SA data pricing is anti-poor, says CompCom

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 24 Apr 2019

Data pricing in South Africa is anti-poor and retail price structures lack transparency. This is according to a provisional report by the Competition Commission (CompCom) on its data services market inquiry.

Competition commissioner Tembinkosi Bonakele released the provisional findings at a media briefing in Pretoria today and said a "disturbing finding" from CompCom's benchmarking exercise was that "lower income consumers may be exploited to a far greater degree relative to wealthier consumers for mobile data prices". This was confirmed by the inquiry's assessment of retail and effective price structures.

"An assessment of headline retail prices of all mobile operators demonstrates that consumers of small data bundles, generally being poorer consumers, pay inexplicably more on a per MB/GB basis."

Bonakele said the inquiry found that relative to a 1GB data bundle, a consumer buying a 100MB data bundle will pay roughly twice the price on a per MB basis for the same data period validity. A consumer buying a 50MB bundle will pay up to three times more, and a 20MB bundle up to four times more per MB.

In addition, the inquiry found punitive out-of-bundle (OOB) rates are more frequently imposed on purchasers of small data bundles, or those that do not commit to a bundle at all. These are generally the lower income consumers, it said.

In August 2017, the commission initiated a market inquiry into data services in SA because it had reason to believe there were features in the sector that may prevent, distort or restrict competition. This after minister of economic development Ebrahim Patel called for the inquiry.

Since 2016, South Africans have been complaining about the high price of data in the country through the social media banner #DataMustFall.

In July 2017, the Independent Communications Authority of South Africa (ICASA) also began its own inquiry into the cost to communicate in South Africa.

The provisional report also found benchmarking shows "South Africa currently performs poorly relative to other countries, with prices generally on the more expensive end".

The commission used existing international comparisons on mobile prepaid data prices, including that of the ITU, Tarifica, ICASA and Research ICT Africa. The commission found South Africa ranks poorly relative to other African countries and its BRICS peers.

Minister Patel was at the briefing and said it may still be a set of provisional findings but it was a "significant report".

"The main take-outs for me are that we have a competition problem and that prices are higher than they should be, that the structure and practices in the market result in discrimination against lower paid consumers, and finally we can do something about this and we must do something about this," Patel said.

"To summarise it differently, the Twitterverse was right," he said.

The commission released a wide range of provisional recommendations to bring both immediate relief on data prices and to enhance price-based competition long-term.

One of the immediate requests is a commitment from mobile operators to reduce the price of sub-1GB bundles "to within an objectively justifiable and socially defensible range of the 1GB price, provisionally a maximum of 25% higher on a per MB basis".

"This will provide immediate relief to lower income consumers using smaller data packages. A similar commitment on maximum out-of-bundle rates relative to in-bundle rates is also required as lower income consumers have been found to be more exposed to these, raising their effective data costs," the report said.

Interested parties have until 14 June to make submissions or recommendations on the provisional findings and the CompCom said it will have "further engagements" before publishing its final report later this year.