KAMPALA —Last week netizens in Uganda as is their banter to complain without much action on social media were abuzz with the announcement of a significant increment in their internet data bundles through the introduction of the 12% levy by the government on all data purchased.
While this announcement came through the big telecom companies simply passed the tax burden onto the consumers.
With the lockdown biting hard with prices of basic necessities skyrocketing many commentators have noted the new tax wouldn’t have been more ill-timed. Few anticipated a global pandemic.
Today, many activities have become virtual. Working, socializing, and banking have increasingly moved online. One positive aspect has been that that by encouraging people to use online services, Covid-19 has accelerated connectivity of the country with the rest of the world or the world yonder as Fred my erstwhile writer literature guru might say. The internet has become the new safest, fastest and most reliable means of both communications and business transactions.
But with the new tax and all of the telecom (except for Smile communications) companies simply passing the burden of tax to the consumers, it is less certain how this would affect competition in terms of price wars but one thing of for sure it has made communication expensive. Two points are less certain. First, how will consumers depending on the internet react to the increment, which is large in relative terms, but low in nominal value?
Second, what might have happened if all the telecom companies had chosen to bear the burden of tax on behalf of their clients. Could it have set the stage for new price wars? Thirdly is the Ugandan consumer price-aware and price-sensitive when using data? If so, one should expect a shift to Smile Communications which has maintained its prices.
Understanding consumer engagement and behaviour, transparency, price sensitivity and the potential for those that choose to keep their prices low especially in this period are just some of the important aspects of the competitive dynamics of internet /data provision services.
Understanding the role that the competitive environment and, equally importantly, competition policy play in the development of internet services is clearly important for promoting internet penetration and use, as evidenced by Smile Communications decision to bear the burden of tax on behalf of its consumers.
The plan I guess to attract more subscribers as well as enable access to fast and reliable internet cheaply. I suppose it is their gift to that child reading of the net or that fashionista depending on Twitter and Facebook to market her merchandise. It’s a great sacrifice but one worth mentioning and in the long term, if it wining we are talking about, smile communications has won. In any case, it can be said that the permanently reduced fees hold benefits for users and, in particular, Smile Communications in the long term.
One thing is for sure if only consumers were more informed, more organized dynamic and louder about their demands then even with the 12% levy the internet rates in Uganda would be much lower. Rather than rant on social media the consumers have a choice, every so often to move to the cheapest, most affordable and reliable internet service providers. Of course, it would set the stage for a vicious price war in which by all means the consumer would come out as the winner.
