Repeating mistakes: opportunity missed to make internet better

If you don't rectify past mistakes, there is no real reform—only cosmetic changes dressed as progress. This thought inevitably arises when examining what the interim government is proposing for internet users in the upcoming budget.

Over the past 15 years, policymakers under the previous regime often spoke of embracing the digital age and building a "Smart Bangladesh." Yet their treatment of the internet ecosystem more closely resembled the way tobacco companies are managed: heavily taxed, tightly regulated, and perpetually under scrutiny. The contradiction is stark.

One of the most damaging aspects is the country's telecom and internet tax structure—a system seemingly designed not to empower but to extract. Despite widespread criticism and strong evidence of its negative effects, this burdensome framework has been inexplicably maintained by the interim government.

This comes at a time when internet access is increasingly recognised as a fundamental right, as reflected in the recently enacted Cyber Security Act and the country's broader digital development goals. Yet Bangladesh continues to maintain one of the highest telecom tax regimes in the Asia-Pacific region.

Only a few token changes have been proposed: reducing the turnover tax for mobile operators from 2 percent to 1.5 percent and lowering the source tax on broadband services to 5 percent. Both are unlikely to have a meaningful impact at the consumer level.

The interim government is attempting to reduce bandwidth prices across various layers, and the BTRC has already slashed broadband prices by up to 20 percent.

However, these measures have had limited effect. Unless internet prices are reduced and service quality improved for mobile users—who account for 90 percent of the total subscriber base—such initiatives are unlikely to deliver significant results.

The supplementary duty (SD) on mobile services remains unchanged at 20 percent, after being raised from 15 percent in the last fiscal year. As a result, users now pay Tk 139 for every Tk 100 worth of mobile services when factoring in 15 percent VAT, 20 percent SD, and a 1 percent surcharge.

Including other levies, such as revenue sharing and minimum taxes, the total tax burden climbs to an astonishing 56.3 percent—among the highest globally, according to industry analysts.

Despite coming to power following a youth-led movement, the current administration appears to be repeating the same mistakes that stifled digital growth under its predecessor.

The SD on mobile voice and data stood at just 3 percent in FY2016, but it has steadily climbed to its current punitive level. The tax on SIM cards increased from Tk 200 to Tk 300 in the last fiscal year, while VAT on SIMs was doubled from Tk 100 to Tk 200 in FY2020-21.

These arbitrary hikes were largely driven by the government's preference for mobile VAT collection, valued for its transparency and ease of enforcement. But the result has been detrimental.

In a market already strained by inflation, these taxes have only worsened the financial burden. Since August 2024, the country has lost over 1 crore internet subscribers.

Beyond taxation, the previous administration's over-issuance of internet-related licences—often influenced by political considerations—created a fragmented and oversaturated market.

Many unqualified licensees, lacking the resources and technical know-how, contributed to regulatory weakness, inefficiency, and stagnation in innovation. The ambitious vision of a "Digital Bangladesh" was left largely unfulfilled.

The internet supply chain has also become riddled with taxation at multiple levels. A 5 percent VAT is applied at every point—from submarine cable operators to international internet gateways (IIGs), and from ISPs to NTTNs.

The BTRC, meanwhile, has increasingly shifted from being a regulator to a revenue collector, imposing various revenue-sharing rates and introducing the so-called Social Obligation Fund (SOF).

These measures have further driven up costs and reduced operators' ability to reinvest in infrastructure.

The consequences are measurable. Bangladesh scored just 62 out of 100 in the UN's June 2024 ICT Development Index, trailing behind Myanmar, Bhutan, and Vietnam.

It ranked 113th in the IMF's Artificial Intelligence Readiness Index and 82nd in Surfshark's 2023 Digital Quality of Life Index.

In CEO World's April 2024 report, Bangladesh ranked 29th out of 30 global freelancing destinations.

And according to Ookla's May 2024 Speedtest Global Index, Bangladesh placed 109th in mobile internet speed and 108th in broadband speed—behind countries such as Kenya, India, and Rwanda.

These are not merely planning failures; they reflect a deeper moral and strategic breakdown. One cannot credibly champion digital innovation while penalising the very industries that enable it.

True reform requires the courage to correct the policy missteps of the past. The interim government now faces a clear and urgent choice: continue a regime that stifles growth in the digital economy, or make a decisive break—one that reduces costs, improves quality, fosters innovation, and finally makes internet access affordable for all.