Liberia: The LTA, GSM Companies, Who’s Muzzling the Public with Sky-Rocketing Charges on Voice and Data Services?
MONROVIA – Whatever the case might be, the Liberian people are totally unhappy with the hike in prices of mobile voice call and internet data, especially in an economy where the majority of the citizens barely get the day’s meal and, in an age, where communication is not only a necessity but a right.
Businesses, way of life, free flow of information, journalism are all being adversely affected by the new charges introduced by both mobile network operators – Orange Liberia and LoneStar Cell MTN.
The Liberia Telecommunications Authority (LTA) has since Friday made futile attempts and issued mandates and stern warnings to the mobile networks operators to return to status quo. This stalemate between the regulator and the mobile network operators has left the public in a state of jeopardy.
The current situation
The new prices introduced by the Mobile Network Operators (MNOs) introduced last week, according to them, was as a result of additional surcharge of US$0.008 for each minute of on-net voice and US$0.0065 for each megabyte of data in compliance with LTA order: 0016-02-25 issued on February 25, 2019.
Following a week of the announcement via SMS to subscribers, the GSM Companies rolled out their new fares which introduced 300% increment on on-net voice service and a 100% increment on mobile data.
Prior to the implementation of the surcharges, the new floor price introduced enforced by the LTA in 2019 put US$1 for 45 minutes of on-net voice call, 15 minutes to other networks and 50 megabytes of data. Also, US$2 offered 2 gigabytes of data.
With the implementation of the surcharge, US$1 now offers 15 minutes of on-net voice service, 5 minutes to other networks and 15 megabytes of data while US$2 now gives 600 megabytes of data.
How did we get here?
The LTA order: 0016-02-25 of February 25, 2019 sought to bring some sanctity among mobile network operators and to create a level plain field for competition and make room for more investors wishing to venture the industry.
This order brought the long the famous ‘three days free call’ to an end. According to the LTA, the termination of the promotion was a request from Mobile Network Operators.
The regulatory authority stated that the request necessitated the LTA Order 0016-02-25-19 to introduce new floor prices that would compensate for the lack of market mechanism and ensure market stability.
Mr. Ivan Brown, the Chairman of the LTA (suspended indefinitely) in 2019 said, “The LTA measure is in response to call for intervention by MNOs to stop predatory pricing wars which has stifled the sector growth and plummeted revenue significantly. The LTA market research indicators showed the sector’s instability and anti-competitive behavior as a major factor. The LTA had to perform its role as the regulator to intervene and save the market from collapse.”
He said, GMS Companies in Liberia were compelled to sell packages below market costs which was gradually leading to their collapse. This, he said, would have been detrimental to the country.
“What was actually happening is Mobile Network Operators were forced to sell packages below market costs and was clearly not profitable. The promotional packages were sold at the cost of diminishing revenue to providers. Diminishing revenue hinders innovation, stalls infrastructure nationwide and decreases revenue to government that could be used to provide social services, etc.,” he added.
The Liberia Telecommunications Authority said it held extensive consultations with Orange and LoneStar MTN to derive at the floor price to stabilize the market before reaching the conclusion.
In accordance with the new pricing, voice packages now have a minimum floor price of 0.0156 cents on each call provided in packages to customers by their MNO. Data packages will now have a minimum Floor Price of 0.0218 per Megabyte (MB) of data provided to customers by their MNO. Monthly minutes and megabytes totals will be used to assess compliance, in other words, their monthly volume.
According to the LTA, the existence of fair competition in the telecommunications market is a necessary condition for sustainable economic development and enhanced social welfare of Liberians.
“Anti-competitive practices by dominant players may marginalize the benefits of economic efficiency inherent in competitive markets, while the abuse of market power diminishes opportunities for dynamic efficiency leading to worsening consumer welfare,” the telecom regulator noted.
The LTA further contended that telecommunication users in Liberia enjoy the lowest prices in West Africa but the low prices come with a high cost for the sustained growth and development of the state.
“A long price war between Orange and Lonestar, multinational companies that control nearly 100 percent of the mobile telephone and data market of Liberia continues to have a negative impact on the access of the population to communication services and on the quality of services provided to consumers,” the LTA says.
The unending price promotion which started in 2012, according to the LTA, pushed other smaller GSM Companies including Novafone and Libercell out of the market, leaving the country with only two Companies, creating less room for competition.
“The price for call dropped from 14 cents per minute in 2014 to less than 1 cent per minute in 2017…
Studies by the LTA showed that the distorted price structure mobile voice and data markets could have risen barriers for potential new market participants of the sector losses generated by the pricing strategy of service providers.
The Sector Regulator further contended that as one of the largest contributor’s to the national income, depressed telecommunications prices result in lower tax and other revenues to finance public welfare and development programs and have an overall negative impact on the economy. US$49 million in revenue was lost within just three years as the gross revenue of the sector fell from a high of US$150 million in 2014 to US$101 million in 2017.
“The regulatory intervention is needed in keeping with the obligations of the LTA under the Act to rebalance the distorted price structure, reduce market inefficiencies, restore effective competition, improve quality of service, restore sector value and stabilize the market,” the LTA argues.
The floor price took effect in October 2019.
The Senate Demanded 1 hour for $1
During a deliberation of the matter at the Senate in September last year, the Senate’s Telecommunications Authority Committee chaired by Senator Augustine Chea of Sinoe County recommended that the Senate engages the LTA on adding additional 15 minutes to the 45 minutes on every dollar in keeping with its “three days free call” promotion.
“The fact that the GSM companies themselves are opting for an increase in the number of minutes from 45 to 60 minutes, the Senate should take up this matter with the LTA to make the minimum adjustment in the new regulatory fees to accommodate the additional 15 minutes.
“The Senate as a matter of urgency should engage the LTA not to impose the counter plated surge charge until the country’s economic conditions are favorable. Admittedly, these are difficult times in our country and it behooves us as representatives of our country to do what we can to minimize their sufferings. The surge as counter plated by the LTA in the words of the GSM companies will be harmful and this must not be allowed,” the committee report stated.
The committee’s report also stated that ending this promotion could earn government more revenue in taxes and also increase revenues for GSM operators. According to the report, the promotion had prevented the GSM companies from extending their services to some parts of the country.
The Controversial Surcharge
In the same Regulation that brought the surcharge into effect, the LTA announced the introduction of additional surcharges that was expected to take effect six months after the introduction of the floor prices. The surcharges were expected to have rolled out in March 2019 but delayed due to the legal challenge by Orange Liberia.
Part IV, Section 4.1 of the Regulations states: “On the sixth monthly anniversary of this Order, being October 15, 2019, there shall be
automatically imposed a surcharge on on-net voice in the amount of US $ 0.008 for each.
Section 4.2: “On the sixth monthly anniversary of this Order, being October 15, 2019, there shall be automatically imposed a surcharge on mobile data in the amount of US$ 0.0065 for each megabyte of data.
And Section 4:3 states: “The surcharges subject to this Subpar shall go into immediate effect on the specified date with no additional notice or Order required, subject only to any determination arising from a review and analysis of market indicators that may be pursuant to Sections 5.1 and 5.2, in the sole discretion of the LTA.”
Why Did Orange Go to Court?
Orange Liberia sought the intervention of the Court to halt the government from enforcing the surcharge. Orange’s core argument was that the LTA was usurping the functions of the Legislature by imposing taxes – a function that is strictly the Legislature’s.
They also argued that imposing the surcharge would make Liberia one of the most expensive countries when it comes to telecommunications services.
The Judge Scheaplor R. Dunbar of Civil Law Court ‘B’ ruled that LTA’s order was promulgated in conformity with the Telecommunication Act of 2007 and that the said order does not violate any provision of the Revenue Code.
“LTA does not have to obtain the full agreement of all service providers and stakeholders before it can promulgate an order, rule or regulation,” said Judge Dunbar in his ruling which was challenged.
Initially, Orange Liberia had complained to the Judge, challenging the LTA’s order 0016-02-25-19, which is intended to establish price floors for on-net voice and data services, a regulatory fee on telecommunications goods and services, and a regulatory surcharge for on-net voice and mobile data services.
Also ruling in Orange’s appeal, the Supreme Court ruled that word “surcharge” used in the LTA’s Order is construed within the context of an imposition of additional fees or charges on data services and on-net voice calls under the authority of the Telecommunications Act Legislature’s authority to levy tax.
The Supreme Court added that it was not the intent of the Legislature to preclude the LTA from imposing surcharges on data services and on-net voice calls when it repealed and amended Section.
Now that Orange Liberia lost the case at the Supreme Court and compelled to adhere to the payment of the surcharges to Government, the LTA served the mobile network operator two invoices for surcharges on on-net voice calls and mobile data for the period ranging from March to September.
The mobile data invoice tallied an amount of US$6,140,370.59 while the bill for on-net voice call was US$10,370,447.40.
These bills represent the surcharges for March to September 2020.
Upon receipt of the invoices, the Mobile Network Operators began to rollout the new surcharges.
Passing on of the surcharges to the customers has risen public outcry – bringing both the LTA and the government under criticisms from the public.
But the LTA last week condemned the GSM Companies’ decision to introduce new prices for voice and data services.
In a statement last Thursday, the LTA described the sudden increment by both Orange Liberia and Lonestar Cell MTN as illegal and that it was done under the pretense of complying with the surcharge order.
“The LTA regards this act as illegal price fixing, collusion, and antitrust conspiracy. Under relevant provisions of the Liberia Telecommunications Act of 2007, no ‘Term Services” can be increased without approval of the LTA,” the LTA statement noted.
The LTA then gave both companies a 12-hour ultimatum to revert to status quo and make full restitution to affected subscribers.
The LTA noted that the new charges introduced by the Operators far exceeds what is required for the implementation of any order and designed for profiteering and political purposes.
Twenty-four hours after there was no action on the LTA instruction, the Regulator issued another statement disclosing that its Board of Commissioners met with representatives from Orange Liberia and Lonestarcell MTN earlier today in separate meetings at the regulatory headquarters in Paynesville.
The Board expressed their displeasure over the increase which was not approved and issued a stern warning. Both Service Providers, according to the LTA, confirmed in the meetings that they are in the process of reverting to prices prior to their arbitrary increase.
Orange: ‘Driving Us Into Bankruptcy’
While Liberians were waiting with unease for Orange and Lonestar to go by the LTA’s action, Orange Liberia issued a statement indicating that the LTA is putting them in a position that would make it almost impossible for them to operate in Liberia.
According to Orange, Instead of the LTA agreeing to meeting on how to roll out this scheme of the LTA Order, the LTA sent Orange Liberia invoices in the amount of approximately US$16.5 million for the period, March 2020 through August 2020, to be paid by October 21, 2020 or Orange Liberia’s license would be suspended and Orange Liberia will be taken to court.
Orange noted that it moved to comply with the LTA by calculating the surcharges (“additional costs”) and placing it on top of its own costs, to be paid by its customers, collected by Orange Liberia and remitted to the LTA.
Shortly after Orange Liberia announced the roll out of its plan to implement the LTA Order, the LTA accused Orange Liberia of price-fixing, profiteering, collusion, antitrust conspiracy and political motive for implementing the LTA ORDER and directed that all MNOs should cease and desist from implementing the LTA Order in the manner and way that the MNOs were implementing it. Orange Liberia has complied with this second order.
Orange Liberia: “Orange Liberia has paid all 5% regulatory fees, annual license fees, numbering and spectrum fees, $0.14/min and $0.05/min on international incoming and outgoing calls, Goods and Services Tax and continues to comply with its obligations under Liberian law. Notwithstanding this, LTA wants Orange Liberia to pay surcharges (“additional costs”), which Orange Liberia never collected from its customers and which Orange Liberia could not collect during the pendency of the Petition for Judicial Review law suit, because the law is that the effectiveness of LTA ORDER was suspended while that matter was in court. By LTA demanding now that Orange Liberia should pay the surcharges (“additional costs”) in the amount of US$19.3 million, which was never collected by Orange Liberia from its customers, the LTA is effectively ordering Orange Liberia into bankruptcy; which is unacceptable to Orange Liberia.”
However, Orange Liberia says is prepared to amicably resolve the matter in a “in a mutually beneficial way”.
Orange Liberia, however, insisted that “the LTA’s demand that the “surcharges” (“additional costs”) should be paid by Orange Liberia from its revenues/assets, not by Orange Liberia’s customers, is tantamount to running Orange Liberia into bankruptcy, as its revenue cannot under any circumstance afford such huge amount. Orange Liberia is ready to open its records in substantiation of the fact that a payment of US$19.3 million will bankrupt the company; if surcharges (“additional costs”) were to be paid from Orange Liberia’s own revenue, Orange Liberia will not be a profitable enterprise in Liberia because it does not generate that amount of revenue from its own costs. It is just not a sustainable proposition”.
Operators’ Being Deceptive?
In a critic of the MNOs’ action, Atty. Kun Teh described the arbitrary increment as callous while at the same time calling the GSM Companies “rogues”. “Their actions are callous! In fact, this is a pure subversion! So, how 0.008 and 0.00065 increments can explain the hike amounting to 300% for voice call and 100% for data?” he stated.
According to him, the LTA Order requires Orange and LonestarCell to pay to the Government certain percentages of the floor price set or a surcharge. The surcharge is not a new or added charge on call or data, but the Government’s fair and lawful share of the floor price set.
Atty. Teh: “The GSM companies are just greedy and mischievous. They have collected money and are refusing to pay the Government its share. Really? Can you imagine the government had even waived six months?
“Besides the revenue objective, another objective of the LTA Order is to ensure stability and uniformity in the sector; primarily, to remedy the unending war between the GSM companies. Hence, prior to the LTA Order there was no clear price regulation.
This is unfair to the government! And to you the opposition, this is not politics, please have balls to call a spade a spade. The recent actions of the GSM companies tacitly amount to subversion.”