Relief from high price of data expected
The Competition Commission probe will put more pressure on mobile and fixed-line network operators voluntarily to reduce tariffs
Consumers can expect some relief from high data prices, with the Competition Commission having officially launched an investigation into the cost of internet bundles. The commission has launched an investigation into the high price of accessing the internet in a move that will put more pressure on mobile and fixed-line network operators voluntarily to reduce tariffs.
South Africans have been campaigning for a reduction in data prices in recent years, forcing the government to rope in the commission as the communications regulator, the Independent Communications Authority of SA, was seen to be taking too long to probe broadband prices and prescribe regulations.
The high price of data is holding back more rapid uptake and more intensive use of data in the mass market. The government wants to connect 22-million people to meet the SA Connect and National Development Plan target of universal access to high-speed internet by the end of 2020.
Commission spokesman Sipho Ngwema says they initiated the inquiry because they believe factors in the market prevent, distort or restrict competition in the sector. The commission aims to determine what may cause or lead to high data prices in order to make recommendations that will result in lower prices for data services.
BMI-TechKnowledge consulting director Denis Smit says the inquiry could have a wide-ranging effect on the industry. "It is interesting to note that the terms of reference do not single out mobile data pricing alone … but data as a ‘category’, which obviously includes all the other fixed-line sectors as well," he said.
Smit says the commission’s study will also allow for a proper interrogation of the "complex value-chain elements and identify the true bottlenecks and obstacles to lower consumer prices".
The commission’s objectives include assessing the state of competition in the market at every stage of the value chain for the provision of data services to identify areas of market power where customers or consumers may be exploited or excluded by firms. It will identify any other structural, behavioural or regulatory factors that may influence competition or pricing, and benchmark data services pricing against those of other countries.
It will probe the general adequacy and effect of the regulatory regime; strategic behaviour by large fixed and mobile incumbents; costs faced; and profits earned by network operators, as well as arrangements for the sharing of network infrastructure.
World Wide Worx MD Arthur Goldstuck says the one concern is that while the terms of reference cover every aspect of the data market, they do not tackle the one that is allowing punitive pricing to continue, namely the high cost of ad hoc data and airtime used as data.
"The … problem is that, when one looks only at the cost of data as a whole, one can be forgiven for assuming the operators have, in fact, brought down prices dramatically, and the cost per megabyte of data is competitive," he says.
Lower-income users tend to consume data on an ad-hoc basis, which means it comes off their airtime rather than a prepaid data bundle. In such cases, the cost of data is among the highest in the world. Consumers are charged between 99c and R2 per megabyte if they access internet services using airtime.
"This is not only punitive pricing, but penalises the poor for not being able to afford or budget for bundles," Goldstuck says.
The inquiry is expected to be completed in August 2018.
Any remedies that may be suggested are only likely to be implemented in 2019.
By then, the market landscape might have changed considerably due to its dynamic nature, says Africa Analysis MD Dobek Pater.