Don’t punish Vodacom and MTN for the government’s failings

The Competition Commission has published a final report on its Data Service Market Inquiry, which aims to force Vodacom and MTN to give away free data to consumers.

The Commission also wants to force the two largest mobile operators to cut their mobile data prices by 30% to 50%.

It stated that Vodacom and MTN’s headline prices of all sub-500MB 30-day prepaid data bundles must reflect the same price per MB as a 500MB 30-day bundle.

All of this is done under the banner of being pro-poor and to “ensure all citizens have data access on a continual basis, regardless of income levels”.

Government failing

These proposals by the Competition Commission were predictably welcomed by many South Africans, especially the forced price cuts and free data.

Unfortunately, this is not how a healthy economy should work. Instead, people should be employed and earn enough money to purchase the goods and services they need.

Corruption, incompetence, and populist policies by the government have, however, destroyed the South African economy.

Unemployment is now at record highs and many businesses are closing their doors because of tough trading conditions.

This means that many South Africans cannot afford the basics like food, electricity, and yes, mobile data.

Giving citizens free services

If the government, or the Competition Commission for that matter, thinks it is a good idea for citizens to receive free data, there is an established way to achieve that – grants.

South African citizens and companies are paying very high taxes which are already used to support the poor through social grants.

If the government can cut down on corruption and the wasting of taxpayers’ money, it can easily increase social grants to fund free mobile data.

To force private companies like Vodacom and MTN to get involved in providing citizens with free services is nothing more than an additional tax.

It is not the private sector’s responsibility to provide free services to anyone. If the government wants this to happen, it should fund it.

You have a choice

Instead of the government getting rid of anti-business policies and driving economic growth, successful companies like Vodacom and MTN are now blamed for people not being able to afford mobile data.

It is easy to forget that the only reason most people in South Africa have access to telecommunications services in the first place is thanks to Vodacom and MTN.

It is also easy to forget that Vodacom and MTN pay billions in tax each year, supporting the poor and helping them to put food on the table.

What is even more perplexing is how easily the fierce competition in the mobile market is dismissed, with Vodacom and MTN called a duopoly.

All consumers in South Africa have a choice between Vodacom, MTN, Cell C, Telkom, and Rain’s mobile products.

If you think Vodacom or MTN is expensive, move to one of their competitors. It is that simple.

Quality and price go together

In South Africa, consumers have a choice to support Vodacom and MTN with excellent networks, or to buy cheaper products from Cell C, Telkom, or Rain.

With national roaming agreements, Cell C and Telkom customers get the benefit of MTN and Vodacom’s extensive 3G and LTE networks respectively.

The basic principle which the Competition Commission’s report fails to mention is network quality and how it affects data pricing.

Vodacom and MTN invest nearly R10 billion each year in their networks – multiple times that of Telkom, Cell C, or Rain. It is, therefore, no surprise that their products cost more.

Forcing them to cut their prices would simply result in lower network investments and lower network quality.

Instead of being feathered and tarred, Vodacom and MTN should be commended for providing South Africans with world-class networks – especially when the government is not giving them additional spectrum.

What should be done

If the government and the Competition Commission are serious about driving down the price of data, the way forward is simple – hand out spectrum, make it easier to roll out networks, and ensure a competitive market.

A free market with strong competition is what drives innovation, better products, and lower prices. It has worked in markets across the world, and it will work here.

To try to implement populist policies like forced price cuts and free data will only serve to hurt the mobile industry and scare international investors out of South Africa.

This is an opinion piece.

Now read: You can now buy Xbox games with Vodacom airtime

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Don’t punish Vodacom and MTN for the government’s failings