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The Competition Commission wants all mobile operators to provide prepaid customers a lifeline package which provides them free data on a daily basis.
This is just one of the recommendations the Commission made in its final report on the data services market inquiry. The final outcomes of the inquiry, which started in August 2017, were announced at a briefing on Monday by Commissioner Tembinkosi Bonakele.
The briefing was attended by Trade and Industry Minister Ebrahim Patel and Communications, Telecommunications and Postal Services Minister Stella Ndabeni-Abrahams. Both ministers received a copy of the report.
Patel had first written to the commission when he was still the economic development minister, requesting the inquiry following public outcry against excessive data pricing. A provisional report was published in April 2019, allowing industry players to make further submissions.
Duopoly
In its final report, the commission ultimately found that the data services market is "highly concentrated" with a duopoly of the two leading mobile operators – MTN and Vodacom, Bonakele said.
As a result of the duopoly, data pricing is excessive, he added.
The commission wants both mobile operators to independently reach an agreement with it to reduce pricing substantially, especially the pricing on prepaid bundles, which it believes is far more excessive than that on contracts. The excessive pricing on prepaid bundles adversely effects lower-income consumers, he said.
"There is a scope to reduce prices in the region of 30% to 50%," said Bonakele.
'Competition problem'
The Commission has given the mobile operators two months to reach an agreement with it. Failing that, it will consider pursuing prosecution for excessive pricing by means of the Competition Tribunal.
Another major finding by the commission is that operators cannot compete effectively – mainly due to infrastructure sharing. Bonakele said essential infrastructure needs to be subject to regulation.
Commenting on the findings, Patel said they showed there is a "competition problem" in the data services market. "The prices are higher than they should be, higher than any other markets elsewhere in the world."
Patel motivated for lower data prices – at competitive levels – to support economic growth. "If we want to grow the economy, we need to have the lowest possible data prices. We need prices to be competitive and access [to data services] to be enhanced."
The Commission has made recommendations to provide immediate relief on high data prices, improve mobile price competition and infrastructure alternatives over the medium term.
"This package of remedies will not only lower prices for all consumers, and particularly the poor, but will lead to greater economic and social inclusion moving forward as the country moves into the digital age," the report reads.
Below are some of the key recommendations.
1. Vodacom and MTN to reduce tariffs
The commission noted that although Vodacom and MTN have introduced price reductions, it still wants agreements with the mobile operators to reduce tariffs.
They must also each reach an agreement within two months to reduce the headline prices of all sub-500MB 30-day prepaid data bundles to reflect the same cost per MB as the 500MB 30-day bundle.
"Given their collective market position, adjustments to their prices should impact on market-wide pricing," the report read.
The Commission called for the operators to independently reach an agreement with it cease what it calls "ongoing partitioning and price discrimination strategies", that may facilitate greater "exploitation" of market power "anti-poor pricing".
2. Lifeline data package
Most notably, all mobile operators must within three months reach an agreement with the Commission to offer all prepaid subscribers a "lifeline package" of free data made available daily. The Commission said this will ensure all citizens have data access on a continuous basis, regardless of their income levels.
Bonakele said this agreement must be given legislative and regulatory effect within six months. The precise level or amount of lifeline data to be made available, as well as annual adjustments are to be determined through consultation with industry players, experts and the regulator – Independent Communications Authority of South Africa (Icasa).
"The Commission is of the view that it should be sufficient to ensure each citizen's participation in the online economy and society," the report read.
3. Zero-rated content
All mobile operators must also reach an agreement with the commission within three months to take an industry-wide approach in zero-rating content from public benefit organisations and educational institutions. This agreement must also be formalised by the regulator, Icasa, within six months.
4. Transparency with consumers
All mobile operators must also reach an agreement with the commission within three months, to inform each subscriber on a monthly basis of the "effective price for all data consumed". This agreement must also be formalised by Icasa, within six months of the report.
5. Telkom Openserve
Telkom's subsidiary Openserve, which provides telecommunications infrastructure, must reach an agreement with the commission to substantially reduce the price of IP Connect, to remove excessive pricing concerns, within two months, the report read.
The commission warned that failure by operators to reach the agreements within the given timeframes, will result in it pursuing prosecution against them. Bonakele said that the Commission would prefer not to resort to prosecution. "We must resolve matters amicably," he said.
The Commission also plans to institute monitoring of pricing levels and profitability in future - until the market becomes more competitive.
High demand spectrum
The Commission noted that immediate relief recommendations are linked to the release of high demand spectrum.
The department of telecommunications and postal services has since published a policy directive on the release of spectrum. "Government as a whole is committed to the release of spectrum," said Bonakele.
The Commission is also engaging with Icasa on how best to assign spectrum. Bonakele said that assigning spectrum to the highest bidder is not necessarily effective in promoting competition. He said that a creative approach is being sought to address the assignment of spectrum in a way that does not frustrate competition.
Commenting on the report, MTN issued a statement in which it stressed that government and regulators have failed to release spectrum required to bring down communications costs.
"To simply lay the blame for data costs at the foot of the operators is wrong. MTN in South Africa has had to compensate for the lack of spectrum by spending over R50bn in the last five years to build a world-class network for all South Africans, covering over 95% of the population with 4G coverage, without any 4G spectrum having been allocated," MTN's statement read.
MTN said that while Nigeria is used as an example of a developing country with lower data costs than South Africa, it is important to note that MTN has 110MHz of spectrum made available to it in Nigeria, compared to only 38MHz of spectrum made available to it in South Africa.
"Industry, policy makers and regulators must collaborate to coordinate policy objectives as to how spectrum will be allocated.
"We agree that costs must continue to fall and competition needs to grow. However, the risk is that by breaking the required spectrum into too small chunks or to create middlemen, operators will lose the ability to deliver networks that are economically viable and efficient – telecoms is a scale business," said MTN CEO Godfrey Motsa.
"We need to look at every progressive approach to support the continued reduction of the cost of communicate, while also offering more South Africans greater access to quality broadband experiences. The urgency to release the 4G and 5G spectrum is now," Motsa added.
In an emailed response to Fin24, Vodacom spokesperson Byron Kennedy said that it is reviewing both the Commission's report and Icasa's discussion document on the market inquiry in mobile broadband services which was released on Friday.
Similarly to MTN, Vodacom said that the delayed spectrum allocation has impacted the rate at which data prices could have fallen. "Vodacom has reduced the effective price of data by circa 50% since March 2016," Kennedy said.
Vodacom will engage with the Commission on its report and issue further comment on due course. Vodacom will also be making submissions on the Icasa discussion document.
