South Africa’s competition watchdog orders data rate cuts

South African telecommunication behemoths, Vodacom Group and MTN Group could face prosecution if they do not agree with the country’s Competition Commission in the next two months to lower data prices.

A data services inquiry was launched in August 2017, in response to a request from the country’s minister of economic Development, Ebrahim Patel, following complaints from users about high data costs.

“What we found is that there is anti-poor pricing and we see it not only in tariffs but in data bundles as well. The prices for lower bundles are more expensive than higher bundles and there is no persuasive explanation [from the mobile operators] for this,” according to James Hodge, the Competition Commission’s chief economist.

In its final report, the Commission recommends that the two mobile operators must independently reach an agreement with the competition watchdog on substantial reductions on tariff levels, especially prepaid monthly bundles, within two months.

Patel, who is currently the minister of trade and industry says:

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“If we want to grow the economy, we need to lower data prices.

“Within policy reflection, we have spoken about economic growth that is inclusive of young people and rural people. When data discriminates against poor people, it goes against public policy.” 

Preliminary evidence suggests that there is scope for price reductions in the region of 30% to 50%.

In addition to the imposed rate cuts, the mobile operators must also reach an agreement to cease ongoing partitioning and price discrimination strategies that may facilitate greater exploitation of market power and anti-poor pricing. The final report found there is a “duopoly between MTN and Vodacom” highlighting that data prices from these two market leaders are cheaper for users who have contracts than for prepaid customers. “The majority of prepaid customers are poor and have to buy daily or hourly data bundles”, says Hodge.

The report came down heaviest on the high costs of prepaid data bundles- to access 1GB prepaid from MTN, customers would have to pay R149, while an hourly data bundle costs R30. 

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For Vodacom prepaid customers, 1GB costs R149, while an hourly 1GB data bundle costs R12. These bundles expire after an hour. 

Hodge says it is clear that MTN and Vodacom don’t charge these excessively high data prices in other countries where they operate. 

“There are strong indications that there is exploitative pricing [in South Africa],” he adds.

In response, both players have blamed the government for its failure to release mobile spectrum, highlighting a ‘significant difference in opinion’ between the Competition Commission and ICASA on a number of issues that are critical to data prices in South Africa. 

This difference of opinion, Vodacom says, is most apparent reviewing mobile data prices in relation to the allocation of spectrum to local mobile operators. 

Addressing mobile data prices, ICASA states that South Africa’s prices are neither extremely high nor very low in relation to other African countries or compared with countries that are more similar to South Africa in terms of their size and level of development. 

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When put in further context with data on speeds and LTE coverage, it is clear that customers in South Africa are benefiting from a much higher quality of access than those in other African countries, says Vodacom.

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