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Statement
on the operation and management of international gateways
Econet Wireless
October
02, 2006
This
statement was published in The Herald newspaper on October 03, 2006
In the interest of the public and various stakeholders, Econet Wireless
would like to clarify and correct material factual inaccuracies
and inconsistencies contained in recent media reports about the
operation and management of international gateways as well as the
accounting of foreign currency revenues generated from international
traffic.
How international
traffic flows into and out of Zimbabwe
Operators
are interconnected for carrying both outgoing and incoming international
traffic through their respective licensed international gateways.
In the case of Econet, it is licensed to carry international traffic
only originating and terminating on its own network. In other words,
Econet is not allowed to carry international incoming traffic terminating
onto Tel*One and does not send its outgoing international traffic
through Tel*One.
However, an
operator has limited control on the access routes chosen by foreign
networks for incoming traffic. The route for inbound traffic is
determined by the originating foreign carrier and is a function
of termination rates and route quality. Commercially oriented carriers
naturally choose least cost routing to minimize costs. Some international
incoming traffic is being refilled into licensed operators through
grey routes such as Internet Service Providers (ISPs) who are actually
customers of Tel*One. Both Tel*One and mobile operators are victims
of refilling by these grey routes. These ISPs are clandestinely
terminating refilled international traffic into local mobile networks
through Tel*One which unwittingly declares this traffic as national
calls. The ISPs are paid in hard currency, but pay Tel-One in local
currency as the calls are classified as national calls. Tel*One,
in turn pays mobile operators in local currency. Econet and Tel*One
have been cooperating in the past in identifying the culprits and
will continue to urge the regulator to take appropriate punitive
action. For example, Econet recently alerted Tel*One to refilling
practices by Tel*One’s customer claiming to be a phone shop operator
based in Gweru.
Accounting
of international traffic volumes and revenue
At
the end of each month operators exchange traffic statistics and
statements of accounts for both outgoing and incoming traffic with
their international partners. Invoices are raised after ensuring
variances are within acceptable limits as recommended by the International
Telecommunications Union (ITU) and as per the interconnect agreement
approved by both POTRAZ and RBZ. Remittance of the net amounts is
in accordance with current regulations governing exporters.
It is a regulatory
requirement for all telecommunications operators in Zimbabwe to
declare international traffic statistics and revenues to monetary
authorities with copies being given to POTRAZ. Operators are required
to complete PTS1 Form monthly indicating International partner,
period of account, payment arrangement, incoming and outgoing traffic
volumes and termination rates used.
In addition
to the existing systems, Econet has previously recommended all operators
to install sophisticated network traffic monitoring systems for
traffic management and to monitor fraud. This system, which Econet
has since installed, can monitor the flow of incoming and outgoing
traffic.
The legal
status of international gateways
International
traffic is being routed into and out of Zimbabwe in two ways:
a) Legally through
licensed telecommunication operators; and
b) Illegally
through grey routes (illegal operators).
Licensed telecommunications
operators in Zimbabwe, (Econet, Tel*One, Net*One and Telecel), are
licensed by law to operate international gateways.
There is thus
nothing sinister or illegal about operators running an international
gateway. It is a right conferred by the license granted by POTRAZ
in terms of existing law. As an example, in compliance with the
License provision, Econet only carries international traffic originating
and terminating on its own network and does not carry or collect
traffic for any other operator in Zimbabwe.
There are, however,
other entities who operate illegal international gateways, commonly
termed ‘grey routes’. These illegal operators are the ones responsible
for refilling. Refilling is a situation where "Operator A"
carries international incoming traffic terminating on "Operator
B" in the same country and declares the traffic as ‘national’.
Maximising
foreign currency inflows from international traffic
Zimbabwe
has the potential to earn significant amounts of foreign currency
by implementing viable international termination rates. On its part,
Econet has made several representations to POTRAZ and RBZ to implement
a single minimum international termination rate for incoming international
calls to maximize foreign currency inflows into the country and
avoid arbitrage opportunities.
It is important
to note that the artificially low foreign currency inflows are not
due to the existence of multiple international gateways but more
to do with the lack of regulated viable termination rates.
The importance
of sustainable termination rates was aptly captured in the RBZ Governor’s
Monetary Policy Statement issued on 18th December 2003
when the Governor, Dr Gideon Gono, stated as follows:
"25.
Telecommunications sector
This sector
is key to the developmental aspirations of our country.
In discussions
with stakeholders in this sector, it became evident that the country
was sitting on foreign currency opportunities yet to exploited.
25.1
International Traffic Termination Rates
(a) Zimbabwe
is losing millions of foreign currency earnings through sub-economic
termination rates for incoming international traffic.
International
traffic is terminating in Zimbabwe at rates which are as low as
3US cents compared to the average international 20US cents.
For traffic
terminating in other countries, Zimbabwe therefore pays approximately
7 times more than it is paid for the same volume of traffic terminating
in Zimbabwe.
(b) This
results in Zimbabwe always being a net payer of scarce of foreign
currency
For
the 25 months between January 2000 and January 2002 I.T.U. statistics
indicate that Zimbabwe lost an opportunity to generate over US$75
million due to the low termination rates for incoming traffic.
(c) It
is against this background that a policy is being initiated to
curb dumping of international traffic at sub-economic rates which
apply across the operators through the Postal and Telecommunications
Regulatory Authority of Zimbabwe.
(d) Monetary
Policy recommendation is that the minimum termination rate be
set at between US20 cents and US 25 cents.
This will
stop the continued loss of the much-needed foreign revenue. In
other countries like UK, Oftel, the UK regulatory authority, has
prescribed International terminating rates.
It is understood
that this proposal has previously been tabled to both Government
and Confederation of Zimbabwe Industries (CZI)but no progress
was made, hence its revival from a Monetary Policy and foreign
currency generation perspective."
In addition
to the above, Econet’s view is that multiple gateways introduce
competition for the benefits of industry, commerce and individual
customers. It also provides customers with choice. Multiple gateways
are important to our country from a strategic point of view in that,
should one gateway face problems the country does not experience
a telecommunications blackout as the other gateways can be used.
Conclusion
It
is regrettable that the media reports have created an erroneous
impression about the legality and legitimacy of international gateways
that could have been avoided had efforts been made to seek comment
and factual information from telecom operators concerned.
As a leading and key member of the
Telecommunications Operators Association of Zimbabwe (TOAZ), Econet
is also willing to share and educate interested stakeholders about
its operations in particular and of the telecoms sector in general.
The company has and continue to provide
valuable input to the relevant regulatory authorities to ensure
that the telecom sector plays its crucial role in the economic development
of the country. The telecoms sector is key to national recovery
efforts being spearheaded by the Government in close partnership
with, and the support of the business sector.
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