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Tumwebaze: We’re internally fighting OTT tax

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By Frank Tumwebaze

In this article, the Minister of ICT and National Guidance explains why OTT tax is not the reason prices of the internet are high in Uganda and what they are doing as a ministry to come up with better ways of reducing internet costs in the country.

Though, he also says the tax should be removed. And they are trying to convince the Ministry of Finance to reconsider the initiative.

Below is the article:

Those of you insulting are free to because being ignorant is also your unfortunate right but for the sake of those who value substance here is what you need to know about the cost-push factors for broadband pricing.

With or without OTT, the cost of data will remain high if the real cost-push factors aren’t addressed and this is exactly what the debate I had at the African Internet Summit was about.

As the ICT sector, OTT is not the best we wish to have in the industry and indeed we advised against it internally.

Just like any other sector would wish to see taxes on its industry services and products reduced or removed at all if possible, so would be us in the ICT sector.

Not only have we been engaging ministry of finance on OTT but also to consider reducing many other taxes on handheld devices that enable broadband penetration.

Ministry of finance also has its mandate of mobilising revenue to again invest in all other sectors ICT inclusive for the delivery of public services.

So it has to be always a balance between the need to raise revenue for delivering public goods and at the same time avoid a hurting tax regime.

This is where and why you have Parliament scrutinizing all tax proposals to come up with middle-roader positions.

Back to OTT and whether with or without it, the cost of internet especially dedicated internet that commercial businesses require full time will come down, my answer is NO.

OTT monthly charge is Shs6000 less than 2 dollars.

While removing it may be good for low or NO income earners like students, it still will not substantially push the cost of internet down.

Internet costs have traditionally been high in Africa mainly because the telecom operators and Internet service providers (ISPs) were the only ones investing in broadband (Internet) infrastructure e.g building of optic fibre networks, terrestrial micro-wave, satellite among others.

They had to accordingly price their services (data, voice , digital transactions like Mobile money) highly so as to recoup their return on investment.

That is standard economics.

Just imagine if any bus/ taxi or airline company was required to build on its own a road or airport for its route and try to recover its money through charging transport fares, how affordable do you think would public transport be for the general travelling public?

What if Umeme was to own and build all power dams and then seek to recover their money from the power utility bills? Electricity would never be affordable.

It’s for these reasons THAT government chose to regard physical infrastructure (roads, railway, power dams, airports etc) as public goods and as such invest in building them, such that service providers like transport, aviation and power companies only come in to provide and trade in services.

They don’t have to price those services so highly because they have no pressure of struggling to recover their infrastructure investment.

For the ICT sector, it was different over the years.

ICT is a relatively new sector and not so many citizens had embraced it 20 or 10 years ago AND so govts world over never prioritised it over or among the traditional sectors of the frontline services (health, education etc) in terms of public good investments.

So, one major achievement the ministry of ICT has proudly registered is to manage to convince govt to recognise broadband (Internet) infrastructure as a public good the way it did decades ago for other utility infrastructure.

That is why you see the President launching the extension of ICT optic fibre in almost all regions of the country he is going and recognising ICT as another sector for job creation.

The second and related strategy we have provided for in the broadband policy to mitigate internet cost is infrastructure sharing among all operators both private and public.

There will be no more duplication in building this infrastructure.

If one telecom or internet service provider has broadband infrastructure e.g optic fibre or satellite in one geographical location, another operator should share on the same infrastructure without having to duplicate.

Duplication increases the cost of investment which eventually is passed on to the consumer as I had explained.

In addition, duplication damages our roads as all the time each operator has to dig to bury its cable or erect its mast.

The sharing principle will enforce a “dig and bury” once strategy.

So, talking about lowering the cost of internet is really talking about how to mitigate the real and major push factors.

And as a matter of fact, the cost of internet came down from over $1000 per month per Mbs to now below $100.

That is why the numbers of people using the internet has grown exponentially in the last 5 years only.

But still we aren’t yet happy, we still need to lower the cost of internet to at least $30 dollars per month for about 3mbps pet month for dedicated or fixed users so as to promote more online activity as many govt and private sector services are going online (e-government).

Can we achieve this with OTT? Yes, we can.

If OTT can be removed the better. But even if it’s not, we can still make the internet affordable by addressing the above core push factors.

Take an example of water or electricity which are both universal and critical necessities of life. Government still charges VAT on water and electricity.

Check national water bills, there is a VAT charge.

However, with increased investment in the water sector through National Water and Sewerage Corporation to increase more water connections to even the more rural, the cost of water per unit is affordable despite having the VAT component.

So my advice to all of you is that despite the unpopularity of OTT which is understandable and which I think Parliament can still review, the real cost-push factors for internet pricing are different.

Even if OTT was removed but #govt fails to invest enough in connectivity, online access would remain a dream to many.

So, as the ICT sector, we shall continue to work on those primary factors within our mandate and I am glad we have made impressive strides.

On Taxation we shall continue to give our opinions just as sectors do.

Next time I will take off time to articulate for you how our ICT innovation ecosystem has grown from leaps and bounds because of this recognition of ICT as a priority sector.

For those of you that only excel in insulting, it does you no harm to also read these facts and inform your good selves.

I never mind about insults but please not trade in emotions only at the expense of facts.

I thank you

Hon. Frank K. Tumwebaze

Min. of ICT, Information and National Guidance.

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