Fairness for Africa: Cheaper Transit, Reasonable Royalties, Fair Taxes

“Affordability is the single most important lever to bring the Internet to everyone,” Hamadoun Touré tells us in Busan. Here are some things the richer countries can solve to help bring affordable broadband to the poor. I’m focused on correcting flaws in the system that suck 

1) High backhaul/transit costs double or triple the cost of providing broadband in most of Africa. A megabit costs $0.50-$3 in most of the U.S. and much of Europe. The same megabit in Lagos costs $170, 100x as much. 50-90% of the difference is cartel pricing, based on undersea costs where there is more competition.

2) High royalties may soon double or triple the cost of a low end smartphone.  Hundreds of millions fewer people will connect. Carlos Slim of Telmex told me at the Broadband Commission the $50 smartphone will connect two billion more people. On a mass product like a smartphone, a “reasonable” royalty would be something like 5-10%. Intel calculates royalties may soon be $140 on a mid-priced phone. Every international agreement calls for “reasonable” royalties and it’s time to reduce the Qualcomm tax.

3) Multinational giants should pay reasonable taxes. France and England can’t get Google or Apple to pay taxes. What chance does Cameroon or Thailand have without strong support from International groups like ITU and the giant’s home countries? Collecting through a “sender pays” is a terrible system which clearly is anti-consumer in the developed world. But changes in telecom pricing have sucked hundreds of millions in taxes/fees and probably more from some of the the poorest countries. Most of the benefit goes to carriers and consumers in richer countries, starting with carriers like AT&T that now aren’t paying the old termination charges. 

I’ve been asking those from the emerging world what countries like the U.S. can and should we do to support affordable broadband development. I’ve spoken in the last few days to people from Sudan, South Africa, Malawi, Niger, Zimbabwe, Guyana, Bangladesh, Saudi Arabia, Costa Rica, Egypt, Nigeria, China, Mali and others.

    One question I asked is “What should richer countries and International organizations do to help those in need?” The answers were surprisingly consistent, focusing on a few situations where richer countries/their companies are extracting capital from poorer countries. 

    Most of the work climbing out of poverty and building networks will need to be done in-country. Fortunately, the domestic private companies are finding the finance they need to build mobile networks for the cities of the world. Econet Wireless in Zimbabwe is completely privately funded and has reached nine million subscribers in one of the poorest countries in the world. Zimbabwe has more mobile subscriptions than people, and Econet is expanding across Africa.

    

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