Mobile pricing: Regulatory challenges facing SA

South Africa compares poorly to other African countries when it comes to the affordability of mobile services

April 25, 2012
Alison-Gillwald

Contrary to what one might expect considering the high mobile penetration rates that we have in South Africa, our country compares poorly to at least 30 other African countries when it comes to affordability and pricing structure.

Not too long ago South Africa and Namibia shared similar retail prices. Today Namibia enjoys some of the cheapest mobile prepaid prices on the continent while South Africa’s prices are of the most expensive in Africa.

Cell C and 8ta have been attempting to introduce sustainable cheaper products, but these products were not able to force down the prices of Vodacom and MTN.

With over 100 mobile voice products available in the South African market alone – and with changing and often convoluted tariff structures – it is challenging to do a simple and accurate cost review to find the best package for their needs.

Pricing for the people?

It is the duty of the national regulator to ensure that all citizens have access to mobile technology which is affordable.

To gain insights about the price-scrutiny procedures by the regulator as it is today I interviewed a leading researcher and academic in the field of information communication technology, Dr. Alison Gillwald (Executive Director at Research ICT Africa and Adjunct Professor at the University of Cape Town’s Graduate School of Business).

South Africa is only ranked 30th out of the 46 countries for which mobile pricing data was available on the web in Africa for prepaid mobile. What are the primary reasons for the country’s current low ranking?

Dr. Gillwald: Pricing provides an excellent barometer of competition in the market and is a key indicator of policy success. South Africa’s low ranking reflects our poor market structure and weak regulation of its uncompetitive outcomes. The fact of the matter is that we don’t have an as highly competitive market as they have in many other African countries, nor as effective regulation. Instead we have what is essentially a well-entrenched duopoly, which is not regulated in support of late entrants or consumers.

The problem is that our laws have just been copied over directly from Europe, where markets are far more mature and have the benefit of strong and varied competition. Much of our legislation is not appropriate for our market, and very onerous on an incapacitated regulator.

Kenya, Mauritius, Egypt and Namibia are among the cheapest countries in Africa in terms of mobile pricing. What factors have enabled them to achieve this status?

Dr. Gillwald: The reverse conditions exist in many of these countries. They open up their markets in some instances to service neutral licenses and have effectively regulated the classical bottlenecks in infrastructure industries such as telecoms, where competitors have to co-operate to offer seamless services to their customers, such as terminating each other’s calls on their networks. Even though most African countries have smaller markets than what we do; some of them have as many as 7 players, though 4 or 5 seems more optimal in terms of market fragmentation. This means their retail pricing is naturally more competitive to drive demand, which nullifies the need for strict pricing regulations.

Operator tariffs are lodged with the regulator and approved by default after the prescribed period in which ICASA has to respond expires. Does it sometimes happen that these tariffs are passed simply because of the review period limitations?

Dr. Gillwald: It may come as a great surprise to most people that these tariffs are, almost all of the time, approved by default due to the expiration of ICASA’ s response period window.

Just think about how never-ending advertisements for new mobile offerings in the media are. Of course one wants flexibility with these; we don’t want the regulator constraint on the responsiveness of operators to the market. But what we do want from the regulator is some kind transparency of pricing. A published quarterly review of prices perhaps, or some kind of online cost calculator such as the British regulator Ofcom has put online.

Ideally, we should see the creation of mechanisms that are more speedy and flexible for our market – which will work to the advantage of both operators and consumers.

So if you say that these prices are never publicly assessed and no analysis of the prices is ever nationally or continentally published by the regulator, what needs to be put into place to make our pricing more transparent?

Dr. Gillwald: The regulator needs to take the initiative to put out consumer oriented pricing comparisons that are accessible and understandable to the man on the street. We need to have thorough long-term oversight, regular reviews on the retail side as well as the wholesale or termination rate side together with efforts to educate the public about our national mobile pricing structures.

Once there is competent regulation, rates should be based on the cost of an efficient operator, but since our rates are disproportionately high compared to that of our neighbors, does that mean our operators may be running inefficient networks?  

Dr. Gillwald: We have to understand that, like any business, it’s the prerogative of the operators to make profits. It’s their job to provide an efficient service in order to make money, but the question is always whether these efficiencies are being passed on to the end user or whether companies are making super-profits.

What South Africa’s ranking on this index shows is that one of the  primary rationales for regulation, consumer welfare, is not at the forefront of regulatory interventions in the sector. Pricing is the critical policy outcome and with affordable access to enhanced services a primary objective of our policy we can safely concludes that current policy and practices have failed the people of South Africa.

Related news

South Africa’s mobile prices compared

Voice over data and lower mobile call prices

Changing the rules

Tags: 8ta, Alison Gillwald, Cell C, Headline, ICT Africa, MTN, Vodacom

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