Low Vodacom effective call rates questioned

[Sodan]

It's really not complicated.

You take the total revenue generated and devide it by the total number of minutes. It gives the average cost per minute.

As with any metric, understand it and use it in context.

Inclusive of VC staff calls, which may be zero-rated?

If so, then that definitely has some impact on the average (though exactly how significant this is, I'm not sure).

 

[Paul Hjul]

the other variable I've never quite figured out is how "free minutes" on postpaid contracts affect the "effective rate" calculations because if the subscriber fee is not incorporated into voice revenue they change the situation dramatically (I tend to assume that subscription monthly basic is included in the revenue figure). I know this particular set is on the prepaid market but when the data is presented more generally flat rates and so on can change things a lot.

 

[[)roi(]]

well my whole point is that "predatory pricing" really is only possible because of government coercion. Without government coercion it is simply a loss leading marketing strategy that in the long run has no total predatory consequences. For this reason I don't like the defining of predatory pricing on the basis of market share or anything of that nature as there is correlation but not causation. However in the case of a regulated and historically regulated industry competition issues naturally arise and in the same way as administrative law mangles about in the allocation of licenses it features in competition issues.
The best end result in my view is to have CTRs determined by contract (which might well refer to some or another index or whatever) but in the current framework the CTR prices are being fixed by a regulator and I'd rather they be fixed to support growing competition than fixed to support what the dominant operators want.

The problem with the coercion theory is that it assumes a fair bit of competency on the part of the DOC and its underlying structures -- sorry but that the point where we disagree; IMO the previous DOC structures were well known for their practiced incompetence and a high propensity for corruption.

Care to amend your opinion? Btw I agree re fixed CTRs to support growth, where we possibly differ is in how the duopoly should be treated re their historic business practices.

 

[Paul Hjul]

there is no assumption of competency on the DoC at all. Thugs can be (and often are) stupid. Incompetence and corruption go hand in hand with coercion - if you want to impart intelligence don't look to coercion look to fraud.

 

[[)roi(]]

there is no assumption of competency on the DoC at all. Thugs can be (and often are) stupid. Incompetence and corruption go hand in hand with coercion - if you want to impart intelligence don't look to coercion look to fraud.

Just for clarity: my point is that the duopoly needs to be completely accountable for their actions; that said I have my doubts that the past DOC structures were either capable, financially motivated or even interested to partake in any measurable level of coercion, and even if that did happen: it should never escape a full independent legal / audit review.

 

[Paul Hjul]

my point is that coercion by the state is not an excuse for a beneficiary of that coercion who needs to be held accountable under the law

the coercive component is still in operation - if you don't have ICASAs permission and you put up a radio equipment men with guns can take it away with impunity. The distortion is significantly less now than when it was a state sanctioned duopoly that also shafted Telkom's fixed line operations

The specific question at hand is do we (ordinary members of this forum) hold Google to a "predatory pricing" discourse, and if not why is Google different to Vodacom? JvZ has put in a volley about an apparent hypocrisy at the discourse around CellC vs Vodacom

 

[[)roi(]]

my point is that coercion by the state is not an excuse for a beneficiary of that coercion who needs to be held accountable under the law

the coercive component is still in operation - if you don't have ICASAs permission and you put up a radio equipment men with guns can take it away with impunity. The distortion is significantly less now than when it was a state sanctioned duopoly that also shafted Telkom's fixed line operations

The specific question at hand is do we (ordinary members of this forum) hold Google to a "predatory pricing" discourse, and if not why is Google different to Vodacom? JvZ has put in a volley about an apparent hypocrisy at the discourse around CellC vs Vodacom

Even with that I still feel there's merit for setting a legal precedent iro abuse. It's far too easy to place all the blame at the DOC.

Abuse and/or manipulation within a regulated system does not grant anyone or any organization with absolute impunity. The petroleum sector (even with firm regulation) has more than one recorded example of abuse by means of manipulation / collusion.

Google is not out concern, but in short the same rules should apply irrespectively assuming of course that we ignore for now any specifics of the legal domicile.

There should be always a singular approach i.e. Cell C should similarly never be granted any impunity.

 

[Paul Hjul]

sorry I think we are crossing wires:
I am saying that Vodacom and MTN (and Telkom and even for that matter CellC) should be held to the competition approach that holds them guilty of abuse. I find the attempt at a doctrine of impunity because of regulation to be backwards, instead competition law is necessary because of the abuses made possible by regulatory intervention.

However I have a massive dislike for defining actionable collusion that is of concern to the competition authorities in a manner that looks at the activities of an enterprise that are aimed at gaining market share or involves collaboration as being "anti-competitive". I really do not want Similane's approach to competition law to carry any weight.

 

[jannievanzyl]

Inclusive of VC staff calls, which may be zero-rated?

If so, then that definitely has some impact on the average (though exactly how significant this is, I'm not sure).

Not zero-rated, but even if it is, it is such a small base that it won't move the numbers at all. Do the maths; a few thousand over a base of tens of millions.

 

[Paul Hjul]

Not zero-rated, but even if it is, it is such a small base that it won't move the numbers at all. Do the maths; a few thousand over a base of tens of millions.

unless you hire some chatty Cathys ...

 

[jannievanzyl]

unless you hire some chatty Cathys ...

The chatty staff member will then pay out if his/her own pocket.

 

[[)roi(]]

sorry I think we are crossing wires:
I am saying that Vodacom and MTN (and Telkom and even for that matter CellC) should be held to the competition approach that holds them guilty of abuse. I find the attempt at a doctrine of impunity because of regulation to be backwards, instead competition law is necessary because of the abuses made possible by regulatory intervention.

However I have a massive dislike for defining actionable collusion that is of concern to the competition authorities in a manner that looks at the activities of an enterprise that are aimed at gaining market share or involves collaboration as being "anti-competitive". I really do not want Similane's approach to competition law to carry any weight.

Yip re crossed wires.

What in your opinion is the primary issue with Similane's approach (ignoring for now the controversy around his appointment)?

 

[[)roi(]]

The chatty staff member will then pay out if his/her own pocket.

give it up already; nobody is going to take Vodacom word on this. Simple solution: Independently audit the results and/or simplify your cost model (i.e. dumb it down)

 

[Paul Hjul]

Similane wanted to go for private sector players on the basis of a suspicion of having "behaved" anti-competitively regardless of whether a specific prohibition under the Act had been complained of. The idea really being to have the name of competitition law as a basis for continuous state interference.

As I see it there must be a commission of specifically prohibited practice accomplished through fraud (deception) or violence (coercion) in order for a legitimate competition law concern to arise. If all the bottle stores in my town get together and decide to increase the price of crappy booze I really don't see it as a competition matter unless they are doing so in the knowledge that no additional licences will be issued or they agree to bliksem anybody violating the agreement or opening a new shop. Whether such an agreement can be enforced by the courts is another story altogether.

 

[[)roi(]]

Similane wanted to go for private sector players on the basis of a suspicion of having "behaved" anti-competitively regardless of whether a specific prohibition under the Act had been complained of. The idea really being to have the name of competitition law as a basis for continuous state interference.

As I see it there must be a commission of specifically prohibited practice accomplished through fraud (deception) or violence (coercion) in order for a legitimate competition law concern to arise. If all the bottle stores in my town get together and decide to increase the price of crappy booze I really don't see it as a competition matter unless they are doing so in the knowledge that no additional licences will be issued or they agree to bliksem anybody violating the agreement or opening a new shop. Whether such an agreement can be enforced by the courts is another story altogether.

Agreed re a well defined / limited scope of Gov "interference"

Except I can't agreed with your bottle store example: that as demonstrated more than once in the petroleum sector (both locally & internationally) is clear evidence of pricing collusion: something IMO well within the domain of the CC --> in my examples penalties btw were appropriately applied in both cases (locally and in Europe)

 

[Paul Hjul]

"collusion" is only possible where certain players have access to force - look at the petroleum industry

a drug cartel doesn't get its monopoly profits by cornering the market

 

[[)roi(]]

Agreed re a well defined / limited scope of Gov "interference"

Except I can't agreed with your bottle store example: that as demonstrated more than once in the petroleum sector (both locally & internationally) is clear evidence of pricing collusion: something IMO well within the domain of the CC --> in my examples penalties btw were appropriately applied in both cases (locally and in Europe)

The petroleum sector is an area I know to well (20+ years) including their downstream marketing operations.

So I've been involved in legally testing the flexibility of price management across the independent operated service stations / shops.

As you possibly know the petroleum sector in SA specifically disallows any form of vertical integration i.e. each service station is therefore a separate / independently operated business.

The point being that all legal opinions specifically advised us to steer clear of the same type of price management that is persistent in our international markets (where vertical integration is acceptable), but even then the international markets (as we've also tested in 12 countries) tends to specifically restrict any form of price management across competitors.

 

[Paul Hjul]

very much the case - with good reason - in the petroleum industry especially if you look at the continuous links between government and industry players. SASOL ...

and it would be a complete balls up if suddenly a franchise were to start acquiring service stations against the prohibition of vertical integration and was allowed to do so with impunity which as I see it is what MTN are actually demanding and to an extent how Telkom is behaving with LLU (until Tuesday, hopefully we are seeing a real change in attitude on that front)

However, and for me this is a big issue, the mere presence of a temporary monopoly (consequent upon being the first player in a niche market) or a duopoly or small cartel like sector is not in my view a problem or threat provided that new entrants are not restricted by law (state coercive force) or violence or its threat by existing players and there is no fraud in the equation. The reality is that we've created monopolies by deploying the states coercive force and stepping to a free market requires a process of undoing that which therefore necessitates competition law. In most cases a historic state granted monopolies will take a century to untangle from in other cases technology speeds things up.
I would agree with a sentiment from VC and MTN that we must be careful not to create a game where they are unable to make informed rational decisions today for fear of some arbitrary competition construct (the exact % of market share) but the sentiments evaporate when consideration to the extent to which they've gamed the system comes up

 

[[)roi(]]

I personally don't agree with most of the SA specific controls around the petroleum sector as it creates a high level of inefficiencies and unnecessary costs which are ultimately passed onto both the consumer and petroleum corps. The entire model requires review, and due to global trend to pressure for lower margins its arguably better to adopt the same model as used internationally (allow vertical integration); I'd hasten a bet it's probably the similar for VC & MTN.

Nevertheless I don't see a change for the petroleum sector any time soon as changes will definitely bring about a fair amount job losses and service station closures, for example: pump attendants will probably be the 1st to go.

Anyway I didn't intend my previous point to relate specifically to vertical integration but rather to deal with the illegalities re any collusion ito for example: pricing fixing, margin targeting, ...

Thanks again for the chat; very enlightening as always.

 

[Paul Hjul]

if ever you are in Jbay drop me a PM