The Malawi Communications Regulatory Authority (Macra) is reportedly buying equipment to check call records of all phone subscribers in Malawi, despite protests from operators and consumer rights groups. You can read the story here and here. Macra’s new technology is called a Consolidated ICT Regulatory Management System (CIRMS) and was supplied by Agilis of the US as part of a reported USD6M contract. The regulator states that the purpose of CIRMS is to monitor RA, fraud, QoS and spectrum management. However, those opposing the regulator state their fear that the technology will actually be used to invade the privacy of customers.
Taken at face value, it is reasonable to question why a regulator would directly test for integrity of revenues and look for frauds. Telcos are businesses, and are already motivated to enhance the bottom line by implementing any and every check that would support this goal in a cost-effective manner. The story in the Nyasa Times highlights this point of view:
Telecom operators submitted that they did not have any problems with the collection of Quality of Service data using the device. However, they argued that to verify the volume of traffic for revenue and Fraud management functionalities “seem to be questionable as to whose interest the authority it will be done.”
Why should a regulator hence duplicate the efforts of telcos? One simple conclusion would be that the regulator’s motives are not what they say they are. This is the line being taken by sections of the press concerned that customer privacy is being abused to satisfy security objectives. It is also possible that the regulator has a different objective, which does link to revenues, but which is not properly explained to the taxpayers who, one way or another, fund the regulator’s activities. After all, failing to bill customers does not harm customers, so, put simply, RA is not an activity that directly benefits customers. However, if the government benefits from increased tax due to reduced revenue leakage, then that would give the regulator a straightforward motive for introducing what is effectively an automated audit of telco revenues. Evidence that this is the real driver for CIRMS was reported in the Weekend Nation:
…Minister of Information and Civic Education Symon Vuwa Kaunda on Thursday defended the project, saying it is there “simply to monitor revenue generated by the operators and not to listen to phone conversations.”
“Tax was removed on handsets and imposed on airtime. Government has no mechanism to monitor revenue generated by these operators. We are at their mercy. They declare at the end of the year how much they have generated. They can give any figure. The facility is to do with revenue generation to help MRA [Malawi Revenue Authority] tax accordingly,” said Kaunda.
In other words, the government interferes with the free market by imposing a tax on airtime – effectively a tax on consumers – and then feels compelled to follow-up by auditing its tax revenues. This behaviour, which is not in the interests of customers, is then mangled with messages about QoS and spectrum management to confuse customers about how the government spends their money in order to tax them more, under the guise of regulating the telecoms market. It is small wonder that some might perceive more draconian goals when they try to see through the obfuscation.
Over the years, I have taken a consistent line on stealth taxation of communications services. When governments levy taxes and charges directly on services, and not just on the profits of the businesses providing those services, they hurt their own economy, and undermine their own tax base. Communications fuel wider economic growth. The lower the cost of communications, the better for growth. Taxing calls and texts is economically regressive. However, some governments love to use telecoms as a way to get money from the people without the people knowing, in the hope that subscribers will blame high usage charges on the greed of telcos.
The actions of Malawi’s regulator also highlights the thinning line between where RA stops and surveillance begins. Their only riposte to the accusation that CIRMS will be used for spying is to say they will not use it for spying, and that such use would be illegal. They do not deny that CIRMS could be used for spying on customers. Relying solely on a legal barrier to the improper use of technology provides little comfort to customers. They can look at the behaviour of totalitarian governments, or at the repeated stories about violations of customer privacy worldwide, and draw their own conclusions about the desirability of systems that enable mass surveillance. It would be better for RA to keep well clear of this line in how it audits the integrity of revenue streams. Better still, governments and regulators should be genuinely transparent about why they implement monitoring systems, and the safeguards they will put around them to prevent misuse.
Eric, I have to disagree with your determination. The machine in question is not being installed to tax consumers more. I’m a telecom expert and understand its operation. In a nut shell, imagine if a government had no means of verifying revenue information supplied to it, by a telecom operator (which is a private entity in business to make a profit). In that scenario, the government must belive figures which the telecom operator desclare. The problem is those figures are not always true, complete, transparent,credible. Ordinarily, there would be no problem if the telecom operator did indeed provide authentic data to the tax authorities, regarding the number of calls it received, the nature (national or international calls, etc). However, in practice, and as has been seen in many other countries over the years, in the absence of independent verification, this is not always the case and some companies will not declare the actual cost of their takings. Its happened before and happens in many countries where these systems are not inb place. The problem is the telecom operators are extremely influential, and very good at qyashing voices that will expose their shady conduct. If you send me an email, I can furnish you with further evidence.
On the other hand, there are data protection concerns, but considering the data monitored is in the form of logs of numbers and not names of people, there is little basis for fearing that personal data will be compromised.
@ T Dyson, thanks for your comment, but we agree to disagree. You observe that a tax on transactions has no implication for consumers. I believe that is very unlikely. A tax on shoes would increase the cost of shoes, a tax on children’s sweets would increase the cost of children’s sweets, and a tax on phone calls increases the costs of phone calls. Governments hide behind telecoms firms because they do not have the honesty to transparently tax their citizens. You note that telecoms operators are in business to make a profit, but you draw the wrong conclusion. Rather than imposing taxes on a class of transactions and then observing that operators might cheat the tax in order to improve profits, the simpler approach is just to tax profits. Profits ultimately convert into cash. Hence it is far more efficient, and fairer, to tax and audit the trail of cash than to start interfering with the pricing, and hence profitability, of the company’s individual product lines. Finally, I am surprised by your mixture of cynicism and optimism in human nature. You accuse private businesses of shady conduct, but are happy to trust governments who want to collate vast amounts of data about its citizens. A student of the last century of history might rather conclude that governments pose the greatest threat to human freedom and security, if allowed to acquire unwarranted and excessive powers.
Rather than arguing theoretically about whether some telecoms operators may do wrong, I would much rather that Malawi’s regulator shows some hard evidence to justify the cost of implementing these systems. You mention that you have evidence of wrong-doing and dishonesty by operators. That I can believe. However, let me assure you that I have plenty of evidence of wrong-doing and dishonesty by regulators. If Malawi’s regulator cannot furnish any evidence of the operators’ fraud, then why not? A cheap and simple comparison between interconnect bills and reported retail transactions would give a useful indication of under-reporting, and there are other simple checks that can be performed. After all, the company’s accounts, and hence its profits, are audited… this audit should also be able to pick up evidence of discrepancies between record-keeping and cash collected, so it would make more sense to focus efforts on this area first, before jumping to the conclusion that automated verification is needed. After all, if the transactions are under-reported, then profits will likely be under-reported too, hence affecting the amount of corporation tax taken. If Malawi’s regulator can show evidence of fraud by operators, then it should do so. If it cannot, then it should not assume the guilt of the operators, nor smear them by implying they are dishonest. Regulators should justify their actions before they impose burdens upon business, and even more so in this case, given the threat posed to Malawi’s citizens. I also consider myself an expert, and I share the privacy concerns voiced by many Malawians. Or would you rather suppose that all government agencies always act in the best interests of their countries and of their people, and that none ever acts cynically to serve its own interest?