Combating Counterfeit and
Substandard ICT Devices
(Geneva, Switzerland, 17-18 November 2014)
Regulatory procedures and solutions for
protecting the market against
counterfeit/substandard terminal
equipment in Ukraine
Dmytro Protsenko,
Deputy Director, Radio Service Directorate,
Ukrainian State Centre of Radio
Frequencies, protsenko@ucrf.gov.ua
Geneva, Switzerland, 17-18 November 2014
Content
Growing problem of counterfeit products
Special concerns over mobile phones
Negative impact of counterfeit and substandard
mobile phones
Measures of administrations and regulators
Situation on mobile terminal’s market in Ukraine
as of 2008
Mobile terminal’s import and registration
procedures in Ukraine (legal basis,
implementation)
Benefits of regulatory procedure implementation
Conclusions and Recommendations
Geneva, Switzerland, 17-18 November 2014
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Growing problem of counterfeit
products
Total value of internationally traded counterfeit
and pirated products: 2005 - $200 billion, 2009 $360 billion, 2015 – estimated up to $960 billion
– BASCAP Report “Estimating the global economic and social impacts of
counterfeiting and piracy”, Frontier Economics, February 2011
1998: One of the first reported cases of
counterfeit products in the IT industry (remarking
Intel’s Pentium II Processors) – BRIDGE Report “ProblemAnalysis Report on Counterfeiting and Illicit Trade”, 2007
2006: 8% to 10% of all goods in IT industry sold
worldwide was counterfeit - Alliance for Grey Market and
Counterfeit Abatement (AGMA), 2006
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Special concerns over mobile phones
Worldwide combined shipments of mobile phones
for 2015 are estimated to exceed 1.9 billion units
– Gartner (October 2014)
Shanzhai (literally
“bandit”) phones
constitute an
estimated 15-20% of
the global market in
terms of units sold
and about $9 billion
in revenue – EC Study on
internationalisation and
fragmentation of value chains
and security of supply (February
2012)
Source: Gartner (October 2014)
Geneva, Switzerland, 17-18 November 2014
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Special concerns over mobile phones
Figures may differ but they are
impressive:
One out of every five cellphones
sold in the world are illegal or
unlicensed copycats – Nokia, 2011
Shipments of gray-market
China-made cellphones reached
their peak in 2011 with a total
of 250.4 million - IHS iSuppli, July 2013
White-box sales exceeded 360
million units in 2010 – Gartner,
February 2011
Geneva, Switzerland, 17-18 November 2014
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Negative impact of counterfeit and
substandard terminal equipment
GOVERNMENT
- loss of revenue due to non-payment of
customs duties and sales taxes
- need of additional measures to ensure
a compliance with national regulations
(import, sale, certification, changing the IMEI
etc.)
- danger to public security (phones with
invalid IMEI or “no IMEI” number are potentially
attractive for criminal activity and terrorism)
- lost workforce
INDUSTRY
USER
- low quality (performance degradation, high
% of dropped calls, access failures, handover
problems)
- low reliability
- failed warranty and technical support
- potential hazard to health (use of
hazardous substances, higher SAR, batteries’
explosion etc.)
- security and privacy issues (in cases of
theft or stolen phone, it is difficult to track the
phone with invalid IMEI or “no IMEI” number)
Negative impact
- losses for right’s holders (unfair
competition, loss of sales, price may be
affected, copyright and trademark infringement,
adverse effect on brand value and reputation)
OPERATOR
- lowering QoS of mobile
telecommunication services (loss in voice
and data capacities, data transmit speeds,
reduced coverage)
- potential interference and EMC
problems
- need of expensive and unnecessary
technical measures (more antenna
installations, base stations and the need of
more spectrum)
Geneva, Switzerland, 17-18 November 2014
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All regions are affected
IHS iSuppli forecast for gray-handset markets for
2013 showed a significant negative impact in all
regions:
Asia-Pacific (India, Vietnam, Thailand,
Pakistan, Indonesia, the Philippines etc.) - 103
million units
Middle East and Africa
(Nigeria, Turkey, Egypt, Iran
etc.) - 38.2 million units
Central and Latin America 37.3 million units
countries in Eastern Europe
also are major target
markets
Geneva, Switzerland, 17-18 November 2014
Source: ARCchart
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Measures of administrations and
regulators - AZERBAIJAN
Mobile Devices Registration System, based on
IMEI codes database, has been operated under
the Ministry of Communication and Information
Technologies since May 2013
aimed to prevent the use of illegally imported
phones, phones with "broken" IMEI codes, lost or
stolen phones
all imported mobile
devices must be
registered within the
first 30 days
over 13 million devices
are registered now
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Measures of administrations and
regulators - COLOMBIA
In 2011 the Ministry of Information and
Communication Technologies issued Decree 1630
for the purpose of establishing mechanisms
aimed at controlling the marketing and sale of
both new and used terminal devices and creating
two types of centralized databases, one that has
a registry of the IMEI numbers of terminal
devices reported stolen or lost, and preventing
their use or activation, and another with a
registry with a record of the IMEI numbers for
terminal devices legally imported or
manufactured in the country and associated with
an identification number of the owner or
subscriber
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Measures of administrations and
regulators - EGYPT
In 2010 the National Telecommunication
Regulatory Authority established the Central
Equipment Identity Register with aim to curb the
handsets with illegal, fake, null and cloned IMEIs,
combating handsets theft and address the health
and safety concerns
3.5 million mobile handset with illegal IMEI code
(13579024681122),
250 000 handsets with
cloned IMEIs, 500 000
handsets with fake
IMEIs, 350 000 with all
zeros IMEI, and 100
000 without IMEI code
Geneva, Switzerland, 17-18 November 2014
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Measures of administrations and
regulators - INDIA
2004: Telecom Regulatory Authority of India initiated a
consultation in order to curtail the illegal handset market,
discourage handset theft and protect consumer interest
2009: Government of India banned services on mobile
handsets without IMEI number after 30.11.09. Up to 25
million mobile handsets were estimated to become
ineffective
2012: TRAI advised about a need of common database to
be available across customs checkpoints in India so that duplicated/fake/
non IMEI mobile devices are not
allowed to enter the country
2014: The Telecom Department plans
to put in place an online database of
IMEI numbers of imported GSM phones
in circulation in India
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Measures of administrations and
regulators - KENYA
In 2011 the Communications Commission of Kenya
gave a notice to all mobile network operators to
phase out counterfeit handsets on their networks.
As a result, 1.89 million counterfeit mobile phones
were phased out after 30th September 2012
A handset verification system was established to
enable subscribers to verify
the validity of their phones
through submitted IMEI. As
well, a system for blocking
counterfeit handsets within
the mobile networks was
implemented
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Measures of administrations and
regulators - SRI LANKA
With the aim to curtail the counterfeit mobile phone
market, discourage mobile phones theft and protect
consumer interest, the Telecommunications
Regulatory Commission of Sri Lanka intends to
implement National Equipment Identify Register
(NEIR) that connects to the IMEI databases and/or
core networks of all the mobile Operators. NEIR
acts as a central
system for all
network Operators
to share black listed
mobile terminals
Geneva, Switzerland, 17-18 November 2014
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Measures of administrations and
regulators - TURKEY
In 2006 the Information and Communication
Technologies Authority established the Central
Equipment Identity Register (CEIR) with aim to
prevent the usage of non-registered mobile phones,
tax loss, unfair competition in the sector, hijacking
as well as automating the importation processes
131,836,847 IMEI numbers which are legally
registered and 14,308,239
IMEI numbers which were
included in black list due
to being lost, smuggled,
stolen and cloned as of
the end of 2010
Geneva, Switzerland, 17-18 November 2014
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Measures of administrations and
regulators - UGANDA
The Uganda Communications Commission (UCC)
has embarked on the implementation of a project
that aims at the gradual elimination of counterfeit
mobile phones from the Ugandan market
A study certified by the UCC
indicates that about 30% of
Uganda’s estimated 17
million mobile phones are
Chinese-made counterfeits
The government loses about
Shs15 billion in tax revenue
to fake or counterfeit mobile
phone dealers
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Situation on mobile terminal’s market
in Ukraine as of 2008
Legal import of mobile terminals constituted 5-7% of
the market in Ukraine as of 2008
Counterfeit / substandard mobile terminals
constituted a substantial part of contraband import
93-95% of consumers used the mobile terminals of
unknown origin, which had not been tested on
conformity to the Ukrainian standards for:
permissible technical characteristics of terminals to
be used in telecommunication networks in Ukraine,
safety requirements in part of radio radiation
Annual loss of revenue to the State Budget of Ukraine
exceeded USD 200 million due to non-payment of
customs duties on import of mobile terminals
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AISMTRU
The Automated Information System for Mobile
Terminal Registration in Ukraine (AISMTRU) was
established and put into operation by the Ukrainian
State Centre of Radio Frequencies (UCRF) on
01.07.2009
AISMTRU’s main objectives:
protect the Ukrainian market against low quality
and unauthorized terminal equipment (in the first
place, mobile phones)
ensure adequate QoS (first of all, for mobile
communication services) and consumer right’s
protection
resolve a social problem of terminal equipment
theft (especially, phones and tablets from children)
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Legal basis of regulatory procedures
Legal basis for terminal equipment’s import is
defined by the Law of Ukraine “On Radio
Frequency Resource of Ukraine” and other
regulatory acts
These acts provide for registration of unique
international identification codes as a tool for
protecting the Ukrainian market against low
quality, unauthorized and illegally imported
terminal equipment
Before 26.07.14 the UCRF’s permission was
mandatory for import of radio equipment (to be
presented to customs’ authorities)
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Legal basis of regulatory procedures
On 26.07.14 the legislation changes entered into
force with aim to facilitate the business and
decrease a number of authorization documents in
Ukraine:
import permission for radio equipment is
cancelled
documentary confirmation of conformity with
technical regulations is mandatory for import
and use of radio equipment in Ukraine
the term “international identifier of terminal
equipment” is defined by the Law, thereby
securing and extending the regulatory
procedures for registration and use of terminal
equipment within telecommunication networks
Geneva, Switzerland, 17-18 November 2014
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Import and registration procedures
Import of radio equipment to Ukraine is controlled
by the customs authorities under the following
conditions:
conformity to the Register of radio electronic
facilities and radiating devices, which are
permitted to be used in Ukraine in the
frequency bands of common usage
availability of a document on radio equipment’s
conformity with technical regulations
In accordance with the Law of Ukraine “On
Confirmation of Conformity” the conformity of
terminal equipment has to be certified by the
bodies, agreed by the Regulator
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Import and registration procedures
According to legislation changes, the Regulator
approved new Procedure for import of radio
electronic facilities and radiating devices
provides the registration of international
identifiers
developed in cooperation with manufactures
and market players
At present the registration of international
identifiers of terminal equipment, legally imported
to Ukraine, requires the confirmation of the State
Customs Service of Ukraine including the extract
from customs declaration (in electronic form) for
import of radio electronic facilities
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General structure of database
Generalized database of international identifiers
for terminal equipment contains:
Database with identifiers for authorized terminals
(White list) - legally imported terminals to be
served by telecommunication networks
Database with identifiers for temporarily
permitted terminals (Grey list) - terminals not
entered into the White or Black Lists at the
moment of first registration in the
telecommunication network
Database with identifiers for unauthorized
terminals (Black list) – terminals are not
authorized according to legislation to be served
by telecommunication networks
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Benefits of regulatory procedure
implementation
Implementation of import regulatory procedure
based on registration of mobile terminals’
international identifiers together with control of
their legal import almost eliminated the problem
of counterfeit and contraband import of mobile
phones in Ukraine
Benefits reached:
economic
state security
social
Technical realization of regulatory procedure was
performed by the UCRF without state budjet
funding
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Economic benefit
Grey import of mobile terminals in Ukraine
decreased abruptly - a share of legally imported
mobile phones increased to 93-95% in 2010 (first
year after implementation)
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Economic benefit
The revenue from customs duties on import of
mobile terminals to the State Budget of Ukraine
increased to USD 200 million in 2010 (20 times,
compared with year 2008) and remains stable
over the preceding years
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Economic benefit
Legalization of mobile terminals’ import facilitated
in whole the legalization of the Ukrainian market
and resulted in considerable improvement of
situation with legal import of other types of radio
electronic facilities
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State security benefits
Registration of international identifiers of terminal
equipment facilitates the anti-terrorism and
combating against other criminal activities
Security services and police broadly use the IMEI
codes to identify the individual number of mobile
phone, track the phone usage under change of its
individual number (SIM card) or operator network
UCRF’s registration system capable of preventing
the registration of IMEI codes, having an
inappropriate format (TAC code does not
correspond to the code for a specific model, IMEI
code does not correspond to the code specified by
the GSMA document DG06 (TW.06), e.g. all 15
digits are “0”, “1” or others)
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Social benefits
Under common operation of international identifier
database and operators’ EIRs, the service of
terminal equipment may be stopped, thereby the
theft of terminals becomes a purposeless
Impact of regulatory procedure and registration
system implementation on customers’ awareness
and wish to
buy the legally
imported and
nonhazardous
equipment,
especially
mobile phones
(65% of IMEI
codes were
checked in 2013)
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Future tasks of market regulation
Closing of the market for counterfeit and
contraband terminal equipment (mobile
communication, wireless broadband networks,
new mobile radio technologies)
Combating against mobile equipment theft and its
prevention
Ensuring the state security
Effective realization of above tasks requires the
national legislation changes and may be
facilitated by creation of the global information
system for exchange by unique
telecommunication/ICT devices identifiers
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WTDC-14 Resolution 79 (Dubai, 2014)
WTDC-14 Resolution 79 (Dubai, 2014) resolves to
instruct the BDT, in close collaboration with the
TSB and BR
to continue to increase and develop ITU activities
on combating, and ways of limiting the spread
of, counterfeit devices;
to assist Member States, particularly
developing countries, in addressing their
concerns regarding counterfeit devices
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PP-14 Resolution COM5/4 (Busan,
2014)
in general, telecommunication/ICT devices that do not
comply with a country's applicable national conformity
processes and regulatory requirements or other
applicable legal requirements, should be considered
unauthorized for sale and/or activation on
telecommunication networks of that country
ITU and other relevant stakeholders have key roles to
play in fostering coordination between the parties
concerned to study the impact of counterfeit devices and
the mechanism for limiting their use and to identify
ways of dealing with them internationally and regionally
resolves to instruct the three Bureaux to assist Member
States in addressing their concerns with respect to
counterfeit telecommunication/ICT devices through
information sharing at regional or global level, including
conformity assessment systems
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Establishing the global system as a
way of dealing with counterfeit
Study on internationalisation and fragmentation of
value chains and security of supply (EC, February 2012):
While governments in, for instance, India and
Kenya have taken or are planning to take action
to close down counterfeit mobiles without IMEI
numbers, such actions are proving difficult
in practice
Creation of the global information system for
exchange by unique telecommunication/ICT
devices identifiers with a key role of the ITU and
other relevant stakeholders may significantly assist
the Member States in line with the WTDC-14
Resolution 79 and PP-14 Resolution COM 5/4
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Conclusions and Recommendations
Today, there are a
number of successful
solutions based on
unique
telecommunication/ICT
devices identifiers’
registration, which are
deployed or planned by
individual
administrations and
regulators to combat
against counterfeit/
substandard terminal
equipment
Geneva, Switzerland, 17-18 November 2014
Creation of the global
information system for
exchange by unique
telecommunication/ICT
devices identifiers with
a key role of the ITU
and other relevant
stakeholders may
significantly assist the
Member States in line
with the WTDC-14
Resolution 79 and PP14 Resolution COM 5/4
33