Rain CEO Willem Roos recently said data bundles “are simply there for telcos to be more profitable” and that “Rain doesn’t offer data bundles that expire because it is a poor customer offering”.
This is currently a popular view, with politicians, commentators, and regulators slating mobile operators for the high price of data.
However, the argument is not as simple as mobile providers selling expiring data bundles and pocketing the breakage.
Breakage allows the operators to reduce the in-bundle price for data, which benefits consumers with lower data rates and more freedom.
The idea that banning expiring data bundles will automatically result in consumer benefits is therefore misguided.
This will have a wide range of unintended consequences, like increased liability on the balance sheets of companies and an increase in the overall cost of capital.
This, in turn, will inevitably result in increased data prices – and not the simplistic and ideological view that prices will stay the same, but data will last forever.
Roos explains his comments
With all these arguments in mind, we asked Roos to explain his comments regarding expiring data bundles.
He told MyBroadband that the argument is often made that data bundles are required to project data usage for network planning.
“In our view this is not really accurate as many other parameters are far more predictive,” Roos said.
He said the breakage incurred by consumers when data expires is a significant source of profit for telcos worldwide.
“Of course, one could make a good argument that a variety of data bundles gives consumers more choice to buy according to their usage patterns.”
“However, given the significant breakage, Rain would contend that the expiry of data is not consumer friendly,” he said.
“This is the main reason why we do not offer bundles, have no out-of-bundle rates and our data never expires.”
Roos answers the tough questions
MyBroadband asked Roos four questions about his comments – here are his answers.
Data bundles from Telkom and Cell C with expiring data drops the price per GB to below R10 for anytime data.
Rain charges R50 per GB. If data bundles were not consumer friendly, why can Rain not match the lowest bundle data pricing (per GB) from mobile operators?
Most of the large data bundles can only be bought by contract customers, and certainly offer good value to consumers – unless there is significant breakage. We think our offer of R50 per gig with no contractual lock in, no expiry of data, and no out-of-bundle rates, together with our R250 Unlimited Off-Peak option for 19 hours of the day, is a compelling alternative.
We would argue though that our offering is simple, easy to understand, and that consumers do not have to do extensive research on a myriad of options and spend time to carefully manage their packages and bundles.
Before Vodacom launched its first data bundles, the price was R45 per MB. With data bundles it reduced the price to R1 per MB.
Is this not a great example of how data bundles with expiring data offer consumer big pricing benefits?
I would think that the reduction is data costs has little to do with bundles as such. As technology improves the underlying cost of data goes down, scale, competitive pressures, etc. are much more important factors.
Rain offers the most affordable non-bundled mobile data product at R50 per GB. However, it is much higher than large bundles from other operators.
Do bundles not offer an attractive price point for high-end users, which would not be possible with other options?
Yes indeed, very large bundles – which of course would probably have the biggest breakage – do offer compelling value per gig. We think our offer of R250 for unlimited data off-peak may be an even better option for some higher-end users as they typically have access to uncapped Wi-Fi networks during peak hours.
When Rain launched its fixed-LTE products, it offered bundles through ISPs with data which expires at the end of the month.
How is this different from expiring data which you refer to as not consumer unfriendly?
Guilty as charged. Rain initially worked with ISPs to rapidly launch a fixed offering which was admittedly a very similar product to the other players. We think our mobile offering is much more innovative, simple, and consumer friendly.