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telecommunications

If tech giants paid NZ’s Telecommunications Development Levy

In the UK, the Labour Party plans to nationalise part of the telecommunications network if it wins this year’s election.

To cover costs, a Labour government will tax multinational tech giants including Google and Facebook.

Let’s put aside the idea of nationalisation1. Instead, let us focus on the idea of making tech giants contribute towards the cost of telecommunications networks.

Not ridiculous

The idea isn’t ridiculous. Google and Facebook made their fortunes on the back of telecom networks. In effect they had a free ride.

People who invested in building Spark, Vodafone, Chorus and the rest of New Zealand’s telecommunications networks have, up to a point, subsidised the tech giants.

A decade ago there was talk in telecom circles about recapturing some of the value taken by over-the-top companies.

That battle was lost before it started.

It could be impractical and difficult for a small nation like New Zealand to force tech giants to pay all the costs of our telecommunication network.

That would remove price signals. These are important. They help the industry squeeze value from the assets. They tell planners where to invest.

Jangling the gold

There is one area where we can hold Facebook, Google and maybe other tech giants upside down and jangle the coins out of their pockets.

We could get them to contribute to our Telecommunications Development Levy.

This is the money collected by the government to help subsidise rural telecommunications. It also pays for things like the services that help blind and deaf people use phones.

At the moment the TDL is $50 million a year. It’s called a levy, but it’s really a tax on telecommunications companies. They each pay a share roughly based on how much they earn from sales.

As things stand today, Spark, Vodafone and Chorus pay the lion’s share.

How it might work

Suppose, for one minute, we decide to treat income the digital giants earn from New Zealand on the same basis as local telco revenue.

We’ll forget the smaller firms for now and focus on only two tech giants: Google and Facebook.

It’s hard to know exactly how much these companies make in New Zealand. The Commerce Commission would be have a job extracting this data, but it is doable.

This NZ Herald story estimates Google made around $600 million here in 2017. The number for Facebook is hard to estimate. For the sake of argument, let’s say it is much the same.

The total qualified revenue for New Zealand’s telcos is $4.1 billion. If we add in the tech giant revenue that gives us $5.3 billion.

In round numbers that puts Google and Facebook’s share at 20 percent of the total.

This means we could reasonably ask the two giants to stump up $10 million towards the TDL.

If we add in the other large companies who earn revenue on the back of New Zealand having a decent digital network that could take the total contribution from over the top money earners up to around a third of the TDL total.

Fair dealings?

It would be hard for anyone to argue such an approach is unfair. The amounts are, in comparison, tiny. A $10 million charge on $1.2 billion is less than one-tenth of one percent. It wouldn’t even feature as a budget line item.

Tech giants make huge margins on their revenues. The charge need not have any effect on prices.

In comparison the profit margins for New Zealand’s telecommunications companies are slender. Putting $15 million or so2 back into their hands wouldn’t make a huge difference. It would ease their burden.

So there you have it. The company’s that benefit most from investment in telecommunications can return a tiny trickle from their rivers of gold so that more New Zealanders can access their products and services. Is that so unreasonable?


  1. Maybe until another time. Maybe not. ↩︎
  2. This presumes an expanded programme where more than just two tech giants contribute ↩︎

By Bill Bennett

Not actually a geek, more a chronicler of geekdom. Still mainly a journalist, sometimes a blogger.

32 replies on “If tech giants paid NZ’s Telecommunications Development Levy”

I agree!

The idea is ridiculous.

“Google and Facebook made their fortunes on the back of telecom networks. In effect, they had a free ride.”

What free ride? A review of the profit and loss statements from both companies will have a line item for telecommunications expenses.

Google and Facebook “customers” paid their ISP and Google paid their ISP for the same bandwidth.

How many times should people pay for the network? We pay subscriber fees to ISPs to connect to the Internet: I’m not sure why ISPs should be able to charge other parties too?

This isn’t about ISPs charging tech companies. It’s about tech companies contributing to the TDL along side the telcos. It would actually help them reach more rural customers.

Ok. There are two differences here with net neutrality. First, it’s not about telcos clipping the ticket, it’s about companies that stand to gain from expanded networks helping to pay for that expansion. Second, the network remains neutral. Paying the TDL doesn’t buy a better net

Well yes… of course that’s the best approach by a country mile. In my opinion the TDL costs should come from general taxation anyway, it seems unfair to single out one sector for an extra tax.

Google can make all that money without being even being in New Zealand. Want to tax them extraterritorial? There is a symbiosis between the ISPs and Google, take them out of New Zealand and the ISPs costs go up by A LOT. Its a dumb idea.

Suppose, for one minute, we decide to treat income the digital giants earn from New Zealand on the same basis as local telco revenue.

How about we treat them the same as local businesses and remove their ability to transfer profits offshore without paying taxes on them?

It’s hard to know exactly how much these companies make in New Zealand. The Commerce Commission would be have a job extracting this data, but it is doable.

If it’s difficult to do then our laws are wrong. We should know their financial transactions in NZ to the cent and in real-time. That, of course, goes for all businesses in NZ.

People who invested in building Spark, Vodafone, Chorus and the rest of New Zealand’s telecommunications networks have, up to a point, subsidised the tech giants.

And the NZ punlic have massively subsidised them. There is a reason, after all, why the government had to build the network in the first place and why these ‘investors’ only came in after the network had been built.

“How about we treat them the same as local businesses and remove their ability to transfer profits offshore without paying taxes on them?”

While that would be “treating the income they earn on the same basis as NZ telcos”, I deliberately put that question to the side. But yes, there’s a good case for doing this.

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