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Big blow for Vodacom, MTN as CompCom orders data cost cut

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Competition commissioner Tembinkosi Bonakele.
Competition commissioner Tembinkosi Bonakele.

The Competition Commission has thrown a curve ball to SA’s leading telcos, MTN and Vodacom, recommending that they reduce their mobile data pricing by half.

The competition watchdog, which has been investigating the cost of data in the country, presented its final report in Pretoria on Monday.

The Data Services Market Inquiry report is scathing to both carriers, saying they have to reduce data prices otherwise it will consider prosecution for exorbitant pricing.

The Commission says based on the evidence before it, “we find that price-based competition is inadequate, the challenger networks of Cell C and Telkom Mobile are unable to effectively constrain the two first movers, and that Vodacom has substantial market power, with MTN to a lesser degree.”

It says there was a consensus in the submissions to the Commission on this point, “with the obvious exception of Vodacom and MTN themselves who continued to maintain that the market was competitive.”

The Competition Commission says notwithstanding the most recent price reductions, Vodacom and MTN must independently reach agreement with it on substantial and immediate reductions on tariff levels, “especially prepaid monthly bundles, within two months of the release of the report. The preliminary evidence suggests that there is scope for price reductions in the region of 30% to 50%.”

Furthermore, it says Vodacom and MTN must independently reach agreement with the Commission within two months on a reduction in the headline prices of all sub-500MB 30-day prepaid data bundles to reflect the same cost per MB as the 500MB 30-day bundle “or cost-based differences where such cost differences have been quantified, as well as the cessation of partitioning strategies that contribute to anti-poor pricing and/or inferior service outcomes.”

The Commission says given their collective market position, adjustments to their prices should have a market-wide impact.

Additionally, the report says Vodacom and MTN must independently reach agreement with the Commission “to cease ongoing partitioning and price discrimination strategies that may facilitate greater exploitation of market power and anti-poor pricing.”

It adds that all mobile operators must reach agreement with the Commission within three months to offer all prepaid subscribers a lifeline package of daily free data to ensure all citizens have data access on a continual basis, regardless of income levels.

“This agreement must then be given formal legislative or regulatory effect within six months.

“This may include the ICASA [Independent Communications Authority of SA] End-User and Subscriber Charter Regulations, spectrum licensing conditions or planned amendments to the Electronic Communication Act.

“The precise level of lifeline data and any annual adjustments should be determined in consultation with industry, ICASA and relevant experts. The Commission is of the view that it should be sufficient to ensure each citizen’s participation in the online economy and society,” reads the report.

SA mobile operators have been under-pressure from the society regarding data prices, which led to launch of the inquiry in August 2017.

Since 2016, South Africans have been complaining about the high price of data through the social media banner #DataMustFall, and both the Competition Commission and ICASA initiated inquiries into data pricing.

Now, the Competition Commission is recommending that all mobile operators must reach agreement with the Commission within three months to inform each subscriber, on a monthly basis, of the effective price for all data consumed by the customer.

It says: “This agreement should be given formal regulatory status in the ICASA End-User and Subscriber Service Charter within six months of this report.”

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