Text tax draws fire in Manila

Abigail Ho
12 Jun 2009

The Philippine telecom industry has made great strides since its deregulation almost 15 years ago. Since 1995, the country has risen to become the SMS capital of the world, with two billion text messages a day being processed by the three local mobile operators. One proposed tax measure, however, threatens that success and the market\'s innovation.

Danilo Suarez, representative for Quezon province, has proposed a fixed fee of P0.50 ($0.01) as well as a tax of P0.05 ($0.001) for every SMS sent. The amount to be generated from this can supposedly support the government\'s computer literacy program by putting computers in every public primary, secondary and tertiary school in the country.

While the proposal has a noble aim, what it is more likely to spur is a telecom industry that offers services that can be deemed unaffordable by most of the masses - the bulk of the three cellcos\' subscribers, according to Smart Communications public affairs group head Ramon Isberto.

\'If this pushes through, it will jeopardize the gains made by the deregulated environment,\' he says.

Globe Telecom regulatory affairs head Froilan Castelo explains that should Suarez\'s proposal become a reality, the cellco, and likely its two competitors as well, will be forced to halt its bucket pricing plans.

First to go will be the popular unlimited texting schemes that have led the number of text messages sent each day to skyrocket, he told Telecom Asia.

\'[The proposal] will definitely increase the pricing of SMS and make the unlimited texting schemes untenable and not feasible,\' he warns. \'There will be no more bucket pricing, even if it\'s the most popular among all our offerings. Around 88% of our SMS traffic is attributed to unlimited texting.\'

He says higher-priced SMS and the elimination of the unlimited texting proposition will cause SMS volumes to dip, resulting in lower revenue. This, in turn, would hit their overall tax paid to the government.

The proposed tax measure will also place additional burden on the already-overtaxed mobile operators, says William Pamintuan, senior VP at Digitel Mobile Philippines, operator of third-largest cellco Sun Cellular.

He said this tax proposal will add to the long list of taxes that mobile operators have to pay, including the VAT, supervision and regulatory fee, spectrum users\' fee, franchise tax, real property tax, tower tax and income tax.

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