Counteracting Smartphone Counterfeiting Through Technology

A recent study by the European Union Intellectual Property Office (EUIPO) into the economic cost of IPR infringement in the Smartphones sector aimed to estimate the economic impact of counterfeit Smartphones.

The study analysed the number of Smartphones sold in 2015 in 90 countries in every region in the world based on the point-of-sale tracking of consumer purchases. The main findings revealed significant losses in 2015 due to counterfeiting with €45.3 billion lost worldwide (12.9% of all legitimate sales). By region, this is broken down as follows:

• European Union, €4.2 billion was lost of all legitimate sales (8.3%)
• Africa 21.3% of sales
• Latin America 19.6% of sales
• North America 7.6% of sales
• Arab countries 17.4% of sales
• China 15.6% of sales with China accounting for one-third of the global revenue loss in the Smartphone sector that year
• Asia-Pacific region 11.8% of sales

The EUIPO report notes that the increasing role that mobile devices especially Smartphones are playing in e- and other services has raised the importance of these devices and made them essential for many people. The use of mobile phones, which started out as simple voice communication terminals has increased steadily in the global context—evolving towards Smartphones. This has created economic and social opportunities for people around the world. However, it has also raised concerns about the trust and security of such devices. This is particularly true for policy makers and National ICT regulatory authorities.

Impacts in Africa
Many of these impacts are particularly serious in regions such as Africa, where many people rely on their Smartphones to an even greater extent than consumers in Europe or North Africa—the Smartphone is often the only way to access the Internet, and the main source of financial services for example, the M-Pesa mobile banking service in Kenya. In this context, any malware or security breach brought about by counterfeit devices has serious consequences not only for private individuals but for businesses. In particular, the impact is felt on small businesses which are almost totally dependent on Smartphones to conduct their daily business activities.

There are a number of other impacts in areas such as health and safety, damage to the environment, network quality, cyber-security and privacy. The International Telecommunication Union (ITU) has identified the following non-economic effects of counterfeit mobile devices:

• lowering the quality of service of mobile telecommunication services, impacting on consumers and businesses
• creating a safety hazard for consumers due to the use of cheap, defective, or inadequate components or materials and poor assembly and manufacturing processes
• raising cyber-security related threats
• jeopardising consumer privacy
• impairing the safety of digital transactions
• hurting the most financially vulnerable consumers by failing to provide any consumer warranties and otherwise violating consumer law requirements

Because of their poor assembly and the use of cheap, poor quality components in their manufacture, counterfeit products often contain hazardous substances banned in many countries under the restriction of hazardous substances (RoHS) or the equivalent national legislation.

Promising Results from Global Voice Group Device Control Technologies in Africa

Technology can effectively block counterfeit and fraudulent activities to the benefit of all the stakeholders in the industry. All countries—but in particular the emerging countries—could benefit greatly from device detection and control technology. A solution provider like Global Voice Group (GVG), for example, has developed and implemented such technology that combines automated device detection with central equipment identity management systems (CEIMS). This provider has recently assisted the Tanzanian authorities in implementing a national iMEI database with a view to reduce mobile device crime in Tanzania.

Counterfeiting was a widespread problem in Tanzania as approximately 40% of the phones used in the country were counterfeits. This measure is assisting the government and the Tanzanian Communications Regulatory Authority (TCRA) to gain control of mobile phone theft and related criminal activities in the country like counterfeiting and cloning. The government has blocked 1.82 million counterfeit International Mobile Equipment Identity (IMEI) numbers since a concerted blocking exercise began in early 2016, with the control against the use of fake devices in the country sustained on a daily basis. Other East African states, including Rwanda, Uganda and Burundi are expected to follow the TCRA’s example.

Through this kind of technology, stolen devices are blacklisted and barred from linking to the local networks through this system and the system can be integrated seamlessly into external fraud management systems. Once the system is active, mobile subscribers are required to verify the legitimacy of their cell phones and related devices.

With the increasing fraud and crime in the telecommunications sector, it is important to have focused leadership with a proactive and effective fraud strategy in place with the appropriate systems to give visibility over the big picture—these sophisticated systems help governments to know where to aim and whether or not their anti-fraud focus and efforts are effective.

It is crucial for telecoms regulators to nip cybercrime, counterfeit mobiles and fake mobile money supply in the bud. They could do this by rolling out an integrated and publicly accessible IMEI blacklisting system which would go a long way towards closing the loopholes and counteracting the proliferation of Smartphone counterfeiting—a significant problem in many countries.