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Incentives, Taxes, Data, and the Struggle to Lower Costs in Mozambique

Note: You can read the Portuguese version of this blog here.
 
The biggest obstacle in expanding broadband access in all of the countries that A4AI works in is the high cost of connecting to the Internet, but in Mozambique, it is a particularly imposing hurdle. According to the International Telecommunication Union (ITU), a fixed-line broadband connection costs almost 51 percent of the average monthly income in the country, and a mobile broadband connection costs 41 percent (ITU MIS 2014). These statistics can be daunting when considering prices are much higher for the 60 percent of the population who live below the $1.25/day poverty line.
 
Undoubtedly, these high costs are preventing most of the population from logging on — the ITU estimated that in 2013, only 5 percent of Mozambicans were using the Internet. Yet, this is an opportune time for the country to connect more of its citizens — Mozambique is currently experiencing tremendous economic growth (GDP grew by 7 percent last year) and increasing demand for broadband from businesses and individuals.
 
On November 18, members of the A4AI-Mozambique Coalition met to plan how best to seize this opportune time to address the major policy and regulatory obstacles to more affordable Internet access. The coalition set concrete goals focused on tackling three key issues: Infrastructure Sharing & Investment; Taxation; and Data Collection.
 
Incentivizing Infrastructure Sharing & Investment
 
Coalition members from the country’s telecom operators and private sector shared their experiences and frustrations with the state of infrastructure sharing in the country. Despite the existence of an infrastructure sharing regulation and attempts by the national regulator to promote infrastructure sharing, the regulation is not being implemented adequately. While mobile operators Mcel and Vodacom are currently negotiating an agreement to begin sharing some infrastructure, stakeholders expressed concerns around the fact that the third operator Movitel is building infrastructure with no plans to allow sharing. The key takeaways from the coalition’s discussion on this topic were:
 

  • Constructing new infrastructure without sharing is too expensive to be sustainable. Sharing will reduce operational costs and network overlaps, and expand network coverage to reach more users.
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  • The coalition’s working group will need to consider ways in which all operators can be incentivized to share existing infrastructure and invest in new shareable infrastructure.
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  • The role of the national regulator, the Instituto Nacional das Comunicações de Moçambique (INCM), is key, especially in revising the current infrastructure sharing regulation to set minimum quality standards for infrastructure in the country. INCM must also create incentives to increase the frequency and quality of sharing.

 
Rebalancing Taxation to Promote Growth in Mobile Sector
 
Mercy Ndegwa, Africa policy advisory for the GSMA, provided an overview on taxation and its impact on the mobile industry, explaining that high taxation of the telecoms sector limits growth potential of mobile services, lowers 3G/4G penetration and reduces potential contribution to economic growth. She urged the fiscal policy makers in attendance to consider four ways to improve current taxation on the mobile industry so that more users could enjoy the benefits of mobile access:
 

  • Realign towards a broad-based tax system, and not unfairly taxing the telecoms sector
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  • Reduce the complexity and uncertainty of mobile taxation
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  • Carefully consider the impact of taxation on new and emerging services
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  • Reduce taxation on access

 
Improving National Data and Research Efforts
 
The coalition meeting provided an opportunity for one of A4AI’s members, Research ICT Africa, to launch its policy research report Understanding what is happening in ICT in Mozambique. Report author Francisco Mabila, director of the Informatics Centre of the Eduardo Mondlane University, provided an overview of the findings and discussed the country’s broader need for more data and research on the ICT sector to contribute to more evidence-based policymaking. Some of the challenges that were discussed include a lack of clearly defined roles for the government agencies mandated to collect ICT data and a lack of staff capacity to collect and analyse data adequately.
 
As part of our efforts to build the capacity of local researchers and develop a robust framework for data collection and reporting in Mozambique, A4AI hosted a workshop on ICT data collection methodologies in partnership with Brazil’s Regional Centre of Studies for the Development of the Information Society (Cetic.br) on November 19-20. Through its partnership with Cetic.br, A4AI also hopes to strengthen South-South cooperation between research institutions from Portuguese-speaking countries.
 
Setting Goals for the A4AI-Mozambique Coalition
 
After examining the major challenges in each key issue area, the coalition’s working groups met to map out their work plans, set their objectives and plan their activities. Some of the proposals that will be incorporated into the work plans include:
 

  • A thorough review of current legislation and standards around infrastructure sharing in the country and elsewhere. Based on the outcome of the review, develop a draft proposal that addresses infrastructure minimum standards and an incentive policy for infrastructure sharing.
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  • An assessment of the impact of current fiscal policy on the ICT sector — the results of which will contribute to subsequent proposals for tax reform.
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  • A national framework for ICT data collection and reporting by government agencies.
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  • Formation of a research consortium for non-government research institutions to share information and collaborate on joint research projects.

 
Three coalition members will serve as leads for each working group and manage the implementation of the work plans with the support of the A4AI team. The next coalition meeting, planned for the first quarter of 2015 will be an opportunity for the working groups to update the coalition on their progress. In addition, two workshops will be conducted to complement and strengthen the work of the working groups.