This is why we need competition

When OECD telecoms analyst Taylor Reynolds was asked in 2005 what should be done to improve broadband access in South Africa his answer was clear: competition.

Reynolds said that aggressive price reductions and better services in the broadband market were always a result of competition.

This remains true today. In 2013 the OECD said that countries must ensure mobile markets remain open and competitive to sustain innovation and meet the rising demand for data services.

The South African communications arena, which contains both monopoly players and competitive markets, is a great test-bed for the OECD’s views.

If the OECD is correct that competition is the driver behind lower prices and better services, we should see this happening in competitive areas, but not in areas where one player dominates.

Mobile broadband versus fixed broadband speeds

South Africa has a competitive mobile data market, with four companies fighting for market share – Vodacom, MTN, Cell C and Telkom Mobile.

The fixed line broadband market, in comparison, is dominated by one player – Telkom. It is the only ADSL provider in the country, and ADSL accounts for most fixed broadband connections in South Africa.

The latest Ookla Net Index statistics show that the average global fixed broadband speed is 240% higher than local speeds.

When looking at mobile broadband speeds, the global average is only 20% higher than South African speeds.

This substantiates the view that competition (like in the SA mobile market) results in better service levels.

Fixed broadband Global South Africa Global average vs local speed
Average download speed 17.7Mbps 5.2Mbps Global speeds 240% faster than SA
Average upload speed 8.0Mbps 2.5Mbps Global speeds 220% faster than SA
Mobile broadband Global South Africa
Average download speed 7.7Mbps 6.4Mbps Global speeds 20% faster than SA
Average upload speed 2.8Mbps 2.2Mbps Global speeds 27% faster than SA

ADSL data (competitive market) – 97% decrease in 12 years

The ADSL Internet Service Provider (ISP) market is one of the most competitive areas in the South African telecommunications space.

Telkom controls the wholesale market, but despite relatively high wholesale rates, ISPs slashed prices and offered innovative services to consumers to remain competitive.

In 2002 ADSL users paid R73 per GB for ADSL data. This price plummeted to the current R2 per GB on high usage accounts.

ADSL data price per GB
ADSL data price per GB

Mobile broadband (competitive market) – 97% decrease in 12 years

Vodacom launched its first mobile broadband (3G) service in December 2004, and MTN joined Vodacom in June 2005.

The market became more competitive in September 2010 when Cell C launched its first HSPA+ products.

The mobile broadband market became even more competitive in July 2011 when 8ta (Telkom Mobile) launched its 10GB for R199 mobile data deal.

In December 2004 a gigabyte of data cost R599. This price is now R20 per GB, thanks to Telkom Mobile’s Go 10GB Big deal.

Mobile data price per GB
Mobile data price per GB

Fixed broadband (some competition) – 75% decrease in 12 years

Telkom maintains a monopoly on ADSL access, but many wireless broadband providers started to compete with their own fixed broadband offerings. This includes iBurst, Neotel, Vodacom, MTN and WISPs.

The result is that Telkom started to drop their ADSL prices, and increased the speed of its ADSL services.

In 2002 Telkom charged R680 per month for a 512kbps DSL line. The current entry-level ADSL speed has increased to 2Mbps, and the price decreased to R165 per month.

Entry level ADSL price
Entry level ADSL price

DStv premium (limited competition) – 75% increase in 10 years

MultiChoice has a near monopoly in the high end pay-TV market. This monopoly was mainly built because of legislation which protected it against competition.

However, the company should also be credited with consistently improving its offering with various innovations and securing a wide range of premium content.

In 2004 a DStv premium package cost R379 per month. A decade later this price increased to R665 per month.

DStv prices
DStv premium price

Fixed line (limited competition) – 132% increase in 12 years

Telkom continues to be the dominant player in South Africa’s fixed line market, and remains the only fixed line provider of telecoms services in the residential arena.

Pricing for a fixed line service from Telkom increased from R67.72 in 2003 to the current R157.00 per month.

Telkom line rental
Telkom line rental

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This is why we need competition