Payment of 50% of the spectrum with projects for sectors without connectivity, among telecommunications reforms that include current tax law

At least three important changes are generated from the entry into force of the Law of Economic Development and Fiscal Sustainability in the telecommunications sector, which covers mobile telephony and audio and video subscription services.

These are the possibility that companies pay 50% of two items such as the contribution of 1% of their billing for the universal telecommunications plan and the rates of the radioelectric spectrum, through projects for prioritized or vulnerable sectors; the elimination of the so-called “payment for market concentration”, to promote competitiveness; and the lowest special consumption tax (ICE) rates for customer plans.

Article 129 of the Economic Development Law indicates that, in order to reduce the digital divide, guarantee universal service and modernization of the State through technological growth, telecommunications and telecommunications service providers subscription “may pay up to 50% of the values ​​corresponding to rates for the use of the radioelectric spectrum and a contribution of 1% on the income invoiced and received (…) through the implementation of national priority projects”.

The idea is that these projects are preferably destined to improve connectivity in rural or urban-marginal areas that will be determined and valued by the governing body of telecommunications. In these cases, a favorable opinion of fiscal sustainability issued by the governing body of public finances will be required.

Article 130 of the law indicates that universal service projects and programs may be executed directly by public companies or contracted with mixed, private or popular and solidarity economy companies that have the respective enabling titles. These can be from provision of services and expansion of coverage in rural, urban-marginal areas, prioritized areas, as well as in areas of special interest to the State that serve vulnerable segments. All of them must be included in the universal service plan, previously approved by the governing body of telecommunications.

Jorge Cevallos, executive director of the Association of Telecommunications Companies (Asetel), commented that the payment of up to 50% of the spectrum usage fees, which is a new and positive measure, guarantees that these monies go to programs that will generate services that reduce the digital divide and not that they fall on deaf ears or go to other issues that are not related to the sector, as had been happening.

In this way, companies will be able to promote projects to to serve remote towns with few people, that do not have connectivity and that normally would not have been desired for an investment because they are not very profitable. You can also do projects aimed at improving road connections. They can do it with fiber optics or radio bases. This is decided by the Government.

Additionally, explain that this 1% exists since 2008, and that the idea was to generate a fund with these resources to be able to apply works in favor of the digitization of communities that do not seem profitable for companies. And since then some $ 300 million. However, the funds, in the hands of the State, never went towards the intended objective.

In this sense, it is positive that it is now established that 50% of that 1% can be paid with works and projects that allow people who are not connected to digitally connect. However, he says that it is strange that the Government in a few months has changed its opinion, since President Guillermo Lasso himself had issued the executive decree 126 last July, which allowed that payment to be the entire 1% and not just 50%. This was never put into effect, as the Ministry did not issue the regulation.

In another point, the law eliminates article 34 of the Telecommunications Law. This article established a progressive table of payments based on the market share that each one occupied.. They had to pay between 0.5% and 9% depending on the market concentration of each company. This payment, which was handled by the Agency for the Regulation and Control of Telecommunications, is eliminated, but said elimination takes effect only on January 1, 2023.

Cevallos positively evaluates the changes that have been made to the law for its sector. However, he regrets that this has not been eliminated since January 1, 2022, but in a transitory period it is established that it is eliminated as of January 2023. This pay table had become a limitation for growth, since the companies preferred to stay in a range so as not to have to pay more. Rather, what this table did was eliminate the competition. It’s a payment that should never have existed, he says.

Also note how positive the elimination of the tax on special consumption (ICE) for both corporate and personal plans. These lower values ​​for customers will be reflected in December invoices, with a reduction of 15% and 10%, depending on the type of plan.

For Lucas Gallito, Director for Latin America at GSMA (Global Association of the Mobile Ecosystem), which brings together telephone companies in the region, the validity of the law it is a positive step. On the one hand, the elimination of ICE says that it means to stop imposing a tax that was a luxury service, when in reality it is a tool to democratize access to information and digitization.

He considered that the other reforms also are aimed at reducing the digital divide, and explained that they are also in line with the proposals that the GSMA made to the presidential candidates during the campaign.