Vodacom defends its data prices, suggests spectrum is still the problem

Cellphone giants Vodacom and MTN have been given two months to reduce their high data prices, or face prosecution. They must also provide plans on how they will provide free data packages for all consumers.

The Competition Commission yesterday released its final report after the initiation of the market inquiry on data pricing in August 2017, following concerns of high data pricing by the minister of economic development.

The findings confirmed that Vodacom and MTN charged South African consumers much more for similar data bundles than they did in other countries.

Vodacom charged people in South Africa about R115 per 1GB but in Egypt charged R18.20. MTN’s fee for a 1GB bundle was R148 in South Africa but just R40 in Uganda.

Despite the recent price reductions, cellphone networks’ pricing was found to have discriminated against the poor as they paid more per bundle compared with contracted users, said commissioner Tembinkosi Bonakele.

Lower-income consumers who purchased smaller data bundles paid higher costs per megabyte than consumers who purchased larger data bundles.

“We have noted that there have been recent price reductions, but we recommend that Vodacom and MTN reach an agreement with the commission on reduction of pricing, especially pricing of prepaid bundles which we have found to be more expensive than contracts. This reflects a bias against the poor,” said Bonakele.

Network providers previously blamed the lack of spectrum in SA as a contributing factor to exorbitant data pricing, as it cost more to maintain the existing spectrum.

“Looking at submissions we received in the process, the additional cost of a lack of spectrum in South Africa in fact indicates that this is less than 5% of the capital expenditure and operating costs. So, they cannot explain the difference in the pricing that we see,” said the commission’s chief economist, James Hodge.

In the past five years until last month, Vodacom’s prices for 30-day prepaid bundles have remained unchanged, he said.

“This suggests there is what we term partitioning strategies and exploitative price discrimination,” said Hodge.

The leading cellphone providers are to change their pricing in the next two months to avoid prosecution. This should be in agreement with the commission, Bonakele said.

“Failure to reach an agreement within two months will lead the commission to consider going ahead with prosecution for excessive pricing,” said Bonakele.

Vodacom and MTN are recommended to reduce their headline prices on all 500MB 30-day prepaid data bundles to cost the same as the 500MB 30-day bundle for contract users.

All mobile operators should, within three months, provide for a monthly lifeline package of daily free data.

While Vodacom notes the report by the Competition Commission, spokesperson Byron Kennedy said comments by the commission contrast those of Icasa.

According to Icasa’s analysis, South Africa’s data prices are neither extremely high nor very low in relation to other African countries or other countries with similar size and level of development.

He said data speeds and LTE coverage was at a much higher quality than in African countries.

“Another area where there is a significant difference in opinion pertains to the impact of the continuous delays in allocating available spectrum.”

“Icasa says there are ‘a number of reasons why spectrum assignment is critical to achieving cheap, high quality mobile broadband,’ whereas the Competition Commission has downplayed the role of spectrum in reducing data prices.

“Vodacom has consistently stated that delayed spectrum allocation has impacted the rate at which data prices could have fallen. Vodacom has reduced the effective price of data by circa 50% since March 2016,” Kennedy said.

MTN could not be reached for comment by the time of going to print.

– rorisangk@citizen.co.za

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