Consumer protection in telecommunication services

Posted by Rohan Samarajiva on September 11, 2020  /  0 Comments

In a wide-ranging interview, the Director General of the Sri Lanka Telecom Regulatory Commission (TRC) explained the reasons for requiring mandatory registration of IMEI numbers from October 1, 2020, saying all commercial vendors of terminal devices had to be registered with the TRC and that the IMEIs of the devices they sold had to be registered as well. He stated that these actions were being taken to protect consumers.

Consumer protection in a market economy is anchored on information asymmetry. The default position is caveat emptor: let the buyer beware. Each consumer has a right to decide on the price-quality bundle he/she wishes to buy. It is when the buyer’s information regarding price and/or quality is deficient that there is a role for the state. [Of course, all this has been thrown into some disarray because of Tversky and Kahneman, but the old approximations are still useful as a base for policy thinking.]

So the question we have ask is whether there is an information asymmetry with regard to mobile terminal devices. Some of these devices we carry on our bodies and use close to our heads. There are standards for emitted radiation. The purchaser of a device cannot know the radiation emitted by the devices other than by relying on the manufacturer’s compliance with the appropriate standards. The setting of standards and ensuring compliance is a legitimate consumer protection action. Is the TRC the appropriate body for this task? It should be within the purview of the Consumer Protection Authority, but given the technical nature of the task it may well have been properly delegated. But this safeguard does not require registration of an IMEI.

The IMEI is a unique identifier for a device that interacts with a mobile network. When a phone is stolen, it is possible to trace it if the device is being used on the network by another. For tracing to be feasible, the device and the SIM need to be connected. The SIM registry is used by the phone company. The IMEI registry can be maintained by the operator. But as is done in Sri Lanka, also by the regulator.

Where border taxes exist, it is possible for smuggled or “hand-carried” devices to be cheaper than legitimately imported devices. Mandatory IMEI registration (and associated penalties) can be useful in controlling smuggled devices. If, as proposed after October 1, phones with unregistered IMEIs can be deactivated, the smugglers will be stymied.

The above outcome is not connected to consumer protection; it serves tax compliance. if the border taxes are low, there would be no need for this action.

The DGT claims that IMEI registration protects the consumer by ensuring that only “type-approved” devices are sold within Sri Lanka. The first question that has to be asked is what kind of type approval is done by the TRC, with what labs and technicians. If it is simply a checking of documents, one may ask what value the entire process is and what the three-week time taken for it is about. The claim that type approval can catch refurbished devices is a little fanciful. It would require all the devices that come into the country to be run through physical inspection, at least on a random basis.

There is a very commonly used mechanism called mutual recognition that can yield the same results for less cost and delay. Country A manufactures certain products and runs it through government labs to test compliance with standards, including non-interference. Country B manufactures other products and does the same. Both have internal capacity to do proper testing, because they also have big R&D and manufacturing operations in their countries. Instead of testing each other’s products a second time, they enter into a mutual recognition agreement to accept each other’s approvals, after satisfying themselves that the lab facilities are adequate etc.

Now certain other countries (like Sri Lanka) may, for various reasons, lack the labs and the personnel. They can also enter into mutual recognition agreements (actually unilateral recognition). They save time and effort and close off an opportunity for bribery. This is what we should do, rather than automating and speeding up what is essentially a flawed and bribery-prone system.

There is one value of IMEI registration. There used to be Chinese imports that were so fake that even the IMEI numbers were fake. Hundreds of devices would have the same number. These one may catch using the registration mechanism.

The interview given by the Director General of Telecommunications of Sri Lanka (in Sinhala).

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