It’s all clear for new tax to fund internet spread

Players in the local ICT sector are to begin contributing to the Universal Service Fund in July in a move meant to deepen the penetration of mobile and Internet service in the country.

All licensees of the Communications Commission of Kenya (CCK) will be required to remit 0.5 per cent of their annual revenues as the fund finally takes off more than two years after it was created through an Act of Parliament.

The failure by Information minister Samuel Poghisio in naming a board to run the fund as well as disagreements by major players over how it should function caused the delay.

But CCK says most the issues have now been ironed out, and a consultative meeting to achieve full consensus between the regulator and operators is expected to take place immediately following the March 4 General Election.

“We have tried our best to address those outstanding issues, and we are now set to start collecting the levy in July this year. We have planned a meeting with the industry stakeholders to iron out all the details of the project, but they are required to start giving their contributions,” said CCK director-general Francis Wangusi.

The new levy is meant to expand the reach of modern information and communications services to remote areas market players do not consider to be commercially viable.
Priority projects
The fund will be administered by an advisory council charged with making decisions about which projects will be given priority.
While agreeing on the importance of contributing to the Universal Service Fund, mobile operators have remained split over the question of how the money should be utilised and the composition of the council to administer the fund.
Only yuMobile has so far committed to start remitting its contribution to the fund in its current form. However, other operators cite concerns they say must be addressed before they can participate.
“We do support the decision and will contribute the relevant tax when applicable,” yuMobile chief executive Madhur Taneja said in a statement.
But the other operators, although agreeing with the idea behind the USF, maintain their stand that a few concerns have to be settled before they can begin contributing.

Topping the list of demands is a direct representation on the advisory council, the decision-making organ of the fund. As contributors, they feel they should have a say on which projects receive priority funding.

Industry involvement

“As it is, there is no industry involvement in the administration of the fund. We also need to know beforehand what the regulator intends with the fund and what projects will receive priority,” Safaricom corporate affairs director Nzioka Waita said
But Mr Wangusi last week insisted that the commission had given the players a chance to forward names of nominees to sit on the advisory council, but he said positions were limited.
“We wrote to the licensees a long time ago asking them to forward names and CVs of their nominees to the council, but most of them delayed. No one should say we did not give them a chance to be represented on the board. We have nothing to hide, and everyone understands the purpose of this fund,” Mr Wangusi said.

He said CCK was considering creating an oversight committee comprising representatives of all the licensees to watch over the decisions of the advisory council and monitor how the fund is used.

Oversight role

“We are suggesting that the mobile operators and all the other licensees come together to play to an oversight role. This is important because they will be well positioned to ensure their money is being deployed to the intended purposes,” Mr Wangusi said.

The tax is applicable to all licensees in the information and communications sector including mobile operators, broadcasters, Internet service providers and postal/courier service providers.

The fund is part of the strategy Kenya is employing to realise the objectives of the five-year national ICT masterplan launched last week. The road map envisions connecting every Kenyan household to high speed and affordable Internet service by 2017.

It also projects that more than 500 new companies will have been registered in the sector in Kenya with more than 50,000 jobs created in the ICT sector as the country transforms into a middle-income society.

Under the new strategy, the Universal Service Fund would serve the purpose of spreading connectivity to remote parts of the country providing the possibility of accessing government services online.