SA operators make small #DataMustFall adjustments

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There have been some efforts to bring down costs in a managed way in SA, say analysts.
There have been some efforts to bring down costs in a managed way in SA, say analysts.

South Africa's mobile operators have started to make small efforts to reduce the cost of data, although locals will have to wait for six more months before the inquiry into the exorbitant costs of data is finalised.

Businesses and consumers will be waiting in anticipation for the outcome of the Competition Commission's inquiry into data costs, which is expected to be finalised in August.

In August last year, the Competition Commission officially launched an inquiry into the high price of data services in SA.

South Africans have been vocal about their displeasure in regard to the cost to communicate. The topic of "crazy" mobile data rates gained traction last year when citizens took to social media to complain about high mobile data costs under the banner #DataMustFall.

Law firm Webber Wentzel says the commission believes there are features of this market that prevent, distort or restrict competition. The purpose of the inquiry is to assess the elements of the data services value chain which contribute to the pricing of data.

Blanket approach

World Wide Worx MD Arthur Goldstuck says: "We have seen efforts to bring down costs in a managed way. Telkom Mobile has had a standard out of bundle rate of 29c for some time. Cell C has a 15c rate under certain circumstances. MTN has brought it down for specific accounts.

"We now need a transparent, blanket approach to putting a ceiling on the price of ad hoc data that comes off airtime. That is where a substantial amount of damage is being done to the poor. Please, stop calling for the non-nuanced fall of data prices. It must fall for the poor."

Goldstuck points out there are two realities behind data costs in SA. "The first is for the well-off, who are able to afford contracts and bundles. For them, data costs have fallen dramatically in recent years.

"The reason is simple - by providing an incentive to buy large bundles, the operators are able to lock in revenue upfront. Because the lower income groups buy in very small increments, or use data off their airtime, they are not an attractive market for the operators."

Further, he adds, because this segment also does not have buying power, in that it does not make a massive difference to the network's average revenue per user if a customer in this segment moves to another network, there is little incentive to offer incentives to stay.

According to BMIT director Brian Neilson, Telkom and Cell C have shown that data costs can fall dramatically relative to the prices of the two largest mobile operators, proving yet again that competition is the best means of achieving more affordable prices for all.

"Data has become an essential service, and we need lower prices in order to make data available to all on an equitable basis, even in smaller bundles. Large data bundles are still by far the cheapest on a per-MB basis."

Policy uncertainty

Meanwhile, Leon Louw, executive director of the Free Market Foundation, says there is a lot of policy uncertainty in the ICT sector, especially as it relates to radio frequency spectrum.

"The industry needs spectrum to provide their services, but government has sat on it for more than a decade now, refusing or failing to release it to mobile operators. Mobile operators, thus, are forced to refarm existing spectrum by building additional infrastructure.

"This has cost them billions of rands, which means higher prices for their services. Furthermore, the ICT sector is heavily regulated, including that operators need to provide data at lower costs to educational institutions. South Africa also has a low-density population, unlike places like Nigeria and India, meaning a single tower reaches fewer people. This also adds to the cost of data," Louw says.

Thus, he says, there is no need to reduce the cost of data in SA. "All things being equal, South Africa's data costs are comparable to other nations. Our ICT infrastructure is also on par with developed nations."

According to Louw, the industry needs competition and a friendly regulatory environment for data prices to decline. For this to happen, he notes, government must abandon its new ICT policy (the 2016 White Paper) and the new Electronic Communications Amendment Bill, which will have deleterious consequences for the industry.

"The WOAN [wholesale open access network] monopoly has not worked elsewhere in the world, and has only been tried in Mexico, Kenya, Russia and Rwanda. The Bill will have the effect of no new infrastructure being built and for data prices to likely soar as spectrum is now guaranteed not to be released.

"Telkom's recent comments that all spectrum should be given to the WOAN is also quite unfortunate. Telkom should compete with its bigger rivals, not ask government for assistance. This kind of crony capitalism is not conducive to a competitive market."

For ICT veteran Adrian Schofield, there is a proven relationship between broadband access and economic opportunities, so SA must continue its efforts to improve affordability and accessibility.

However, he is concerned the Competition Commission needs so long to complete an inquiry.

"I accept that they may be constrained by lack of resources but the delay in arriving at a result will delay the implementation of recommendations."

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