Cellular7.04.2022

Why a proposed 6-month data expiry rule could be a bad idea

South Africa’s biggest mobile network operator Vodacom has warned that the proposed amendment of bundle expiry rules could make data more expensive.

Icasa recently published its Draft End-user and Subscriber Service Charter Amendment Regulations, stating that all data, voice, and SMS bundles only expire after six months.

The only exception would be promotional bundles, which are typically added as an extra incentive on a contract or bundle purchase.

MyBroadband asked mobile network operators about the proposed change, and Vodacom spokesperson Byron Kennedy indicated how it could affect bundle prices.

Kennedy said under Vodacom’s current pricing methodology, it offers customers several choices that drive data prices lower as expiry periods shorten.

“Bundles with shorter expiry periods — such as hourly, daily and weekly bundles — have been instrumental in making data more accessible to customers who have sporadic and limited disposable income,” Kennedy stated.

“For example, Vodacom customers can opt for a 1GB bundle at R12 with a 1-hour expiration, R29 for 1GB for the day, whereas a 1GB 30-day bundle is priced at R85.”

This implies a bundle with a six-month expiry period would be more expensive.

Kennedy also pointed out that the vast majority of bundles bought by its customers —around 90% — were hourly, daily or weekly bundles.

He said Vodacom would need to consider these draft regulations and potential changes to call termination regulations, draft numbering regulations, and the social obligations attached to recent spectrum acquisitions before assessing the overall impact of the amendments.

MTN and Telkom told MyBroadband they were still reviewing the proposed regulations and would only be in a position to comment once their internal discussions on the matter had been concluded.

Cell C said it would also first consider the business and customer impact of the change before responding.

Why shorter-period data is cheaper

Security researcher Rogan Dawes previously provided a technical explanation on why it made sense that shorter-period data was cheaper.

Dawes explained that Internet service providers (ISPs), including mobile networks, buy capacity rather than data.

For example, they have to buy a 100 Mbps transceiver or a 1 Gbps fibre line to provide Internet services.

This leaves them with a set amount of data that can be transferred if their links are run at peak capacity all the time.

Dawes pointed out that capacity had a time element, expressed as “per second”,  which data did not. Unused capacity can never be recovered.

That means ISPs typically calculate an average data rate, factoring in temporary over-utilisation and time to perform upgrades when the averages increase too much.

“So, they calculate how much they are paying for all their capacity and the average bytes transferred (data), add their profit margin, and come up with a figure that they charge the masses for their data bundles.”

Dawes said that enforcing lengthy data rollover periods could cause “all sorts of problems”.

For example, if most subscribers only started using their data at the end of a long expiry period, the ISP would need to upgrade capacity to avoid their connection hitting the ceiling.

If the ISP has to buy more capacity from the get-go to account for this possibility, they would have to pass the extra costs on to their customers.


Now read: Greed and corruption blocked cheaper data prices in South Africa

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