Competition Commission poised to whack cell giants with a big stick
Vodacom and MTN have been nailed for exploiting the country’s poor
SA’s cellphone giants have been warned: stop discriminating against the poor and damaging the economy, or face the wrath of the government.
In the release of its provisional report into the cost of data, the Competition Commission on Wednesday slammed the country’s mobile giants, in particular Vodacom and MTN.
The commission’s inquiry into the country’s high cost of data began in August 2017 after a public outcry over pricing and mobile operators’ failures to carry over unused data.
The commission, in revealing its findings, said it had given mobile operators until June 14 to come to the party and show how they planned to significantly reduce their data costs.
It has told operators that data less than 1GB must be reduced in cost by 25% .
The report, released by Competition Commission commissioner Tembinkosi Bonakele, showed the country’s poor were being exploited by mobile operators.
He said those buying smaller data bundles paid up to twice as much compared to consumers who bought larger bundles.
“The cost of mobile data is anti-poor and lacks transparency, with lower-price-income consumers being exploited compared to higher-income consumers.”
He said the inquiry found operators had a totally different attitude to their “wealthier consumers”.
Bonakele said international benchmarking studies showed how SA’s data costs compared poorly to other Brics and SADC countries, with MTN and Vodacom charging far higher rates in SA than the other countries where they operated.
“The larger networks, who dominate the market, have found it better not to price downwards and are resilient against competition.”
He said there needed to be greater accounting of larger network operators with proper transparency around the real costs of data.
“Relative to 1GB data bundle, a consumer buying a 100MB data bundle will pay roughly twice the price on a per megabyte basis. A consumer buying a 50MB bundle will pay up to three times more and a 20MB bundle up to four times more.
“The inquiry found that punitive out-of-data-bundle rates are more frequently imposed on purchasers of small data bundles. These are generally bought by the lower-income consumers.”
He said of material concern for the inquiry was the lack of transparency over the rates consumers were paying for data.
“The inquiry is concerned about the dynamics around pricing, which may be responsible for anti-poor pricing structures.”
Bonakele said their recommendations included obtaining commitments from operators to improve transparency around costing.
“We think this situation can be fixed through a voluntary process. We believe the commitment route is a better way than going the enforcement route.
“If there is no buy to this request for commitment then we will have to evoke the regulations we are empowered with.”
Competition Commission chief economist James Hodge said the consistent message from the inquiry was that SA performed poorly when it came to the price of mobile data.
“Some of the operators charge six to 10 times more in South Africa than they do in other countries, with the data price gap widening rapidly over time.
“There is no cost justification for why consumers are paying two to three times more for 1GB of data.”
Economic development minister Ebrahim Patel said the report painted a picture that “we have a problem”.
Responding to questions from Times Select on punitive measures that can be meted out against mobile operators, Patel said they were going by the saying, “talk softly and carry a big stick”.
“Currently the commission’s approach is to have operators sign up to binding commitments. In the absence of the commitments, it will be to open up our toolkit.
“There is legislation which is coming into effect soon, which will deal with excessive pricing, price discrimination and domination with higher penalties which can be levelled against operators.”
The new laws, he said, had taken out the yellow card option for companies sailing close to the edge, who get off “scot-free” for infringements.
“Now if you break the law, penalties will be imposed.
“It is clear there are competition problems resulting in discrimination against the poor. We can and must do something about this because data costs are critical to the performance of the economy.
“Data is the new currency, with international research indicating a correlation between data prices and economic growth.”
MTN spokesperson Jacqui O’Sullivan in a statement said they would study the report.
She said the inquiry appeared to have largely relied on data from 2017 and may not have considered changes in 2018 and 2019.
“One such significant change is MTN’s decision in February to cut its out-of-bundle-data rate by up to 75% for prepaid customers.
“Customers not making use of data bundles are now only paying 29c per MB for data usage, and customers that do purchase data bundles are 49c per MB.
“MTN’s significant reduction in out-of-data-bundle pricing emphasises our commitment to continue driving down the cost of data.”
Vodacom in a statement said they were committed to meeting the commission’s deadline.
“Vodacom remains committed to its ongoing pricing transformation strategy to reduce the cost [of data]. Recently, Vodacom announced an out-of-data-bundle price reduction by up to 70%.”