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CompCom, ICASA headed for #DataMustFall battle

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A battle of authority is brewing between the Competition Commission (CompCom) and the Independent Communications Authority of SA (ICASA) over data pricing.

The battle lines were drawn on Monday following a damaging finding by the CompCom that MTN and Vodacom are perpetuating the high costs of data.

The competition watchdog, which had been investigating data pricing in SA since August 2017, presented its final report in Pretoria, recommending that both carriers reduce data prices by up to a half or face prosecution.

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 CompCom and ICASA have circled around each other for two years, with the competition watchdog pushing an attack on retail prices, while the regulator had opted for intervention at wholesale level.

Spectrum dilemma

Both MTN and Vodacom yesterday blamed the regulator for the high cost of data.

Vodacom spokesperson Byron Kennedy says: “It is immediately evident that there is a significant difference in opinion between the Competition Commission and ICASA on a number of issues that are critical to data prices in South Africa.”

He adds that Vodacom is reviewing the positions of both government entities.

“Vodacom notes the release by the Competition Commission of its Data Services Market Inquiry final report earlier today [Monday] and ICASA’s discussion document on the market inquiry into mobile broadband services in South Africa published on Friday,” says Kennedy.

On Friday, ICASA published a Mobile Broadband Services Inquiry discussion document to solicit written comments from different sectors of society, to be submitted within 45 working days from date of publication.

The discussion document, which is informed by information and data received from licensees, sets out the authority’s preliminary views on the definition of relevant mobile broadband services markets and the effectiveness of competition within these relevant markets.

The discussion document further identifies licensees that may have significant market power in the identified markets, and proposes pro-competitive remedies.

Kennedy says in particular, ICASA concludes from its analysis of international mobile data prices that: “South Africa’s prices are neither extremely high nor very low in relation to other African countries or compared to countries which are more similar to South Africa in terms of their size and level of development. When put in further context with data on speeds and LTE coverage, it is clear that customers in South Africa are benefiting from a much higher quality of access than those in other African countries.”

Contrary, Kennedy says, the CompCom states: “South Africa currently performs poorly relative to other countries, with prices generally on the more expensive end.”

He says another area where there is a significant difference in opinion pertains to the impact of the continuous delays in allocating available spectrum.

According to Vodacom, ICASA says there are “a number of reasons why spectrum assignment is critical to achieving cheap, high-quality mobile broadband”, whereas the CompCom has downplayed the role of spectrum in reducing data prices.

“Vodacom has consistently stated that delayed spectrum allocation has impacted the rate at which data prices could have fallen. Vodacom has reduced the effective price of data by circa 50% since March 2016,” Kennedy says.

Supporting Vodacom’s views on cost of data, MTN says to simply lay the blame for data costs at the foot of the operators is wrong.

It says: “MTN in South Africa has had to compensate for the lack of spectrum by spending over R50 billion in the last five years to build a world-class network for all South Africans, covering over 95% of the population with 4G coverage, without any 4G spectrum having been allocated.”

Further, MTN SA CEO Godfrey Motsa says: “Industry, policy-makers and regulators must collaborate to coordinate policy objectives as to how spectrum will be allocated. We agree that costs must continue to fall and competition needs to grow. However, the risk is that by breaking the required spectrum into too small chunks or to create middlemen, operators will lose the ability to deliver networks that are economically viable and efficient – telecoms is a scale business.”

Disconnected policy-making

Analysts that spoke to ITWeb agree there is disconnect between the regulator and policy-makers.

“The CompCom proposals are more aggressive and appear to differ in a material way from the proposals suggested by the telecommunications regulator, ICASA, published last Friday,” says Peter Takaendesa, portfolio manager at Mergence investment Managers.

“ICASA appears to continue to favour intervening at the wholesale level instead of the outright attack on retail prices charged by the operators. It remains to be seen how those key differences will be addressed.”

Ahmore Burger-Smidt, director and competition law specialist at Werksmans Attorneys, says one should expect for this process to continue “for a prolonged period and it is doubtful whether the timeframes prescribed by the inquiry will be achieved. Impact on mobile network operators will be significant.”

Despite this potential fallout, ICASA is still discounting the magnitude of disconnect between the regulator and the CompCom.

Paseka Maleka, ICASA spokesperson, tells ITWeb: “There will be continued engagement between ICASA and the Competition Commission on the outcomes and recommendations of the data services market inquiry in line with the provisions of the memorandum of understanding between the two entities.”

Mobile operators have long been under pressure from society regarding data prices, which led to the launch of the CompCom 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 CompCom and ICASA initiated inquiries into data pricing.

On Monday, the CompCom recommended ICASA should formalise any agreement reached between the mobile operators and the commission within three months from the release of the report to inform each subscriber, on a monthly basis, of the effective price for all data consumed by the customer.

It said: “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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