Vodacom’s decision to reduce its data bundle costs by over 30% has elicited mixed reactions, with social activists saying it could have instituted lower reductions, while others welcomed the telco’s commitment.
Yesterday, SA’s biggest telco announced it had reached a two-year agreement with the Competition Commission (CompCom), promising to substantially reduce monthly data bundles by up to 34%, and saving consumers R2.7 billion in data costs.
The decision came after the competition watchdog ruled in its Data Services Market Inquiry report released in December that Vodacom and MTN had two months to reduce their data prices by between 30% to 50%.
Effective from 1 April, Vodacom’s headline data prices will come down by over 30%, with the key 1GB monthly data bundle dropping from R149 per 1GB to no more than R99. Other commitments from the telco include making all its zero-rated services available on one platform, through its ConnectU service, and expanding its zero-rated offering to all schools, universities and TVET colleges across the country.
While the ICT sector has applauded Vodacom, some say the minimal reduction will not benefit poor South Africans. Others believe the agreement should have been accompanied with an order for the telco to pay punitive costs for having overcharged consumers for years.
Lack of transparency
Founder and convenor of Public Interest SA, Tebogo Khaas, who was present at the announcement in Pretoria, said the 30% reduction is not low enough, as it is the minimum threshold required by the CompCom.
“Vodacom’s decision has been hailed as a new dawn and yet there is nothing new about this dawn. The 30% to 34% deduction is not low enough. Vodacom should have used this opportunity to announce its participation in the formation of the $2 billion sovereign wealth fund, which was developed using the proceeds of state asset sales, and South Africans’ taxes.
“How does Vodacom rebut the notion it is using spectrum allocation as an excuse, when it could have played a better role in ensuring the acceleration of access to ICT services by underserviced areas and poor communities all these years?”
In the agreement, which is subject to confirmation by the Competition Tribunal, the commission points out that certain specific details of the deal are confidential, to protect competition in the market.
Koketso Moeti, social activist and founder of social justice movement Amandla.mobi, believes the lack of transparency in some areas of Vodacom’s agreement with the CompCom raises eyebrows. She says this could mean less than 30% reduction on some data bundles.
“There is no denying that the mobile network operators have gotten off lightly, given how long they have been profiteering. The price reduction is just one step in the process and is also not the only reduction; given the agreement is a two-year process, so this reduction is only the first. Also, the percentage differs by bundle but the details can't be disclosed. So the overall percentage can't only be based on the 1GB bundle.”
Moeti believes that while the CompCom’s approach is commendable, all data price reduction interventions have to be made with low-income consumers getting the highest priority.
“As an organisation whose primary interest has been particularly how low-income consumers are discriminated against in the current pricing structures, I think this is a valid concern. Even as prices drop, we still have to maintain vigilance and ensure low-income consumers are prioritised throughout,” notes Moeti.
Addressing these concerns, Vodacom Group CEO Shameel Joosub pointed out the agreement struck with the commission provides the telco with an opportunity to enter into a social contract with regulators, customers and the people of SA to bring down the cost to communicate and promote digital inclusion.
“When you do comparisons with international data pricing, Vodacom’s new data prices are super-competitive. In terms of services provided, SA is one of the best covered countries and our telcos rate among the best in the world .If you look at the UK, or any of the European countries in terms of rural coverage, they don’t even come close to SA, and all that comes at a cost.
“Another thing we need to understand is that spectrum allocation remains at the heart of this matter. The last time spectrum was allocated in SA was in 2014, so it’s been 16 years without spectrum,” noted Joosub.
Regarding the telco’s participation in the sovereign wealth fund, Joosub explained that Vodacom had spent R37 billion on black economic empowerment suppliers, and the operator is deliberate about supporting small black-owned businesses in SA.
According to a report by broadband market analyst firm Cable.co.uk, SA ranks at number 143 out of 230 countries in regards to mobile data prices. The average cost of 1GB of data in SA is $7.19 (R115), which is up to six times more than what consumers pay in other emerging markets.
Arthur Goldstuck, MD of World Wide Worx, believes the social activism groups raise a valid concern from the point of view of the limited information provided.
“Both Vodacom and the Competition Commission would have earned greater praise if they had come out more firmly with a set of price reductions, as opposed to focusing on only one specific bundle.
“Vodacom has come in as low as possible without seeming to be opting for the absolute minimum data reduction. However, this should come as no surprise, as the two major operators have rarely pushed the boundaries of pricing and flexibility far beyond what regulation demands.
“Vodacom has given the assurance it will be providing reductions of up to 40% on smaller bundles, which is to be welcomed. However, these reductions will apparently be personalised, which will limit the transparency of the approach.”
The range of zero-rated services represents a massively important step going forward, enabling SA to enter a new era of access to digital resources, notes Goldstuck.
Addressing the duopoly
Meanwhile, in a statement, Telkom welcomed the commission’s commitment to lowering data prices, but pointed out Vodacom's reduction is an indication that lack of spectrum allocation had long been used as an excuse to maintain high prices.
"The Competition Commission must put in place adequate and effective measures to address the duopoly and ensure sustained lower prices for consumers.
“Competitors have consistently argued that they can only lower data prices with access to more spectrum. This agreement shows that their argument does not hold water," said the statement.
The Ministry of Communications and Digital Technologies and ICASA welcomed Vodacom’s agreement, saying it comes as ICASA is undertaking two regulatory processes that have a bearing on the pricing of data services in the medium-term – the licensing of International Mobile Telephony, also known as high-demand spectrum, as well as an inquiry into mobile broadband service markets.
“It is our concerted view as a regulator that the licensing of high-demand spectrum is one of the critical components that will facilitate deployment of digital infrastructure, as well as building an inclusive digital society, with the goal of ensuring all South Africans participate meaningfully in the opportunities emanating from the fourth industrial revolution,” says ICASA acting chairperson Dr Keabetswe Modimoeng.
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