The Competition Commission released its Data Services Market Inquiry report on 24 April 2019, which lambasted mobile operators for their “anti-poor” data prices.
The commission’s report states that international benchmarking confirmed South African data prices are high – particularly for mobile prepaid data.
Notably, the commission found that South Africa’s data prices are higher than other BRICS and SADC countries.
It also found that Vodacom and MTN charge higher prices in South Africa than other countries in which they operate.
The Competition Commission therefore recommended that mobile operators should introduce immediate relief on data pricing.
It said that networks should reduce the price of sub-1GB bundles to within range of an “objectively justifiable and socially defensible range of the 1GB price”.
The problem with one-price-fits-all
The basic principle which nearly every report on data prices fails to mention is network quality and how it affects data pricing.
Just like other products, there is a big difference between the most expensive and the cheapest options.
No one expects a Ferrari 488 to cost the same as a Datsun Go, and no one expects a Datsun Go to offer the same quality and performance as a Ferrari 488.
If Ferrari, however, is forced to sell its 488 at the same price as the Datsun Go, it will break Ferrari’s business model and result in the supercar market disappearing.
This is exactly what the Competition Commission is doing in its Data Services Market Inquiry report – it compares mobile products in different countries without looking at network quality.
All networks are not the same, and just like with car prices, people can expect to pay more for a world-class network than one with poor speeds or spotty coverage.
Network investment, spectrum, and data prices
The Competition Commission highlighted that Vodacom and MTN’s prices in South Africa are considerably higher than the prices they charge in other countries in which they operate.
This is true, but what is not mentioned is the network performance or population coverage in these countries.
P3 Communications, for example, benchmarked 180 networks in 65 countries with the same methodology and found that MTN South Africa has the best network in Africa.
To achieve this great performance costs money, but it is not mentioned that Vodacom and MTN invest significantly more in their South African networks than what they do in other countries.
There is also no comparison of how much spectrum Vodacom and MTN have in the countries where they operate.
More spectrum means significantly lower network rollout costs, and it therefore makes sense to list this information alongside retail prices.
The charts below clearly illustrate why Vodacom and MTN’s prices are more expensive in South Africa than in other countries where they operate.
CAPEX (more is better)
Network quality – 4G coverage in South Africa vs other countries (more is better)
Spectrum: South Africa vs other countries (more is better)
Give me choice and competition
I like choice. I like the fact that I can choose between expensive, high-quality mobile data products and more affordable options which may not offer the same performance.
I like the fact that Vodacom and MTN invest billions each year to roll out the latest technologies and offer excellent data speeds to consumers.
I think it is great that Vodacom and MTN’s network performance in South Africa is better than many first-world countries, and I hope it stays that way.
The fact is South Africans have a choice between five operators with very different networks and value propositions. I use products from all these operators:
- I chose an affordable prepaid service from Telkom for my primary SIM.
- For our business we need the best performance and coverage available, and therefore use Vodacom and MTN SIMs.
- We also use Rain and Cell C’s fixed-LTE products at work and home.
To force companies to change their business models to be “pro-poor” is not only counterproductive – it is against what the Competition Commission should do, which is encourage competition.
The free market and strong competition are what drives innovation, better products, and lower prices.
To make data more affordable is also not rocket science: the government and ICASA must hand out spectrum, make it easier to roll out networks, and ensure a competitive market.
It has worked in markets across the world, and it will work here.
This is an opinion piece.