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Mobile data competition heats up

Paula Gilbert
By Paula Gilbert
Johannesburg, 04 Oct 2017
Telecoms operators try to get ahead of a wave of regulatory changes heading their way.
Telecoms operators try to get ahead of a wave of regulatory changes heading their way.

SA's telecoms operators have been busy over the past few weeks, launching new packages and announcing price cuts, as they try to get ahead of a wave of regulatory changes heading their way in terms of data prices and out-of-bundle billing practices.

"The announcements from some telcos to reduce out-of-bundle data prices in SA can be seen as responding to consumer and government pressure and also increasing competition," says George Kalebaila, director for telecoms and Internet of things in Africa at IDC.

In early August, the Independent Communications Authority of South Africa's (ICASA's) then acting chairperson, Rubben Mohlaloga, told the Select Committee on Communications and Public Enterprises that the regulator was looking at tackling "crazy" out-of-bundle mobile data rates and that he believed "there is a need for a decrease in the average price per MB".

Since then, mobile operators have upped their game with new deals and price cuts. The latest was Vodacom, which yesterday announced it was "significantly reducing" out-of-bundle data prices this month. It said out-of-bundle rates for postpaid customers were already reduced from R1/MB to 89c/MB on 1 October.

"For prepaid and customers on top-up packages, the out-of-bundle rate will drop by as much as 50% once the new 99c per megabyte (MB) tariff comes into effect on 15 October," Vodacom said in a statement.

However, it's important to note the new rate is not exactly cheap, with prepaid and top-up customers paying R990/GB out-of-bundle, a drop from close to R2 000/GB previously. Postpaid customers were paying R1 000/GB and this rate has now dropped to R890/GB.

"It is astonishing how wide a divide there is between Telkom and Cell C's out-of-bundle rates and Vodacom's (even Vodacom's revised rates). Although any drop in the out-of-bundle rate by any of the operators will be appreciated by consumers, consumers are expecting much more of a drop," says Antony Seeff, CEO of cellphone bill-optimisation company Tariffic.

This after Cell C last month announced it was also dropping out-of-bundle rates, with prepaid customers on its lowest tariff plan paying 15c/MB as of 1 October. This works out to R150/GB, compared to R990/GB on Vodacom. However, some of Cell C's Pinnacle contracts also carry an out-of-bundle rate of 99c/MB, or R990/GB. In comparison, Telkom's out-of-bundle rate on postpaid packages is around 29c/MB, or R290/GB.

"MTN seems to be making more meaningful moves in reducing out-of-bundle pricing with their new 'Made for Me' packages, which have cascading out-of-bundle pricing that decreases as the tariffs increase," Seeff adds.

He says MTN's out-of-bundle pricing for postpaid packages range from 50c/MB to 99c/MB. This works out to between R500/GB and R990/GB.

ICT policy and regulation think tank, Research ICT Africa (RIA), says the average cost for a 1GB prepaid data bundle in SA is $7.67 or R104. This is according to RIA's index for the second quarter of 2017 based on prepaid data top-ups or bundled top-ups.

Government pressure

"Government's pressure on telcos - which is also mainly as a result of consumer activism - to address high data prices is beginning to receive active attention from telcos, especially as ICASA and the Competition Commission launch separate investigations on the same issue. Therefore, the recent announcements by Cell C and Vodacom could be seen in that light," Kalebaila explains.

In July, ICASA gazetted a notice "of its intention to conduct an inquiry to determine the priority markets in the electronic communications sector", which should be finalised by 31 March 2018. The Competition Commission then launched its own inquiry into the high price of data services in SA. Both inquiries came after ongoing complaints from the public about the cost to communicate in SA. The topic gained traction last year when South Africans took to social media to complain under the banner #DataMustFall.

"The progressive data-centric data plans from Telkom (FreeMe) have had a positive effect on the market, though limited by Telkom's mobile size, as it is starting to force the other operators to reconsider how they structure and price data bundles," says Kalebaila.

BMI-TechKnowledge director Brian Neilson says the recent moves from operators certainly appear to be a reaction to the regulator's call for lower rates, and its intention to mandate data rollover.

"I have always held to the belief that it is competition rather than regulation that plays the most incisive role in raising service levels and reducing prices for consumers. However, regulations can sometimes make a huge impact, particularly those at the wholesale level, as witnessed by the cut in mobile termination rates a few years ago," adds Neilson.

Kalebaila says in general, the issue of high out-of-bundle data rates and high data prices could be addressed if most operators "put the customer first and devised plans that are tailored to customer needs".

"Consumers should be given more choice and flexibility to structure bundles according to their preferences and affordability. And this in essence means shifting strategies to data-centric business models to address changing consumer consumption behaviour and preferences," Kalebaila believes.

Regulatory intervention

While telecoms operators are making moves to cut out-of-bundle data prices, ICASA's new draft regulations are trying to help customers avoid them completely.

ICASA published the proposed regulations in August, which included regulation that would see consumers choose to either opt-out or opt-in to out-of-bundle pricing once their data had expired. This in comparison to the current common practice that customers are automatically switched to out-of-bundle pricing once their data or voice bundles have been depleted.

"A licensee must automatically disconnect the end-user from out-of-bundle data usage until such time the end-user gives express consent or authorisation," the draft regulation reads.

Seeff says this is exactly what Telkom does at the moment.

ICASA's proposed regulations also require operators to send "data depletion notifications on regular intervals through SMS, USSD or any other applicable means". Users must also be sent warning notifications when his/her data bundle has completely run out.

Neilson says the big question about retail regulations is whether customers will end up paying more for the headline price of data bundles, as a counter-reaction by operators to the enforcement of out-of-bundle options.

"The bottom line is that it will be very difficult for the regulator to force operators to reduce retail prices, but not impossible. Consumer pressure as per #DataMustFall will have an equally important, if not even greater impact. But I still believe effective competition is the most critical key," Neilson adds.