High Taxation on Mobile Networks Starves CAPEX

High levels of taxation being placed on the mobile sector by governments are leading to an infrastructure investment deficit, according to ITU Secretary General Dr Hamadoun Touré. Speaking at Mobile World Congress in Barcelona this week, Touré criticised governments which view the huge revenues generated by the mobile sector as a ‘cash cow’ to be used to provide other public services not related to communications.

The problem is particularly acute in emerging markets, although the Secretary General refused to name any specific governments when challenged. The rapid increase in demand for data services as a result of widespread adoption of featurephones and smartphones is to blame. Many older networks in emerging markets were planned mainly for voice services and will need upgrading soon if they are to keep pace.

According to Touré if action is not taken the ‘data pipe’ will start filling up in some countries within 2 years, leaving mobile network operators (MNOs) with major CAPEX challenges and subscribers frustrated at the lack of services. Governments must recognise that new mobile infrastructure will be needed and cut taxation on MNOs.

Evidence for the problem is not thin on the ground. A number of MNOs in emerging markets have handed licenses back to governments or had them withdrawn for failing to launch services by deadlines in the last few years. High taxation and the high cost paid to governments for licenses are invariably among the main reasons given in such circumstances.

To force governments to address the problem and lower taxes ITU is planning a new world conference on international telecom regulation (ITR) later in 2012. The last event to address this issue was held 24 years ago, in 1988. Touré believes the change from voice to data now necessitates a new framework based on regulating bits and bytes rather than time and distance.

However, over the last 20 years the ITU’s power to influence the direction of development and regulation within the ICT field has become much diminished. Many key areas of the internet and mobile ecosystems do not have standards set and are not regulated by the organisation. Without the active involvement of all players it is hard to see how a new ITU framework can achieve the objectives Touré wants.

Sign-up to our weekly newsletter

Keep up-to-date with all the latest news, articles, event and product updates posted on Developing Telecoms.
Subscribe to our FREE weekly email newsletters for the latest telecom info in developing and emerging markets globally.
Sending occasional e-mail from 3rd parties about industry white papers, online and live events relevant to subscribers helps us fund this website and free weekly newsletter. We never sell your personal data. Click here to view our privacy policy.