KNOW MORE ABOUT THE LTA’S INTRODUCTION OF
THE INTERNATIONAL GATEWAYS MEASURING SYSTEMS
(Frequently asked Questions)
Question: What is the IGM about?
Answer: When it is introduced the data generated by International Gateways Measuring Solution will allow the LTA to measure the quality of service, volume of international incoming traffic flow, audit revenues generated by International Incoming calls and detect fraudulent use of sim boxes, among other purposes.
Q: Is it true that raising termination rates will cause the international incoming traffic to decrease, resulting in a loss of revenue both for the local operators and the State?
A: Several African countries have adopted the same policy on the termination rates of international incoming calls as Liberia. Among them: Guinea, the Central African Republic, Congo and Ghana. In these countries, the international incoming traffic have remained stable and even experienced substantial increases. In Ghana, the highest total monthly volume of traffic was recorded in August 2011; more than a year after the price-setting policy was adopted.
Indeed, if this policy had a negative impact on the international incoming traffic, an increasing downward trend would have been observed in the four countries mentioned above. Yet, the figures show the opposite.
Thus, the policy on the termination rates has no negative impact on the volumes of traffic. In other words, it does not affect how often people living abroad call Liberia, nor does it affect the number of minutes they dedicate to each communication.
Q: In the African countries where this termination rate policy is in place, some operators may acknowledge that the international traffic has not decreased, but they say that the actual volume of traffic does not catch up with the increase in their customer-base and their network extensions. They complain they are not getting the much higher traffic they could expect because of the adverse impact of the high termination rate.”
A: This statement disregards three important facts that do not have anything to do with the price-setting policy on the termination of international calls.
Firstly, if the price-setting policy on the termination of international calls really affected the growth of international traffic on the networks of operators in the countries in question, one would notice a significant difference between the international traffic volumes of countries that still have not adopted the policy and the international traffic volumes of the countries that have. Yet, no statistically significant difference has been recorded in that respect.
Secondly, there is always a traffic distribution factor. In a community where the number of subscribers to mobile services is limited, the number of calls received on each line will inevitably be higher than in a community where the number of subscribers is higher. A person who used a relative or friend’s telephone to make and receive calls now uses his or her own, thus causing the number of calls made and received on the other telephone to decrease accordingly. Operators must therefore take this distribution factor into account when making traffic projections based on an increase in their customer-base.
In the whole of Africa, including in Liberia, a downward trend in the Average Revenue per User (ARPU) has been observed for a few years. This trend is due to several factors, specifically the fierce competition on prices, which has led to a substantial decrease in tariffs. The traffic distribution factor also played a role in this situation.
Thirdly, the impact of VoIP (Voice over Internet Protocol): traditional operators across the world have seen their share of the telephone traffic decrease to the advantage of VoIP providers. The impact of VoIP is admittedly less important in Africa due to lower Internet penetration, but is more and more present as a result of the rapid development of mobile Internet, which makes it possible to access VoIP via Smartphones.
From 2005 to 2010, Skype-to-Skype communications grew much more than traditional telephone traffic, which also grew, but at a lower growth rate.
With the fiber optic development and the broader access to the Internet in Liberia in the near future, VoIP is expected to have an increasing impact on the growth in international traffic for the local traditional operators. So the IGM should not be misleadingly used as the reason for reduction in inbound traffic.
Q: The operators and the GSMA say they have studies showing that the surcharge on international incoming calls has very negative impact on the revenues of the sector and impedes its development. (This assertion seems to be the conclusion of the Deloitte & Touche study commissioned in 2011.)
A: The studies on the potential impact of the surcharge of termination rates on the telecom sector in Africa are scarce and mostly based, not on an independent analysis of the operators’ traffic data, but rather on interviews with the same operators. For example, the Deloitte & Touche 2011 study commissioned by the GSM Association was actually based on comments and views expressed by African operators, as explained in the preamble of the study. Deloitte & Touche also stated in the same study that they do not guarantee the reliability of the statistics on which they based the study.
Actually, there is a lack of reliable statistics on international traffic data. The collection of these reliable statistics is precisely one of the many benefits of a system such as the International Gateway Measuring system being implemented by the LTA.
Q. Some service providers are claiming that “Liberians living abroad will pay much more to call their families in Liberia.”
A: Supporting such a claim shows that one underestimates the importance of the law of supply and demand and the impact of competition on the international long-distance calls market. These two factors will have a crucial influence on whether or not a foreign operator will decide to pass on the termination rate increase to the retail rates of its prepaid cards or subscriptions. A foreign company has no interest in passing on this increase, as its customers would very likely be poached (or taken over) by one of its many competitors that might accept a slight decrease in the profit margin they make on the destination.
It is important that the following two things be understood: firstly, despite the increase of the termination rate in Liberia, companies based in Europe and in the Unites States will keep on making large profit margins on the Liberian destination. Secondly, fierce competition and the law of supply and demand mean that consumers living abroad will always benefit from competitive rates to call Liberia, particularly in very competitive markets such as North America and Europe. They will always have the option to not pay more than they currently do, or even to pay less.
In any case, we live in an interconnected world. This means that there are a multitude of possible routes to reach a destination and that the cheaper routes are always preferred by inbound callers.
Soon, when the IGM comes on stream in Liberia, people from the Diaspora who use heavily discounted pre-paid calling cards may see some positive difference after the implementation of the anti-fraud system, as a result of the International Gateways Monitoring System.
In general, analyses show that the implementation of the termination rates policy does not in itself significantly increase the costs of expatriate calls placed through legal channels. In other words, the rates for calls legally placed overseas remain stable. At the same time, because the system provides effective means to prevent international calling fraud, an increasing number of calls that were routed through grey market channels will henceforth be routed legally but will cost a bit more than overseas calls that are masked as local traffic by fraudulent operators.
Diaspora callers who are looking for the best possible rates may be unaware of this illicit practice and are often fooled into buying heavily discounted prepaid calling cards that provide extremely poor call quality and are ultimately not worth their reduced cost.
To be sure, the IGM system being put in place by the LTA will fight fraud, increase revenue not only for the State but also for the very Liberian service operators (some of whom are wrongly frowning on its use), and significantly improve the quality of service for the generality of Liberians who receive calls from their relatives living abroad.
Q. It is further claimed that “Raising termination rates contravenes international telecom regulations and agreements that stipulate that interconnection rates must be cost-oriented.”
A: This is simply not true. Firstly, the surcharge on the termination rate is not something that is set by the operators themselves, as part of their settlement with their foreign counterparts. It is a government policy.
Secondly, ITU’s (International Telecommunications Union’s) Recommendation D.156 on network externalities clearly states that termination rates can include an increment imposed by governments and regulatory authorities to be used as a funding mechanism for universal service and development—which will enable affordable access to telecommunications services to the general population.
Q. What about the view by some that “Foreign countries will respond to the new termination rates by applying reciprocity.”
A: It is the right of any sovereign country to adopt its own pricing policies with respect to international incoming calls. In Africa, termination rates are much higher than in North America, for example. Liberia is following a regional trend. Pricing policies in Africa reflect different national contexts and market conditions, such as the huge differences in teledensity (measurement of how many telephones are available), per capita income, international telecommunications trade balance, etc.
For all these reasons, although the ITU recommends that termination rates be cost-oriented, it does acknowledge that these interconnection rates are a big issue for developing countries, particularly in Africa. The ITU states that the universal access, in developing countries, requires an asymmetric approach. To quote a document published by the ITU’s Secretariat in October 1998: “the subsidies made from high teledensity economies to low teledensity ones should be unilateral, and should not carry the expectation of reciprocal treatment”.
Q. How and why did the LTA choose Global Voices Group (GVG) for the IGM solution in Liberia?”
A: The LTA issued a world-wide request for proposal that was answered by 14 companies, including GVG. Of these 14 companies, 5 made a formal presentation. The LTA was looking for a provider with proven experience in the implementation of International Gateways Measuring Systems and with the technical and financial capacity to provide its solution according to a Build-Operate-Transfer Model.
GVG met all of these criteria, and is currently providing the very same solution to several other countries in Africa.
Q. Alarms about confidentiality and privacy; for example, some claim that “The IGMS is a spy machine. It will be used to do tapping”.
A: The IGMS cannot be used to do tapping. Monitoring or tapping conversations is not the purpose of the solution; in fact, it does not even have the technical capacity to spy on anyone’s communications. The content of any phone calls remains totally inaccessible through the IGMS. The system only captures the signaling data, i.e.: data such as quality of service (QoS) indicators, volumes of calls, percentage of successful connections, etc. In addition to all these, the LTA Act of 2007 prohibits any such act by anyone without applying due process.