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Competition Commission Says Data Is Too Expensive

Competition Commission Says Data Is Too Expensive


By Business Tech on 24 April 2019 - https://businesstech.co.za/news/telecommunications

The Competition Commission has released its provisional report on its Data Services Market Inquiry, in which it prescribed new rules for mobile networks.

The inquiry seeks to understand features in the market and the value chain that may cause or lead to high prices for data services. It also seeks to make recommendations that would result in lower prices for data services.

BusinessTech unpacked the major findings below.

Data too expensive

In its preliminary findings, the commission said that international benchmarking confirmed that South African data prices are high - particularly for mobile prepaid data.

Notably, the commission found that South Africa's data prices are higher than other BRICS and SADC countries.

It also found that Vodacom and MTN charge higher prices in South Africa than other countries which they operate in.

Anti-poor

The commission also found that South Africa's data pricing is 'anti-poor' and lacks transparency.

"An assessment of headline retail prices of all mobile operators demonstrates that consumers of small data bundles, generally being poorer customers, pay inexplicably more on a per MB/GB basis."

"Relative to a 1GB bundle, a consumer buying a 100MB bundle will pay roughly twice the price on a per bundle basis for the same data period validity.

"A consumer buying a 50MB bundle will pay up to three times more and a 20MB bundle up to four times more".

The commission also found that this pricing lacks transparency and that operators prefer to use 'special promotions' instead of dropping headline prices.

Spectrum and new competitors

The commission acknowledged that a lack of spectrum played a role in these high prices.

However, it said that while more spectrum may reduce operator costs, it won't force them to drop prices unless there are competitive pressures to do so.

Despite the introduction of new competitors, the commission said that the dominance of Vodacom and MTN meant that the two companies could introduce prices independently and unconstrained by competitors.

Recommendations 

The Competition Commission made the following major recommendations:

  • These networks should introduce immediate relief on data pricing - including a commitment by mobile operators to reduce headline tariffs;
  • Networks should reduce the price of sub-1GB bundles to within range of an 'objectively justifiable and socially defensible range of the 1GB price'.  Provisionally, this should be a maximum of 25% higher on a per MB basis;
  • Networks should zero-rate public benefit and educational institution websites;
  • Improving affordability and enhancing competition should be central to the assignment of spectrum;
  • Existing regulations on facilities leasing must be extended to include ducts and poles and to impose cost-oriented pricing requirement on such facilities;
  • There should be more regulatory scrutiny at the wholesale level to allow smaller networks to be more competitive;
  • Alternative infrastructure must be developed, particularly to provide data services in lower income areas and smaller secondary cities and towns;
  • The government should look to provide free public Wi-Fi and use their own infrastructure to reduce the costs of  investment and both backhaul and last mile infrastructure in lower-income areas.

Stakeholders have now been called to make submissions on this report by 14 June 2019.

Thereafter the inquiry team will assess these submissions before publishing a final report later this year.