Telecom companies cry foul over law that will tax market share and end the practice of rounding up cell phone minute charges

Dec 25, 2014

Telecom giants Claro and DirecTV are complaining about new rules that will take a bite out of their income.

Ecuador’s National Assembly has passed and sent to President Rafael Correa a telecommunications act that would tax income based on market share and would change the way cell phone minutes are charged. Correa is expected to sign the legislation.

Becausechl directv of its 34% market share for satellite television service in Ecuador, DirecTV would be required to pay half of one percent on income earned beginning 2015. The new rules, which proponents say are intended to increase competition in the telecommunication market, tax companies with more than a 33% market share.

Claro, which has a market share of more than 50% will be required to pay 7% of its income to the government.

The law will also change the way Claro and other cell phone providers calculate per call charges, requiring that partial call minutes be charged proportionally. Currently, cell companies charge customers for a full minute when they only use part of a minute.

Claro is claiming that requirements of the new law constitute a breach of contract agreed to 2008. Eduardo Carmigniani, lawyer for Conecel, parent company of Claro, says his company will go to court to seek compensation if the new rules go into effect. “This new rules are a clear violation of the terms we agreed to six years ago,” Carmigniani said. “The contract says that charges to Conecel cannot be increased unilaterally by the government.”

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Assemblyman Ricardo Calderón disagrees with Carmigniani and says the original contract allows the government to impose new rules based on market share.

The bill also contains provisions that would require telecommunications companies to give discounts for persons with disabilities.

 

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