Liberia Telecommunications Authority Seeking to End Price War in Telecommunications Industry
Monrovia – The Liberia Telecommunications Authority (LTA) is bent on strapping off the three days ‘free’ call promotion currently ongoing with the two GSM Companies in the country.
Report by Gerald C. Koinyeneh 00231880881540/ 00231777769531 [email protected]
Last week, the LTA posted on its website a proposal for new floor pricing for both voice calls and data. The proposal which is open for comments from stakeholders sets the floor price for voice call at US$0.156 per minute and data at US$0.218 per megabyte. This means, a dollar call card that once served consumers for three days unlimited voice calls would now serve for only 64 minutes. While 100 megabytes of data would be US$21.00. Currently, consumers pay US$1 for 1,000 megabytes of data.
The latest decision to drop the popular and affordable three days ‘free’ call promo follows the LTA decision to cancel the international call bundles offered by Lonestar Cell MTN and Orange which allowed customers to make international call at low cost.
According to the LTA, the intent of the new floor tariff is to end the price war between Orange and MTN which came about following the introduction of an extremely low-price call promotion; something it said it said led to counter offers from other telecoms operators which resulted in a various cycle that brought the price far below cost and it is destroying the telecommunications industry in Liberia.
The LTA noted that price war between GSM Companies in the country started in 2012 when some telecommunications providers began price promotions that pushed all the telephone companies into a “price war”.
“As one company reduced its price, the others undercut that price in a vicious cycle that eventually brought the price for calls and internet data to a level far below cost,” the LTA argues.
It stated that the price for calls dropped from 14 cents per minute in 2014 to less than one cent per minute today; stating that the prices have become so low, that services are virtually free; something the LTA noted is prompting some subscribers to “just sit on the phone for hours, taking up bandwidth which is costing a loss for telecoms operators and for the government.”
Impact of Price War on Telecommunications and the Economy
According to the LTA, unlimited calls encourage a behavior of subscribers staying on the phone far longer than necessary and clogging the network; making it difficult for others to place important phone calls; while many people experience dropped calls in the middle of a call.
In addition, it added that Telecom operators are not getting enough returns to re-invest in improving their networks; noting that when the telecom companies lose money, they cannot build new towers and bring telephone and internet to rural Liberians.
“All along our major highways the telephone signal is weak or non-existent. The price war has led to telecom operators selling below their costs and the competition has become unhealthy for the industry and the country,” the LTA contended.
The LTA, further defending its decision to curb what it termed as the price war indicated that the telecommunications industry is one of the largest contributors to government revenue; and as such when the telecom companies lose money, they pay less taxes to government for schools, hospitals, roads, and other developments.
“This does not support the pro-poor agenda. The government needs revenue to carry out its various development initiatives and the telecommunications sector is not currently pulling its weight. The war between telecoms operators caused the country to lose $49 million between 2014 and 2017.”
“This money could have done so much for country: opened more farm to market roads, put medicine in the clinics and bought books for our schools. There is an urgent need to ensure that telecoms industry can contribute to the pro-poor agenda.”
Price Floor and the Future of Telecommunication in Liberia
The LTA has indicated that to end the price war, it is invoking the Telecommunications Law of 2012 which forbids telecom companies from selling below their cost.
“To end the war, the LTA wants to enforce this law and ensure that telecom companies are not selling telephone calls and internet data below their cost price,” it sated.
It furthered that it has consulted with telecoms operators and other stakeholders on how to stabilize the market using a minimum price for calls and internet data; nothing this is where the price floor comes in.
It argues that the minimum price of 0.0156 cents for calls and 0.0218 cents for internet data will still allow telecoms operators to provide affordable and reasonable telephone and internet bundles, but these promotional packages can no longer be unlimited or free.
It furthered that eliminating three days free calls is not denying Liberians the right to call, but rather ensuring that consumers can have reasonable and fair usage of services across the board.
“We all know people who just sit on the phone for hours, taking up bandwidth which is costing a loss for telecoms operators and for the government. This has an impact on other users of the services. Putting in the price floor addresses this imbalance and ensures that usage can be fair for all. It’s not saying you shouldn’t call, everyone should still be able to spend reasonable lengths of time on the phone without the current abuse,” the LTA noted.
The LTA clarified that this is not the first market where a price floor has been implemented to improve the quality of service for consumers; contending “that this is an action that should have been taken a long time ago. However, better late than never. This is a step in the right direction for all stakeholders. After all, we now know that ‘free’ and ‘unlimited’ is very costly and unsustainable in the long run.”