But Virgin’s network is limited and fibre-optic cables are expensive. The two firms can profitably reach only around two-thirds of the population, reckons Matt Yardley of Analysys Mason, a consultancy that helped to prepare the report. Connecting the rest at high speed will cost around £3 billion. So Lord Carter surprised the broadband industry by proposing a £6 annual tax on telephone lines, raising around £150m. That will be used to bring “next generation broadband” (a term left undefined, but probably an expansion of the BT scheme) by 2017 to the third of the country the private sector will struggle to reach.

We sincerely hope this money will be spent as soon as its collected and will not add to the billions of universal service funds rotting in government accounts the world over. We also predict that there will be more mobile-only households as a result. Trust the British to go against the current. Everyone else beats up on mobile and shields fixed; they do the opposite.

Full story.

In his weekly newspaper column in the Lankadeepa, Mr Udaya Gammanpila, the Chairman of the Central Environmental Authority and the main proponent of mobile-specific taxes, has posed the question to me why the mobile sector keeps growing even as they keep loading taxes on it.   For example, the mobile subscriber levy of 10 percent of every bill was in effect in 2008 Q2.  Possibly, the 10 per cent levy on CDMA “fixed” phones was also in effect for at least part of 2008 Q2.  Yet, mobile connections grew by 43.5 per cent and fixed (primarily CDMA) by 42 per cent.

In one of my first columns on the subject of mobile-specific taxes, in September 2007, a year ago, I talked about the goose that lays the golden eggs:

“According to the fable, the regular supply of golden eggs was not enough for the foolish owners; blinded by greed, they cut open the goose to get all the eggs at once. They found to their grief that there was no trove of golden eggs in the goose’s stomach; that their greed had deprived them of any more golden eggs.

I do not accuse the government of being that foolish. They are not killing the goose; their behavior is more like that of trying to milk the goose for more eggs. The end result, however, will be a stressed goose yielding less eggs than it otherwise would have.”

I did not say the goose would stop laying eggs.  From our research we know that people will not radically increase their calling if the prices come down; we also know that people will not radically reduce their calling if the prices go up.  Note that I did not say less eggs than before the taxes; I said, “less eggs than it otherwise would have.”

Now Mr Gammanpila has a response.   The mobile operators are foreign owned and enjoy tax holidays.   All that he’s doing is preventing profits from being repatriated.   He imposes taxes on the customers; the operators reduce their prices because of competitive pressures.  The customers come out even; they pay more taxes, but they pay less to the company.   The company makes less profit; less profit is expatriated; we all live happily ever after in the JHU-mercantilist heaven.   The problem is that it’s not only profits that get affected.  Capital expenditure gets cut back too.  You don’t see the results immediately; they take a few quarters to show up.   But show up they surely will.  That’s when we’ll see the slowing down of growth in the sector, and as a result, in the economy as well.

How many quarters?   Four, I’d guess.   If not I’ll eat crow.

Which reminds me of an equity analyst who predicted that the mobile industry will plateau in 2008 at 38 SIMs/100.  Based on our teleuse@BOP research, both Harsha de Silva and I disagreed (see comments).   FYI, it’s 2008 and we have 45.76 mobile SIMs/100 according to the Department of Census and Statistics.  That is 20 per cent off.

Crow is served, Mr Equity Analyst.  Do you prefer it hot or will you have it cold?

Mega panel at ITU Telecom Asia 2008

I had the opportunity of chairing a panel of seven persons from various parts of Asia at the Forum at ITU Telecom Asia 2008 in Bangkok.  After we got around the inane title of Manga for the masses, we had a decent discussion, focussing on the aspects of connecting the unconnected, assuring adequate quality to the connected, and content.   My overview slides setting the frame are here.

Contrary to expectation, the Chairman of the Bangladesh Telecom Regulatory Commission, representing perhaps one of the least connected of the countries of Asia, talked about using universal service funds to develop content.   Several people referred to the counter-productive nature of universal service taxes, wherein poor people were being taxed to provide services to poor people, yet those taxes were not being utilized, wisely or otherwise.   I personally was relieved to hear that the Bangladesh universal service fund is still under consideration, and not a done deal.

On the subject of taxes, we had an interesting intervention from the floor, when Professor Howard Williams, the Acting Head of ITU Telecom Forum, intervened from the floor in defense of taxes being imposed on the telecom sector.   One assumes that he was working off the misconception that the objections were to ALL taxes on telecom services, and not on punitive mobile-only taxes, including universal-service taxes.  I clarified this.   It would indeed be a dark day when the ITU starts defending punitive taxes being imposed on telecom services.

Immediately after this session, I attended another session that addressed a topic we had done considerable research on, and which was said to be one of the ITU Secretary General’s three top issues:  Emergency telecom and relief.  This was, as I told the head of the ITU Telecom Board, the worst session I had ever attended at an ITU Telecom event.   After hearing many, if not all, the speakers refer to the role that telecom could play in early warning, I asked a simple question about cell broadcasting, with reference to the Maldives.   Pretty much no one on the panel knew what cell broadcasting was, but they answered nevertheless.

Why, when it has in-house expertise in early warning technologies, the ITU puts a non-specialist political official to read a prepared speech at major session, is a mystery to me.   The Thai speaker knew what he was talking about, and more importantly, stuck his area of expertise.  But I was truly disappointed in the rest.