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Firdaus FadzilJuly 2013

ILLEGAL BYPASS FOR INTERNATIONAL CALLS: INDUSTRY POSITION

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To provide a briefing to the mainstream media on the growing trend of the used of illegal SIM boxes to route international incoming calls into the Kingdom of Cambodia.

To highlight its adverse impact to the RGC, network operators and consumers Royal Government of Cambodia:

- Loss of revenue from VAT, Special Tax and revenue sharing with Receiving Network.

- National security – unknown calls are terminating into Cambodia, undetected. Network (Receiving) Operators: Loss of interconnection revenue. Consumers:

- Low Quality of Services – drop calls, echo, voice mailbox service not available. - Originating number is not displayed correctly – not able to call back.

To highlight series of stern actions to be undertaken by the Government and network operators to curb this illegal activity.

AGENDA

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International Traffic Transformation: International incoming calls transformed into domestic calls, via techniques such as SIM box or Pbxhacking, leading to interconnect revenue loss.

Arbitrage International / Domestic Gateways: International incoming calls received on a domestic interconnect gateway. This case leads to a revenue loss as soon as the domestic termination rates are lower than international termination rates

Internal Fraud & Phantom Gateways: Incoming calls received on a phantom interconnect gateway, i.e. non declared on your network or not producing CDR. This case leads to a revenue loss as there is no interconnect revenue for this traffic.

OVERVIEW OF ILLEGAL BYPASS FRAUDIllegal bypass fraud is a common global issue and can be done via several ways. Recently, Cambodian Network Operators have also detected a growing trend of international call illegal bypass (International Traffic Transformation).

Mobile/Fixed operators

Our focus for today

(1) Originating Network (2) Interconnect Carriers (3) Receiving Network(via IGW or VoIP Gateway)

International Transit Carriers

• End user pays 90 cents;• Originating Network keeps 60

cents and pays 30 cents.

• Interconnect Carrier keeps 24 cents and pays 6 cents to the IGW/VoIP Network and Receiving Network.

• IGW / VoIP keeps 4 cents.

• Receiving Network keeps 2 cents (i.e. Mobile Termination Rate)

e.g. Celcom, Maxis

Malaysia

Mobile / Fixed Network in

Cambodia

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NORMAL INTERNATIONAL INCOMING CALL ROUTINGInternational incoming call routing and termination is a licensed activity regulated by MPTC/ TRC. Only Network Operators i.e. Mobile/Fixed licensees, IGW licensees and VOIP Gateway licensees are permitted to operate this activity under specific License Conditions.

Revenue stream

FRAUD IN INTERNATIONAL INCOMING CALL ROUTINGFraud in the form of illegal bypass is done by installing unauthorised equipment i.e. SIM Box to bypass the Network Operators’ billing system. At upstream level, Illegal bypass operators create clandestine arrangement with Transit Carriers.

(1) Originating Network (2) Interconnect Carriers (3) Receiving Network

• Interconnect Carrier keeps 27 cents and pays 3 cents to Illegal SIM Box operator.

• Illegal SIM Box Operator keeps 3 cents and does not pay anything to the Receiving Network. 5

International Transit Carriers

e.g. Celcom, Maxis

Malaysia

Mobile / Fixed Network in

CambodiaIliegal SIM Box Operator

• End user pays 90 cents;• Originating Network keeps 60

cents and pays 30 cents.

• IGW / VoIP gets 0 cent.• Receiving Network gets

0 cent i.e. zero Mobile Termination Rate.

Revenue stream

Redirect calls over inadequate, highly compressed IP connections, resulting in poor service quality.

ECONOMIC IMPACT OF ILLEGAL BYPASS IS DEVASTATINGIndustry estimates not less than 20% of International Incoming International Call is now routed via illegal SIM boxes. If this goes unchecked, the volume will increase further.

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Government has been deprived the following revenues: Special Tax on traffic minutes Value Added Tax charge from IGW/VoIP Network Revenue sharing (as part of License Conditions) Security issue – illegal VoIP call is used to coordinate other criminal acts, leading to a higher security

threat. Recent arrest was made against 24 Chinese nationals allegedly involved with kidnapping and

extortion, leveraging on illegal VoIP calls from people in China. (Phnom Penh Post, 10 June 2013) From 2010-June 2013, ~600 Chinese and Taiwan nationals were arrested for allegedly extorting

money from people in China and Taiwan via VoIP from Cambodia. Used of smuggled equipments

Consumers will experience a deteriorating Quality of Services: SIM Box redirect calls over inadequate, highly compressed IP connections, resulting in a poor service

quality. Network Operators have received complaints on call drops, echo, voice mailbox not reachable and

Caller ID cannot be viewed.

Estimated number of bypass minutes by top Network Operators (from 1 April – 31 May) Revenue loss to Receiving Network (2 cents/min) Revenue loss to IGW/VoIP Network (4 cents/min)

SIM BOX BURNS THE GOVERNMENT’S COFFERWith growing trend of illegal bypass traffic detected by the Network Operators, we strongly believe that the SIM Boxes have been smuggled by a syndicate into Cambodia in a big scale.

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16 SIM Cards Multi-port Modem Pool GSM/GPRS SIM Box Interface type: RS-232 SMS: 9,600 SMS/hour

Etross-8132 8 ports 32 SIM Cards GSM Fixed Wireless Terminal

(Portable) IMEI changeable 32 SIM rotations

Etross-8888G 8 ports 32 SIM Cards GSM Fixed Wireless Terminal

(Portable) IMEI changeable 32 SIM rotations

SIM Box comes in many forms, functionalities and capabilities. This equipment might have been smuggled into Cambodia by a syndicate, depriving

the Government its needed revenues, in the form of import duties. The syndicate may also operate this equipment and engage in the activity without

proper license, therefore, depriving the Government from its needed VAT, Special Tax and revenue sharing.

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2. MoI already initiated a thorough investigation into this matter.

1. Network operators will do active surveillance and tracking down the group.

• Network Operators are already equipped with state-of-art equipment to perform active surveillance and track down the location of the SIM boxes across Cambodia.

• Network Operators are exchanging information on the suspected SIM Boxes details.

• Blocking of numbers for suspected SIM Box numbers.

• Network Operators are now working closely with Internal Security Department, Ministry of Interior to probe this criminal offence.

• On top of operating illegal SIM box and engaging in regulated activity without proper license e.g. VoIP, Fixed, Mobile licenses from MPTC and TRC, the person(s) also carry a security threat to the Nation.

• Criminal charged will be imposed.

• TRC is the sole entity being authorized via Royal Decree dated 1 March 2012 to issue licenses for various activities related to ICT telecommunications industry.

• Network Operators are also working closely with MPTC and TRC by exchanging information on the suspected fraud, the used of smuggled SIM boxes equipment, probe the traffic and facilitate overall inspection and assess the “loss of State revenues”.

Action items Action items description Timeline• Immediate

• Short term

• Short term 3. MPTC and TRC

KEY ACTION TO BE TAKEN BY THE INDUSTRYA series of coordinated action by MPTC, TRC, MoI and Network Operators will be executed soon to curb this criminal offence.

KEY TAKEAWAY

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Illegal bypass activity using SIM Box has been detected by the industry recently. Network Operators continue to monitor and probe the traffic and have acquired the required information for further action.

The growing trend brings a devastating effects to the Government, Network Operators as well as the consumers.

The industry and the Government will work together to curb such a criminal offense.

QUESTIONS & ANSWERS

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