Bangladesh doesn’t need a universal service tax

Posted on October 15, 2008  /  0 Comments

An article written by Rohan Samarajiva on Bangladesh’s proposed universal service taxes has been published in The Daily Star, Bangladesh; an excerpt follows.

Bangladesh currently has the lowest mobile prices in the world and perhaps the world’s highest mobile growth rate. Pretty good, by any measure. A universal service tax can ruin the business model that has given millions of Bangladesh citizens the opportunity to get connected to an electronic network for the first time and to use telecom services at affordable prices. Instead of solving a problem, it will create one.

…the same basket of calls, texts and apportioned connection charges (low-user basket, based on OECD methodology adapted for the region by LIRNEasia) that costs $5.25 in Nepal, costs only $2.46 in Bangladesh.

Yet, the low prices and the resulting low ARPUs [Average Revenues per User] have not bankrupted the mobile operators. They are making enough profits to justify the continued investments that will keep growth going. Low prices and decent profits indicate that a different business model is at work.

…by introducing universal service taxes, the government of Bangladesh will harm the business model that has given the country the highest growth rates, the lowest prices and coverage of the entire national territory. It will not help connect more people (the stated objective of all universal service programs) but will slow down the model that has connected more people than any government program ever has.

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