Jamaica has announced that it will be introducing regulations for over the top VoIP services in order to generate tax revenue, but is that really a good idea?

For most of us in the Caribbean, we have been riveted by the unfolding drama of the proposed purchase of Columbus International by Cable and Wireless Communications Plc. (CWC). The key developments, as the time of publishing, have been that CWC shareholders have enthusiastically approved the transaction, and Caribbean regulators are meeting in Trinidad and Tobago today and tomorrow (10—11 December) to discuss the intended purchase and the associated implications.

However, in some countries in the region, an earlier issue that had received considerable attention – the blocking of Internet-based services that used Voice over Internet Protocol (VoIP) – has remained unresolved. In Jamaica, one of the countries in which over-the-top (OTT) broadband Internet services such as Viber and Nimbuzz were blocked, it appears that the government has finally decided on a course of action. According to Philip Paulwell, Minister for Science, Technology, Energy and Mining, “regulations for VoIP services were currently being drafted and that the government would be going after tax revenue from service providers” (Source: The Gleaner).

It is all about money

Currently, Jamaica is cash-strapped. It is under fiscal oversight by the International Monetary Fund (IMF), as it works to rein in spending and manage debt. Further in the depressed economy that Jamaica and other Caribbean countries have been experiencing over the past few years, there has been an urgency to ferret out all possible avenues and opportunities that might generate revenue. However, should the need for money be solely driving Jamaica’s move to regulate VoIP/OTT services?

OTT regulation not popular worldwide

The arguments of local telcos on the loss of revenue from VoIP-based OTTs services are common worldwide, and though there has been some debate on the issue, it does not yet appear that consensus or a best practice regulatory approach has emerged. Furthermore, and unlike what is expected in Jamaica, the discussions on regulation of OTT services have not been limited VoIP applications, but include, for example:

  • media, such as YouTube, Vimeo, Spotify and Pandora
  • content, such as search, news and articles, gaming, and user-generated content
  • commerce, such as e-commerce and financial transactions
  • cloud, such as DropBox, Drive and Office 365
  • social media, such as Facebook, Twitter, Instagram and Pinterest.

Generally, and in the instances where the plan is to regulate VoIP, much of the focus has been on the use of VoIP by local telcos – to ensure that the quality of the service and its functionality is aligned with that of the traditional telephone service. For example, one of the key issues is how emergency numbers/calls are handled on a VoIP network, since the geographic location of callers cannot be readily gathered from the system.

On a separate note, it is important to highlight that the general premise for regulatory intervention, and utility regulation in particular, is that there are

“… tiny subset of companies that ‘operate with government approval as monopolies and supply a service which is indispensable to modern life.’” Utilities are regulated because they are businesses that both work in an area with a high barrier to entry for competition and, at the same time, are essential. They must be regulated because competition is hard to come by.

(Source: TMCnet).

Hence a move to regulate VoIP-based OTT services in Jamaica appears to be at odds with the principle behind regulation, and could be setting a bad precedence into the future.

Disregarding the evolution of technology

Without a doubt and over the past 25 years, telecoms and ICT have developed and evolved drastically, and would be virtually unrecognisable from that obtained in the early 1990s. However, countries worldwide, and in the Caribbean especially, are still trying to adhere firmly to the regulatory principles that were developed in the 1970s and 1980s. To be fair, the traditional telcos are also encouraging policymakers to maintain that traditional position, although the technologies, upon which those regulatory rules would have been based, would be unrecognisable to regulators from 30 years ago.

An effective approach?

In preparing regulation to secure taxes from firms that provide VoIP-based OTT services, one has to wonder how successful Jamaica might be in this initiative. At the end of 2013, Jamaica’s population was around 2.7 million people. Is that population size, or the associated revenue generated from Jamaica, sufficient to bring OTT providers, such as Microsoft and Facebook, for example, to the table to pay the fees that are being proposed? Instead, could a more plausible approach be that those providers just block access those services from Jamaica, and avoid that headache altogether?

In summary, it is readily admitted that a draft of Jamaica’s proposed regulations has not yet been made publicly available, so we really do not know what framework is being developed. Instead of targeting OTT providers, the regulations could focus on local consumers requiring them to pay extra to access those services, bearing in mind that consumers are the ones that actively seek out and use those services.

Notwithstanding, whatever the approach is envisaged, it is likely to need careful study. It might not only set a bad precedence from a regulatory prospective, but also put Jamaica one giant step behind other countries in terms of competitiveness, doing business and other important metrics used to support investment, thus allowing the country to generate much-needed revenue.

 

Image credit: Stuart Miles (FreeDigitalPhotos.net)

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