On Regulatory Surcharge: Government’s Plan To Backfire

On Regulatory Surcharge: Government’s Plan To Backfire

A leaked report from the Liberia Telecommunications Authority (LTA) obtained by the Heritage has unraveled how the Government of Liberia (GoL) via the LTA is planning to impose surcharges in addition to the controversial Price Floors for On-Net Voice And Data Services on the GSM Companies in the country.

The LTA is the regulatory and competition authority charged with the statutory responsibility to ensure a vibrant telecommunications sector of Liberia, while Lonestar Cell MTN and Orange-Liberia are the GSM companies operating in the country. According to the leaked report, the LTA’s new regulation establishes price floors for no-net voice and data services and a regulatory fee on telecommunication goods and services. It was signed on February 25, 2019.

If the latest regulation goes into effect, the Heritage gathered, GSM operators will now be compelled to charge a minimum of US$0.06 per minute. This is 100% increment to the existing charge on on-net voice call, which offers subscribers a 72-hour open line for US$1.00. The new floor price, it was further gathered, would eventually lead to the cancellation of the much publicized three days free calls promotion. Moreover, there is also a 50% increase in the price of data service. The new floor price is set at US$0.0218 megabyte.

But some key pundits say the imposition of the charges on the GSM companies will greatly affect the ordinary Liberians who are finding life very unbearable by the day. It can be recalled that recently, there was a huge public outcry after a document from the LTA called for public inputs on the new tariff floor proposal circulated on Social Media.

The contentious document, which did not provide clear explanation, put the new cost of On-Net Calls at 1.56 cents and On-Net Data at 2.18 cents. This created serious confusion in the public, making many to think that the new tariffs would have eliminated the three days free calls promotion being offered by the two GSM companies in the country.

However, prior to the mandate of the LTA, the House of Representatives’ Committee on Posts & Telecom instructed the LTA to stop imposing an additional surcharge on all local calls until the committee and the Board of Commissioners (BoC) hold a consultative meeting. Accordingly, the leaked report divulged that the two mobile service providers have agreed on the price floor for on-net voice calls, data services and 5% regulatory fee.

But regrettably, one of the GSM Companies, Orange-Liberia rejected in its totality the decision on the regulator surcharge. An official of the LTA, Mr. Israel Akinsaya, told journalists that after consideration of various parameters, the LTA proposed to key stakeholders that the following regulatory surcharges be applied to domestic voice and data services: (1) Surcharge on Voice-$0.008/Minute and (2) surcharge on Data-$0.0005/Megabytes.

He said the LTA maintains that surcharges are an effective method of restoring sector value lost during the price was among MNOs.  

While the proposed price floors are expected to have a positive impact on sector value in the medium to long term, he disclosed that the imposition of regulatory surcharges would have a more immediate impact and contribute towards the national development agenda.
With such surcharge, he further disclosed, the revenue of the GoL will increase by US$20 million (Twenty million United States Dollars) yearly.

According to the LTA official, Orange-Liberia argued that the introduction of surcharges would have a negative impact on Orange’s EBIDTA and reverse the expected gains from the price floors. But he was quick to point that Orange-Liberia recommended that surcharges not be introduced concomitantly with the price floors, and that a “committee” be established with the LTA and other MNOs to monitor the impact of the price floors on traffic and revenue over a period of six months and then make a determination if surcharges are feasible. Orange-Liberia estimated that, while the price floors may lead to 10% increase surge in revenue, they would correspondingly lead to an 86% drop in traffic from lower income level consumers.

Not satisfied with LTA Regulatory Surcharge, Organe-Liberia ran to court for judicial review of the matter on account that the LTA does not have the legal authority to impose the floor price and surcharges on the telecoms company.  But Judge Scheaplor R. Dunbar of the Civil Law Court ‘B’ on Tuesday, May 7 denied Orange Liberia’s petition to review a recent mandate by the LTA due to lack of sufficient evidence.

The LTA has levied tariffs on voice calls and data. Following Judge Dunbar’s ruling, Orange-Liberia excepted the ruling and took an appeal to the Supreme Court for further determination in the case.  The Supreme Court is the final arbiter of justice in the country.

On the other hand, Akinsaya disclosed that Lonestar Cell MTN also argued that a surcharge of $0.0008 would lead to a 42% fall in MTN’s revenue, and that low-value consumers would be negatively impacted as a result of fewer available minutes within a $1.000 bundle offering.
He mentioned that Lonestar Cell MTN estimated that any surcharge above $0.001would result in a loss of revenue and negate the gains from the price floor.

However, Commissioner Akinsaya noted that the LTA has not decided to take into consideration Organe-Liberia’s 86% drop in tariff from lower income level consumers and Lonestsr Cell MTN’s 46% fall in revenue, but chose to study the market forces relative to the establishment of price floors for on-net voice and data services and the 5% regulatory fee on telecommunications goods and services.

Commissioner Akinsaya pointed out that the two service providers are a part of the monitoring group, and there is no fix price or solution to the surcharge and that the LTA is open to negotiation and continued consultation among stakeholders are being carried out.
Meanwhile, he added that a round table meeting will be held and the six-month data being collected evaluated before the Regulatory Surcharge regime comes into effect.

 

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