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Expiry of data bundles is theft

It's time to get serious about the fraud that mobile operators commit in cancelling data bundles after a given expiry date.

Ivo Vegter
By Ivo Vegter, Contributor
Johannesburg, 27 Jan 2011

You may have noticed, when you buy a data package, that it comes with an expiry date. Unlike fresh food, which actually goes off and can kill you, there's no valid reason for imposing such a limit. Would you accept it if a petrol station drained your tank and discarded what's left every time you fill up? So why do we accept this outright theft by mobile operators?

There is a 'weaselly' excuse that mobile operators trot out whenever this issue is raised. Because they buy upstream bandwidth (mostly via undersea cables) in fixed amounts per month, their upstream data "expires", and this is why they cannot deliver bandwidth bought in one month two months later. They need to make consumer data bundles expire for network capacity management reasons, they say.

The fact that the typical expiry time is two months, rather than one, reveals this claim to be a lie. Because mobile operators aggregate data use over millions of customers, they can predict perfectly accurately what actual usage will be. If they end up getting a monthly total wrong, it won't be by much.

The fact that phone companies are able to sell per-second voice services, likewise, reveals this claim to be a lie. If it was truly needed to pre-sell all available data bandwidth in order to plan network capacity, then ad hoc, post-paid, per-second billing would make it impossible to plan capacity on a voice network.

It isn't, and even an elementary grasp of economies of scale reveals how ridiculous this claim is. Historical statistics of past usage can predict, very accurately, how much a large number consumers will use in total. You know the last few years' monthly totals, you know the growth rate, you know your rate of new customer acquisition, and you know the seasonal variation. How far wrong could you possibly be?

Consumers end up paying far more for data than the adverts will have you believe, because there is always that annoying lump of unused data that expires at the end of each month. Worse, there's no way for them to buy only the data they need, because the price per megabyte (who still measures in megabytes?) for out-of-bundle data is far more expensive than in-bundle data.

When you deposit money into a transactional account, does the bank require that you spend it within a given time?

Ivo Vegter, ITWeb contributor

Again, they'll tell you that this is because they can't do forward planning on ad hoc data use, but this is utter nonsense. Aside from the fact that networks can do simple statistical trend forecasts, the fact that out-of-bundle pricing ranges from 19c (on some MTN packages) to the ridiculous rip-off price of R2 (on Vodacom) shows the argument to be full of holes. Either that, or Vodacom is 10 times worse than MTN at predicting likely network loads. I'm fairly sure they'll deny this.

A comparison could be drawn with banking, which is remarkably similar in terms of the technical requirements of delivering a large pool of a highly divisible, highly liquid commodity to a high number of consumers. When you deposit money into a transactional account, does the bank require that you spend it within a given time so they can better plan the cash float they require from day to day, or month to month? Could they simply forfeit your balance if you haven't used it within a given time? Of course not. That would be theft, and the perpetrators would go to jail.

Not so with data. The status quo, so beloved by the mobile cartel, is that consumers buy packages large enough for their worst-case months, with a bit of margin added because they fear being summarily cut off. Mobile operators love this model, because all of the unused data that's forfeited is pure profit. They don't have to deliver a single bit, but they do get to rake in cold, hard cash.

A vibrant, competitive market in which new competitors could exploit this obvious opportunity might have been sufficient regulation against such rip-offs. However, South Africa's restrictive licensing regime has ensured that a small, powerful cartel can act with impunity.

And even if competition couldn't prevent this practice, forfeiting data for which you have paid is, in fact, theft. For this reason, there is a strong argument to be made for government intervention.

If data bundles did not expire, users could plan for their average use, not the possible maximum in a worst-case scenario. Over- and under-usage can balance out over time, just as it does with the larger economies of scale that the mobile operators themselves enjoy.

It's time for a simple, clear rule from the telecoms regulator: data bundles purchased in good faith may not expire, and must be carried over indefinitely. For technical, administrative purposes, it might be reasonable to permit a high maximum limit of, say, a year or more to clear out stagnant or dormant balances in the accounting system. However, making bundles expire in 30 or 60 days is unacceptable.

It's time the regulators earn their keep and do something about the ongoing rape of consumers by the mobile operator cartel. The government created the monster. The least it can do now is to protect consumers from its rapacious maw.

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