Legal Report Final S

Research Report Submitted in Partial Fulfillment of the Requirement Course MBA 515: Legal and Ethical Issues in Business

Submitted by Ahmed Sayed Jamal (0421035) Md. Sultan Mahmud (0925021) Md. Shawkat Hossain (0925044)

Submitted to Dr. Tanvir A. Khan School of Business

Independent University, Bangladesh

ACKNOWLEDGEMENT

This is my humble attempt to present gratitude in preparing this report. This project would not have been possible without the dedication and contribution of a number of individuals. First and foremost, I would like to express my gratitude to Mr. Dr. Tanvir A. Khan for his support for the preparation of this report. His eagerness helps me in every step of the way and encouraged me to propel myself higher. Than I want to show my gratefulness to the staff’s of Grameen phone Gulshan Branch Dhaka, Specially to Mr. Kazi Habibur Rahman for their continuous and cordial support during my research. Finally, I thank to Independent University Bangladesh for providing me such opportunities to work and gain experience in the professional field.

Executive summary The 21st century has seen a tremendous development in the technological sector. It made the entire human life easier. VOIP is one of those discoveries that generate more value for the customers. In the age of cost cutting this technology allows users to save some more money. Developed countries use this technology very efficiently and make the most benefit. Unfortunately in our country we have made this technology as way to earn illegal money. The top mobile operators in the country involve in the illegal VOIP activities for a long time. Government did not take the proper action to stop it. The situation has change little bit in the Care taker Government but still it exists. We need to take proper steps to remove illegal VOIP in the country and make it more valuable for the users and country.

Hypothesis of the research “Government and Private Sectors are equally responsible for the VOIP corruption“ Methodology Sampling Plan: •

Population – All the employees of Grameen Phone.

•

Sample Unit - Employees of Grameen Phone in Gulshan Branch, Dhaka.

•

Sampling type: Non Probabilistic Sampling. Two types of Non Probabilistic Sampling will be use in this research 1. Judgmental Sampling. 2. Convenience Sampling.

The purpose of using Non probabilistic sampling in this research is, it’s very difficult to get the list of all employees which is required in Probabilistic sampling. Also contact with all respondents during the research period is also not easy because of limited time and the respondent’s busy schedule. That’s why Non Probabilistic Sampling method is used in this research. •

Sample Size- 10 respondents. All the respondents will be the user of Grameen Phone in Gulshan Branch, Dhaka. Sample will be selected from different age group and Designation.

Methods of Data Collection The report is composed of both primary and secondary sources of data. Primary Data: Primary data may be collected by the following two tools. 1. Direct Interview Method. Primary data have been collected by informal interview with the officers. Some information regarding my report objects has been collected through discussion with different executives of the Grameen phone. Secondary Data: The secondary data have been collected from some journals. Also some important information is collected form Internet for the analysis. Survey period The survey is being conducted from January 25th to February 10th 2009. Scope The scope of the report is limited to the opinions of the Officials of Grameen Phone in Gulshan Branch only.

Limitations: Some barriers and limitations were faced while gathering information. These are as follows:  The study is restricted to only Grameen Phone in Gulshan Branch Dhaka .  .It was very difficult to collect the information from Bank, because of some confidential facts.  Short period of time.  Some important respondent may be missing during the questionnaire.  Because of the limitation of information, some assumption was made. So, there may be some mistake in the report.

Introduction What is VOIP? VOIP, which stands for Voice over Internet Protocol, is a technology that allows voice conversations to be carried over the internet. Even though it is highlighted for voice communication, it is a protocol which serves various other technologies like video, fax etc. VOIP sends voice information in digital form, in discrete packets rather than by using the traditional circuitcommitted protocols of the Public Switched Telephone Network (PSTN), Bangladesh's BTTB version. VOIP has become popular largely because of the cost advantages to consumers over traditional telephone networks. How it reduces a cost for a user VOIP uses internet as transport network and thus uses a packet-switched network. As oppose to VOIP, PSTN opted for circuit switched network. In traditional telephony once a circuit is established between caller and called party, it remains connected for the duration of the session. Whereas packet switching opens a brief connection to send small chunk of data from one node to another. Moreover, in circuit switched network, links between nodes that make a path cannot be used by other nodes in the network. On the contrary, in a packet switched network the link that make a route from one node to another can be shared by other nodes. This scenario depicts, packet switching allows several calls to occupy the same amount of

resources that is occupied by only one in a circuit switched network. As a result traditional telephony providers charge more than VOIP providers. Other advantages of VOIP VOIP gives the ability to be mobile. Thus can be in contact anytime, anywhere with an internet connection. Different VOIP protocols are similar to other internet protocols. Thus it provides with a chance to intermingle different software solutions with the telephony system. One such great example is the way VOIP conferencing is done. Compare to PSTN conferences we can now simultaneously share voice, video and files in a conference. By using a single network for different purposes, it is possible to reduce overall operating costs and increase employee efficiency. VOIP installation and maintenance can be based on software rather than hardware. Thus the system is more robust and easy to upgrade. Beside these, VOIP promises with lots of job creation all over the world, especially for the women. For example, call centers, which is enabled via VOIP. Furthermore, new software solutions will integrate real time voice system more and more into their system. Thus VOIP infrastructure may help country like Bangladesh which is looking for a good share from the global software outsourcing. Moreover, legalization of VOIP can benefit a country in several ways. Significant cost saving in the government, private and home telephone bills

would definitely make a mark in the economy. In the world of globalization, unlimited long distance calls are desired to take the home businesses to the global market. VOIP is the cheapest solution to take your voice to the world business community. An Example Calling cards (using VOIP) are available for 850 minutes conversation from UK to Bangladesh at the rate of only 5 pounds (about 700 Taka). In spite of the recent devaluation of US Dollar the VOIP rates are dropping like anything. According to Carrier Exchange Bangladesh mobile rate is very low which was almost double a few months earlier when most of the grey operators remain closed. History of VOIP in Bangladesh The use of VOIP technology in Bangladesh’s telecom Sector was not new. BTTB has been using VOIP since 2003 through its 012 access code. BTRC has been allowing the BTTB to use VOIP calls without any license. However because of cheap setup costs and simple technology hundreds of private VOIP operators sprung up tapping a huge market. VOIP benefit in developed countries All the developed nations are embracing VOIP and its growth is exponentially high. Vonage, one of the largest VOIP providers from USA

has earned 261.939 million US dollar according to the 2005 calendar with total user of 2 million subscribers. However, VOIP provider such as Vonage earns not only from mere telephony but also from other sources of services that can be provided with VOIP with more ease. As VOIP protocols can be affable with all other existing internet protocols, VOIP provider can come out with more and more lucrative services from the internet to the telephony. Demand of VOIP in Global Economy Our development partners in general and the World Bank in particular recognize the importance of access to telecommunication as an element within the agenda of economic development and poverty reduction. The World Bank has adopted a strategy that includes universal access to telecommunications as a goal. The VOIP technology paves the way for the cheapest, efficient and perhaps the best global telephonic communication system for the developing country like ours. The VOIP communications dramatically reduces the cost in telecommunication and this cost effective communication has tremendous impact on overall development of business and the growth of GDP. The VOIP has also opened up new avenue for employment by initiating call centers. Even in Bangladesh some business concerns have already started the practice of arranging video-conferencing using VOIP It has been marked

that especially in the case of software development sector, this sort of video conferencing has boosted up in procuring work orders from global markets. It is true that due to use of VOIP, worldwide the revenue earned from telecommunications has declined abruptly. The same scenario has been found In the developed countries like the UK, USA and Canada. Still at the policy level the developed world have not adopted any policy that hampers the establishment of the VOIP communications as it facilitates the alternative sources of revenue generation, new job opportunities, and above all quality and economical telecommunication services for the people which should be prime concern of the good governance. Even many developing countries have encouraged the rapid expansion of VOIP taking risk of reduction of direct revenue earned from the traditional telecommunications. Besides, common people there are more than happy to get quality and low cost telecommunication services. For this reason many VOIP operators are working there and people are enjoying competitive VOIP based services and indirect revenues earned from VOIP services have also increased significantly. So, it is evident that the many of the developed and developing countries as well have given priorities for rapid expansion of VOIP services. Rather than focusing on direct revenue earned from the telecommunication these countries have given concentration on indirect increase of huge revenues

from VOIP based services. Besides, due to widespread use of VOIP, citizens of those countries are also enjoying quality telecommunications services at low cost. Recent VOIP occurrence in Bangladesh Government filed a case against 10 former and in service high officials including two former CEOs at the country's top mobile phone operator Grameen phone, accusing their involvement in illegal international call termination or VOIP. Grameen phone, AccessTel, a local internet service provider,

and

Malaysia-based

international

call

carrier

DiGi

Telecommunications are also on the accused list. The DiGi Telecommunications has been accused as it has a bilateral deal with the GP to terminate the latter's international call. Norway- based Telenor, the major stakeholder of Grameen phone, is also a shareholder of Digi Telecommunication. Operator Grameen Phone City cell Aktel Banglalink

Amount of Fine (in crore) 168.4 150 145 125

According to Government officials GP terminated international calls through DiGi. The GP's earnings from international calls are deposited with Webstein Bank, Singapore. But a considerable amount of money might be siphoned off from the bank instead of its dispatch to Bangladesh, apprehends BTRC.

The law enforcers tapped GP's calls and found that AccessTel was being used in terminating calls through E1 technology. E1 is an all-digital communications line that allows the transmission of voice, data, video, and graphics at very high speeds over standard communication lines. BTRC fined Grameen phone Tk168crore for its involvement in illegal VOIP. The BTRC also fined City Cell Tk150 crore, AKTEL Tk 145 crore, and Banglalink Tk 125 crore for illegal VOIP trade. How much revenue we loose BTTB's income in the year 2005-06 was 13,300 million Bangladeshi taka with only 1.07 million users. This revenue figure is the lowest compared to last few years. This drop is caused by excellent cellular network of Bangladesh and illegal VOIP businesses. However, if BTTB had 22 million VOIP users they could earn much higher with monthly low fixed charge. 22 million is the current number of users in cellular world of Bangladesh. That clearly indicates there is a high demand for telephony in Bangladesh. With such rapid growth of users BTTB should not have any concern regarding their income target and return on investment in VOIP infrastructure.

VOIP licenses and dirty games in Bangladesh: Despite the fact that the installation and configuration of VOIP communication rely on high-tech, in Bangladesh the trend of VOIP communication, though illegally, has already been started for about last four years. However, three years back in January 2004, due to demand of various quarters including ICT sector, the Bangladesh Telecom Regulatory Commission (BTRC) announced legalizing VOIP and awarding licenses within two months. But ironically, since then long three years have passed but the question of issuance of license is yet to be resolved. Previous Government Policy regarding VOIP The 4-party alliance government, in October, 2006, BTRC took a hurried motion to issue VOIP licenses without ensuring first a common platform for VOIP operators. In response to BTRC’s call it received 51 applications for VOIP licenses on October 8, 2006. Among these applicants, many were powerful illegal VOIP operators, very close to power center of the then political government.

High licensing fee to restrict small providers These illegal VOIP operators were so powerful that they could successfully influence the BTRC in chalking out very high licensing fees for this business

to minimize the number of competitors and to monopolize this business. For providing license, the BTRC has categorized VOIP into three groups namely, Category A: Cellular Mobile operator VOIP License, Category B: PSTN operator VOIP License and (iii) Category C: Nationwide ISP VOIP License. For the inquisitive readers, the following table shows the required licensing fees set by BTRC for these three categories VOIP operators.

Presumably this sort of very high license fees will bar many real IT enabled and genuine business professionals to acquire license from the BTRC.

Problem in the Government policy Unstructured planning

The unusual delay in taking decision for issuing licenses is a technical one. Bangladesh Telephone and Telegraph Board (BTTB) has pointed out that for the security of the country as well as for ensuring the inflow of revenues to the government from the private VOIP service providers , a strong monitoring system must be implemented. At the policy level, initially, there was some dilemma regarding infrastructure of Information exchange, for instance, whether the management of all the traffic be made through a gateway or, in this context, set up an Internet Exchange. Common platform for the total system The original proposal of BRTC suggested that the international phone traffic would be managed through existing very small aperture terminals (VSATs) but later on it was modified and decided that management of all Internet traffic, including that of the ISPs, would be done by a single gateway or exchange managed by the BTTB. The rationale of such a common platform is that without a common platform, nobody will know how much the VOIP operators are earning. It is ridiculous to expect that the VOIP operators will give genuine revenue reports to the government and pay taxes. In line of this argument, subsequently, it has been decided that the license for VOIP would be given after setting up a common Platform in four areas of the country under BTTB through which Internet phone calls will be channelized . The four areas are Dhaka, Chittagong, Sylhet and Bogra. Such a common platform has to be connected to the

submarine cable with a view to connecting our VOIP systems to global Information High Way. Highly political influence Meanwhile, vested interest groups using their political influence slowed down the BTTB’s move to set up a common platform. The BTTB floated tender for installation of such a platform several times but due to allegation of corruptions involved in tender evaluation this initiatives could not be effective. For instance, in its second tender, the BTTB picked up a bid of Chinese company Huawei, represented by the youngest son of a very powerful minister of the 4-party alliance government. However following a formal complaint from a bidder, the planning ministry at that time categorically recommended blacklisting Huawei for corrupt practices to win the contract. Instead of taking decision as per the planning ministry recommendation, the telecoms ministry sat on it, and approved Huawei’s $ 3.5 million bid to set up the platform in Dhaka, Chittagong, Sylhet and Bogra through which internet phone calls will be chanalized. But following exclusive reports in the mass media, the PMO subsequently cancelled the Huawei bid and directed the BTTB to re-tender the scheme.

Steps taken by care taker Government

Presumably with good intention has started a countrywide drive against illegal VOIP operators. Many illegal VOIP operators have been shut down, legal actions against the involved personnel have been initiated and their equipments are seized by the law enforcing agencies. Apparently this drive seems to be very effective and due to this drive, substantial increase of revenue of BTTB earned from overseas phone call is being treated as an optimistic step of the care taker government. However, “the ban of VOIP is proportionate to the increase of revenues earned from the telecommunication sector”, this simplistic notion must be avoided if we want to analyze the implications of VOIP use and its long time impact on overall growth of economics and the development. Why VOIP is still in Bangladesh BTTB being also a mobile operator There is a question. Who are behind these operators? Is BTTB’s mobile service Teletalk anyway involved in this business without proper license from BTRC? These low costs portray that something is out of ordinary here. One can argue that if the VOIP equipments seized by RAB were employed thus reducing the investment cost such low costs can be offered by the operators. Whereas big telecom operators remain easy catch for BTRC and probably they are scapegoats for those who were cashing in a lot of profit. There is a

huge amount of money playing here and they are not thinking about the implications of harassing such big players. Problem Government might face in the future Government has been trying to encourage people to stick to its traditional telephone network. They have been cutting down the consumer's bill by reducing the charges. However, we have seen the traditional telephone network will never be able to allow cheaper rate compared to VOIP network. Rather the government itself can go for VOIP businesses in different form. Moreover, recently it is found by the GSM Association (GSMA) that the Bangladesh government protects the BTTB's monopoly over international phone call business. Thus foreign investors are least interested to inject fund in the country's telecom sector. How to overcome form this situation In Bangladesh, though the VOIP is legalized at least at the policy level but the process of providing licenses has yet to be executed. It has been already discussed that on the issue of providing license for VOIP some dirty games have been played by the immediate past political government undermining the public interest. Drive against illegal VOIP operators should not be considered a positive step unless the procedure for issuance of license begins immediately. In this regard some pragmatic steps that government may follow are given below:

BTTB’s role in VOIP should be reexamined BTTB wants to regulate the VOIP with a view to enhancing its revenues earned from overseas telecommunications. But increase of direct revenues from overseas telecommunications should not be considered as the overall economic growth of the country. Rather it has been observed that the reduction of telecommunication rate has the greater impact on the GDP of the country. Till to date, the telephonic call charge in Bangladesh is the lowest in the world. But still BTTB has failed to contribute much to the net revenues earnings of the country. The BTTB if at all wants to increase the revenue then it should consider initiating other value added services for VOIP and other modes of telecommunications using the facility of the submarine cables. Establish different platform under BTRB authority The decision of management of Internet traffic through a common platform should be reevaluated. But the question is why it should be under BTTB. If at all such common platform has to be implemented then it should be under BTRB. It is to be mentioned that such common platform should be used for monitoring some technical issues for instance, ensuring the network security. Reduced the license fee

There are gross allegations against BTRB on the question of issuing VOIP licenses. For this present BTRB should be reconstituted and reformed without any delay. Present hefty license fees for running the VOIP operation must be reduced drastically so that small and medium scale entrepreneurs can initiate this business. This, in turn, will create a competitive environment following the core philosophy of market economy. Quick and flexible decision making Regulatory decisions should be made in a timely fashion and incorporate flexibility, and should encourage innovation and competition. Conclusion The question of issuance of VOIP must be resolved as quickly as possible otherwise we will fail to achieve success in global competitive business arena. In the past due to delay or ill decision in taking the opportunity of the technological advancement, the nation has slowed down to achieve the economic growth. For taking pragmatic decision on the issue of VOIP, the government may initiate an immediate national dialogue with different stakeholders, experts, economists and other relevant people. In this context it should be mentioned that through a national dialogue Singapore has successfully resolved the question of VOIP regulation and relevant issues. Bibliography

1. Md. Anwarul Kabir and Tamnun E Mursalin Article: VOIP and Relevant Issues: Bangladesh’s Context Faculty Member AIUB 2. www.thedailystar.com 20973 3. www.VOIPforums.com