#DataMustFall: Government interference will drive data prices up - FMF

2017-08-10 16:22 - Kyle Venktess and Carin Smith, Fin24
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Johannesburg - The #DataMustFall campaign utilises "dangerous populist disinformation", which has resulted in government and the Independent Communications Authority of South Africa (Icasa) "trying to force price control on the private sector based on a social media campaign and a false meme, claims the Free Market Foundation (FMF).


It regards the meme as deliberate cherry picking.

The FMF says one should look at the facts behind the #DataMustFall meme. It says a small regional provider in India, for a brief period, offered a loss-leader special deals at R11/GB. India’s isolated cheapest price was then compared to SA’s mainstream most expensive gig.

"The #DataMustFall meme and campaign was born and became entrenched. Nigeria, also part of the meme, may be cheaper, but is highly unreliable with a dropped call rate 50% higher than SA’s," the FMF said.


"The reality is that there are too many variables to make simple price comparisons across countries. Prices vary from zero to hundreds of rand, from regional or national providers, from once-off packages to contracts, from in to out of bundles, from voice to text, and so on."

Other factors affecting data prices include country size, population density, coverage, geography, regulations, subsidies, licensing fees, spectrum availability, quality and level of development.

According to the FMF, one should take into account specific factors related to SA. Unreliable electricity (blackouts, load shedding) means base stations must have expensive backup power. The high crime rate also means network operators experience costly vandalism and theft.

The restrictive spectrum allocation raises prices substantially because duplicate towers must be built or “farmed”. On top of that, the SA government demands free or sub-economic data for schools, hospitals, clinics, universities and FETs.

Costs associated with “free” data must be passed on to consumers. Vodacom and MTN between them have spent around R20bn over the last year or two on new infrastructure. That money comes from profits.

"No profit, no infrastructure. Data traffic and innovation continue to explode, demanding continued and significant capital investment," the FMF said.

Netwerk24 reported that, although data is at least 41% cheaper in 2017 than it was in 2010, the average prices for 500MB of data in 2017 are 33% higher than in 2016. This is according to an investigation by Icasa.

Rubben Mohlaloga, acting chair of Icasa, is especially worried about the big difference between data costs where there is a contract and where there is not.

Rushing headlong

The FMF, an independent organisation that aims to foster an open society as well as economic and press freedom, said government is rushing headlong to introduce more regulation without a clear understanding of what drives the data market and of the unintended consequences of "misguided interference".

The FMF said there is indeed scope to reduce data prices – "if government relaxes regulation, allows free competition and releases more spectrum". Price control is not the answer, nor is the proposed Wireless Open Access Network (WOAN), in its view.

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The FMF argues that government regulation of data costs may have the opposite effect.

"There is no concrete evidence of anti-consumer collusion. In the communications market, the greatest (but not necessarily sole) culprit is government regulation and the Wireless Open-Access Network (WOAN) proposed by the ICT Policy White Paper will make it worse," the FMF said. It regards the WOAN is an effective nationalisation of the telecommunications infrastructure.

READ: #DataMustFall: Vodacom says it is committed to reducing prices

The latest step by Icasa seeks to regulate data expiry, as it was published in the Government Gazette.

The communications authority wants to amend the end-user and subscriber service charter regulations by introducing “out-of-bundle billing practices” and other “expiry of data practices”.

Vodacom, one of the first networks to react to the proposal by Icasa, said it will actively participate in consultation process on the draft regulations regarding data expiry periods and out-of-bundle billing.

Vodacom told Fin24 that it was committed to the process of drafting new regulations, after the communications regulator stepped into the ongoing feud between consumers and networks through the #DataMustFall campaign.

READ: Data struggle should focus on poor

While highlighting the call for the cost of data to fall, experts believe that the #DataMustFall campaign and spin-off campaigns are geared incorrectly.

Most recently, an online protest against the high cost of data crashed spectacularly when it became a trending topic on Twitter.  

The protest asked South Africans to do away with social media for that day under the hashtag #SocialMediaBlackout, but contradicted its purpose by becoming a top trend on a day meant to encourage users to boycott social networks. 

Internet analyst and expert, Arthur Goldstuck told Fin24 although contradicting its purposes the trend has highlighted the consumers’ frustration in dealing with the high cost of data.

He added that the campaign was not geared correctly to have maximum impact. 

“The real issue is that the heaviest data users tended to have a fixed ADSL or fibre line. The most affected users use the least amount of data because of its high cost. Many are prepaid users who use data off their airtime,” he said.

Goldstuck said that networks were punishing users who could not afford to buy bundles with out-of-bundle rates, which consumed more airtime from users.

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