Absolutely terrible research in mobile data pricing report

The Competition Commission recently released a provisional report on its Data Services Market Inquiry, which is aimed at understanding the reasons behind high mobile data prices in South Africa.

In its preliminary findings, the commission said international benchmarking confirmed that South African data prices are high – particularly for mobile prepaid data.

It also found that Vodacom and MTN charge higher prices in South Africa than other countries in which they operate.

While the intentions of the report may be noble, the research and data behind these findings are atrocious.

Instead of doing its own research to do a market comparison, the Competition Commission relied on outdated research from other organisations for its report.

Many of the conclusions, which include its arguments related to data bundle prices, the effective rate of data, MVNOs, spectrum, and fixed broadband services, were half-baked and one-sided.

What makes this particularly frustrating is that the outdated and incorrect data which it used in the report is easy to find, and there is no reason why the commission could not use accurate 2019 data.

Here are three examples which illustrate why the Competition Commission should have done better.

What the Competition Commission report states

The report states that ICASA’s latest tariff report on price benchmarking shows that South Africa’s prices are expensive compared to other countries.

“Disturbingly, ICASA shows that Vodacom and MTN prices in South Africa are considerably higher than the prices they charge in other countries in which they operate,” it states.

“This is illustrated for Vodacom in the 1GB category below…”

Why it is inaccurate

The information provided in the Competition Commission report about the “countries in which Vodacom operates” and “Vodacom 1GB retail tariffs across Africa” is entirely flawed.

Vodacom has mobile network operations in Tanzania, the Democratic Republic of the Congo, Mozambique, Lesotho and Kenya.

It therefore does not have consumer mobile data products, as shown in the table above, in Egypt, Nigeria, Angola, or Albania.

The claim of a data comparison of African operations also curiously includes Albania, which is in Europe and not in Africa.

What the Competition Commission report states

A lot of the data which the Competition Commission relied on for its mobile pricing comparison comes from 2017.

Why it is inaccurate

There were a lot of changes in the South African mobile data market since 2017, which means the Competition Commission based its findings on outdated information.

MTN, for example, cut its out-of-bundle (OOB) data rate by up to 75% for pre-paid customers in February 2019.

Customers not making use of data bundles are now paying R0.29 per MB for data usage and customers that do purchase data bundles are now paying R0.49 per MB for OOB usage.

This information is easy to find, and there is no reason for the Competition Commission to rely on outdated research for its mobile data pricing report.

What the Competition Commission report states

The Competition Commission report states that the legacy of apartheid and the economic characteristics of fixed line infrastructure means that the market will never service lower income and rural households.

“This market has, and will continue to, primarily service wealthy, historically white, urban areas absent from some form of intervention,” it said.

“In this respect, the market is failing lower income and rural households which most need the benefit of lower data prices, and which require alternatives to mobile where there is a pricing structure that exploits this position.”

According to the Commission, thanks to the legacy of apartheid, there existed fixed line copper-based service through aerial poles or underground ducts in former whites-only residential areas.

“This legacy infrastructure has enabled the more immediate provision of ADSL broadband services by Telkom Openserve to these residential areas at low incremental cost. In addition, the duct and pole infrastructure provides the basis of rapid and lower cost fibre rollout by Openserve into these same residential areas, making the deployment of FTTH in these areas far more likely.”

Why it is inaccurate

While it is true that Telkom was able to roll out ADSL in 2002 without having to invest in a new “last mile” fixed line network, the Competition Commission’s take on the situation is, at best, a gross oversimplification.

The Competition Commission seems to be suggesting ADSL as an alternative to low-volume mobile data services for South Africa’s poorest citizens.

However, Telkom’s pricing of ADSL has always been completely beyond the reach of the poor, currently requiring a monthly payment of over R200 just for access to a phone line.

Then you haven’t even paid the monthly ADSL access fee, or for your data. The least you will pay for ADSL in South Africa is around R355 per month.

The Competition Commission also failed to mention the fact that Telkom, a state-owned enterprise, was forced to roll out phone lines to underserviced areas more than 10 years ago, but completely abandoned those fixed lines as soon as it could.

Furthermore, the Competition Commission is completely ignoring the work many fibre network operators are doing, digging their own trenches and laying their own ducts due to government’s and ICASA’s failure to implement effective facilities leasing regulations.

There is also no mention of Vumatel’s ambition to roll out fibre in Alexandra, and the challenges the company is facing to roll out uncapped 100Mbps fibre services to the township at R89 per month.

The availability of existing ducting or poles is not a requirement for network operators to roll out fixed line infrastructure in an area. Conversely, the lack of ducting is not a serious impediment to rolling out in an area.

One serious impediment that didn’t get any attention is crime.

In addition to suffering terrible living conditions, many of South Africa’s poorest households also face high crime rates in their communities.

There have been reports of contractors who work for fibre network operators being harassed, attacked, and robbed at gun-point.

Most recently, MyBroadband received word that Vumatel has completely abandoned its network deployment in KwaZulu-Natal. Though the company declined to provide reasons, the historical record speaks for itself.

The company’s workers faced intimidation and threats, and Vumatel said at the time that “it is not safe or practical for the contractors to continue working in the field at the moment.”

Perhaps if the South African government just made it safe for fibre network operators to go to under-serviced communities, and nailed criminals who steal and destroy critical infrastructure, the equation of broadband access in South Africa would look quite different.

No comment from the Competition Commission

The Competition Commission was asked for comment about the outdated and inaccurate information in the report, but it did not respond by the time of publication.

The way forward

It is disappointing that a respected body like the Competition Commission produced such a poorly-researched report.

Some good news is that this is only a provisional report and stakeholders can make submissions on the report by 14 June 2019.

Thereafter the inquiry team will assess these submissions before publishing a final report later this year.

The Competition Commission can therefore redeem itself by using accurate and current data for the report to ensure accurate findings and recommendations.

Now read: Big mobile data price changes and new network rules proposed

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Absolutely terrible research in mobile data pricing report