COMPETITION COMMISSION ON DATA SERVICE MARKET INQUIRY

On Wednesday, 24 April 2019 the SA Competition Commission released the preliminary findings of its Data Services Market Inquiry. The provisional findings have already caused a ripple through the telecoms sector and should they be confirmed as final, they are likely to have far reaching implications for the sector the economy, and South Africa’s attempts to embrace the Fourth Industrial Revolution (4IR).

Here are the main findings of the report:

 

  1. South Africa’s mobile data costs, especially the cost of prepaid data, compare poorly with other countries’ –  This is especially in the case of small prepaid data bundles which are on average 6-10 times higher than the cheapest headline prices. The pricing structure of the mobile operators penalises the poor and the cost differential cannot be justified on commercial grounds
  2. The retail pricing structure lacks transparency and has resulted in exploitation of the poor – although operators have tried to downplay the effect on the poor by suggesting that hourly, promotional and free data narrows the gap, there is no justified explanation for the price differentials
  3. The failure to release high demand spectrum has raised costs unnecessarily –releasing such spectrum should therefore be a priority. This must be done in a pro-competitive manner and not through an auction that will result in the spectrum being awarded to the highest bidder. “we don’t need the highest possible revenue from auctioning spectrum, but rather a balanced approach.” – Bonakele
  4. The wholesale open access network (WOAN) is supported as it will facilitate service-based competition via MVNOs – the WOAN must be both commercially and technically feasible and the likely outcome is a hybrid model;
  5. Access to passive infrastructure has been identified as a large cost driver including base stations, high sites and ducts and poles for fibre backhaul (see paragraphs 19, 20 & 21 in the report summary);
  6. Active infrastructure sharing could result in anti-competitive behaviour such as collusion;
  7. Vodacom and MTN are not constrained by the smaller operators in their pricing decisions – price-based competition needs to be improved;
  8. Fixed line prices compare well by African standards, but they are still not competitive;
  9. Wholesale roaming arrangements favour the provider networks;
  10. Focus on role of fixed line access for the provision of cheap/free public WiFi; and 
  11. Need to increase fixed/fixed wireless access for poorer communities – the focus of all providers has been in wealthier formerly white suburbs – need to find a means of reducing costs of rollout e.g. trenching costs

INQUIRY RECOMMENDATIONS

 

  • Need to find a means of enhancing price-based competition through:
    • Cost oriented pricing of ducts and poles;
    • Moving towards cost-based pricing on roaming which will allow smaller operators to achieve scale since without regulation pricing is not cost effective due to inequitable bargaining positions;
    • A commitment by MNOs to reduce headline tariffs to the current effective levels including promotions, free data etc;
    • A commitment by mobile operators to reduce the price of sub1GB bundles to a maximum of 25% above the 1GB price
    • Zero rating of content for public benefit
    • Urgent assignment of high demand spectrum (HDS) and cost oriented access to a broader range of facilities to reduce infrastructure costs – any assignment of HDS should be contingent upon obligations to pass through cost reductions from greater spectrum access and other obligations to improve affordable access, including spectrum caps on larger operators, asymmetric assignments and set asides for new entrants such as the WOAN
    • The use of existing facilities legislation and regulations to include ducts and poles and to impose cost-oriented pricing requirements on such facilities;
    • Call for voluntary commitments to improve the terms of access amongst existing operators – Vodacom wants access to ducts and poles, Telkom wants access to masts and towers;
    • Functional or accounting separation for large mobile operators to improve price transparency and fairer access pricing to third parties– reference was made to the success of the Commission in transforming the fixed market;
    • Reform to the regulatory framework and greater collaboration amongst regulators is necessary to ensure effective wholesale regulation of fixed and mobile markets;
    • Encourage alternative technologies and WiFi data offloading from mobile networks to provide free public WiFi or cheaper WiFi subscription services;
    • Government departments need to find means to improve the investment case for last mile access and backhaul provisioning  into currently underserviced areas by increasing their own demand;
    • Government needs to support smaller players/new entrants and open access on infrastructure
    • Investigations into excessive pricing is not the preferred route, but will be used if necessary.

WAY FORWARD

There is now an opportunity for all affected parties to scrutinise the provisional findings and recommendations, and to provide comments on same by 14 JUNE 2019  where after the final report will be published

DOWNLOAD THE FULL REPORT HERE