In
the past week and six days since Monday May 27th 2012AD, we were hit
by several surprises that have left Jamaicans on a whole reeling!!
It
was a week where additional taxes were announced as part of the GOJ (Government
of Jamaica) Budget Debate on several food items and other things and then
altered due to “public outcry” as noted in the article “No
GCT on raw foods at markets”, published Thursday, May 31,
2012, The Jamaica
Observer and “Tax
package softened”, published Thursday, June 07, 2012 by
Balford Henry, The
Jamaica Observer
One
Tax stood out for me personally: The Tax on Telecom Providers.
Despite
the alterations in the Tax packages, the Public is wary of the GOJ as they know
that the missing money has to be found elsewhere in the Budget. Worse, no final
deal has been yet announced with the IMF (International Monetary Fund), making
many wonder with half of the year already gone, where are the fund to come
from.
Already,
thanks to the delaying tactics by the GOJ, the Growth rate as recorded by the
PIOJ (Private Sector Institute of Jamaica) has declined for the First Quarter
of 2012 to 0.6% as stated in the article “Mining
Sector Fizzles But Economy Grows 0.6%”, published Friday
June 1, 2012, The
Jamaica Gleaner.
This
as an additional Taxof US$0.075 per minute on inbound international Calls as
well as an additional US$0.30per minute is to be placed on all Cross Network
Calls between Local Mobile Networks, mainly Telecom Provider Digicel
and Telecom Provider LIME.
Apparently
the GOJ is looking to raise some US$5.2 billion from the Tax measure on Voice Services,
completely ignoring the still nascent Data Services.Telecoms would be an
obvious and logical choice as International Calling is inelastic in demand i.e.
people have relatives to Call abroad to have them send remittance money as well
as keep in touch.
However
Digicel
CEO Mark Linehan apparently flustered, did not take the news very well,
especially after previous weeks run-in with the TAJ (Tax Administration of
Jamaica) with regards to unpaid GCT on Mobile Phone Calls, over which the GOJ
and Digicel
have called a truce as stated in the article “Gov't
Defends Digicel Tax Raid”, published Thursday May 10, 2012,
The Jamaica Gleaner
and “Digicel,
Tax Administration Call Truce”, published Monday May
14, 2012, The Jamaica
Gleaner.
This
was reported in the article “Digicel opposes proposed telecoms Tax”, published
Wednesday May 30, 2012 8:38 am, The Jamaica Gleaner and “Digicel Slams Telecoms Tax”, published Wednesday
May 30, 2012, The Jamaica Gleaner.
Digicel
CEO Mark Linehan is quoted as saying, quote: “Digicel
is strongly urging the Government to reconsider the imposition of these
excessive taxes on the telecoms sector. While these punitive taxes on the
telecoms industry may assist the Government's budget shortfall in the short
term, ultimately it will be detrimental to the development of Jamaica in the
medium to long run. The imposition of these taxes will severely restrict
further investment in Jamaica by the operators and their ability to assist in
the development of the economy, ultimately harming businesses and consumers.”
Even
Opposition Minister of Finance Audley Shaw got into the mix-up also making
complaints about the supposedly unfair taxes as stated in the article “Hostile
phone Tax”, published Wednesday May 30, 2012, The Jamaica Gleaner.
Truth
be told, Opposition Minister of Finance Audley Shaw and Digicel
CEO Mark Linehan are BOTH overreacting as it’s good to note Telecom Provider LIME has no
complaints.
The
reason: Most people already make Calls on the Telecom Provider Networks using
either:
1. VoIP
platforms such as Master Jack, Google Voice or even Skype, which is now owned
by Microsoft and deeply integrated into Facebook as stated in my blog
article entitled “Microsoft
aquires Skype for US$8.5 billion - Miley Cyrus's Fly on the Wall Drops it Like
it’s Hot” and “FaceBook
deeply integrates Skype - Microsoft, the Ladykiller of Landline”
2. International
Calling Plan as detailed in my Geezam
blog
article entitled “How
to set up an International Calling Plan for Digicel or LIME Prepaid and
Postpaid”
If
anything, from a purely economic point of view, the increased taxation will
translate to increased International and Local Calling for more funds to be
sent from relatives both Internationally and Locally respectively. This will
spur an increase in the adoption of Postpaid Mobile Services, Landline and
Mobile Wireless and Wired Broadband Internet as already predicted in my blog
article entitled “OUR
Records Voice Decline for the Fourth Quarter of 2010 - Postpaid, Data Services
and Fixed Line Mobile and Landline Saturday Night Fever for Telecom Providers”.
Difficulties
of collecting these taxes abound, such as the extra-territorial nature of the Tax
on Inbound International Calls, effectively a Tax on the US of A. The FCC
(Federal Communications Commission) might not gripe much about this.
Contrary
to Media Reports, Call termination on another Telecom Provider Network attract
a Flat Rate termination tariff, which is negotiated by Telecom Provider with
Carriers in the US, Canada and UK. Negotiations rounds should thus begin again
with the aim to increase this Calling rate to accommodate the new Tax of
US$0.075 per minute.
Customers
can insulate themselves from this by adopting an International Calling Plan on
offer from Either Telecom Provider. This was the point of the JA$8.99 Flat Rate
Calling Plan for Prepaid and now the Anywhere Calling Plan for Postpaid as
stated in my Geezam blog
article entitled “Digicel
intros the Anywhere Plan for Postpaid” and my blog
article entitled “LIME's
4G Experience Centers & Digicel's JA$8.99 One Rate Plan - Telecom Providers
fear Municipal Wi-Fi SkyFall from Broadcasters DSO”:
Get customer to adopt an International Calling Plan.
As
for the local Tax of US$0.30 cents on Cross Network Calling, that is set to get
a boost thanks to the recent declaration by the OUR (Office of Utilities
Regulation) of an interim rate of JA$5.00 per minute for Cross Network Calling
as stated in the article “OUR
sets interim termination Call rates at $5”, published
Tuesday June 5, 2012, The
Jamaica Gleaner.
The
new Telecom Regulator will be adjust the rates in the future and make them
permanent in keeping with changes in the Telecommunications Act of 2000 to whom
the OUR will hand off its portfolio responsibilities in the Telecom Sector.This
news of lower Cross Network Calling Rates combined with the increase prospect
of increased usage of Data Services may be what’s keeping Telecom Provider LIME mute on the
subject of the Telecoms Tax!
In
the coming months may see the balance of power in BOTH Data Services and Voice
service swing in their favour as suggested by the article “LIME
scores with rate changes”, published Thursday May 31, 2012,
The Jamaica Gleaner
and “Digicel
worried, LIME welcomes telecoms changes” Published Wednesday
May 2, 2012, The
Jamaica Gleaner.
Telecom
Provider LIME
has already rolled out both sweeteners for Voice Services in the form of the LIME XL Value
Promotion and Lower Data Charges effective since Tuesday May 1st
2012AD as stated in my
blog article entitled
“LIME launches XL Value Campaign and slashes 3G Mobile Prepaid
Data come May 1 - Shadows of the Old Republic as LIME does Baby Cham's Wine”.
In addition, Telecom Provider LIME’s brand new IPTV (Internet Protocol Television) services
also dubbed LIME TV and different from its DVB-H (Digital Video
Broadcast – Handheld) service LIME TV as explained in my
blog article entitled
“LIME launches IPTV Streaming Service LIME TV in Barbados on
schedule - Lady Gaga's Bad Romance for Digital Cable and Free-to-Air Broadcasters”, will get an extraordinary boost from this
taxation measure.
Hence their silence is most likely glee; they
are going to benefit from the double whammie combo of Increased Taxation on
Voice Services, with Data Service completely ignored and the new Flat Rate of
JA$5.00 for Cross Network and International Calling
Both announcements represent a decline in
Medium term profitability for Telecom Provider Digicel and hence their angst at the coming revenue
losses, as their Network is 90% Prepaid Customers, according to OUR statistics.
Telecom Provider Digicel, however will benefit in this Telecom Tax accelerated love
affair with Data Services, particularly Mobile Data as more and more Jamaican
are going smartphones and dodging Blackberrys as noted in my blog article entitled “Blackberry popularity wanes as Jamaicans go smartphones -
Android and Apple's Smartphone Revolution”.
Telecom Provider Digicelalso benefits as this push towards Data Services means that
their Mobile Data Push and Cloud Services via the acquisition of CLARO Jamaica will
be fruitful in the long term as predicted in my
blog article entitled “CLARO’s Freeness ends
5th January 2012 – Digicel’s Bigger, Better with Data and Cloud”.
Again, as I had said at the very beginning,
this Telecom Tax is aimed at Voice Services, not Data Services. Hence the
reason why this measure is good for the Telecom Providers overall!
Especially when Data Services are combined with
VAS (Value Added Services) such as IPTV Streaming and VoIP Calling, interest in
which will peak customer interest and spending and thus encourage Telecom
Provider to upgrade and expand their Data Service offerings!
BOTH
Telecom Providers may not necessarily like this in the medium term as this for
them is a kind of “Bitter Medicine”. Data Services are not as spectrally
efficient as Voice Services i.e. less Network resources are required for Voice
Services, both Prepaid and Postpaid than Data Services.
Telecom
Providers are still yet to complete very expensive upgrades as stated in my
blog article entitled
“LIME's US$80 million Caribbean HSDPA+ Release 7
Upgrade - Sonic the Hedgehog” and “Digicel's US$85 million HSDPA+ and WiMax 4G
Upgrade - Wizards of Waverly Place Fast Five Showdown” slated to ramp up be completed by December
2012Ad of this year.
Long
term, however, the advantage rests with the Customer and Telecom Provider to
capitalize on the coming trend of a shift to Data Services which this Tax is
sure to accelerate. This as it will make VoIP Voice, Video Services and Cloud
Data Services and other Data-Centric VAS (Value Added Services) increasingly
popular with customers and thereby justify any increase expansion of their T1
thirsty and resource hungry Data Networks.
In
essence the Telecoms Tax is a Prometheus (2012) and the coming
of Flat Rate International and Local Cross Network Calling which will result in
the increased adoption of Data Services as prognosticated based on OUR
Statistics for 2009AD to 2010AD in my blog
article entitled “OUR
Records Voice Decline for the Fourth Quarter of 2010 - Postpaid, Data Services
and Fixed Line Mobile and Landline Saturday Night Fever for Telecom Providers”.
Now
all we needs is a third competitor…..stay tuned for more on the FTC vs Telecom Provider Digicel as
anticipated in my blog
article entitled “FTC
wins right to pursue legal action against the Digicel-America Movil swap - Game
of Thrones as Mobile Data Candyshop beckons”.
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