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Summary

In a move that has grabbed the local media’s attention while sidelining net-neutrality principles, the Ministry of Telecommunications in Jordan said last week that it will let three local mobile operators, Zain, Orange, and Umniah, charge users extra fees for the use of VoIP applications.

The potential introduction of an OTT tax

The Jordanian Ministry of Telecommunications is considering introducing a JOD2 (US$2.82) tax on the country’s subscribers for the use of OTT apps, mainly Whatsapp, Viber, and Facebook. These apps have rapidly gained popularity among smartphone users. Other players in the mVoIP market include iPhone’s FaceTime, Microsoft's Skype, Google Voice and Duo, and Tango.

While the particulars of the decision aren’t clear yet, the main purpose of this action is to support service providers in paying existing government taxes by levying a JOD2 tax on OTT users instead of a tax of JOD1 for everyone in the country. Half of the tax would go to the government, with the rest apportioned to the operators, giving them a boost in revenue.

The widespread use of these mobile applications is adding data traffic and cutting into text and voice profits, along with reducing the operators’ ability to raise data tariffs. Operators in Jordan shot themselves in the foot a couple of years back, when they maximized competition by offering unlimited voice and generous data tariffs to prepaid users. The move brought down the country’s blended ARPU from US$9.90 in 4Q11 to US$6.10 in 3Q16.

On a global level, this policy is not the first of its kind: Similar regulations have been introduced in markets such as South Korea, though those have been driven by telecoms operators. In South Korea, the three local operators built a case in 2012 to charge extra for mobile VoIP apps to protect falling voice revenues. The Colombian regulator introduced a VAT of 19% on services used over telecommunications networks plus an additional 4% for data packages that cost more than $14.70.

The policy presents the tax as an alternative revenue stream to offset falling international-direct-dialing revenues for telecoms operators, but it puts the Jordanian market at odds with the principle of net neutrality. If the policy is unclear, it could expand to include video and streaming services in the future. Furthermore, the fact that this is a wireless tax is not expected to limit the use of some mVoIP apps over wirelines and Wi-Fi networks, potentially opening up a case of limited OTT use over alternative broadband networks (as opposed to regulated).

Appendix

Further reading

How Regulators Are Approaching OTTs, TE0007-001023 (September 2016)

Author

Tareq Masarweh, Senior Consulting Analyst, Middle East and Africa

tareq.masarweh@ovum.com

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