Taxing international inbound calls: Is there a middle way between fleecing consumers and monitoring international voice traffic transparently?
Many African regulators’ have introduced a tax on international inbound calls. It started with Côte d’Ivoire and then spread like a plague to Gabon, Ghana and Senegal, to name but a few. The latest country wanting to join the fold is Liberia and operators are seeking to persuade the regulator LTA not to go ahead. Isabelle Gross talks to Marzen Mroue, the CEO of Lonestar/MTN in Liberia and Richard Chisala, board member of Macra, the regulator in Malawi about this contentious subject.
Back in August 2011, the LTA, the telecoms regulator in Liberia, issued a draft regulation on international traffic proposing that “all international inbound calls terminating to subscriber number with country code +231 incur a minimum regulatory fee of US$0.15 per minute (on top of the US$0.12 per minute wholesale price) and shall be collected by the terminating service provider on behalf of LTA”.
If implemented, this would mean that the wholesale cost of calling Liberia from abroad would more than double. Inevitably, this increase would rapidly trickle down to the retail level and the Liberian diaspora would soon notice that the price for calling home had drastically increased.
According to Marzen Mroue, MTN’s experience from other African countries that have implemented such a tax points to a decrease in volume of traffic which would translate into a decrease in revenue and finally a decrease in tax revenues. Mroue is also worried that any tax on international inbound calls would have a broader socio-economic impact, causing the diaspora to have less money available to send back to their families in Liberia.
The disproportionate nature of the proposed tax appears all the more stark when one considers that 80% of Liberia’s international voice traffic is with the USA – one of the lowest priced telecoms wholesale markets on earth. While US carriers charge a couple of US cents to terminate a minute in their country, they will need to pay 27 cents to terminate a minute in Liberia: an imbalance that seems unfair and ultimately unsustainable. MTN’s CEO is of the view that US carriers will respond to this disparity by increasing the current termination rate to the USA. As a result, Liberians will need to pay more to call their family and friends in the USA.
As we have suggested in earlier articles, some African regulators are not looking beyond the short term in terms of taxes on inbound calls, preferring to treat the consumer as a cash cow, rather than looking at the bigger picture including the impact on their people, and the negative effects on their country's international image as a business-friendly environment. Marzen Mroue says that his company remains optimistic about solving this issue with LTA. Based on best practices in other markets, he is sure that alternative solutions are workable that will raise income for the Government of Liberia without stifling the growth and innovation that taxed international voice connectivity will bring.
In East Africa, Malawi’s regulator MACRA tried to introduce a similar monitoring system on international and national traffic. A lack of communication between the regulator, the telecoms operators and the press ended with Airtel launching a campaign against what it labelled the “spy machine”. According to Richard Chisala, member of MACRA’s board, Malawi is not actually going to monitor calls but will rather create an independent platform for call traffic analysis. The core requirements are QoS, revenue assurance, fraud and spectrum management.
Initially, Malawi was not far from implementing a similar monitoring system to those in Ghana, Congo-Brazzaville or Guinea. These of course are limited to monitoring international inbound voice traffic and are intended to generate considerable revenue by applying a hefty levy, tax or fee or whatever inventive term regulators could come up with on the price of international inbound calls.
Visits by MACRA to the monitoring providers in these countries gave the regulator second thoughts and encouraged it to look for alternative providers. Richard Chisala explains that he went to the USA to meet with Agilis International, a company specialised in revenue management and fraud detection. Their services and offerings come with few strings attached: a CAPEX layout to acquire the system and a small maintenance, fee which MACRA will recoup on voice call traffic. For the telecoms operators this represents a levy of between 4-5% on voice traffic, which is considerably cheaper than what the initial monitoring service provider had asked for.
It is important to understand what is at stake here. The issue is not the enforcement of regulatory requirements in itself, but rather ensuring that this is done in a way that does not excessively reward the monitoring provider or that it imposes inefficient tax burdens. To some extent what one may term "the Malawi solution" might offer an acceptable midway course. It fulfils the regulator’s aim of having more transparency on the volume of international and national voice traffic, while at the same time it is more cost-effective and less likely to penalise African citizens and business.
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