Uganda: New social media tax will push basic connectivity further out of reach for millions

By Alliance For Affordable Internet |
Uganda’s government has passed a new tax that will require citizens to pay UGX 200 (US$0.05) per day in order to use messaging and voice over-the-top services (OTTs), including Facebook, WhatsApp, Twitter, and Viber. The tax, slated to take effect on 1 July, will push the cost of basic internet access further out of reach for millions of low-income Ugandans. The government must take urgent action to reverse this measure.
The Excise Duty (Amendment) Bill 2018, passed last week by the Ugandan Parliament, calls for telecommunications service operators providing data used to access OTTs to pay an excise duty on this access. According to Reuters, the country’s mobile network operators are likely to pass these costs on to consumers, levying a daily tax on each SIM card used to access the relevant platforms and services. The impact on consumers in Uganda — and particularly on low-income users — will be significant, and is likely to force many of these users to curb their internet usage, or to forego access entirely.
Only five other countries in Africa (where data was available) have more expensive mobile internet plans than Uganda. At the end of 2016, a 1GB mobile broadband plan in Uganda cost more than 15% of average monthly income. This high cost is keeping Ugandans offline — according to the GSMA, individual mobile internet subscriber rates in Uganda stand at just 18% of the population.
The true cost to connect is even higher for those earning less than the average national income (i.e., less than US$630/year). For the lowest income group in Uganda (see graph below), purchasing the same 1GB plan costs them 30% of their average monthly income. With the excise duty in place, this cost to connect for Uganda’s poorest will jump by 10%, resulting in just 1GB of data costing them nearly 40% of their average monthly income. The richest Ugandans will also experience an increase of 1% in their cost to connect, and by and large, this new excise duty disproportionately and negatively impacts low-income Ugandans and their ability to affordably access the internet.

he Ugandan government has argued that such a tax is necessary both to reduce gossip (“lugambo”) on these platforms, and to raise funds needed to address the impacts of comments made on social media that are critical of the government. However, it has not provided any explanation as to how such a tax might change what people say on the platforms, nor how the funds collected would be used to address these impacts.
The government has also argued that this tax will help promote local content development by placing a tax on “imported content.”  As consumers increasingly shift toward data-based services, mobile operators will have new opportunities to develop and offer their own OTT services on their networks. However, the current language in the bill makes the duty applicable to all voice and messaging OTTs, including those that could potentially be developed by mobile operators or Ugandan firms. This is precisely why regulators in other countries have opted not to intervene on OTTs — so that local companies can innovate and create jobs and value in the telecoms market. The government of Nigeria, for example, previously considered a tax on internet use, which was eventually scrapped as a result of studies showing it would make access unaffordable for millions of people.
For other local firms that rely on voice and messaging apps for sales and service, for example when they use WhatsApp to communicate with customers, this duty will hurt their businesses. Finally, from a consumer view, these services offer value for money to communicate and share with others beyond what existing voice and messaging services can provide.
Stifling internet uptake and use is also likely to result in failure to achieve the goals laid out in the Digital Uganda Vision.The ICT sector contributed 3.4% to Uganda’s GDP in 2015, and increasing internet access has the potential to spur significant socio-economic growth — a recent study showed that a 10% increase in mobile broadband penetration can increase economic growth by nearly 3%.
We urge the government of Uganda to:

  • Repeal the excise duty amendment before it goes into effect, and
  • Adopt an evidence-based approach to policy making for the sector, with a specific focus on better broadband planning, increased public access solutions, innovative spectrum policy, and more efficient use of universal service and access funds.

By focusing instead on these areas, the government can have a far more positive impact on increasing internet access, and promoting local content development and innovation.
Featured image: Bustling street scene in Kabale, Uganda (Photo credit: Adam Cohn, CC BY-NC-ND 2.0)

Enabling Open Access ICT Infrastructure Through Universal Access

In view of the ongoing debates about how to reduce bandwidth costs in Africa, and discussions about how the East African Submarine Cable System (EASSy) should be managed, APC is supporting the Collaboration on International ICT Policy for East and Southern Africa (CIPESA) to develop a series of papers that discuss issues concerning Open Access fibre optic systems and how they can benefit from Universal Access programmes in Africa.
Among other things, this paper:
1)    Addresses the factors that inform Universal Access in Africa;
2)    Makes the case for Open Access infrastructure in addressing the continent’s connectivity headaches;
3)    Examines the flaws that are common in African connectivity programmes, including the shortage of useful content and the failure to create sustainable demand for service;
4)    Presents the case of the Ugandan and Kenyan rural access programmes and scrutinises areas that may fail their Universal Service aspirations; and
5)    Concludes that regional infrastructure undertakings like EASSy require Universal Access to be correctly implemented and to address demand in order for Open Access principles to prevail.
Several African countries have adopted Universal Access principles as part of their efforts to extend modern communication services to disadvantaged areas. The thinking is that Universal Access will help bridge the digital divide within countries, whereby urban areas tend to have better and often more affordable connectivity compared to rural/disadvantaged areas.
Increasingly, the principle of Open Access is also gaining currency for similar reasons: countries seek to lower the cost of extending connectivity and enhance the affordability of ICT services. Some countries are embracing Open Access not only for regional infrastructure backbones, but also promulgating it for national ICT infrastructure.
This paper questions whether Open Access will bear much fruit if Universal Access does not significantly go beyond the mere provision of connectivity, to creating effective demand.
Why Universal Access
Universal Access entails access by all to quality communication services like telephony or the Internet at affordable prices and reasonable distances. In Botswana’s, the definition seems more comprehensive than in most African countries. Its National ICT policy defines Universal Access as “[t]he provision of affordable, reliable, simple to operate, advanced capabilities for new telecommunications and information services, so that they are either available or easily accessible to everyone, with due regard to people with special needs”.
Overall, African Internet penetration is very low at only 2.6 per 100 inhabitants. Comparative figures for Europe are 31.2%, the Americas (north and south) 28.2%, and Asia 8.1%. But even within Africa, penetration levels tend to be lower in some of the East and Southern African countries (as shown in the graph below), where the lack of a link to the international fibre optic system makes connectivity more costly.
Interventions (mainly public sector) are therefore necessary to extend services to regions that are rural, poor, or difficult to connect due to geographical complexities, as they often lag behind in access to ICT. As it is, Universal Access implies having a telephony/Internet access facility within walkable distance for all, but does not necessarily imply that people have the means to use and maximise the benefit of the technology. Issues such as the ability to pay for the service, skills in using the service, and appropriate content, may hinder a person from maximizing the benefit of the ICT services, yet they are often ignored by Universal Service programmes.
Case for Open Access
As can be seen from the illustration above, only a tiny fraction of Africa has access to the Internet. The shortage of infrastructure and the high cost of connectivity are key contributing factors. The advent of fibre optic bandwidth will potentially make it affordable to connect thousands of more users. But if the cable is run along a consortium format, it is likely that the price for connecting will be kept artificially high, resulting in much of the bandwidth available on cables like EASSy staying redundant. This is why Open Access should result in more people accessing ICT services. Open Access requires that owners of assets that are thought to be unique/ costly/ wasteful to duplicate, make them available to others at a competitive price. This mainly applies to what are deemed to be national infrastructural assets. EASSy is probably the best-known African project to adopt Open Access principles, but others like the COMESA Telecommunications Company (COMTEL) are following suit. Countries where exclusivity periods for telecos are ending are requiring all infrastructure providers to allow access to their resources at competitive prices so that the new entrants are not disadvantaged vis-à-vis the existing infrastructure owners. In fact, COMESA at large and the East African Community have endorsed the Open Access principles for ICT infrastructure, though they have not effectively implemented them. Open Access in a way shares the vision of Universal Access since it sees the challenge as being able to extend communications to those at the bottom of the income pyramid by lowering the cost of services. In this sense, Open Access can be viewed as an enabler of Universal Access. Open access encourages small operators, including those that operate in limited geographical areas, to enter the market and service also ‘last mile’ connectivity.
Rural and ‘last mile’ connectivity are crucial in Africa. Because African connectivity is extremely low compared to other parts of the world, connectivity in more deprived parts of the continent is unlikely to be effected by private sector operators whose motives are purely commercial. A person in a high-income country is over 22 times more likely to be an Internet user than someone in a low-income country. And in high-income countries, mobile phones are 29 times more prevalent, and mainline penetration is 21 times that of low-income countries (UNCTAD 2006). Relative to income, the cost of Internet access in a low-income country is 150 times the cost of a comparable service in a high-income country. The disparities in access to ICT are huge in most of Africa, which creates a need for improving ICT connectivity, access and usage. Both Universal Access and Open Access respond to this need.
It is generally agreed that access to reliable and affordable ICT can help to positively transform the lives of those who own them and use them effectively. ICT can be an enabler of development, as they can reward those who use them well with increased income and a better quality of life. Conversely, those who do not use them are left behind, and ICT disparities often tend to worsen the existing inequalities.

Flaws in African Universal Access programmes

Several African countries have set up universal service funds in their national ICT policies. But it is becoming evident that the definition of Universal Access and the implementation of Universal Access programmes in much of Africa tend to be flawed. In most cases, the designation of Universal Access does not go beyond taking connectivity to rural areas. But as will be argued below, for the majority of rural Africans to access and effectively use ICT, more than connectivity is needed: Relevant (including local and adapted) content, building capacity for people to be able to use the ICTs, and for communities to maintain the ‘equipment’, are crucial too. So are access to reliable and affordable electricity to power the connectivity, the use of appropriate technology for the connection, and connectivity services that are sustainable. These are what will create effective demand that will feed Open Access and make it a success.
While some schools of thought hold that the lack of electricity is a leading impediment to the success of Universal Access programmes in Africa, we feel content is a much more fundamental problem. Most of the Universal Access programmes are implemented in rural areas that do not have power, so in cases like Uganda’s Rural Access Programmes, diesel-powered generators are part of the package extended to such initiatives. Like electricity, the development of local content is one of the paramount prerequisites for Africa’s effective uptake of the Internet and associated services. But at the moment, African-generated content is only a tiny fraction of the online content. This means that what is available on the Internet (and associated mediums) is not always relevant to Africans. Without appropriate content, Africa cannot fundamentally boost usage of ICT in disadvantaged areas.
However, the development of content cannot be achieved without empowering people and organisations in Africa to enable them develop and disseminate their content, including indigenous knowledge. The reality is that few Universal Access programmes in Africa prioritise content generation. In some cases where content is mentioned in Universal Access policy documents, it is often a peripheral issue that hardly moves beyond the policy documents to actual implementation.
This could also explain the challenges telecentres in Africa have faced, which have made only a handful of them successful. Quite often they have failed to address critical issues such as the requirements of the beneficiary communities. There tends to be a general assumption that technology brings development and everybody should know this, including rural communities. A telecentre is then dumped in the community whose needs are not well ascertained, and which is unable to use the service. That is a recipe for failure.
The case of CELAC (Collecting and Exchange of Local Agricultural Content, in Uganda is an instructive one in best practice. It collects local indigenous knowledge from the communities, processes it, and exchanges it between communities in different parts of the country. This is content people can easily associate with, and are comfortable working with. Additionally, CELAC has demonstration gardens where it ‘practices what it preaches’. The farming community then finds it easier to appreciate the practical relevance to improving their livelihoods of the information available at the CELAC resource centre.
Without a doubt, demand for information carried by modern communication channels exists in rural and under-served Africa. And this demand should rise as new technologies allow for a decrease in costs of bandwidth and of telephony connectivity generally. The telecom operators that are in the consortium that has promoted EASSy over the years, are perceived to want closed control over the cable’s bandwidth so that they can charge for it as they wish. But it is also conceivable that they want the consortium model because demand is not easily predictable, and they need to be in charge of servicing that uncertain demand.
But while the completion of EASSy would obviously result in a possibility for users to get top-grade bandwidth at significantly lower prices, there is no guarantee that under a consortium this will be the case. What is more likely to happen is that the individuals and organisations that already have Internet connectivity, in predominantly urban areas, will upgrade their connectivity; few additional connections outside the currently connected circuits would be made under an arrangement other than Open Access. In turn, by enabling operators, even small ones, to hook onto the cable, and making it possible for them to operate in less-served areas, Open Access would boost demand for Internet services.
The telecentre experience shows that we have to address the demand side at the same time as we address the supply constraint. Creating content that is relevant for education or health, and making communities aware of the uses of ICTs, are ways of generating demand. This why development agencies that support ICT for Development programmes need to ensure that these programmes create requisite demand on a sustainable basis.
Uganda’s Rural Access Fund
In 2001, Uganda set up the Rural Communications Development Fund (RCDF), one of the very first on the continent, to “enable the establishment of an appropriate infrastructure that supports ICT development and at the same time achieves Universal Access in Uganda.” The primary objective was to ensure that basic communication services of acceptable quality were accessible, at affordable prices, and at reasonable distances, by all people. The fund would primarily be used to assist in areas where the provision of commercial services was not feasible, and would be accessed through some form of competition by operators. The initial proposed prioritisation was support for the establishment of access to basic ICT services in sub-counties, which are un-served; support for the introduction of Internet Points of Presence (PoP) in every district headquarters; the promotion of ICT capacity (training, management and maintenance of services established at vanguard institutions); the promotion of content creation; and the establishment of a domestic Internet Exchange Point (IXP).
While the RCDF has funded the establishment of Internet PoPs and the setting up of community access points, with power supply highly erratic (and costly), the centres are often inoperational. Critics say a lack of effective capacity building for operators and beneficiaries of these centres, coupled with a lack of sufficient local and adapted content, also detract from the usefulness of the facilities. At another level, how to sustain these operations beyond the RCDF subsidies has not been properly worked out, which casts doubt on whether this initiative is sustainable in its present format.
Kenya’s Rural Development Fund
In Kenya, telecom operators have opposed the establishment of a special Universal Service Fund (USF) for developing communication infrastructure and services in rural and under-served areas. The USF was to be financed through a tax charged on mobile phone airtime. Telecom operators argue that the fund would inflate the cost of airtime and prevent full use of the emerging mobile phone service. The proposal is for telecom companies, both mobile and landline providers, to contribute 1% of their gross annual revenue to the fund. But operators argue that USF would instead threaten to reduce penetration, as it will increase total levies charged on mobile phone usage to 28% from the current 27%. Celtel has argued that in the past it had connected areas not served by any means of communication, and that telecom companies do not need government prodding to move to these areas. It argues that rather than asking phone companies to contribute 1% of their gross revenue to the fund, government should identify areas it wants to cover, then tell them to use that 1% to cover these areas. The operators’ argument is that the USF by itself cannot create the necessary conditions for running a sustainable service in the areas where government envisages intervening. By extension, it can be posited that Open Access would not be feasible in such areas, unless Universal Access interventions helped create demand in such regions.
Universal Access is designed to take connectivity to areas where it is lacking and is not likely to be made available by commercial operators. While it should ideally develop both infrastructure and content, usually funding for appropriate content is disregarded. Equipment often breaks down and there are no maintenance support facilities; while low levels of literacy also mean that even when services are extended to some rural areas, they will not be useful to many members of the community – unless they are given training. A distinction is often made about ‘necessary conditions’ (which entail bringing the relevant ICT infrastructure to a community, including carriage facilities that store, service or carry information, the actual devices that the people use and the tools to operate); and ‘sufficient conditions’, which refer to conditions that yield maximum usage and benefit of ICT. That is, communities should have the skill to take full advantage of ICT, be able to afford to pay for services, and appropriate content has to be made available. It can be argued then that universal access programmes in Africa may have taken noteworthy strides in the direction of the necessary conditions for Universal Access, but they are far from embarking on the sufficient conditions for Universal Access. Open Access is a means of enabling Universal Access; though, conversely, a comprehensive and well-implemented Universal Access programme is also an aid to the successful operation of an Open Access model.  – With