Time to kill mobile tax
The logic seems to be as follows, if the company providing you with a service knows where you are then you pay significantly less for the service than if you have the annoying habit of wandering around and using bandwidth from multiple locations.
It has never really been clear if this difference is because of the increased cost of provisioning services to places where users might be, rather than to places where they will definitely be used.
The pricing announced by Cell C last week has been heralded as a wake-up call for the industry but I have been wondering what it really means.
The first issue is that this pricing is not permanent – Cell C is punting it as a promotion (and of course this is only available in Port Elizabeth). This hints that the pricing structure that CellC have introduced is a temporary one and once the full rollout is complete the pricing structure will change.
Now I don’t know if this is the case or not. The real question that needs to be asked is: Can CellC make a profit while still charging these kinds of prices? If the answer is no, then we have probably been getting all excited for nothing.
If the answer is yes, then the other operators have some very serious questions to answer.
Let’s assume that the answer is yes. That it is possible to deploy and run a 3G network on a national basis and make a profit off it while charging R33/GB. That means the other networks have been not just overcharging us by several hundred percent over the last few years, but also lying to us about the cost of running this type of network.
What is clear to me is that (if you can sell bandwidth at R33/GB over a wireless network and still make a profit) the time is now for all mobile operators to come clean and start pricing their bandwidth in the real world.
Now maths was never my strong suit but here is how I work it out. If you are paying R2/MB for data services on your cellular network of choice then this is how that is probably broken up. Given that the mobile operators are very large companies they are probably able to provision basic internet access for 0.02c/MB (or R20/GB). This is the cheapest price that you would pay for ADSL bandwidth. I would speculate that they actually pay a bit less than that, but let’s be generous.
This means that out of your R2/MB you are paying R1.98 towards building and maintaining the cellular network and assorted other overheads.
Now if CellC is making a decent profit off its data pricing then the formula looks as follows: R0.02 going for connectivity, R0.31 covering the rest of the costs and some profit as well and a whopping R1.67 contributing towards the profits of the cellular companies.
Now apparently Neotel were a little unhappy about what I wrote last week (Neotel slap in the face column here) and are busy formulating a rebuttal as we speak, but I would like to challenge our friends at the cellular networks. If I have got this wrong and if CellC are selling this bandwidth at a cost that simply isn’t sustainable then let us know. We would love to see how the people who passed higher grade maths do their figures.
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