Tax to fund broadband penetration in Kenya to take effect in July

Kenyan government has announced a new tax on telecom operators specifically aimed at raising funds for advancing Internet penetration in Kenya.

The new levy is set to take effect in July this year after the Communications Commission of Kenya (CCK) confirmed the issues arising from the formation of a committee to manage the fund had been sorted out.

Under the new arrangement, licensed operators will be required to remit 0.5 percent of their annual income to fund the Universal Service Fund (USF) expected to ensure rapid growth on telecom and broadband reach.

Telecom operators can borrow money from the USF to expand and offer services in regions that are marked as commercially non-viable and hence not worth spending shareholder money on.

The fund is geared towards promoting the availability of quality telecom services at affordable rates, increasing access to advanced countrywide telecommunications services and advancing the availability of communication services to consumers, including those in low-income, rural and isolated areas at rates that are reasonably comparable to those in urban areas.

Several countries have implemented similar programmes to extend telecom and Internet reach in their countries. Some countries even charge up to 6 percent of annual revenues of telecom companies.

In Kenya, the tax was already in place two years ago, though disagreement on who would manage the fund delayed its implementation.

A number of Kenyan telecom companies however seem uncomfortable with the new arrangement. Zain Kenya (now Bharti Airtel) argued that the responsibility of spreading the mobile and broadband reach remains with the operators and not with the government.

“As it is, there is no industry involvement in the administration of the fund. We also need to know beforehand what the regulator intends with the fund and what projects will receive priority,” Safaricom’s corporate affairs director Nzioka Waita said, as quoted by the Daily Nation.

Yu Mobile is the only one seemingly ready to comply with the CCK.

It is yet to be seen how the tax will be administered. Customers hope the telcos will not push the burden of the new tax to them, as in the case of the newly introduced mobile money tax where Safaricom has passed down the cost to the users.

According to a report by the International Telecommunication Union (ITU) on best practices of USF in Sub Saharan Africa, as more countries in the region increase the scope of their Universal Service and Access Funds they will be forced to move past projects that focus on providing access to shared services or public access such as telecentres and payphones, and those that seek to extend network reach.

“They will have to turn their attention to broadband Internet and ICT services, including applications, usage and capacity development in addition to pure access,” the ITU said.

Posted in: Internet

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