According to observers, most of VOIP services are operating in violation of rules and without paying taxes. -AP Photo

The PTA now admits that its policy of raising ASR was 'misused' by some operators, but says that “no estimates for the volume of grey traffic and the annual loss for it are available”.

One of the leading beneficiaries of the grey traffic is Rodcom Europe, now being renamed as Hollywell Solutions. Rehman Malik, the sitting interior minister, is the chairman of London-based Rodcom Europe — a specialised VOIP (voice-over internet protocol) company established in 2001 “offering a limited number of high quality routes to a limited number of high quality customers”, according to the company website.

It says its early destinations were mainly to Europe and “Pakistan soon joined them when VOIP licences were first issued in 2003.” Rodcom's activities in Pakistan, the website claimed, “have grown to a level where we are now one of the top five senders of Pakistan calls in Europe

The lack of transparency on the part of the government makes it next to impossible to figure out whether or not Rodcom's activities are legal. The government contends that not all VOIPs are illegal, but the PTA refuses to provide details about operators registered with them.

This, observers conclude, suggests that most of them are operating in violation of rules and without paying taxes.

Regardless of whether or not Rodcom is operating legally, Rehman Malik's ownership of the company raises moral and ethical questions. “That a federal minister who oversees law enforcement agencies which are required to curb such illegal telephone calls, should own a company involved in this business is clearly a conflict of interest,” an observer said.

Dawn has learnt that raids carried out by law enforcement personnel against such operators usually target small fry. This allegedly creates more business for the larger companies.

The aim of such raids, it is alleged, is not to eliminate the illegal grey traffic but to facilitate certain telecom players. A number of such telecom operators contacted by Dawn declined to say anything on the record about the issue, fearing a backlash from within the government.

Repeated attempts to get Mr Malik's point of view failed; text messages to his mobile telephone remained unanswered. Repeated efforts to get his version though his personal staff members — Mohammad Shoaib, Zafar, Latif, Abdul Majeed and Nawazish Ali — over four weeks also remained futile. His ministry does not have an official spokesman at present.

What makes the conflict of interest issue more serious is the fact that the current government has not made a concerted effort to eliminate the grey traffic; instead circumstantial evidence suggests that official policies have encouraged such activity. There are two commonly known methods of checking grey traffic. First, by reducing the official PTA rates to make them competitive with those offered by such operators; Dr Mohammad Yaseen, the current chief of the PTA, confirms this.

“In order to reduce grey traffic, one tool available to the PTA was to reduce the ASR (reduced approved settlement rates),” he says. And in the past the PTA has reduced the ASR with the publicly announced objective of curbing grey traffic. For instance, the PTA reduced rates from about 20 US cents per minute to 7 cents per minute in the first three years of telecom market liberalisation until late 2007.

However, the PPP-led government reversed this trend; the ASR were increased to 10 cents in May 2008 and then to 12.5 cents in February 2009. Though in July 2009 these were brought down to 10.5 cents per minutes, they still remain higher than they were before the PPP came into power. Furthermore, an additional tax, the access promotion contribution (APC), also witnessed a hike from two cents to five cents per minute in 2008 and then to 7.5 cents in February 2009. This too was reduced to 5.5 cents in July last year, where it still remains higher than what it was in 2008.

The impact the higher rates had on legal international traffic to Pakistan is no secret — data shows that legal phone calls made to the country from international locations increased from 200 million minutes in February 2005 to above one billion minutes in February 2008, after which the PPP government came into power. Since then, the legal international traffic has dropped to below 400 minutes, coinciding with the increase in the ASR.

The PTA, in a written statement, claimed that the hike was intended “to deliver the benefit of increased contribution to operators as well...enable local loop operators to expand their networks from the subsidies received via access promotion contribution.” However, the authority conceded that this did not happen. According to the PTA, the increase in rates led to a reduction in the number of fixed lines being used by customers, “forcing PTA to reduce APC as well as ASR”.

A second common mode to check grey traffic is the installation of filters at main gateway exchanges; all international calls to and from Pakistan, terminate at or originate from these exchanges. Dawn has learnt, however, that the filters have not been installed so far.

Instead, the PTA says that it “has installed state-of-the-art equipment which detects illegal telecom traffic” which along with a team of highly technical professionals and dedicated workers “monitors the illegal activities on 24-hour basis...to apprehend the culprits and to prevent losses to the national exchequer...”

However, according to sources, the “state-of-the-art” equipment has its limitations. For instance, it can only identify numbers receiving unusually huge traffic and that, too, once the calls have been terminated. By the time, PTA and law enforcement agencies swing into action, the laptop, through which the calls are being routed, is usually shifted to another location.

HOW GREY TRAFFIC RUNS Grey traffic is defined as the use of illegal exchanges for making international calls, bypassing the legal routes and exchanges. These illegal exchanges include VOIP (Voice-Over Internet Protocol) that uses a computer; GSM (Global System for Mobile) gateways; WLL (wireless local loop) phones or mobile SIMs. This traffic may then be distributed onwards using WLL and mobile numbers.

Generally, grey traffic can be recognised from the fact that such calls with either not show up or a fake number will appear on the display window if the recipient has the CLI (caller's line identification) facility. This is because licensed operators also make use of grey traffic as the use of illegal exchanges or gateways allows them to avoid taxes. If for instance the rate for an international call is higher than a domestic call — the norm in many countries — the operator will pay less in taxes if the international call can appear to be a local one, which can be done by rerouting it through a local number. The operator can then report a far smaller number of calls to the regulator — the PTA in Pakistan — and pay far less in tax than he would if he disclosed the actual number of international calls put through to Pakistan. This form of grey traffic is called concealment or misreporting of traffic.