Regulators demand cellular providers drop data costs following investigations which confirm exorbitant prices
South Africa is one step closer to catching up with its peers on the Fourth Industrial Revolution (4IR), with regulatory authorities making moves to solve one of the country’s most intractable hurdles: the high costs of data charge by mobile networks.
One of the main regulators, The Competition Commission, recently released the preliminary findings of a market inquiry it conducted into the cost of data communications, and parts of it make for shocking reading.
One of the state’s main gripes against the country’s mobile network operators (MNOs) is that entrepreneurs and small to medium companies, which have been earmarked as central to help grow the economy, cannot afford the costs to communicate and therefore the cost of doing business. This is also the case for ordinary individual consumers, the poorest of whom are locked out of the benefits of the digital economy as a result. Even among higher income groups internet connectivity is simply too expensive for South Africans, which means we have not got off the starting blocks to fully benefit from 4IR.
The preliminary findings by the Competition Commission prove just how urgent it is for our mobile operators drop their data costs. These are two simple examples from the document – Vodacom users in South Africa are currently paying nine times more for a retail tariff of 1GB than Egyptian subscribers, and MTN users in the country fork out R172 for 1GB of data, while Iranian consumers pay just R2.
“Lower income consumers may be exploited to a far greater degree relative to wealthier consumers,” says Commissioner Tembinkosi Bonakele.
He has called on operators to commit to reducing the price of sub-1GB packages to “within an objectively justifiable and socially defensible range” of current levels.
The findings resulted in MTN and Vodacom’s shares taking a big dip this week. The report showed how the two carriers bill more in their home market than in other countries, and particularly overcharge those on lower incomes who pay for smaller bundles. Vodacom and MTN dominate the market in South Africa. Smaller carriers have been appealing to regulators for years to curb the dominance of the two companies.
And though both operators have dropped some of their prices due to pressure from the #DataMustFall campaign, which saw South Africans taking to the streets and social media in protest, it is clear from the preliminary report this is far from enough.
Late last year, President Cyril Ramphosa said that unless women, the youth and small businesses were intrinsically involved in technological advancement, 4IR would fail in South Africa.
A quick win in this regard would be dropping the prices of data. And it is going to be difficult for mobile operators not to buckle under the ongoing pressure.
Government action now seems to be on the cards to force the operators’ hand. Following the release of the findings, Economic Development minister Ebrahim Patel says there is no more time for talk, and the government will take action against the excessive costs.
“Data is the new currency, with international research indicating a correlation between data prices and economic growth. Data pricing matters especially if we want more jobs, better health care, better education and greater equality in society,” he says.
The Independent Communications Authority of South Africa (Icasa) says the Competition Commission’s provisional findings and recommendations confirm its recent observations and findings that the cost of data services is high in South Africa relative to peer countries.
But Icasa says there has been a shift towards rectifying these skewed costs.
“The recent promulgation and implementation of the End-User and Subscriber Service Charter Amendment Regulations (EUSSC) has since brought some much-needed relief to consumers against unfair business rules in the communications sector especially as it relates to the expiry of data bundles, out of bundle charging and lack of transparency in the provision of services,” it says in a statement.
“In particular, and as a result of the measures implemented through the EUSSC, there has been a recent downward trend in out of bundle tariffs charged by operators. Icasa continues to monitor compliance with regards to the implementation of the requirements of the EUSSC.”
The regulator published a tariff analysis report in March. It confirms that MTN and Vodacom charge higher prices for the 1GB and 3GB data bundles at R149 and R299 respectively. The report reveals that virtual network operator (VNO) Rain’s “One Plan Package” prepaid mobile data offering of R50 for a 1GB bundle, remains the most affordable.
Icasa is currently conducting a market review into mobile data services. It will assess the effectiveness of the market for provision of mobile data services and where appropriate, impose procompetitive remedies on players with significant market power. The review is likely to be completed by the end of the 2019/20 financial year.
The authority will also embark on the licensing process for the radio frequency spectrum, once Telecommunications and Postal Services Minister Stella Ndabeni-Abrahams gives a policy directive, which is expected soon.
The government wants to accelerate the licensing of the radio frequency spectrum in the 2.6Ghz, 700Mhz and 800Mhz bands to hasten the growth of mobile communications.
In addition, President Cyril Ramaphosa has said that the country has begun work to prepare for 5G spectrum licensing as part of its efforts to build a smarter digital economy. But first the radio spectrum frequency is needed.
The first licences to cellular providers for the spectrum that will allow them to build 5G in South Africa are likely to be released by 2020. 5G is expected to bring speeds between 5Gbps to 8Gbps, and up to 20Gbps in theory – compared to 4G LTE which has a maximum throughput of 1Gbps.
As mentioned by Patel, analysts say basic supply and demand economics indicate that the reduced cost of data means increased consumption. This increased consumption means more incentive for the country’s mobile content and applications developers to innovate.
So not only will consumers and businesses benefit from decreased costs; an increase in consumption and competition means there will have to be more investment in content and applications, which is likely to boost the industry.