would be.

  • Dan Blackband