At the start of December, the Competition Commission published its final report on the Data Services Market Inquiry, making a number of recommendations around the cost of data in South Africa.
While commentators have primarily focused on the headline-grabbing recommendations for immediate data price drops, there has been little discussion on the broader package of reforms that the data inquiry recommended be put in place says James Hodge, chief economist at the Competition Commission.
Writing in an opinion column for the Sunday Times, Hodge said that these reforms aim to ensure a competitive and inclusive data market going forward, but also aim to assist the operators themselves to reduce costs and overcome regulatory hurdles – both of which support investment in the sector.
“The inquiry has long championed the immediate release of spectrum in recognition that it is a factor affecting pricing, albeit not the only or primary factor,” he said.
“The inquiry called for a licensing process focused not on revenue maximisation for the state but rather supportive of competition and universal access.
“This would involve some caps on spectrum to the larger operators, but also seeing the benefits of spectrum resulting in cost reductions and price commitments to enhance affordability rather than being used to plug a gap in the fiscus.”
He added that the inquiry has identified a suite of wholesale interventions to reduce costs and enhance competition. These recommendations include:
- The possibility of reducing investment costs through greater infrastructure sharing, which the inquiry recommends be achieved through legislative changes. These would enable cost-based access to essential infrastructure, including the ducts and poles of Telkom, which provide the fibre backhaul for mobile networks;
- This extends to municipal infrastructure, looking to unblock access to electricity/lighting poles, speed up permission for wayleaves and put an end to exorbitant charges for those rights of way;
- Reducing the cost of roaming agreements to promote more aggressive competition from the smaller networks in South Africa’s poorest areas;
- Legislative reform to enable more effective and rapid regulatory interventions by Icasa;
- Investment incentives for fibre to the home (FTTH) in low-income areas and a public-private partnership initiative to provide Wi-Fi in public places, commuter points and government buildings.
“This package of interventions should make the market for data more competitive and inclusive in future, but this will not happen overnight,” Hodge said.
“It is for that reason that some immediate pricing interventions are necessary and justified. Ensuring fair pricing is not only within the enforcement powers of the commission but is also incumbent upon firms entrusted with a scarce national resource, namely spectrum.”
Data must fall
In its report, the Commission called the high price of data ‘anti-poor’ and noted that networks such as MTN and Vodacom offer lower prices in the other African countries they operate in.
To combat these issues, the Commission said that all networks should offer all prepaid subscribers a ‘lifeline package’ of daily free data to ensure all citizens have data access on a continual basis, regardless of income levels.
The precise level of lifeline data and any annual adjustments should be determined in consultation with industry, Icasa and relevant experts.
The Commission is of the view that it should be sufficient to ensure each citizen’s participation in the online economy and society.
It added that Vodacom and MTN must independently reach an agreement with it on ‘substantial and immediate reductions on tariff levels’ within the next two months. It added that preliminary evidence suggests that there is scope for price reductions in the region of 30% to 50%.
It also called for the two operators to reduce the cost of all sub-500MB 30-day prepaid data bundles as well as the ‘cessation of partitioning strategies that contribute to anti-poor pricing and/or inferior service’.
Other major findings include:
- All mobile operators must reach agreement within three months to zero-rate content from public benefit organisations and educational institutions to ensure broad application;
- All mobile operators must inform each subscriber, on a monthly basis, of the effective price for all data consumed by the customer;
- Telkom Open serve must reach an agreement with the Commission on substantial reductions in the price of IP Connect to remove excessive pricing concerns within two months.
The Commission said that if these recommendations are not met within the specified time frames it will proceed with prosecution.