Government ICT policy criticised for harming consumers

Even though the government acknowledges that better and cheaper access to the internet will support economic growth, it continues to drag its feet in making more spectrum available and ensuring cheaper data.

Spectrum and data are important to provide South African consumers with full, easy, quick and affordable access to the internet, with all the accompanying benefits on cell phones, laptops, tablets, GPSs and other devices.

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According to the Free Market Foundation’s (FMF) Socio Economic Impact Assessment (SEIA) of the government’s information and communication technology (ICT) and spectrum policy and its impact on consumers, the key message of the study was that regulatory failure and outmoded ideology have deprived South African consumers of better mobile coverage and lower prices.

Leon Louw, president of the FMF, said the government’s failure to release telecommunications spectrum, failed migration from archaic analogue to modern digital technology, misconceptions about competition and insistence on an untried unproven state-owned Wireless Open Access Network (WOAN), means consumers have been deprived of benefits taken for granted elsewhere in the world.

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South African consumers are missing out on faster downloads, lower prices, unlimited data and the roll-out of 5G, which is required for the much-anticipated Internet of Things (IoT).

Consumers have been complaining about data prices for years and their complaints gave rise to the #datamustfall movement. Spectrum, the collective term for various radio frequencies that deliver data services, is the lifeblood of the mobile communications industry. Without affordable data and faster speed, digital migration is impossible in many instances.

Digital migration can only happen if there is a shift from analogue broadcasting to digital to release “digital dividend” radio waves broadcasters currently use wastefully to mobile operators. This migration has been delayed beyond the internationally agreed 2015 deadline.

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Key findings

Some of the key findings of the assessment were:

• Government, rather than market failure, especially affects low-income rural consumers who battle with incomplete coverage, higher prices, poorer quality, reduced productivity and impaired educational opportunities.
• 15 years of withholding spectrum, or “government squatting” as Louw calls it, continues to harm consumers, especially the poor.
• Failed digital migration means that even after the delayed spectrum auction, carriers will be unable to fully use the 700 and 800MHz “digital dividend” spectrum until 2023, denying consumers access to high-quality, low-cost rural services and more expensive urban infrastructure.
• Misguided competition policies and regulatory interventions distort the market, create investment uncertainty and encourage counter-productive rent-seeking.
• The government should replace ideology-based policies with evidence-based SEIA policies.
• The spectrum crunch imposed on MTN and Vodacom and the recapitalisation of ailing entities revived by Liquid Telecom and Rain paved the way for a market-driven WOAN that makes the proposed government WOAN unnecessary.

Socio Economic Impact Assessments (SEIAs)

SEIAs that are done properly are comprehensive analyses of the expected social and economic effects of policies. Policy making requires evidence-based and quantified SEIAs, but policy makers often forget about these important assessments, as happened with the country’s ITC policy.

The FMF used its expertise in competition policy and SEIA expertise to use this globally recognised instrument. Industry expert Christoph Klein, CEO of Dotadvisors and Louw wrote the report.

“Regulatory paralysis imposed enormous opportunity costs on ordinary citizens. Further developments should be left to freely transacting operators who know what they are doing and have ‘skin in the game’,” Klein says.

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He says with six competing mobile operators, when the government originally allowed only two, as well as the spectrum auction, conditions for industry liberalisation and development are optimal.

“Under free competition, with more operators than in most countries, free-to-choose consumers, not organs of state, should decide if we are over- or under-served.

“The notion that free market intermediation and spectrum trading are prone to ‘market failure’ is not supported by historical evidence, the technology revolution, or economic theory,” he said.

Louw said an important aspect is that the SEIA clarifies competition economics and criticises the insidious myth that there is more competition when there are more competitors.

“The degree of real world competition is determined by market contestability, not the number of contestants.”

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