About this blog

News and analysis of developments in the enterprise communication industry and market with primary focus on Europe.

The author aims to tap into ideas, insights and thoughts of the readers to get varied perspectives.

Views expressed in this blog are solely the author's opinion and in no way reflect those of his employer.

Wednesday, July 12, 2006

Tax communication services?!?!?!

I was reading an article in 'IT Week' on plans by the EU to tax e-mails and texts. Before, I submit my opinion, lets have a look at the facts.

The article says that a working group in Brussles is reviewing a plan for an EU wide tax on texting and e-mail. It goes on to say that "the idea is to introduce an EU wide tax of 1.5 cents on each text message and 0.00001 cent on each e-mail."

It is estimated that around 196 billion phone text messages were sent across in Europe in 2005, and 5475billion e-mails (including spams). The tax if applied at the suggested rates will generate
€2.94 billion from text messages and another €0.54 million from e-mail. Let's not forget the exponential grow each of these services are having.....well, in case of imposition of such a tax, it would be prudent to say 'were' having.

Let's look at the scenario where voice calls are taxed too, say at the rate of 1 cent a minute. With over 966billion minutes of fixed-line traffic in Europe (82.585 billion in UK alone) and 447 billion mobile minutes in Europe (63.119 billion minutes of mobile telephony in UK alone), the total tax amounts to €14.13 billion (€1.46 billion in UK alone). Definitely, a huge sum of money.

However, as soon as such a tax is imposed, the market dynamics will change. Free SMS will be gone. The world of Yahoo mail and Google mail will have to treak their business models if they continue to offer free mail service. The pricing of data services in advanced third generation networks will be guided by the tax structure, thus all the discusions on pricing by size of traffic will be lost.

New service delivery models will become a difficult to pursue as even a nominal tax will increase the entry barriers. Further, enterprises would rather have premise-based systems instead of network based services. I can think of a whole lot of changes, however I will stop here to leave all my visitors ponder upon the idea.

1 comment:

Anubhav Mundra said...

what is premise based system.....n how is it different from network based system?

Secondly I feel, though there will b a downward spike in short run but in long run, this will work. Threshold will be soon reached since people have modelled there businesses along strong communication systems (processes n procedures)......n so success of tax communication services in my view should be seen with adaptability of people

its difficlt to adapt to one kind of system n then readapt.....Ironically , sumtime back one of the popular e-mail service (i don't remeber the name) began charging a small amount in India, n soon it was out of public memeory...this was becauz people have other free mail service options....n switching cost was zero

By the way how is AOL doing in states?