Evading LDI charges: After criticism, FIA and PTA crack down on grey traffic

Raid conducted in Lahore part of a nationwide dragnet, govt claims Rs6b in revenue lost every year to grey traffic.

LAHORE/ISLAMABAD:

The Federal Investigation Agency has uncovered one of the largest ever networks of illegal “grey” international telecommunications traffic in Lahore, conducting a raid against a company called Vocal Solutions, seizing equipment and questioning several employees, according to an internal FIA report made available to The Express Tribune.

According to the 400-page report compiled by the FIA’s National Response Centre of Cyber Crimes (NR-3C), the company had been illegally selling long-distance phone call minutes to foreign clients using a voice over internet protocol (VoIP) mechanism that bypassed the centralised gateway through which all internet traffic in Pakistan must pass.

Using this mechanism, the company was able to avoid paying the mandatory $0.025 per minute fee that the Pakistan Telecommunication Authority (PTA) charges to all licensed providers of long-distance and international (LDI) phone calls. Because they were not paying the license fee, they were able to offer competitive pricing to about 20, mostly corporate, clients.

Vocal Solutions was found to be using illegal software – MVTS-II – in their operations. The FIA seized several computers and other equipment during the raid.

The company’s directors – Bilal Mushtaq and Ali Nayyer Saleem – claimed to be affiliated with a Dubai-based company called Vocal Solution Viz. It is legal to provide VoIP-based LDI phone calls from several countries, including the United Arab Emirates.

Vocal Solutions used a series of fake and front companies to keep their activities hidden, claiming to be a business process outsourcing company that simply did a call centre business. Many of their clients also appear to be unregistered businesses.

Jawad Ahmed Qureshi, the FIA officer leading the investigations in Lahore, has constituted three teams to go after more illegal LDI providers as well as the client roster of Vocal Solutions. Sources familiar with the investigation say that Vocal Solutions appears to be at the nexus of a nationwide network of grey traffic providers.

The raid in Lahore was not the first by the FIA. Indeed, it was a result of a tip-off gained from similar raids by the FIA in Karachi and Islamabad. The government has been cracking down on illegal providers of LDI phone calls in a bid to reduce what they deem to be lost revenues. According to a PTA statement released on Saturday, the government loses an estimated Rs5.7 billion in revenues owing to illegal LDI providers not paying the PTA charges.

The “grey” traffic is a substantial portion of the total international incoming voice traffic into Pakistan, estimated to be about 12 billion minutes a year. Grey traffic is estimated at about 4.8 billion minutes a year, about 40% of the total.

An official from the PTA claims that the regulator had identified about 150 illegal provides since 2008 and conducted 45 raids in collaboration with the FIA. The official claimed that the crackdown had been effective and had shifted between 500 million to 1 billion minutes from the grey market to the legal market.

The PTA statement comes at a time when the regulator is facing criticism for its inability to crackdown on grey trafficking. An analysis by the ministry of information technology concluded that a big reason for the large size of the grey LDI market is a lack of monitoring ability on the part of the PTA.

A cabinet committee designated to study the matter recommended to the prime minister that an International Clearing House be established to reconcile the incoming traffic count, enhancing the PTA’s monitoring capacity. The committee also recommended that the PTA be mandated to raise about $50 million in monthly revenues from the Access Promotion Contribution – a levy the government charges from the operators in return for the provision of allied services.

Published in The Express Tribune, December 11^th, 2011.