Wednesday, September 14, 2011

Telco Collusion: Competition Act 2010

Recently the local telecommunications companies incurred the wrath of Malaysians by attempting to pass on the services tax to the prepaid users. The service tax which was increased by the Government from 5% to 6% this year was absorbed by these companies since 1998.

While the backlash from the public, and pressure from political parties have resulted in a temporary reprieve for the prepaid users, pending further consultations with the Malaysian Communications and Multimedia Commission (MCMC), the real issue at hand is the blatant and coordinated attempt by the telecommunication companies to raise prices concurrently, contemptuous of the competitive spirit.

Last Thursday, the companies said in a joint statement that purchases of prepaid reloads and prepaid starter/SIM packs would be charged a six percent service tax, effective Sept 15.

While the telecommunication providers had every right to decide as to whether to absorb or pass on the service tax to consumers, the fact that the statement was issued jointly meant these companies – Maxis, Digi, Celcom and U-Mobile were colluding to increasing the prices of their services concurrently, to increase the profits for all parties, without fear of any of the companies keeping lower prices to eat into the customer base of the others.

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