The most important competitive intervention required to create a more competitive broadband market in South Africa is opening up competition in the mobile broadband market. This is according to ISPA’s regulatory advisor Dominic Cull.
Over the last few years, competition in the ADSL market has seen better services, massive price reductions and lots of innovation. This can also happen in the mobile market, Cull said.
“The impact of service competition in the fixed line environment – even within the scope of the limitations of an unbundled resale model – has unquestionably resulted in consumer benefits,” said Cull.
He said that it is obvious that service competition is largely absent in the mobile services sector outside of the incumbents.
This is notwithstanding the fact that there are many new entrants who would enter the mobile services resale market if the incumbents created opportunities to do so.
“Given that the majority of South Africans currently access broadband services through a mobile device and that the trend towards mobile access will intensify, addressing this market failure has the potential to address the obstacle which affordability presents to achieving the objective of universal service and access to broadband services for all South Africans by 2020,” said Cull.
“There is no doubt that affordable universal service will be achieved in the first instance through the mobile networks, with people using their handsets as the device with which they access broadband and other services. Already the mobile networks have close up to 90% population coverage for 3G services.”
ISPA accordingly believes that there is ample evidence that South Africa has an “affordability gap” rather than an “access gap”.
ISPA’s case for greater mobile services competition
ISPA stated its case for greater mobile services competition in the following strong and simple terms:
- In the fixed-line broadband market there has been a massive pricing and service benefit to ADSL customers over the past two years as a result of strong competition in the fixed-line broadband services market.
- Consumers have seen per GB pricing falling from round R70 to current pricing which is as low as R2 per GB. At the same time competition from aggressive ISPs has seen the explosion of uncapped broadband product, with an uncapped 2Mbps account now costing as little as R99 per month excluding line rental costs.
- It is no exaggeration to say that full services competition has revolutionised the provision of fixed-line broadband services in South Africa. This has created significant value for consumers and facilitated productivity in the SMME and corporate markets which typically use ADSL as their primary broadband connection. This is amply illustrated by the manner in which ISPs immediately passed on to their customers the benefits of the 30% IPC cost reduction provided by Telkom, indicative of a market in which the benefits of full competition are being absorbed by consumers.
- There is agreement that the vast majority of South Africans, who currently do not have access to broadband access will, initially at least, obtain such access through a mobile network using a smartphone or other handset capable of allowing such access. But service competition is largely absent in the mobile services sector outside of the incumbents, notwithstanding that there are a substantial number of new entrants who would enter the mobile services resale market were the incumbents to create opportunities to do so. Although APN solutions are currently available from mobile operators they are not price competitive, making it impossible for ISPs or other operators to resell mobile broadband at competitive prices. In fact it is cheaper to buy mobile broadband in the open market than it is to buy it from the mobile operators on an APN solution. The kind of APN solutions available are not the kind that allow ISPs to resell on an ‘open basis’, they are typically only corporate-type APNs. Currently there is also no regional breakout at competitive pricing.
According to ISPA the form of intervention to be made is relatively simple and, with sufficient political will, easy to implement.
ISPA strongly suggested that the mobile network operators should be regulated to offer wholesale solutions on their networks to qualifying third parties at prices related to those which they effectively charge to their own retail arm.
“This will create a fully-competitive reseller market below the mobile network operators, in the same manner that such a market exists below Telkom. Properly regulated, we have no doubt that this will have a substantial impact on broadband penetration and usage in South Africa,” said Cull.