{"id":547844,"date":"2006-01-26T12:25:04","date_gmt":"2006-01-26T12:25:04","guid":{"rendered":"http:\/\/localhost:8888\/wordpress\/technology\/547844-choking-on-telecom-licence-fees.html"},"modified":"2006-01-26T12:25:04","modified_gmt":"2006-01-26T12:25:04","slug":"choking-on-telecom-licence-fees","status":"publish","type":"post","link":"https:\/\/mybroadband.co.za\/news\/technology\/547844-choking-on-telecom-licence-fees.html","title":{"rendered":"Choking on telecom licence fees"},"content":{"rendered":"

Telecom operators fork out enormous sums every year. To whose gain?
\u00a0
Are SA telecommunications operators paying too much in licence fees? Some of them think so and say the fees, which amount to R1bn\/year or more, push up the cost of telephony for consumers. <\/font><\/p>\n

The telecom industry has been treated like an exclusive club in which companies, in return for high licence fees and social upliftment obligations, are protected from full-scale competition. <\/font><\/p>\n

The fees are stiff. Mobile phone operators have to pay R100m upfront in fees when they are licensed. Then, under their licence obligations, they have to fork out over 5% of their operating profit each year. <\/font><\/p>\n

Fixed-line operators don’t escape the net either. They have to hand over 0,1% of their revenue each year. The newly licensed second network operator will also have to pay R100m at the outset but, interestingly, incumbent operator Telkom did not have to pay this fee when it got its licence in 1997. <\/font><\/p>\n

These fees push up the costs involved in operating telecom networks and the result is that telecom prices overall are higher than they should be, says Genesis Analytics research manager James Hodge. He says there are serious inconsistencies in government’s approach to the market. On one hand, it tends to treat operators as cash cows for revenue collection; on the other, it complains that telecom prices are too high. <\/font><\/p>\n

Last year, Genesis Analytics recommended that government review its policy of imposing licence fees. It made this recommendation in a research report it prepared for the SA Foundation in which it detailed ways in which telecom prices could be brought down. <\/font><\/p>\n

Vodacom CEO Alan Knott-Craig says licence fees amount to another corporate tax. The standard income tax rate for SA companies is 29% but Vodacom is paying an effective 37%, he says. <\/font><\/p>\n

In a GSM Association report on taxation released in September, Knott-Craig claims Vodacom has paid more than R3bn over the past 10 years in service and spectrum licence fees and contributions to the universal service fund. This excludes regular tax contributions and its obligation to offer subsidised telephony in underserviced areas. <\/font><\/p>\n

Telkom, long blamed for the high cost of telecom prices in SA, has also made staggering contributions to the fiscus. Besides paying more than R1bn in income tax in the year to March 31 2005, it also paid R29m in licence fees and contributed more than R58m to the universal service fund. (Though not a tax, the state also benefited from R1,86bn in dividends arising from its 37,7% shareholding in Telkom.) <\/font><\/p>\n

Hodge says it’s best practice internationally for operators’ licence fees to cover only the cost the industry regulator incurs in overseeing the sector. The intention should not be to tax communications more than other industries. <\/font><\/p>\n

The Independent Communications Authority of SA (Icasa) collected more than R1bn in licence fees – excluding broadcasting and frequency spectrum fees – in the year to March 31 2005. Its annual operating budget, on the other hand, amounted to only R141m. <\/font><\/p>\n

Genesis Analytics says the mobile market has grown far beyond initial expectations and so the revenue generated from licence fees is now far more than is needed to fund Icasa. <\/font><\/p>\n

Reducing or scrapping licence fees won’t necessarily lead to lower prices for consumers, Hodge says. There should be some kind of mechanism to ensure that end-users benefit from reductions in licence fees and that operators don’t simply bolster their profit margins. <\/font><\/p>\n

The communications minister sets licence fees for major licence categories, such as fixed lines and cellular telephony; Icasa sets fees for lesser categories, such as value-added network services and private telecom network licences. Under the new Electronic Communications Bill, to be enacted soon, Icasa will take full responsibility for setting licence conditions for all operators. Icasa spokesman Jubie Matlou won’t say if the new law will result in a drop in licence fees but says the deregulation of the market, as well as the entry of more operators, will "definitely be factors that will affect licence fees ". <\/font><\/p>\n

He says licence fees are imposed because companies derive commercial benefit from a sector that uses national and limited resources. He says it’s a "privilege" for companies to operate in the sector and they are therefore "obligated" to pay licence fees. <\/font><\/p>\n

Matlou offers the argument that licensees are protected from full-scale competition and so licence fees and other obligations are commensurate with this "benefit". <\/font><\/p>\n

Inet-Bridge ||<\/em>\u00a0 <\/font>Discuss this article<\/font><\/a> <\/font><\/p>\n

<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Are SA telecoms operators paying too much in licence fees? Some of them think so and say the fees push up the cost of telephony for consumers.<\/p>\n","protected":false},"author":23,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_sma_x_autopost_status":"idle","_sma_x_autopost_error":"","_sma_x_post_id":"","_sma_facebook_post_id":"","_sma_instagram_post_id":"","_sma_threads_post_id":"","_sma_x_attempts":0,"footnotes":""},"categories":[17],"tags":[],"class_list":["post-547844","post","type-post","status-publish","format-standard","hentry","category-technology"],"_links":{"self":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/547844"}],"collection":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/users\/23"}],"replies":[{"embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/comments?post=547844"}],"version-history":[{"count":0,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/posts\/547844\/revisions"}],"wp:attachment":[{"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/media?parent=547844"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/categories?post=547844"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mybroadband.co.za\/news\/wp-json\/wp\/v2\/tags?post=547844"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}