Voice over Internet Protocol (VoIP) should be a great way to cut costs. Carrying voice over flexible multi-purpose IP networks reduces costs for operators, who can pass on the benefits to customers. The problem is, not everybody wants to cut costs. Governments, for example, are not always on the side of consumers. Some governments would rather exploit the competitive barriers inherent with traditional voice infrastructure. They do so to increase the government’s income, as is the case in Bangladesh. The Bangladeshi government generates revenues from the state-owned BTTB network. Bangladeshi law requires private operators to use the state-owned BTTB network for international voice calls. By having a monopoly, the state can not only generate revenues but also keep prices higher than they would be if competition were allowed. The problem with using legal barriers to obstruct the free flow of telecommunications traffic is that they enhance the economic advantages of circumventing the rules. One telco breaking the rules on a restrictive market can make more money than three telcos competing freely against each other. Some telcos may find the temptation too great. Bangladeshi GSM operator Grameenphone stands accused of illegally terminating VoIP traffic, and their government looks determined to take robust action to enforce the law. Grameenphone’s headquarters were raided in December. Now the Bangladeshi regulator has charged ten current and former Grameenphone executives with conspiring to break the law. See here for another write-up of the story which explains the principles in simple terms.
Who is right? Soverign governments have the legal right to raise money as they see fit. Charging telecoms consumers is one way they can do so. If the Grameenphone execs broke the law, knowingly or otherwise, they are responsible and should expect the relevant punishment. However, obstructing competition to keep prices high may be considered to be contrary to the nation’s best interests. Communication is a fundamental pillar for economic growth, as is appreciated in many developing countries. Barriers to talk are an indirect barrier to trade. Whatever the outcome of this case, I have some sympathy for the Grameenphone execs implicated. If they were guilty of wrongdoing, and their shareholders profited, you could argue that Bangladeshi consumers and businesses profited as well.