IMANI Alert: Of Telecom Revenue Assurance And The Game Of Musical Chairs By The Ministry Of Communications
Ghanaians will remember in 2014 that the government, in it’s bid to enhance its oversight and revenue generation activities in the telecommunications sector, contracted Subah Infosolutions Ltd to build and operate a platform for monitoring caller data records (CDR). Two government agencies, namely the National Communications Authority, (NCA) and the Ghana Revenue Authority (GRA) were at loggerheads over which of them had the mandate to authorize the delivery of such a service.
A careful study of the Communications Service Amendment Tax, Act 2013 (Act 864) indicates in Section 4 that the Minister of Communication shall be responsible for the creation of a monitoring mechanism to verify the actual revenue that accrues to telecom operators, and among others establish a common monitoring platform to monitor the revenues as per the Electronic Communications Act 2009 (Act 775).
Since that time, the zeal to discharge these services by the Ministers in charge of communication in subsequent dispensations has led to a litany of interesting events that show a serious lack of strategic direction and clarity in the discharge of these functions. This leaves a lot to be desired in a sector that is perceived to be a major source of taxable revenue for the state, and leaves a lot of doubt as to the intentions of key decisionmakers in discharging the legal mandate.
PROBLEMATIC LEGAL FRAMEWORK
The genesis of some of these problems has been inherited from the Electronic Communications Act 2009 which explicitly indicated that any international call terminating in Ghana should attract a minimum surcharge of 0.19 US Dollars with the government of Ghana retaining 32% of such charges billed to inbound international calls by the telcos.
The law created a complex system that allowed illegal call terminations in Ghana to become very lucrative through operations commonly termed as “SIMBOX Fraud”. This system allows people with the right equipment to easily divert inbound international calls through their systems and pass them off as local calls, while pocketing 0.15 US Dollars per call at the expense of the government. This concept, known as the surtax on international inbound call termination or SIIT, has not only increased the costs of inbound international calls, but also encouraged similar reciprocal measures. Indeed, this intervention has also led to the sanctioning of several local operators, who in a bid to reduce tariff costs discounted their 68% share of the SIIT charges which was deemed illegal by the regulator. The stiff sanctions imposed by the regulator for such an unfair telecommunications regime also meant that they were being punished for prioritizing the consumer.
THE CONFUSION: WHO COLLECTS WHAT?
In 2010, Subah Infosolutions was contracted by the Ghana Revenue Authority to oversee the revenue assurance activity from the telcos with regards to ensuring that the right surcharges were paid to the GRA as per the communications service tax provisions. Subsequent events around the mode of operation and the monies charged by Subah for apparently no work done have been in the news since 2013. At least GHC 75 million was collected by Subah Infosolutions for very little work done, although subsequently Subah was able to install its infrastructure and utilize its platform to monitor telco network data for the GRA. Advantage GRA.
In 2015, the NCA decided to proceed with the creation of an Interconnect Clearing House (ICH) as a basis of accounting for the SIIT returns which were being bypassed through SIMBOX fraud. The ICH was to be established at the cost of GHC40 million in 2015 with the view to curbing revenue losses to SIMBOX fraud, while estimates by the government indicated revenue losses of $5.8 million to SIMBOX fraud around 2011.
Speculations were that the ICH would be better placed to monitor the landscape and prevent cases of SIMBOX fraud through the deployment of special systems and save the state money. Per its license, Afriwave, the operator of the ICH would create a common independent mechanism to monitor the routing, billing and settlement of local and international interconnect traffic for existing and future telecoms activity.
Afriwave’s core activities included revenue assurance as well as other value added services like identity registering for blocking stolen lines among others. However, its core mandate is revenue assurance.
It is quite interesting that this activity by the NCA led to a serious conflict with the contractors for revenue assurance contracted by the GRA, Subah Infosolutions. This conflict got to a head when the NCA refused to acknowledge the legitimacy of Subah’s operations in 2015, with the then Director-General, William Tevie indicating that Subah didn’t have a license to conduct real time monitoring of international traffic for revenue assurance. It proceeded to communicate to Subah Infosolutions to cease its operations in the telecommunications industry on the 12th of November 2015. Meanwhile, just a week before, the NCA issued a license for what it called “International Monitoring of Traffic” to Afriwave Telecom Ghana Limited to carry out real time monitoring of international traffic.
These two industry players were essentially doing the same thing but sanctioned by two different state institutions without clear guidelines on how to co-operate, and it was unclear how the systems would be treated independently or the data that they handled.
To deepen the confusion further, the GRA in December 2016 renewed their contract with Subah Infosolutions, only for the NCA to direct all mobile network operators to disregard data requests from Subah for revenue assurance activities.
The question then is, why is the NCA refusing to issue a license to Subah Infosolutions, if Subah has been contracted by a fellow government agency for revenue assurance.
Secondly, what is the role and status of Afriwave in the middle of these activities, and are they still discharging their agreement as per the contract they signed, or it has been abrogated?
A NEW PLAYER IN 2017
A new entrant in this game of musical chairs has emerged, in the midst of all this confusion. GVG/Kelni, a Haitian originated company, has been awarded a contract for, guess what; design, development and implementation of a common platform for traffic monitoring, revenue assurance, mobile money monitoring and fraud management. Just like in previous arrangements, the preamble to the contract indicates the mandate as emanating from both the Act 865 and the Act 786.
What is perplexing from a policy and strategy point of view is the rationale behind signing a new contract when there is no clarity as to the statuses of the mandate of the previous contractors operating in this revenue assurance space.
There has not been any defined and clear performance parameters set for the contracts related to Subah and later Afriwave, and it is therefore very difficult to decipher whether their services provide value for money. Indeed, there has been no such report of underperformance by the stakeholders that contracted Subah. The issue then is, why did the Ministry of Communications go ahead and sign a new contract under the name of a common monitoring platform for a service that is already being rendered under an existing contract by a fellow government agency?
Already, the contract upon signing stipulates that a payment of USD 1,491,225 be paid monthly for a 5-year period, amounting to a total of USD 89,473,500. Per the stipulations of the contract, which was signed in December 2017, the monthly payments are supposed to begin not later than 30 days after the contract was signed. This means by inference that the state through the Ministry of Communications owes at least USD 5.96 million as of May this year. Has the Ministry of Communications paid up?
In contrast, the SUBAH contract allowed for similar amounts to be paid ALSO for no work done for a considerable period of time to the tune of some GHC 4 Million a month. Are we saying that for the activities of revenue assurance we need such staggering maintenance figures?
In racking up these costs, it would be very important to know what work has already gone into the creation of the CMP till date, and what value it has added or accrued to the state in terms of revenue to justify this staggering figure. It is also very curious to an observer why the contract in its current form automatically provides for an extension for a further 60 months after the expiry of the initial period based on a very vague terms of reference in terms of performance.
It will be interesting to know how much revenue is being gained from the discharge of this service in addition or as a value add to what the likes of SUBAH and Afriwave were contracted to do all this while. The definitions of what entails traffic monitoring, revenue assurance, fraud management and mobile money monitoring seek to create a situation where there will be very poor accountability with relation to contract obligations since none of these activities were described in detail so as to allow for better independent assessment of the quality of work going to be undertaken by this new company.
Seeing that we need to learn from history, we note with grave concern the addition to the scope of the contract the activity of mobile money monitoring, considering that the GHIPPS has the necessary infrastructure as a clearing house to handle the full scope of that activity. Like what happened between the GRA and the NCA, we see very clearly an inter-agency conflict brewing up due to unnecessary duplication of data, processes and activities which do not serve any benefits to either the agencies involved, the telco service delivery ecosystem or the general public and the nation’s public purse.
We believe that it is very dangerous as a nation that important data like CDR are toyed with along very vague outlines in contractual activity, to the extent that under the umbrellas of analysis and fraud management, the service providers in question can easily abuse the data. The basis of reference for the obligation of the client to ensure the installation of infrastructure at the interconnection points and core networks of the telecommunication networks in Ghana is very fuzzy.
It is important that clear distinctions are made as to the type and nature of infrastructure in this case as the Communications Service Tax (Amendment Act) provides in Section 7 (the amendment to Section 14 of the Original act) in subsection 6 that monitoring mechanisms should not be able to actively or passively record or tap into any of the converged platforms. By the reference and obligation of the client, GVG in this contract, there is the danger that the equipment being installed might be abused in contravention with the law. Because of the technical sophistication of such equipment, it could easily be done at the blind side of all concerned.
Interestingly, GVG, or in its latest iteration GVG/Kelni has some history in Ghana and other countries, where it had been cited for unethical practices which led to the abrogation of some of their contracts. It is therefore very surprising that of all the contractors that would have been able to provide this service, we returned to the most controversial of contractors in an area that requires trust, a commitment to ethics and the handling of confidential information.
It is time the policymakers in the telecoms industry begin to see the demerits in the implementation of the SIIT regime. The implementation of revenue assurance and oversight has been fraught with so much controversy, with so much money being charged by service providers that it is difficult to be seen if we are indeed gaining anything from it as a nation.
In countries like South Africa and Nigeria, there has been ZERO incidences of SIMBOX fraud because of an absence of SIIT.
A total of the quantum of purported service charges, starting from SUBAH in 2010 till 2013 when it was uncovered that a possible GHC 75 million had been paid for no work done (in the region of around $35 million in those days, and at todays rate around GHC 110 million), to the current dispensation of outlays of around $350,000 monthly is very problematic. We have only been given as a nation from time to time vague estimates of losses due to SIMBOX fraud.
If that is the case that these services are absolutely necessary and indispensable, we will need to examine how much is lost monthly to SIMBOX fraud and how much we pay as a nation to these service providers in totality to actually determine the real value add.
In an era where the technology is increasingly facing competition from other service offerings that use online services for practically free, why are we concentrating on milking telecom operators and setting up arbitrage requirements in a sector whose tariffs are increasingly on the decline due to increased competition and lowering infrastructure costs?
Would it not be better if instead of surcharging telcos on violations of SIIT the telcos are rather encouraged to use those revenues to expand infrastructure of their existing systems?
In the wording of the contract, there was very little representation of the GRA as a stakeholder, and even in signing the contract, the Ministry of Finance was not a signatory although it was mentioned as a party to the contract. These seeming tiny inconsistencies have very grave meanings as it seems as if the Ministry of Finance is not directly privy to what is going on or the events and conditions under which this contract was signed. Should that not be a cause of worry if the Ministry of Finance decides not to discharge any obligations of payment due to the fact that it was a party but not a signatory to the contract? What are the implications should there be a conflict?
Inasmuch as the nation needs revenue, there should be coherence as to the appropriate methodologies implemented to ensure policy coherence and a stakeholder based approach to telecommunication policy. We note with a lot of worry that decisionmakers have not learnt the lessons of past contracting activity with regards to dealings with telcos. This, together with the opaque nature of contracting will lead to bigger problems down the line.
Please direct all enquiries to the telcoms desk at IMANI - [email protected]